Capital Requirements Regulation

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Article 1 Scope This Regulation lays down uniform rules concerning general prudential requirements that institutions institutions, financial holding companies and mixed financial holding companies supervised under Directive 2013/36/EU shall comply with in relation to the following items: (a) own funds requirements relating to entirely quantifiable, uniform and standardised elements of credit risk, market risk, operational risk, settlement risk and settlement risk; leverage; (b) requirements limiting large exposures; (c) after the delegated act referred to in Article 460 has entered into force, liquidity requirements relating to entirely quantifiable, uniform and standardised elements of liquidity risk; (d) reporting requirements related to points (a), (b) and (c) and to leverage; (c); (e) public disclosure requirements. This Regulation lays down uniform rules concerning the own funds and eligible liabilities requirements that resolution entities that are global systemically important institutions (G-SIIs) or part of G-SIIs and material subsidiaries of non-EU G-SIIs shall comply with. This Regulation does not govern publication requirements for competent authorities in the field of prudential regulation and supervision of institutions as set out in Directive 2013/36/EU.

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Article 2
Supervisory powers
For the purposes of ensuring compliance with this Regulation, competent authorities shall have the powers and shall follow the procedures set out in Directive 2013/36/EU.

after (02013R0575-20190627)

Article 2
Supervisory powers
1. For the purpose of ensuring compliance with this Regulation, competent authorities shall have the powers and shall follow the procedures set out in Directive 2013/36/EU and in this Regulation.
2. For the purpose of ensuring compliance with this Regulation, resolution authorities shall have the powers and shall follow the procedures set out in Directive 2014/59/EU of the European Parliament and of the CouncilDirective 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ L 173, 12.6.2014, p. 190). and in this Regulation.
3. For the purpose of ensuring compliance with the requirements concerning own funds and eligible liabilities, competent authorities and resolution authorities shall cooperate.
4. For the purpose of ensuring compliance within their respective competences, the Single Resolution Board established by Article 42 of Regulation (EU) No 806/2014 of the European Parliament and of the CouncilRegulation (EU) No 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No 1093/2010 (OJ L 225, 30.7.2014, p. 1)., and the European Central Bank with regard to matters relating to the tasks conferred on it by Council Regulation (EU) No 1024/2013Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions (OJ L 287, 29.10.2013, p. 63)., shall ensure the regular and reliable exchange of relevant information.

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Article 4 Definitions 1. For the purposes of this Regulation, the following definitions shall apply: (1) credit institution means an undertaking the business of which is to take deposits or other repayable funds from the public and to grant credits for its own account; (2) investment firm means a person as defined in point (1) of Article 4(1) of Directive 2004/39/EC, which is subject to the requirements imposed by that Directive, excluding the following: (a) credit institutions; (b) local firms; (c) firms which are not authorised to provide the ancillary service referred to in point (1) of Section B of Annex I to Directive 2004/39/EC, which provide only one or more of the investment services and activities listed in points 1, 2, 4 and 5 of Section A of Annex I to that Directive, and which are not permitted to hold money or securities belonging to their clients and which for that reason may not at any time place themselves in debt with those clients; (3) institution means a credit institution or an investment firm; (4) local firm means a firm dealing for its own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets; (5) insurance undertaking means insurance undertaking as defined in point (1) of Article 13 of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II)OJ L 335, 17.12.2009, p. 1.; (6) reinsurance undertaking means reinsurance undertaking as defined in point (4) of Article 13 of Directive 2009/138/EC; (7) collective investment undertaking or CIU means a UCITS as defined in Article 1(2) of Directive 2009/65/EC of the European Parliament and of the CouncilDirective 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS)OJ (UCITS) (OJ L 302, 17.11.2009, p. 32., including, unless otherwise provided, third-country entities which carry out similar activities, which are subject to supervision pursuant to Union law 32). or to the law of a third country which applies supervisory and regulatory requirements at least equivalent to those applied in the Union, an AIF alternative investment fund (AIF) as defined in point (a) of Article 4(1)(a) 4(1) of Directive 2011/61/EU of the European Parliament and of the CouncilDirective 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund ManagersOJ Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (OJ L 174, 1.7.2011, p. 1., or a non-EU AIF as defined in Article 4(1)(aa) of that Directive; 1).; (8) public sector entity means a non-commercial administrative body responsible to central governments, regional governments or local authorities, or to authorities that exercise the same responsibilities as regional governments and local authorities, or a non-commercial undertaking that is owned by … 439 unchanged words … the laws of a third country which applies supervisory and regulatory requirements at least equivalent to those applied in the Union; (20) financial holding company means a financial institution, the subsidiaries of which are exclusively or mainly institutions or financial institutions, at least one of such subsidiaries being an institution, and which is not a mixed financial holding company; the subsidiaries of a financial institution are mainly institutions or financial institutions where at least one of them is an institution and where more than 50 % of the financial institution's equity, consolidated assets, revenues, personnel or other indicator considered relevant by the competent authority are associated with subsidiaries that are institutions or financial institutions; (21) mixed financial holding company means mixed financial holding company as defined in point (15) of Article 2 of Directive 2002/87/EC; (22) mixed activity holding company means a parent undertaking, other than a financial holding company or an institution or a mixed financial holding company, the subsidiaries of which include at least one institution; (23) third-country insurance undertaking means third-country insurance undertaking as defined in point (3) of Article 13 of Directive 2009/138/EC; (24) third-country reinsurance undertaking means third-country reinsurance undertaking as defined in point (6) of Article 13 of Directive 2009/138/EC; (25) recognised third-country investment firm means a firm meeting all of the following conditions: (a) if it were established within the Union, it would be covered by the definition of an investment firm; (b) it is authorised in a third country; (c) it is subject to and complies with prudential rules considered by the competent authorities at least as stringent as those laid down in this Regulation or in Directive 2013/36/EU; (26) financial institution means an undertaking other than an institution, institution and other than a pure industrial holding company, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points 2 to 12 and point 15 of Annex I to Directive 2013/36/EU, including a financial holding company, a mixed financial holding company, a payment institution within the meaning as defined in point (4) of Article 4 of Directive 2007/64/EC (EU) 2015/2366 of the European Parliament and of the CouncilDirective (EU) 2015/2366 of the European Parliament and of the Council of 13 25 November 2007 2015 on payment services in the internal marketOJ market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 319, 5.12.2007, 337, 23.12.2015, p. 1., 35)., and an asset management company, but excluding insurance holding companies and mixed-activity insurance holding companies as defined, respectively, in points (f) and (g) of Article 212(1) of Directive 2009/138/EC; (27) financial sector entity means any of the following: (a) an institution; (b) a financial institution; (c) an ancillary services undertaking included in the consolidated financial situation of an institution; (d) an insurance undertaking; (e) a third-country insurance undertaking; (f) a reinsurance undertaking; (g) a third-country reinsurance undertaking; (h) an insurance holding company as defined in point (f) of Article 212(1) of Directive 2009/138/EC; (k) an undertaking excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive; (l) a third-country undertaking with a main business comparable to any of the entities referred to in points (a) to (k); (28) parent institution in a Member State means an institution in a Member State which has a institution or an institution, a financial institution or an ancillary services undertaking as a subsidiary or which holds a participation in such an institution, financial institution or financial institution, ancillary services undertaking, and which is not itself a subsidiary of another institution authorised in the same Member State, or of a financial holding company or mixed financial holding company set up in the same Member State; (29) EU parent institution means a parent institution in a Member State which is not a subsidiary of another institution authorised in any Member State, or of a financial holding company or mixed financial holding company set up in any Member State; (29a) parent investment firm in a Member State means a parent institution in a Member State that is an investment firm; (29b) EU parent investment firm means an EU parent institution that is an investment firm; (29c) parent credit institution in a Member State means a parent institution in a Member State that is a credit institution; (29d) EU parent credit institution means an EU parent institution that is a credit institution; (30) parent financial holding company in a Member State means a financial holding company which is not itself a subsidiary of an institution authorised in the same Member State, or of a financial holding company or mixed financial holding company … 612 unchanged words … persons which are controlled by that person according to point (a) or interconnected with that person in accordance with point (b), including the central government. The same applies in cases of regional governments or local authorities to which Article 115(2) applies; applies. Two or more natural or legal persons who fulfil the conditions set out in point (a) or (b) because of their direct exposure to the same CCP for clearing activities purposes are not considered as constituting a group of connected clients; (40) competent authority means a public authority or body officially recognised by national law, which is empowered by national law to supervise institutions as part of the supervisory system in operation in the Member State concerned; (41) consolidating supervisor means a competent authority responsible for the exercise of supervision on a consolidated basis in accordance with Article 111 of EU parent institutions and of institutions controlled by EU parent financial holding companies or EU parent mixed financial holding companies; Directive 2013/36/EU; (42) authorisation means an instrument issued in any form by the authorities by which the right to carry out the business is granted; (43) home Member State means the Member State in which an institution has been granted authorisation; (44) host Member … 912 unchanged words … in Article 36(1)(k)(i); (ii) Tier 2 capital as referred to in Article 71 that is equal to or less than one third of Tier 1 capital as calculated pursuant to point (i) of this point; (b) for the purposes of Article 97 and Part Four it means the sum of the following: (i) Tier 1 capital as referred to in Article 25; (ii) Tier 2 capital as referred to in Article 71 that is equal to or less than one third of Tier 1 capital; (72) recognised exchange means an exchange which meets all of the following conditions: (a) it is a regulated market; market or a third-country market that is considered to be equivalent to a regulated market in accordance with the procedure set out in point (a) of Article 25(4) of Directive 2014/65/EU of the European Parliament and of the CouncilDirective 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (OJ L 173, 12.6.2014, p. 349).; (b) it has a clearing mechanism whereby contracts listed in Annex II are subject to daily margin requirements which, in the opinion of the competent authorities, provide appropriate protection; (73) discretionary pension benefits means enhanced pension benefits granted on a discretionary … 514 unchanged words … intended to benefit from actual or expected short-term price differences between buying and selling prices or from other price or interest rate variations; (86) trading book means all positions in financial instruments and commodities held by an institution either with trading intent, intent or in order to hedge positions held with trading intent; intent in accordance with Article 104; (87) multilateral trading facility means multilateral trading facility as defined in point 15 of Article 4 of Directive 2004/39/EC; (88) qualifying central counterparty or QCCP means a central counterparty that has been either authorised in accordance with Article 14 of Regulation (EU) No 648/2012 or recognised in accordance with Article 25 of that Regulation; (89) default fund means a fund established by a CCP in accordance with Article 42 of Regulation (EU) No 648/2012 and used in accordance with Article 45 of that Regulation; (90) pre-funded contribution to the default fund of a CCP means a contribution to the default fund of a CCP that is paid in by an institution; (91) trade exposure means a current exposure, including a variation margin due to the clearing member or to the client, but not yet received, and any potential future exposure of a clearing member or a client, to a CCP arising from contracts and transactions listed in points (a) to (e) (a), (b) and (c) of Article 301(1), as well as initial margin; (92) regulated market means regulated market as defined in point (14) of Article 4 of Directive 2004/39/EC; (93) leverage means the relative size of an institution's assets, off-balance sheet obligations and contingent obligations to pay or to deliver or to provide collateral, including obligations from received funding, made commitments, derivatives or repurchase agreements, but excluding obligations which can only be enforced during the liquidation of an institution, compared to that institution's own funds; (94) risk of excessive leverage means the risk resulting from an institution's vulnerability due to leverage or contingent leverage that may require unintended corrective measures to its business plan, including distressed selling of assets which might result in losses or in valuation adjustments to its remaining assets; (95) credit risk adjustment means the amount of specific and general loan loss provision for credit risks that has been recognised in the financial statements of the institution in accordance with the applicable accounting framework; (96) internal hedge means a position that materially offsets the component risk elements between a trading book position and a one or more non-trading book position positions or sets of positions; between two trading desks; (97) reference obligation means an obligation used for the purposes of determining the cash settlement value of a credit derivative; (98) external credit assessment institution or ECAI means a credit rating agency that is registered or certified in accordance with Regulation … 783 unchanged words … directly linked to the value of the capital instruments issued by a financial sector entity; (127) cross-guarantee scheme means a scheme that meets all the following conditions: (a) the institutions fall within the same institutional protection scheme as referred to in Article 113(7); 113(7) or are permanently affiliated with a network to a central body; (b) the institutions are fully consolidated in accordance with Article 1(1)(b), (c) or (d) or Article 1(2) of Directive 83/349/EEC and are included in the supervision on a consolidated basis of an institution which is a parent institution in a Member State in accordance with Part One, Title II, Chapter 2 of this Regulation and subject to own funds requirements; (c) the parent institution in a Member State and the subsidiaries are established in the same Member State and are subject to authorisation and supervision by the same competent authority; (d) the parent institution in a Member State and the subsidiaries have entered into a contractual or statutory liability arrangement which protects those institutions and in particular ensures their liquidity and solvency, in order to avoid bankruptcy in the case that it becomes necessary; (e) arrangements are in place to ensure the prompt provision of financial means in terms of capital and liquidity if required under the contractual or statutory liability arrangement referred to in point (d); (f) the adequacy of the arrangements referred to in points (d) and (e) is monitored on a regular basis by the competent authority; (g) the minimum period of notice for a voluntary exit of a subsidiary from the liability arrangement is 10 years; (h) the competent authority is empowered to prohibit a voluntary exit of a subsidiary from the liability arrangement; (128) distributable items means the amount of the profits at the end of the latest last financial year plus any profits brought forward and reserves available for that purpose purpose, before distributions to holders of own funds instruments instruments, less any losses brought forward, any profits which are non-distributable pursuant to provisions in legislation Union or national law or the institution's bye-laws by-laws and any sums placed to in non-distributable reserves in accordance with applicable national law or the statutes of the institution, those in each case with respect to the specific category of own funds instruments to which Union or national law, institutions' by-laws, or statutes relate; such profits, losses and reserves being determined on the basis of the individual accounts of the institution and not on the basis of the consolidated accounts; (129) servicer means a servicer as defined in point (13) of Article 2 of Regulation (EU) 2017/2402. 2017/2402; (130) resolution authority means a resolution authority as defined in point (18) of Article 2(1) of Directive 2014/59/EU; (131) resolution entity means a resolution entity as defined in point (83a) of Article 2(1) of Directive 2014/59/EU; (132) resolution group means a resolution group as defined in point (83b) of Article 2(1) of Directive 2014/59/EU; (133) global systemically important institution or G-SII means a G-SII that has been identified in accordance with Article 131(1) and (2) of Directive 2013/36/EU; (134) non-EU global systemically important institution or non-EU G-SII means a global systemically important banking group or a bank (G-SIBs) that is not a G-SII and that is included in the list of G-SIBs published by the Financial Stability Board, as regularly updated; (135) material subsidiary means a subsidiary that on an individual or consolidated basis meets any of the following conditions: (a) the subsidiary holds more than 5 % of the consolidated risk-weighted assets of its original parent undertaking; (b) the subsidiary generates more than 5 % of the total operating income of its original parent undertaking; (c) the total exposure measure, referred to in Article 429(4) of this Regulation, of the subsidiary is more than 5 % of the consolidated total exposure measure of its original parent undertaking; for the purpose of determining the material subsidiary, where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings shall count as a single subsidiary on the basis of their consolidated situation; (136) G-SII entity means an entity with legal personality that is a G-SII or is part of a G-SII or of a non-EU G-SII; (137) bail-in tool means a bail-in tool as defined in point (57) of Article 2(1) of Directive 2014/59/EU; (138) group means a group of undertakings of which at least one is an institution and which consists of a parent undertaking and its subsidiaries, or of undertakings that are related to each other as set out in Article 22 of Directive 2013/34/EU of the European Parliament and of the CouncilDirective 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).; (139) securities financing transaction means a repurchase transaction, a securities or commodities lending or borrowing transaction, or a margin lending transaction; (140) initial margin or IM means any collateral, other than variation margin, collected from or posted to an entity to cover the current and potential future exposure of a transaction or of a portfolio of transactions in the period needed to liquidate those transactions, or to re-hedge their market risk, following the default of the counterparty to the transaction or portfolio of transactions; (141) market risk means the risk of losses arising from movements in market prices, including in foreign exchange rates or commodity prices; (142) foreign exchange risk means the risk of losses arising from movements in foreign exchange rates; (143) commodity risk means the risk of losses arising from movements in commodity prices; (144) trading desk means a well-identified group of dealers set up by the institution to jointly manage a portfolio of trading book positions in accordance with a well-defined and consistent business strategy and operating under the same risk management structure; (145) small and non-complex institution means an institution that meets all the following conditions: (a) it is not a large institution; (b) the total value of its assets on an individual basis or, where applicable, on a consolidated basis in accordance with this Regulation and Directive 2013/36/EU is on average equal to or less than the threshold of EUR 5 billion over the four-year period immediately preceding the current annual reporting period; Member States may lower that threshold; (c) it is not subject to any obligations, or is subject to simplified obligations, in relation to recovery and resolution planning in accordance with Article 4 of Directive 2014/59/EU; (d) its trading book business is classified as small within the meaning of Article 94(1); (e) the total value of its derivative positions held with trading intent does not exceed 2 % of its total on- and off-balance-sheet assets and the total value of its overall derivative positions does not exceed 5 %, both calculated in accordance with Article 273a(3); (f) more than 75 % of both the institution's consolidated total assets and liabilities, excluding in both cases the intragroup exposures, relate to activities with counterparties located in the European Economic Area; (g) the institution does not use internal models to meet the prudential requirements in accordance with this Regulation except for subsidiaries using internal models developed at the group level, provided that the group is subject to the disclosure requirements laid down in Article 433a or 433c on a consolidated basis; (h) the institution has not communicated to the competent authority an objection to being classified as a small and non-complex institution; (i) the competent authority has not decided that the institution is not to be considered a small and non-complex institution on the basis of an analysis of its size, interconnectedness, complexity or risk profile; (146) large institution means an institution that meets any of the following conditions: (a) it is a G-SII; (b) it has been identified as an other systemically important institution (O-SII) in accordance with Article 131(1) and (3) of Directive 2013/36/EU; (c) it is, in the Member State in which it is established, one of the three largest institutions in terms of total value of assets; (d) the total value of its assets on an individual basis or, where applicable, on the basis of its consolidated situation in accordance with this Regulation and Directive 2013/36/EU is equal to or greater than EUR 30 billion; (147) large subsidiary means a subsidiary that qualifies as a large institution; (148) non-listed institution means an institution that has not issued securities that are admitted to trading on a regulated market of any Member State, within the meaning of point (21) of Article 4(1) of Directive 2014/65/EU; (149) financial report means, for the purposes of Part Eight, a financial report within the meaning of Articles 4 and 5 of Directive 2004/109/EC of the European Parliament and of the CouncilDirective 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC (OJ L 390, 31.12.2004, p. 38).. 2. Where reference in this Regulation is made to immovable property, to residential property or commercial immovable property or to a mortgage on such property, it shall include shares in Finnish residential housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation. Member States or their competent authorities may allow shares constituting an equivalent indirect holding of immovable property to be treated as a direct holding of immovable property provided that such an indirect holding is specifically regulated in the national law of the Member State concerned and that, when pledged as collateral, it provides equivalent protection to creditors. 3. Trade finance as referred to in point (80) of paragraph 1 is generally uncommitted and requires satisfactory supporting transactional documentation for each drawdown request enabling refusal of the finance in the event of any doubt about creditworthiness or the supporting transactional documentation. Repayment of trade finance exposures is usually independent of the borrower, the funds instead coming from cash received from importers or resulting from proceeds of the sales of the underlying goods.4. EBA shall develop draft regulatory technical standards specifying in which circumstances the conditions set out in point (39) of paragraph 1 are met. EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2020. Power 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.

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Article 6 General principles 1. Institutions shall comply with the obligations laid down in Parts Two to Five and Eight on an individual basis. 1a. By way of derogation from paragraph 1 of this Article, only institutions identified as resolution entities that are also G-SIIs or that are part of a G-SII, and that do not have subsidiaries shall comply with the requirement laid down in Article 92a on an individual basis. Material subsidiaries of a non-EU G-SII shall comply with Article 92b on an individual basis, where they meet all the following conditions: (a) they are not resolution entities; (b) they do not have subsidiaries; (c) they are not the subsidiaries of an EU parent institution. 2. No institution which is either a subsidiary in the Member State where it is authorised and supervised, or a parent undertaking, and no institution included in the consolidation pursuant to Article 18, shall be required to comply with the obligations laid down in Articles 89, 90 and 91 on an individual basis. 3. No institution which is either a parent undertaking or a subsidiary, and no institution included in the consolidation pursuant to Article 18, shall be required to comply with the obligations laid down in Part Eight on an individual basis. 4. Credit institutions and investment firms that are authorised to provide the investment services and activities listed in points (3) and (6) of Section A of Annex I to Directive 2004/39/EC shall comply with the obligations laid down in Part Six on an individual basis. Pending the report from the Commission in accordance with Article 508(3), competent authorities may exempt investment firms from compliance with the obligations laid down in Part Six taking into account the nature, scale and complexity of the investment firms' activities. 5. Institutions, except for investment firms referred to in Article 95(1) and Article 96(1) and institutions for which competent authorities have exercised the derogation specified in Article 7(1) or (3), shall comply with the obligations laid down in Part Seven on an individual basis.

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Article 11 General treatment 1. Parent institutions in a Member State shall comply, to the extent and in the manner prescribed in Article 18, with the obligations laid down in Parts Two to Four and Part Seven on the basis of their consolidated situation. The parent undertakings and their subsidiaries subject to this Regulation shall set up a proper organisational structure and appropriate internal control mechanisms in order to ensure that the data required for consolidation are duly processed and forwarded. In particular, they shall ensure that subsidiaries not subject to this Regulation implement arrangements, processes and mechanisms to ensure a proper consolidation. 2. Institutions controlled by a parent financial holding company or a parent mixed financial holding company in a Member State shall comply, to the extent and in the manner prescribed in Article 18, with the obligations laid down in Parts Two to Four and Part Seven on the basis of the consolidated situation of that financial holding company or mixed financial holding company. Where more than one institution is controlled by a parent financial holding company or by a parent mixed financial holding company in a Member State, the first subparagraph shall apply only to the institution to which supervision on a consolidated basis applies in accordance with Article 111 of Directive 2013/36/EU. 3. EU parent institutions, institutions controlled by an EU parent financial holding company and institutions controlled by an EU parent mixed financial holding company shall comply with the obligations laid down in Part Six on the basis of the consolidated situation of that parent institution, financial holding company or mixed financial holding company, if the group comprises one or more credit institutions or investment firms that are authorised to provide the investment services and activities listed in points (3) and (6) of Section A of Annex I to Directive 2004/39/EC. Pending the report from the Commission in accordance with Article 508(2) of this Regulation, and if the group comprises only investment firms, competent authorities may exempt investment firms from compliance with the obligations laid down in Part Six on a consolidated basis, taking into account the nature, scale and complexity of the investment firm's activities. 3a. By way of derogation from paragraph 1 of this Article, only parent institutions identified as resolution entities that are G-SIIs, part of a G-SII or part of a non-EU G-SII shall comply with Article 92a of this Regulation on a consolidated basis, to the extent and in the manner set out in Article 18 of this Regulation. Only EU parent undertakings that are a material subsidiary of a non-EU G-SII and are not resolution entities shall comply with Article 92b of this Regulation on a consolidated basis to the extent and in the manner set out in Article 18 of this Regulation. Where Article 21b(2) of Directive 2013/36/EU applies, the two intermediate EU parent undertakings jointly identified as a material subsidiary shall each comply with Article 92b of this Regulation on the basis of their consolidated situation. 4. Where Article 10 is applied, the central body referred to in that Article shall comply with the requirements of Parts Two to Eight on the basis of the consolidated situation of the whole as constituted by the central body together with its affiliated institutions. 5. In addition to the requirements in paragraphs 1 to 4, and without prejudice to other provisions of this Regulation and Directive 2013/36/EU, when it is justified for supervisory purposes by the specificities of the risk or of the capital structure of an institution or where Member States adopt national laws requiring the structural separation of activities within a banking group, competent authorities may require the structurally separated institutions to comply with the obligations laid down in Parts Two to Four and Parts Six to Eight of this Regulation and in Title VII of Directive 2013/36/EU on a sub-consolidated basis. Applying the approach set out in the first subparagraph shall be without prejudice to effective supervision on a consolidated basis and shall neither entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole nor form or create an obstacle to the functioning of the internal market.

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inserted text (02013R0575-20190627)

Article 12a
Consolidated calculation for G-SIIs with multiple resolution entities
Where at least two G-SII entities belonging to the same G-SII are resolution entities, the EU parent institution of that G-SII shall calculate the amount of own funds and eligible liabilities referred to in point (a) of Article 92a(1) of this Regulation. That calculation shall be undertaken on the basis of the consolidated situation of the EU parent institution as if it were the only resolution entity of the G-SII.
Where the amount calculated in accordance with the first paragraph of this Article is lower than the sum of the amounts of own funds and eligible liabilities referred to in point (a) of Article 92a(1) of this Regulation of all resolution entities belonging to that G-SII, the resolution authorities shall act in accordance with Articles 45d(3) and 45h(2) of Directive 2014/59/EU.
Where the amount calculated in accordance with the first paragraph of this Article is higher than the sum of the amounts of own funds and eligible liabilities referred to in point (a) of Article 92a(1) of this Regulation of all resolution entities belonging to that G-SII, the resolution authorities may act in accordance with Articles 45d(3) and 45h(2) of Directive 2014/59/EU.

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Article 13 Application of disclosure requirements on a consolidated basis 1. EU parent institutions shall comply with the obligations laid down in Part Eight on the basis of their consolidated situation. Significant Large subsidiaries of EU parent institutions and those subsidiaries which are of material significance for their local market shall disclose the information specified in Articles 437, 438, 440, 442, 450, 451 451, 451a and 453, 453 on an individual or basis or, where applicable in accordance with this Regulation and Directive 2013/36/EU, on a sub-consolidated basis. 2. Institutions controlled by an EU parent financial holding company identified as resolution entities that are G-SIIs or EU parent mixed financial holding company that are part of a G-SII shall comply with the obligations laid down in Part Eight Article 437a and point (h) of Article 447 on the basis of the consolidated situation of that financial holding company or mixed financial holding company. Significant subsidiaries their resolution group. 3. The first subparagraph of paragraph 1 shall not apply to EU parent institutions, EU parent financial holding companies or EU parent mixed holding companies and those subsidiaries which are of material significance for their local market shall disclose the information specified in Articles 437, 438, 440, 442, 450, 451 and 453 on an individual or sub-consolidated basis. 3. Paragraphs 1 and 2 shall not apply in full or in part to EU parent institutions, institutions controlled by an EU parent financial holding company or companies, EU parent mixed financial holding company, to the extent that companies or resolution entities where they are included within in equivalent disclosures provided on a consolidated basis provided by a parent undertaking established in a third country. The second subparagraph of paragraph 1 shall apply to subsidiaries of parent undertakings established in a third country where those subsidiaries qualify as large subsidiaries. 4. Where Article 10 is applied, applies, the central body referred to in that Article shall comply with the requirements of Part Eight on the basis of the consolidated situation of the central body. Article 18(1) shall apply to the central body and the affiliated institutions shall be treated as the subsidiaries of the central body.

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Article 14 Application of requirements of Part Five Article 5 of Regulation (EU) 2017/2402 on a consolidated basis 1. Parent undertakings and their subsidiaries that are subject to this Regulation shall be required to meet the obligations laid down in Part Five Article 5 of Regulation (EU) 2017/2402 on a consolidated or sub-consolidated basis, to ensure that their arrangements, processes and mechanisms required by those provisions are consistent and well-integrated and that any data and information relevant to the purpose of supervision can be produced. In particular, they shall ensure that subsidiaries that are not subject to this Regulation implement arrangements, processes and mechanisms to ensure compliance with those provisions. 2. Institutions shall apply an additional risk weight in accordance with Article 407 270a of this Regulation when applying Article 92 of this Regulation on a consolidated or sub-consolidated basis if the requirements laid down in Article 5 of Article 405 or 406 Regulation (EU) 2017/2402 are breached at the level of an entity established in a third country included in the consolidation in accordance with Article 18 of this Regulation if the breach is material in relation to the overall risk profile of the group. 3. Obligations resulting from Part Five concerning subsidiaries, not themselves subject to this Regulation, shall not apply if the EU parent institution or institutions controlled by an EU parent financial holding company or EU parent mixed financial holding company, can demonstrate to the competent authorities that the application of Part Five is unlawful under the laws of the third country where the subsidiary is established.

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Article 18 Methods for of prudential consolidation 1. The institutions that are required to comply with the requirements referred to in Section 1 on the basis of their consolidated situation shall carry out a full consolidation of all institutions and financial institutions that are its subsidiaries or, where relevant, the subsidiaries of the same parent financial holding company or parent mixed financial holding company. Paragraphs 2 to 8 of this Article shall not apply where Part Six applies on the basis of an institution's consolidated situation. For the purposes of Article 11(3a), institutions that are required to comply with the requirements referred to in Article 92a or 92b on a consolidated basis shall carry out a full consolidation of all institutions and financial institutions that are their subsidiaries in the relevant resolution groups. 2. However, the competent authorities may on a case-by-case basis permit proportional consolidation according to the share of capital that the parent undertaking holds in the subsidiary. Proportional consolidation may only be permitted where all of the following conditions are … 403 unchanged words … of Directive 2013/36/EU, ancillary services undertakings and asset management companies as defined in point (5) of Article 2 of Directive 2002/87/EC shall be included in consolidations in the cases, and in accordance with the methods, laid down in this Article.9. EBA shall develop draft regulatory technical standards to specify conditions in accordance with which consolidation shall be carried out in the cases referred to in paragraphs 3 to 6 and paragraph 8. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2020. Power 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.

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Article 26 Common Equity Tier 1 items 1. Common Equity Tier 1 items of institutions consist of the following: (a) capital instruments, provided that the conditions laid down in Article 28 or, where applicable, Article 29 are met; (b) share premium accounts related to the instruments referred to in point (a); (c) retained earnings; (d) accumulated other comprehensive income; (e) other reserves; (f) funds for general banking risk. The items referred to in points (c) to (f) shall be recognised as Common Equity Tier 1 only where they are available to the institution for unrestricted and immediate use to cover risks or losses as soon as these occur. 2. For the purposes of point (c) of paragraph 1, institutions may include interim or year-end profits in Common Equity Tier 1 capital before the institution has taken a formal decision confirming the final profit or loss of the institution for the year only with the prior permission of the competent authority. The competent authority shall grant permission where the following conditions are met: (a) those profits have been verified by persons independent of the institution that are responsible for the auditing of the accounts of that institution; (b) the institution has demonstrated to the satisfaction of the competent authority that any foreseeable charge or dividend has been deducted from the amount of those profits. A verification of the interim or year-end profits of the institution shall provide an adequate level of assurance that those profits have been evaluated in accordance with the principles set out in the applicable accounting framework. 3. Competent authorities shall evaluate whether issuances of Common Equity Tier 1 capital instruments meet the criteria set out in Article 28 or, where applicable, Article 29. With respect to issuances after 28 June 2013, institutions Institutions shall classify issuances of capital instruments as Common Equity Tier 1 instruments only after permission is granted by the competent authorities, authorities. By way of derogation from the first subparagraph, institutions may classify as Common Equity Tier 1 instruments subsequent issuances of a form of Common Equity Tier 1 instruments for which may consult EBA. For capital instruments, with they have already received that permission, provided that both of the exception following conditions are met: (a) the provisions governing those subsequent issuances are substantially the same as the provisions governing those issuances for which the institutions have already received permission; (b) institutions have notified those subsequent issuances to the competent authorities sufficiently in advance of State aid, that are approved as eligible for their classification as Common Equity Tier 1 instruments. Competent authorities shall consult EBA before granting permission for new forms of capital instruments by to be classified as Common Equity Tier 1 instruments. Competent authorities shall have due regard to EBA's opinion and, where they decide to deviate from it, shall write to EBA within three months from the competent authority but where, in date of receipt of EBA's opinion setting out the opinion of EBA, compliance with rationale for deviating from the criteria relevant opinion. This subparagraph does not apply to the capital instruments referred to in Article 28 or, where applicable, Article 29, is materially complex to ascertain, the competent authorities shall explain their reasoning to EBA. 31. On the basis of information collected from each competent authority, authorities, EBA shall establish, maintain and publish a list of all the forms of capital instruments in each Member State that qualify as Common Equity Tier 1 instruments. In accordance with Article 35 of Regulation (EU) No 1093/2010, EBA shall may collect any information in connection with Common Equity Tier 1 instruments that it considers necessary to establish that list compliance with the criteria set out in Article 28 or, where applicable, Article 29 of this Regulation and publish it for the first time by 28 July 2013. EBA may, after purpose of maintaining and updating the list referred to in this subparagraph. Following the review process set out in Article 80 and, and where there is significant sufficient evidence of those that the relevant capital instruments do not meeting meet or have ceased to meet the criteria set out in Article 28 or, where applicable, Article 29, EBA may decide not to remove non-State aid capital add those instruments issued after 28 June 2013 from to the list and referred to in the fourth subparagraph or remove them from that list, as the case may be. EBA shall make an announcement to that effect. effect that shall also refer to the relevant competent authority's position on the matter. This subparagraph does not apply to the capital instruments referred to in Article 31. 4. EBA shall develop draft regulatory technical standards to specify the meaning of foreseeable when determining whether any foreseeable charge or dividend has been deducted. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 28 Common Equity Tier 1 instruments 1. Capital instruments shall qualify as Common Equity Tier 1 instruments only if all the following conditions are met: (a) the instruments are issued directly by the institution with the prior approval of the owners of the institution or, where permitted under applicable national law, the management body of the institution; (b) the instruments are fully paid up and their purchase the acquisition of ownership of those instruments is not funded directly or indirectly by the institution; (c) the instruments meet all the following conditions as regards their classification: (i) they qualify as capital within the meaning of Article 22 of Directive 86/635/EEC; (ii) they are classified as equity within the … 574 unchanged words … liquidation. The condition set out in point (j) of the first subparagraph shall be deemed to be met, notwithstanding the instruments are included in Additional Tier 1 or Tier 2 by virtue of Article 484(3), provided that they rank pari passu. For the purposes of point (b) of the first subparagraph, only the part of a capital instrument that is fully paid up shall be eligible to qualify as a Common Equity Tier 1 instrument. 2. The conditions laid down in point (i) of paragraph 1 shall be deemed to be met notwithstanding a write down on a permanent basis of the principal amount of Additional Tier 1 or Tier 2 instruments. The condition laid down in point (f) of paragraph 1 shall be deemed to be met notwithstanding the reduction of the principal amount of the capital instrument within a resolution procedure or as a consequence of a write down of capital instruments required by the resolution authority responsible for the institution. The condition laid down in point (g) of paragraph 1 shall be deemed to be met notwithstanding the provisions governing the capital instrument indicating expressly or implicitly that the principal amount of the instrument would or might be reduced within a resolution procedure or as a consequence of a write down of capital instruments required by the resolution authority responsible for the institution. 3. The condition laid down in point (h)(iii) of paragraph 1 shall be deemed to be met notwithstanding the instrument paying a dividend multiple, provided that such a dividend multiple does not result in a distribution that causes a disproportionate drag on own funds. The condition set out in point (h)(v) of the first subparagraph of paragraph 1 shall be considered to be met notwithstanding a subsidiary being subject to a profit and loss transfer agreement with its parent undertaking, according to which the subsidiary is obliged to transfer, following the preparation of its annual financial statements, its annual result to the parent undertaking, where all the following conditions are met: (a) the parent undertaking owns 90 % or more of the voting rights and capital of the subsidiary; (b) the parent undertaking and the subsidiary are located in the same Member State; (c) the agreement was concluded for legitimate taxation purposes; (d) in preparing the annual financial statement, the subsidiary has discretion to decrease the amount of distributions by allocating a part or all of its profits to its own reserves or funds for general banking risk before making any payment to its parent undertaking; (e) the parent undertaking is obliged under the agreement to fully compensate the subsidiary for all losses of the subsidiary; (f) the agreement is subject to a notice period according to which the agreement can be terminated only by the end of an accounting year, with such termination taking effect no earlier than the beginning of the following accounting year, leaving the parent undertaking's obligation to fully compensate the subsidiary for all losses incurred during the current accounting year unchanged. Where an institution has entered into a profit and loss transfer agreement, it shall notify the competent authority without delay and provide the competent authority with a copy of the agreement. The institution shall also notify the competent authority without delay of any changes to the profit and loss transfer agreement and the termination thereof. An institution shall not enter into more than one profit and loss transfer agreement. 4. For the purposes of point (h)(i) of paragraph 1, differentiated distributions shall only reflect differentiated voting rights. In this respect, higher distributions shall only apply to Common Equity Tier 1 instruments with fewer or no voting rights. 5. EBA shall develop draft regulatory technical standards to specify the following: (a) the applicable forms and nature of indirect funding of own funds instruments; (b) whether and when multiple distributions would constitute a disproportionate drag on own funds; (c) the meaning of preferential distributions. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 33 Cash flow hedges and changes in the value of own liabilities 1. Institutions shall not include the following items in any element of own funds: (a) the fair value reserves related to gains or losses on cash flow hedges of financial instruments that are not valued at fair value, including projected cash flows; (b) gains or losses on liabilities of the institution that are valued at fair value that result from changes in the own credit standing of the institution; (c) fair value gains and losses on derivative liabilities of the institution that result from changes in the own credit standing risk of the institution. 2. For the purposes of point (c) of paragraph 1, institutions shall not offset the fair value gains and losses arising from the institution's own credit risk with those arising from its counterparty credit risk. 3. Without prejudice to point (b) of paragraph 1, institutions may include the amount of gains and losses on their liabilities in own funds where all the following conditions are met: (a) the liabilities are in the form of bonds as referred to in Article 52(4) of Directive 2009/65/EC; (b) the changes in the value of the institution's assets and liabilities are due to the same changes in the institution's own credit standing; (c) there is a close correspondence between the value of the bonds referred to in point (a) and the value of the institution's assets; (d) it is possible to redeem the mortgage loans by buying back the bonds financing the mortgage loans at market or nominal value. 4. EBA shall develop draft regulatory technical standards to specify what constitutes close correspondence between the value of the bonds and the value of the assets, as referred to in point (c) of paragraph 3. EBA shall submit those draft regulatory technical standards to the Commission by 30 September 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 36 Deductions from Common Equity Tier 1 items 1. Institutions shall deduct the following from Common Equity Tier 1 items: (a) losses for the current financial year; (b) intangible assets; (c) deferred tax assets that rely on future profitability; (d) for institutions calculating risk-weighted exposure … 593 unchanged words … draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.4. EBA shall develop draft regulatory technical standards to specify the application of the deductions referred to in point (b) of paragraph 1, including the materiality of negative effects on the value which do not cause prudential concerns. EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2020. Power 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.

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Article 37 Deduction of intangible assets Institutions shall determine the amount of intangible assets to be deducted in accordance with the following: (a) the amount to be deducted shall be reduced by the amount of associated deferred tax liabilities that would be extinguished if the intangible assets became impaired or were derecognised under the applicable accounting framework; (b) the amount to be deducted shall include goodwill included in the valuation of significant investments of the institution. institution; (c) the amount to be deducted shall be reduced by the amount of the accounting revaluation of the subsidiaries' intangible assets derived from the consolidation of subsidiaries attributable to persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.

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Article 39 Tax overpayments, tax loss carry backs and deferred tax assets that do not rely on future profitability 1. The following items shall not be deducted from own funds and shall be subject to a risk weight in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable: (a) overpayments of tax by the institution for the current year; (b) current year tax losses of the institution carried back to previous years that give rise to a claim on, or a receivable from, a central government, regional government or local tax authority. 2. Deferred tax assets that do not rely on future profitability shall be limited to deferred tax assets arising which were created before 23 November 2016 and which arise from temporary differences, where all the following conditions are met: (a) they are automatically and mandatorily replaced without delay with a tax credit in the event that the institution reports a loss when the annual financial statements of the institution are formally approved, or in the event of liquidation or insolvency of the institution; (b) an institution is able under the applicable national tax law to offset a tax credit referred to in point (a) against any tax liability of the institution or any other undertaking included in the same consolidation as the institution for tax purposes under that law or any other undertaking subject to the supervision on a consolidated basis in accordance with Chapter 2 of Title II of Part One; (c) where the amount of tax credits referred to in point (b) exceeds the tax liabilities referred to in that point, any such excess is replaced without delay with a direct claim on the central government of the Member State in which the institution is incorporated. Institutions shall apply a risk weight of 100 % to deferred tax assets where the conditions laid down in points (a), (b) and (c) are met.

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Article 45 Deduction of holdings of Common Equity Tier 1 instruments of financial sector entities Institutions shall make the deductions required by points (h) and (i) of Article 36(1) in accordance with the following provisions: (a) they may calculate direct, indirect and synthetic holdings of Common Equity Tier 1 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met: (i) the maturity date of the short position matches is either the same as, or later than the maturity date of the long position or has a the residual maturity of the short position is at least one year; (ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book; (b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to the capital instruments of the financial sector entities in those indices.

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Article 49 Requirement for deduction where consolidation, supplementary supervision or institutional protection schemes are applied 1. For the purposes of calculating own funds on an individual basis, a sub-consolidated basis and a consolidated basis, where the competent authorities require or permit institutions … 341 unchanged words … first subparagraph shall not entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole forming or creating an obstacle to the functioning of the internal market. This paragraph shall not apply when calculating own funds for the purposes of the requirements laid down in Articles 92a and 92b, which shall be calculated in accordance with the deduction framework set out in Article 72e(4). 3. Competent authorities may, for the purposes of calculating own funds on an individual or sub-consolidated basis permit institutions not to deduct holdings of own funds instruments in the following cases: (a) where an institution has a holding in another institution and the conditions referred to in points (i) to (v) are met: (i) the institutions fall within the same institutional protection scheme referred to in Article 113(7); (ii) the competent authorities have granted the permission referred to in Article 113(7); (iii) the conditions laid down in Article 113(7) are satisfied; (iv) the institutional protection scheme draws up a consolidated balance sheet referred to in point (e) of Article 113(7) or, where it is not required to draw up consolidated accounts, an extended aggregated calculation that is, to the satisfaction of the competent authorities, equivalent to the provisions of Directive 86/635/EEC, which incorporates certain adaptations of the provisions of Directive 83/349/EEC or of Regulation (EC) No 1606/2002, governing the consolidated accounts of groups of credit institutions. The equivalence of that extended aggregated calculation shall be verified by an external auditor and in particular that the multiple use of elements eligible for the calculation of own funds as well as any inappropriate creation of own funds between the members of the institutional protection scheme is eliminated in the calculation. The consolidated balance sheet or the extended aggregated calculation shall be reported to the competent authorities no less frequently than with the frequency laid down set out in the implementing technical standards referred to in Article 99; 430(7); (v) the institutions included in an institutional protection scheme meet together on a consolidated or extended aggregated basis the requirements laid down in Article 92 and carry out reporting of compliance with those requirements in accordance with Article 99. 430. Within an institutional protection scheme the deduction of the interest owned by co-operative members or legal entities, which are not members of the institutional protection scheme, is not required, provided that the multiple use of elements eligible for the calculation of own funds as well as any inappropriate creation of own funds between the members of the institutional protection scheme and the minority shareholder, when it is an institution, is eliminated. (b) where a regional credit institution has a holding in its central or another regional credit institution and the conditions laid down in points (a)(i) to (v) are met. 4. The holdings in respect of which deduction is not made in accordance with paragraph 1, 2 or 3 shall qualify as exposures and shall be risk weighted in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable. 5. Where an institution applies method 1, 2 or 3 of Annex I to Directive 2002/87/EC, the institution shall disclose the supplementary own funds requirement and capital adequacy ratio of the financial conglomerate as calculated in accordance with Article 6 of and Annex I to that Directive. 6. EBA, EIOPA and the European Supervisory Authority (European Securities and Markets Authority) (ESMA) established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010OJ L 331, 15.12.2010, p. 84. shall, through the Joint Committee, develop draft regulatory technical standards to specify for the purposes of this Article the conditions of application of the calculation methods listed in Annex I, Part II of Directive 2002/87/EC for the purposes of the alternatives to deduction referred to in paragraph 1 of this Article. EBA, EIOPA and ESMA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010, of Regulation (EU) No 1094/2010 and of Regulation (EU) No 1095/2010 respectively.

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Article 52 Additional Tier 1 instruments 1. Capital instruments shall qualify as Additional Tier 1 instruments only if the following conditions are met: (a) the instruments are directly issued by an institution and fully paid up; (b) the instruments are not purchased owned by any of the following: (i) the institution or its subsidiaries; (ii) an undertaking in which the institution has a participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking; (c) the purchase acquisition of ownership of the instruments is not funded directly or indirectly by the institution; (d) the instruments rank below Tier 2 instruments in the event of the insolvency of the institution; (e) the instruments are neither secured nor subject to a guarantee that enhances the seniority of the claims by any of the following: (i) the institution or its subsidiaries; (ii) the parent undertaking of the institution or its subsidiaries; (iii) the parent financial holding company or its subsidiaries; (iv) the mixed activity holding company or its subsidiaries; (v) the mixed financial holding company or its subsidiaries; (vi) any undertaking that has close links with entities referred to in points (i) to (v); (f) the instruments are not subject to any arrangement, contractual or otherwise, that enhances the seniority of the claim under the instruments in insolvency or liquidation; (g) the instruments are perpetual and the provisions governing them include no incentive for the institution to redeem them; (h) where the provisions governing the instruments include one or more early redemption options including call options, the option to call may be exercised options are exercisable at the sole discretion of the issuer; (i) the instruments may be called, redeemed or repurchased only where the conditions laid down in Article 77 are met, and not before five years after the date of issuance except where the conditions laid down in Article 78(4) are met; (j) the provisions governing the instruments do not indicate explicitly or implicitly that the instruments would or might be called, redeemed or repurchased repurchased, as applicable, by the institution other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication, except in the following cases: (i) the liquidation of the institution; (ii) discretionary repurchases of the instruments or other discretionary means of reducing the amount of Additional Tier 1 capital, where the institution has received the prior permission of the competent authority in accordance with Article 77; indication; (k) the institution does not indicate explicitly or implicitly that the competent authority would consent to a request to call, redeem or repurchase the instruments; (l) distributions under the instruments meet the following conditions: (i) they are paid out of distributable items; (ii) the level of distributions made on the instruments will not be amended on the basis of the credit standing of the institution or its parent undertaking; (iii) the provisions governing the instruments give the institution full discretion at all times to cancel the distributions on the instruments for an unlimited period and on a non-cumulative basis, and the institution may use such cancelled payments without restriction to meet its obligations as they fall due; (iv) cancellation of distributions does not constitute an event of default of the institution; (v) the cancellation of distributions imposes no restrictions on the institution; (m) the instruments do not contribute to a determination that the liabilities of an institution exceed its assets, where such a determination constitutes a test of insolvency under applicable national law; (n) the provisions governing the instruments require that, upon the occurrence of a trigger event, the principal amount of the instruments be written down on a permanent or temporary basis or the instruments be converted to Common Equity Tier 1 instruments; (o) the provisions governing the instruments include no feature that could hinder the recapitalisation of the institution; (p) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the law or contractual provisions governing the instruments require that, upon a decision by the resolution authority to exercise the write-down and conversion powers referred to in Article 59 of that Directive, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted to Common Equity Tier 1 instruments; where the issuer is established in a third country and has not been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union, the law or contractual provisions governing the instruments require that, upon a decision by the relevant third-country authority, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted into Common Equity Tier 1 instruments; (q) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the instruments may only be issued under, or be otherwise subject to the laws of a third country where, under those laws, the exercise of the write-down and conversion powers referred to in Article 59 of that Directive is effective and enforceable on the basis of statutory provisions or legally enforceable contractual provisions that recognise resolution or other write-down or conversion actions; (r) the instruments are not issued directly by an institution, both the following conditions shall be met: (i) the instruments are issued through an entity within the consolidation pursuant subject to Chapter 2 of Title II of Part One; (ii) the proceeds are immediately available set-off or netting arrangements that would undermine their capacity to the institution without limitation and in a form that satisfies the conditions laid down in this paragraph. absorb losses. The condition set out in point (d) of the first subparagraph shall be deemed to be met notwithstanding the fact that the instruments are included in Additional Tier 1 or Tier 2 by virtue of Article 484(3), provided that they rank pari passu. For the purposes of point (a) of the first subparagraph, only the part of a capital instrument that is fully paid up shall be eligible to qualify as an Additional Tier 1 instrument. 2. EBA shall develop draft regulatory technical standards to specify all the following: (a) the form and nature of incentives to redeem; (b) the nature of any write up of the principal amount of an Additional Tier 1 instrument following a write down of its principal amount on a temporary basis; (c) the procedures and timing for the following: (i) determining that a trigger event has occurred; (ii) writing up the principal amount of an Additional Tier 1 instrument following a write down of its principal amount on a temporary basis; (d) features of instruments that could hinder the recapitalisation of the institution; (e) the use of special purpose entities for indirect issuance of own funds instruments. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 54 Write down or conversion of Additional Tier 1 instruments 1. For the purposes of point (n) of Article 52(1), the following provisions shall apply to Additional Tier 1 instruments: (a) a trigger event occurs when the Common Equity Tier 1 capital ratio of the institution referred to in point (a) of Article 92(1) falls below either of the following: (i) 5,125 %; (ii) a level higher than 5,125 %, where determined by the institution and specified in the provisions governing the instrument; (b) institutions may specify in the provisions governing the instrument one or more trigger events in addition to that referred to in point (a); (c) where the provisions governing the instruments require them to be converted into Common Equity Tier 1 instruments upon the occurrence of a trigger event, those provisions shall specify either of the following: (i) the rate of such conversion and a limit on the permitted amount of conversion; (ii) a range within which the instruments will convert into Common Equity Tier 1 instruments; (d) where the provisions governing the instruments require their principal amount to be written down upon the occurrence of a trigger event, the write down shall reduce all the following: (i) the claim of the holder of the instrument in the insolvency or liquidation of the institution; (ii) the amount required to be paid in the event of the call or redemption of the instrument; (iii) the distributions made on the instrument. instrument; (e) where the Additional Tier 1 instruments have been issued by a subsidiary undertaking established in a third country, the 5,125 % or higher trigger referred to in point (a) shall be calculated in accordance with the national law of that third country or contractual provisions governing the instruments, provided that the competent authority, after consulting EBA, is satisfied that those provisions are at least equivalent to the requirements set out in this Article. 2. Write down or conversion of an Additional Tier 1 instrument shall, under the applicable accounting framework, generate items that qualify as Common Equity Tier 1 items. 3. The amount of Additional Tier 1 instruments recognised in Additional Tier 1 items is limited to the minimum amount of Common Equity Tier 1 items that would be generated if the principal amount of the Additional Tier 1 instruments were fully written down or converted into Common Equity Tier 1 instruments. 4. The aggregate amount of Additional Tier 1 instruments that is required to be written down or converted upon the occurrence of a trigger event shall be no less than the lower of the following: (a) the amount required to restore fully the Common Equity Tier 1 ratio of the institution to 5,125 %; (b) the full principal amount of the instrument. 5. When a trigger event occurs institutions shall do the following: (a) immediately inform the competent authorities; (b) inform the holders of the Additional Tier 1 instruments; (c) write down the principal amount of the instruments, or convert the instruments into Common Equity Tier 1 instruments without delay, but no later than within one month, in accordance with the requirement laid down in this Article. 6. An institution issuing Additional Tier 1 instruments that convert to Common Equity Tier 1 on the occurrence of a trigger event shall ensure that its authorised share capital is at all times sufficient, for converting all such convertible Additional Tier 1 instruments into shares if a trigger event occurs. All necessary authorisations shall be obtained at the date of issuance of such convertible Additional Tier 1 instruments. The institution shall maintain at all times the necessary prior authorisation to issue the Common Equity Tier 1 instruments into which such Additional Tier 1 instruments would convert upon occurrence of a trigger event. 7. An institution issuing Additional Tier 1 instruments that convert to Common Equity Tier 1 on the occurrence of a trigger event shall ensure that there are no procedural impediments to that conversion by virtue of its incorporation or statutes or contractual arrangements.

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Article 59 Deduction of holdings of Additional Tier 1 instruments of financial sector entities Institutions shall make the deductions required by points (c) and (d) of Article 56 in accordance with the following: (a) they may calculate direct, indirect and synthetic holdings of Additional Tier 1 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met: (i) the maturity date of the short position matches is either the same as, or later than the maturity date of the long position or has a the residual maturity of the short position is at least one year; (ii) either both the short position and the long position are held in the trading book or both are held in the non-trading book. (b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to the capital instruments of the financial sector entities in those indices.

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Article 62 Tier 2 items Tier 2 items shall consist of the following: (a) capital instruments and subordinated loans where the conditions laid down set out in Article 63 are met; met, and to the extent specified in Article 64; (b) the share premium accounts related to instruments referred to in point (a); (c) for institutions calculating risk-weighted exposure amounts in accordance with Chapter 2 of Title II of Part Three, general credit risk adjustments, gross of tax effects, of up to 1,25 % of risk-weighted exposure amounts calculated in accordance with Chapter 2 of Title II of Part Three; (d) for institutions calculating risk-weighted exposure amounts under Chapter 3 of Title II of Part Three, positive amounts, gross of tax effects, resulting from the calculation laid down in Articles 158 and 159 up to 0,6 % of risk-weighted exposure amounts calculated under Chapter 3 of Title II of Part Three. Items included under point (a) shall not qualify as Common Equity Tier 1 or Additional Tier 1 items.

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Article 63 Tier 2 instruments Capital instruments and subordinated loans shall qualify as Tier 2 instruments instruments, provided that the following conditions are met: (a) the instruments are directly issued or the subordinated loans are raised, as applicable, by an institution and fully paid-up; paid up; (b) the instruments are not purchased or the subordinated loans are not granted, as applicable, owned by any of the following: (i) the institution or its subsidiaries; (ii) an undertaking in which the institution has participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking; (c) the purchase acquisition of ownership of the instruments or the granting of the subordinated loans, as applicable, is not funded directly or indirectly by the institution; (d) the claim on the principal amount of the instruments under the provisions governing the instruments or the ranks below any claim of the principal amount of the subordinated loans under the provisions governing the subordinated loans, as applicable, is wholly subordinated to claims of all non-subordinated creditors; from eligible liabilities instruments; (e) the instruments are not secured or subordinated loans, as applicable, are neither secured, nor not subject to a guarantee that enhances the seniority of the claim by any of the following: (i) the institution or its subsidiaries; (ii) the parent undertaking of the institution or its subsidiaries; (iii) the parent financial holding company or its subsidiaries; (iv) the mixed activity holding company or its subsidiaries; (v) the mixed financial holding company or its subsidiaries; (vi) any undertaking that has close links with entities referred to in points (i) to (v); (f) the instruments or subordinated loans, as applicable, are not subject to any arrangement that otherwise enhances the seniority of the claim under the instruments or subordinated loans respectively; instruments; (g) the instruments or subordinated loans, as applicable, have an original maturity of at least five years; (h) the provisions governing the instruments or subordinated loans, as applicable, do not include any incentive for their principal amount to be redeemed or repaid, as applicable by the institution prior to their maturity; (i) where the instruments or subordinated loans, as applicable, include one or more call options or early repayment options, as applicable, including call options, the options are exercisable at the sole discretion of the issuer or debtor, as applicable; issuer; (j) the instruments or subordinated loans, as applicable, may be called, redeemed redeemed, repaid or repurchased or repaid early only where the conditions laid down set out in Article 77 are met, and not before five years after the date of issuance or raising, as applicable, issuance, except where the conditions laid down set out in Article 78(4) are met; (k) the provisions governing the instruments or subordinated loans, as applicable, do not indicate explicitly or implicitly that the instruments or subordinated loans, as applicable, would or might be called, redeemed, repaid or repurchased or repaid early, as applicable applicable, by the institution other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication; (l) the provisions governing the instruments or subordinated loans, as applicable, do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the institution; (m) the level of interest or dividend dividends payments, as applicable, due on the instruments or subordinated loans, as applicable, will not be amended on the basis of the credit standing of the institution or its parent undertaking; (n) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the law or contractual provisions governing the instruments require that, upon a decision by the resolution authority to exercise the write-down and conversion powers referred to in Article 59 of that Directive, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted to Common Equity Tier 1 instruments; where the issuer is established in a third country and has not been designated in accordance with Article 12 of Directive 2014/59/EU as a part of a resolution group the resolution entity of which is established in the Union, the law or contractual provisions governing the instruments require that, upon a decision by the relevant third-country authority, the principal amount of the instruments is to be written down on a permanent basis or the instruments are to be converted into Common Equity Tier 1 instruments; (o) where the issuer is established in a third country and has been designated in accordance with Article 12 of Directive 2014/59/EU as part of a resolution group the resolution entity of which is established in the Union or where the issuer is established in a Member State, the instruments may only be issued under, or be otherwise subject to the laws of a third country where, under those laws, the exercise of the write-down and conversion powers referred to in Article 59 of that Directive is effective and enforceable on the basis of statutory provisions or legally enforceable contractual provisions that recognise resolution or other write-down or conversion actions; (p) the instruments are not issued directly by an institution, subject to set-off or where netting arrangements that would undermine their capacity to absorb losses. For the subordinated loans are not raised directly by an institution, as applicable, both purposes of point (a) of the following conditions are met: (i) first paragraph, only the instruments are issued or subordinated loans are raised, as applicable, through an entity, which is part of the consolidation pursuant capital instrument that is fully paid up shall be eligible to Chapter qualify as a Tier 2 of Title II of Part One; (ii) the proceeds are immediately available to the institution without limitation in a form that satisfies the conditions laid down in this paragraph. instrument.

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Article 64 Amortisation of Tier 2 instruments 1. The full amount of Tier 2 instruments with a residual maturity of more than five years shall qualify as Tier 2 items. 2. The extent to which Tier 2 instruments qualify as Tier 2 items during the final five years of maturity of the instruments is calculated by multiplying the result derived from the calculation referred to in point (a) by the amount referred to in point (b) as follows: (a) the nominal carrying amount of the instruments or subordinated loans on the first day of the final five year five-year period of their contractual maturity divided by the number of calendar days in that period; (b) the number of remaining calendar days of contractual maturity of the instruments or subordinated loans. instruments.

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Article 66 Deductions from Tier 2 items The following shall be deducted from Tier 2 items: (a) direct, indirect and synthetic holdings by an institution of own Tier 2 instruments, including own Tier 2 instruments that an institution could be obliged to purchase as a result of existing contractual obligations; (b) direct, indirect and synthetic holdings of the Tier 2 instruments of financial sector entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to inflate artificially the own funds of the institution; (c) the applicable amount determined in accordance with Article 70 of direct, indirect and synthetic holdings of the Tier 2 instruments of financial sector entities, where an institution does not have a significant investment in those entities; (d) direct, indirect and synthetic holdings by the institution of the Tier 2 instruments of financial sector entities where the institution has a significant investment in those entities, excluding underwriting positions held for fewer than five working days. days; (e) the amount of items required to be deducted from eligible liabilities items pursuant to Article 72e that exceeds the eligible liabilities items of the institution.

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Article 69 Deduction of holdings of Tier 2 instruments of financial sector entities Institutions shall make the deductions required by points (c) and (d) of Article 66 in accordance with the following: (a) they may calculate direct, indirect and synthetic holdings of Tier 2 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met: (i) the maturity date of the short position matches is either the same as, or later than the maturity date of the long position or has a the residual maturity of the short position is at least one year; (ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book; (b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the capital instruments of the financial sector entities in those indices.

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Article 72a
Eligible liabilities items
1. Eligible liabilities items shall consist of the following, unless they fall into any of the categories of excluded liabilities laid down in paragraph 2 of this Article, and to the extent specified in Article 72c:
(a) eligible liabilities instruments where the conditions set out in Article 72b are met, to the extent that they do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 items;
(b) Tier 2 instruments with a residual maturity of at least one year, to the extent that they do not qualify as Tier 2 items in accordance with Article 64.
2. The following liabilities shall be excluded from eligible liabilities items:
(a) covered deposits;
(b) sight deposits and short term deposits with an original maturity of less than one year;
(c) the part of eligible deposits from natural persons and micro, small and medium-sized enterprises which exceeds the coverage level referred to in Article 6 of Directive 2014/49/EU of the European Parliament and of the CouncilDirective 2014/49/EU of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ L 173, 12.6.2014, p. 149).;
(d) deposits that would be eligible deposits from natural persons, micro, small and medium–sized enterprises if they were not made through branches located outside the Union of institutions established in the Union;
(e) secured liabilities, including covered bonds and liabilities in the form of financial instruments used for hedging purposes that form an integral part of the cover pool and that in accordance with national law are secured in a manner similar to covered bonds, provided that all secured assets relating to a covered bond cover pool remain unaffected, segregated and with enough funding and excluding any part of a secured liability or a liability for which collateral has been pledged that exceeds the value of the assets, pledge, lien or collateral against which it is secured;
(f) any liability that arises by virtue of the holding of client assets or client money including client assets or client money held on behalf of collective investment undertakings, provided that such a client is protected under the applicable insolvency law;
(g) any liability that arises by virtue of a fiduciary relationship between the resolution entity or any of its subsidiaries (as fiduciary) and another person (as beneficiary), provided that such a beneficiary is protected under the applicable insolvency or civil law;
(h) liabilities to institutions, excluding liabilities to entities that are part of the same group, with an original maturity of less than seven days;
(i) liabilities with a remaining maturity of less than seven days, owed to:
(i) systems or system operators designated in accordance with Directive 98/26/EC of the European Parliament and of the CouncilDirective 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (OJ L 166, 11.6.1998, p. 45).;
(ii) participants in a system designated in accordance with Directive 98/26/EC and arising from the participation in such a system; or
(iii) third-country CCPs recognised in accordance with Article 25 of Regulation (EU) No 648/2012;
(j) a liability to any of the following:
(i) an employee in relation to accrued salary, pension benefits or other fixed remuneration, except for the variable component of the remuneration that is not regulated by a collective bargaining agreement, and except for the variable component of the remuneration of material risk takers as referred to in Article 92(2) of Directive 2013/36/EU;
(ii) a commercial or trade creditor where the liability arises from the provision to the institution or the parent undertaking of goods or services that are critical to the daily functioning of the institution's or parent undertaking's operations, including IT services, utilities and the rental, servicing and upkeep of premises;
(iii) tax and social security authorities, provided that those liabilities are preferred under the applicable law;
(iv) deposit guarantee schemes where the liability arises from contributions due in accordance with Directive 2014/49/EU;
(k) liabilities arising from derivatives;
(l) liabilities arising from debt instruments with embedded derivatives.
For the purposes of point (l) of the first subparagraph, debt instruments containing early redemption options exercisable at the discretion of the issuer or of the holder, and debt instruments with variable interests derived from a broadly used reference rate such as Euribor or Libor, shall not be considered as debt instruments with embedded derivatives solely because of such features.

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Article 72b
Eligible liabilities instruments
1. Liabilities shall qualify as eligible liabilities instruments, provided that they comply with the conditions set out in this Article and only to the extent specified in this Article.
2. Liabilities shall qualify as eligible liabilities instruments, provided that all the following conditions are met:
(a) the liabilities are directly issued or raised, as applicable, by an institution and are fully paid up;
(b) the liabilities are not owned by any of the following:
(i) the institution or an entity included in the same resolution group;
(ii) an undertaking in which the institution has a direct or indirect participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;
(c) the acquisition of ownership of the liabilities is not funded directly or indirectly by the resolution entity;
(d) the claim on the principal amount of the liabilities under the provisions governing the instruments is wholly subordinated to claims arising from the excluded liabilities referred to in Article 72a(2); that subordination requirement shall be considered to be met in any of the following situations:
(i) the contractual provisions governing the liabilities specify that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;
(ii) the applicable law specifies that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation;
(iii) the instruments are issued by a resolution entity which does not have on its balance sheet any excluded liabilities as referred to in Article 72a(2) of this Regulation that rank pari passu or junior to eligible liabilities instruments;
(e) the liabilities are neither secured, nor subject to a guarantee or any other arrangement that enhances the seniority of the claim by any of the following:
(i) the institution or its subsidiaries;
(ii) the parent undertaking of the institution or its subsidiaries;
(iii) any undertaking that has close links with entities referred to in points (i) and (ii);
(f) the liabilities are not subject to set-off or netting arrangements that would undermine their capacity to absorb losses in resolution;
(g) the provisions governing the liabilities do not include any incentive for their principal amount to be called, redeemed or repurchased prior to their maturity or repaid early by the institution, as applicable, except in the cases referred to in Article 72c(3);
(h) the liabilities are not redeemable by the holders of the instruments prior to their maturity, except in the cases referred to in Article 72c(2);
(i) subject to Article 72c(3) and (4), where the liabilities include one or more early repayment options, including call options, the options are exercisable at the sole discretion of the issuer, except in the cases referred to in Article 72c(2);
(j) the liabilities may only be called, redeemed, repaid or repurchased early where the conditions set out in Articles 77 and 78a are met;
(k) the provisions governing the liabilities do not indicate explicitly or implicitly that the liabilities would be called, redeemed, repaid or repurchased early, as applicable by the resolution entity other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;
(l) the provisions governing the liabilities do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the resolution entity;
(m) the level of interest or dividend payments, as applicable, due on the liabilities is not amended on the basis of the credit standing of the resolution entity or its parent undertaking;
(n) for instruments issued after 28 June 2021 the relevant contractual documentation and, where applicable, the prospectus related to the issuance explicitly refer to the possible exercise of the write-down and conversion powers in accordance with Article 48 of Directive 2014/59/EU.
For the purposes of point (a) of the first subparagraph, only the parts of liabilities that are fully paid up shall be eligible to qualify as eligible liabilities instruments.
For the purposes of point (d) of the first subparagraph of this Article, where some of the excluded liabilities referred to in Article 72a(2) are subordinated to ordinary unsecured claims under national insolvency law, inter alia, due to being held by a creditor who has close links with the debtor, by being or having been a shareholder, in a control or group relationship, a member of the management body or related to any of those persons, subordination shall not be assessed by reference to claims arising from such excluded liabilities.
3. In addition to the liabilities referred to in paragraph 2 of this Article, the resolution authority may permit liabilities to qualify as eligible liabilities instruments up to an aggregate amount that does not exceed 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3) and (4), provided that:
(a) all the conditions set out in paragraph 2 except for the condition set out in point (d) of the first subparagraph of paragraph 2 are met;
(b) the liabilities rank pari passu with the lowest ranking excluded liabilities referred to in Article 72a(2) with the exception of the excluded liabilities that are subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article; and
(c) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.
4. The resolution authority may permit liabilities to qualify as eligible liabilities instruments in addition to the liabilities referred to in paragraph 2, provided that:
(a) the institution is not permitted to include in eligible liabilities items liabilities referred to in paragraph 3;
(b) all the conditions set out in paragraph 2, except for the condition set out in point (d) of the first subparagraph of paragraph 2, are met;
(c) the liabilities rank pari passu or are senior to the lowest ranking excluded liabilities referred to in Article 72a(2), with the exception of the excluded liabilities subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article;
(d) on the balance sheet of the institution, the amount of the excluded liabilities referred to in Article 72a(2) which rank pari passu or below those liabilities in insolvency does not exceed 5 % of the amount of the own funds and eligible liabilities of the institution;
(e) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.
5. The resolution authority may only permit an institution to include liabilities referred to either in paragraph 3 or 4 as eligible liabilities items.
6. The resolution authority shall consult the competent authority when examining whether the conditions set out in this Article are fulfilled.
7. EBA shall develop draft regulatory technical standards to specify:
(a) the applicable forms and nature of indirect funding of eligible liabilities instruments;
(b) the form and nature of incentives to redeem for the purposes of the condition set out in point (g) of the first subparagraph of paragraph 2 of this Article and Article 72c(3).
Those draft regulatory technical standards shall be fully aligned with the delegated act referred to in point (a) of Article 28(5) and in point (a) of Article 52(2).
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power 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.

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Article 72c
Amortisation of eligible liabilities instruments
1. Eligible liabilities instruments with a residual maturity of at least one year shall fully qualify as eligible liabilities items.
Eligible liabilities instruments with a residual maturity of less than one year shall not qualify as eligible liabilities items.
2. For the purposes of paragraph 1, where a eligible liabilities instrument includes a holder redemption option exercisable prior to the original stated maturity of the instrument, the maturity of the instrument shall be defined as the earliest possible date on which the holder can exercise the redemption option and request redemption or repayment of the instrument.
3. For the purposes of paragraph 1, where an eligible liabilities instrument includes an incentive for the issuer to call, redeem, repay or repurchase the instrument prior to the original stated maturity of the instrument, the maturity of the instrument shall be defined as the earliest possible date on which the issuer can exercise that option and request redemption or repayment of the instrument.
4. For the purposes of paragraph 1, where an eligible liabilities instrument includes early redemption options that are exercisable at the sole discretion of the issuer prior to the original stated maturity of the instrument, but where the provisions governing the instrument do not include any incentive for the instrument to be called, redeemed, repaid or repurchased prior to its maturity and do not include any option for redemption or repayment at the discretion of the holders, the maturity of the instrument shall be defined as the original stated maturity.

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Article 72d
Consequences of the eligibility conditions ceasing to be met
Where, in the case of an eligible liabilities instrument, the applicable conditions set out in Article 72b cease to be met, the liabilities shall immediately cease to qualify as eligible liabilities instruments.
Liabilities referred to in Article 72b(2) may continue to count as eligible liabilities instruments as long as they qualify as eligible liabilities instruments under Article 72b(3) or (4).

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Article 72e
Deductions from eligible liabilities items
1. Institutions that are subject to Article 92a shall deduct the following from eligible liabilities items:
(a) direct, indirect and synthetic holdings by the institution of own eligible liabilities instruments, including own liabilities that that institution could be obliged to purchase as a result of existing contractual obligations;
(b) direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to artificially inflate the loss absorption and recapitalisation capacity of the resolution entity;
(c) the applicable amount determined in accordance with Article 72i of direct, indirect and synthetic holdings of eligible liabilities instruments of G-SII entities, where the institution does not have a significant investment in those entities;
(d) direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities, where the institution has a significant investment in those entities, excluding underwriting positions held for five business days or fewer.
2. For the purposes of this Section, all instruments ranking pari passu with eligible liabilities instruments shall be treated as eligible liabilities instruments, with the exception of instruments ranking pari passu with instruments recognised as eligible liabilities pursuant to Article 72b(3) and (4).
3. For the purposes of this Section, institutions may calculate the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3) as follows:hiHiliLi
where:
h
the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3);
i
the index denoting the issuing institution;
Hi
the total amount of holdings of eligible liabilities of the issuing institution i referred to in Article 72b(3);
li
the amount of liabilities included in eligible liabilities items by the issuing institution i within the limits specified in Article 72b(3) according to the latest disclosures by the issuing institution; and
Li
the total amount of the outstanding liabilities of the issuing institution i referred to in Article 72b(3) according to the latest disclosures by the issuer.
4. Where an EU parent institution or a parent institution in a Member State that is subject to Article 92a has direct, indirect or synthetic holdings of own funds instruments or eligible liabilities instruments of one or more subsidiaries which do not belong to the same resolution group as that parent institution, the resolution authority of that parent institution, after duly considering the opinion of the resolution authorities of any subsidiaries concerned, may permit the parent institution to deduct such holdings by deducting a lower amount specified by the resolution authority of that parent institution. That adjusted amount shall be at least equal to the amount (m) calculated as follows:
mi = max{0; OPi + LPi – max{0; β · [Oi + Li – ri · aRWAi]}}
where:
i
the index denoting the subsidiary;
OPi
the amount of own funds instruments issued by subsidiary i and held by the parent institution;
LPi
the amount of eligible liabilities items issued by subsidiary i and held by the parent institution;
β
percentage of own funds instruments and eligible liabilities items issued by subsidiary i and held by the parent undertaking;
Oi
the amount of own funds of subsidiary i, not taking into account the deduction calculated in accordance with this paragraph;
Li
the amount of eligible liabilities of subsidiary i, not taking into account the deduction calculated in accordance with this paragraph;
ri
the ratio applicable to subsidiary i at the level of its resolution group in accordance with point (a) of Article 92a(1) of this Regulation and Article 45d of Directive 2014/59/EU; and
aRWAi
the total risk exposure amount of the G-SII entity i calculated in accordance with Article 92(3) and (4), taking into account the adjustments set out in Article 12a.
Where the parent institution is allowed to deduct the adjusted amount in accordance with the first subparagraph, the difference between the amount of holdings of own funds instruments and eligible liabilities instruments referred to in the first subparagraph and that adjusted amount shall be deducted by the subsidiary.

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Article 72f
Deduction of holdings of own eligible liabilities instruments
For the purposes of point (a) of Article 72e(1), institutions shall calculate holdings on the basis of the gross long positions subject to the following exceptions:
(a) institutions may calculate the amount of holdings on the basis of the net long position, provided that both the following conditions are met:
(i) the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk;
(ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book;
(b) institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own eligible liabilities instruments in those indices;
(c) institutions may net gross long positions in own eligible liabilities instruments resulting from holdings of index securities against short positions in own eligible liabilities instruments resulting from short positions in underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met:
(i) the long and short positions are in the same underlying indices;
(ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book.

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Article 72g
Deduction base for eligible liabilities items
For the purposes of points (b), (c) and (d) of Article 72e(1), institutions shall deduct the gross long positions subject to the exceptions laid down in Articles 72h and 72i.

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Article 72h
Deduction of holdings of eligible liabilities of other G-SII entities
Institutions not making use of the exception set out in Article 72j shall make the deductions referred to in points (c) and (d) of Article 72e(1) in accordance with the following:
(a) they may calculate direct, indirect and synthetic holdings of eligible liabilities instruments on the basis of the net long position in the same underlying exposure, provided that both the following conditions are met:
(i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year;
(ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book;
(b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the eligible liabilities instruments in those indices.

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Article 72i
Deduction of eligible liabilities where the institution does not have a significant investment in G-SII entities
1. For the purposes of point (c) of Article 72e(1), institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:
(a) the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the institution has a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution after applying the following:
(i) Articles 32 to 35;
(ii) points (a) to (g), points (k)(ii) to (k)(v) and point (l) of Article 36(1), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences;
(iii) Articles 44 and 45;
(b) the amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment divided by the aggregate amount of the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the resolution entity has a significant investment.
2. Institutions shall exclude underwriting positions held for five business days or fewer from the amounts referred to in point (a) of paragraph 1 and from the calculation of the factor in accordance with point (b) of paragraph 1.
3. The amount to be deducted pursuant to paragraph 1 shall be apportioned across each eligible liabilities instrument of a G-SII entity held by the institution. Institutions shall determine the amount of each eligible liabilities instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:
(a) the amount of holdings required to be deducted pursuant to paragraph 1;
(b) the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment represented by each eligible liabilities instrument held by the institution.
4. The amount of holdings referred to in point (c) of Article 72e(1) that is equal to or less than 10 % of the Common Equity Tier 1 items of the institution after applying the provisions laid down in points (a)(i), (a)(ii) and (a)(iii) of paragraph 1 of this Article shall not be deducted and shall be subject to the applicable risk weights in accordance with Chapter 2 or 3 of Title II of Part Three and the requirements laid down in Title IV of Part Three, as applicable.
5. Institutions shall determine the amount of each eligible liabilities instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount of holdings required to be risk weighted pursuant to paragraph 4 by the proportion resulting from the calculation specified in point (b) of paragraph 3.

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Article 72j
Trading book exception from deductions from eligible liabilities items
1. Institutions may decide not to deduct a designated part of their direct, indirect and synthetic holdings of eligible liabilities instruments, that in aggregate and measured on a gross long basis is equal to or less than 5 % of the Common Equity Tier 1 items of the institution after applying Articles 32 to 36, provided that all the following conditions are met:
(a) the holdings are in the trading book;
(b) the eligible liabilities instruments are held for no longer than 30 business days.
2. The amounts of the items that are not deducted pursuant to paragraph 1 shall be subject to own funds requirements for items in the trading book.
3. Where, in the case of holdings not deducted in accordance with paragraph 1, the conditions set out in that paragraph cease to be met, the holdings shall be deducted in accordance with Article 72g without applying the exceptions laid down in Articles 72h and 72i.

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Article 72k
Eligible liabilities
The eligible liabilities of an institution shall consist of the eligible liabilities items of the institution after the deductions referred to in Article 72e.

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Article 72l
Own funds and eligible liabilities
The own funds and eligible liabilities of an institution shall consist of the sum of its own funds and its eligible liabilities.

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Article 73 Distributions on own funds instruments 1. Capital instruments and liabilities for which an institution has the sole discretion to decide to pay distributions in a form other than cash or an own funds instrument instruments shall not be capable of qualifying eligible to qualify as Common Equity Tier 1, Additional Tier 1 or 1, Tier 2 instruments or eligible liabilities instruments, unless the institution has received the prior permission of the competent authorities. authority. 2. Competent authorities shall grant the prior permission referred to in paragraph 1 only where they consider all the following conditions to be met: (a) the ability of the institution to cancel payments under the instrument would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made; (b) the ability of the capital instrument or of the liability to absorb losses would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made; (c) the quality of the capital instrument or liability would not otherwise be reduced by the discretion referred to in paragraph 1, or by the form in which distributions could be made. The competent authority shall consult the resolution authority regarding an institution's compliance with those conditions before granting the prior permission referred to in paragraph 1. 3. Capital instruments and liabilities for which a legal person other than the institution issuing them has the discretion to decide or require that the payment of distributions on the instrument those instruments or liabilities shall be made in a form other than cash or an own funds instrument instruments shall not be capable of qualifying eligible to qualify as Common Equity Tier 1, Additional Tier 1 or 1, Tier 2 or eligible liabilities instruments. 4. Institutions may use a broad market index as one of the bases for determining the level of distributions on Additional Tier 1 and 1, Tier 2 and eligible liabilities instruments. 5. Paragraph 4 shall not apply where the institution is a reference entity in that broad market index unless both the following conditions are met: (a) the institution considers movements in that broad market index not to be significantly correlated to the credit standing of the institution, its parent institution or parent financial holding company or parent mixed financial holding company or parent mixed activity holding company; (b) the competent authority has not reached a different determination from that referred to in point (a). 6. Institutions shall report and disclose the broad market indices on which their capital instruments and eligible liabilities instruments rely. 7. EBA shall develop draft regulatory technical standards to specify the conditions according to which indices shall be deemed to qualify as broad market indices for the purposes of paragraph 4. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 75 Deduction and maturity requirements for short positions The maturity requirements for short positions referred to in point (a) of Article 45, point (a) of Article 59 59, point (a) of Article 69 and point (a) of Article 69 72h shall be deemed considered to be met in respect of positions held where all the following conditions are met: (a) the institution has the contractual right to sell on a specific future date to the counterparty providing the hedge the long position that is being hedged; (b) the counterparty providing the hedge to the institution is contractually obliged to purchase from the institution on that specific future date the long position referred to in point (a).

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Article 76 Index holdings of capital instruments 1. For the purposes of point (a) of Article 42, point (a) of Article 45, point (a) of Article 57, point (a) of Article 59, point (a) of Article 67 67, point (a) of Article 69 and point (a) of Article 69, 72h, institutions may reduce the amount of a long position in a capital instrument by the portion of an index that is made up of the same underlying exposure that is being hedged, provided that all the following conditions are met: (a) either both the long position being hedged and the short position in an index used to hedge that long position are held in the trading book or both are held in the non-trading book; (b) the positions referred to in point (a) are held at fair value on the balance sheet of the institution; (c) the short position referred to in point (a) qualifies as an effective hedge under the internal control processes of the institution; (d) the competent authorities assess the adequacy of the internal control processes referred to in point (c) on at least an annual basis and are satisfied with their continuing appropriateness. 2. Where the competent authority has given granted its prior permission, an institution may use a conservative estimate of the underlying exposure of the institution to capital instruments included in indices as an alternative to an institution calculating its exposure to the items referred to in either one or both more of points (a) and (b): the following points: (a) own Common Equity Tier 1, Additional Tier 1 and 1, Tier 2 and eligible liabilities instruments included in indices; (b) Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities, included in indices; (c) eligible liabilities instruments of institutions, included in indices. 3. Competent authorities shall grant the prior permission referred to in paragraph 2 only where the institution has demonstrated to their satisfaction that it would be operationally burdensome for the institution to monitor its underlying exposure to the items referred to in one or both more of point (a) or (b) the points of paragraph 2, as applicable. 4. EBA shall develop draft regulatory technical standards to specify: (a) when an estimate used as an alternative to the calculation of underlying exposure referred to in paragraph 2 is sufficiently conservative; (b) the meaning of operationally burdensome for the purposes of paragraph 3. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 77 Conditions for reducing own funds and eligible liabilities 1. An institution shall require obtain the prior permission of the competent authority to do either or both any of the following: (a) reduce, redeem or repurchase Common Equity Tier 1 instruments issued by the institution in a manner that is permitted under applicable national law; (b) reduce, distribute or reclassify as another own funds item the share premium accounts related to own funds instruments; (c) effect the call, redemption, repayment or repurchase of Additional Tier 1 instruments or Tier 2 instruments as applicable, prior to the date of their contractual maturity.2. An institution shall obtain the prior permission of the resolution authority to effect the call, redemption, repayment or repurchase of eligible liabilities instruments that are not covered by paragraph 1, prior to the date of their contractual maturity.

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Article 78 Supervisory permission for reducing to reduce own funds 1. The competent authority shall grant permission for an institution to reduce, repurchase, call call, redeem, repay or redeem repurchase Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments instruments, or to reduce, distribute or reclassify related share premium accounts, where either of the following conditions is met: (a) earlier than before or at the same time as any of the action actions referred to in Article 77, 77(1), the institution replaces the instruments or the related share premium accounts referred to in Article 77 77(1) with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution; (b) the institution has demonstrated to the satisfaction of the competent authority that the own funds and eligible liabilities of the institution would, following the action referred to in question, Article 77(1) of this Regulation, exceed the requirements laid down in Article 92(1) of this Regulation and the combined buffer requirement as defined in point (6) of Article 128 of Directive Directives 2013/36/EU and 2014/59/EU by a margin that the competent authority considers necessary. Where an institution provides sufficient safeguards as to its capacity to operate with own funds above the amounts required in this Regulation and in Directive 2013/36/EU, the competent authority may consider necessary on grant that institution a general prior permission to take any of the basis actions set out in Article 77(1) of Article 104(3) this Regulation, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of Directive 2013/36/EU. this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the competent authority. In the case of Common Equity Tier 1 instruments, that predetermined amount shall not exceed 3 % of the relevant issue and shall not exceed 10 % of the amount by which Common Equity Tier 1 capital exceeds the sum of the Common Equity Tier 1 capital requirements laid down in this Regulation, in Directives 2013/36/EU and 2014/59/EU by a margin that the competent authority considers necessary. In the case of Additional Tier 1 or Tier 2 instruments, that predetermined amount shall not exceed 10 % of the relevant issue and shall not exceed 3 % of the total amount of outstanding Additional Tier 1 or Tier 2 instruments, as applicable. Competent authorities shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission. 2. When assessing under point (a) of paragraph 1 the sustainability of the replacement instruments for the income capacity of the institution, institution referred to in point (a) of paragraph 1, competent authorities shall consider the extent to which those replacement capital instruments would be more costly for the institution than those capital instruments or share premium accounts they would replace. 3. Where an institution takes an action referred to in point (a) of Article 77 77(1) and the refusal of redemption of Common Equity Tier 1 instruments referred to in Article 27 is prohibited by applicable national law, the competent authority may waive the conditions laid down set out in paragraph 1 of this Article Article, provided that the competent authority requires the institution to limit the redemption of such instruments on an appropriate basis. 4. The competent Competent authorities may permit institutions to redeem call, redeem, repay or repurchase Additional Tier 1 or Tier 2 instruments before or related share premium accounts during the five years of the following their date of issue only issuance where the conditions laid down set out in paragraph 1 and point (a) or (b) one of this paragraph are the following conditions is met: (a) there is a change in the regulatory classification of those instruments that would be likely to result in their exclusion from own funds or reclassification as a own funds of lower quality form of own funds, quality, and both the following conditions are met: (i) the competent authority considers such a change to be sufficiently certain; (ii) the institution demonstrates to the satisfaction of the competent authorities authority that the regulatory reclassification of those instruments was not reasonably foreseeable at the time of their issuance; (b) there is a change in the applicable tax treatment of those instruments which the institution demonstrates to the satisfaction of the competent authorities authority is material and was not reasonably foreseeable at the time of their issuance. issuance; (c) the instruments and related share premium accounts are grandfathered under Article 494b; (d) before or at the same time as the action referred to in Article 77(1), the institution replaces the instruments or related share premium accounts referred to in Article 77(1) with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution and the competent authority has permitted that action on the basis of the determination that it would be beneficial from a prudential point of view and justified by exceptional circumstances; (e) the Additional Tier 1 or Tier 2 instruments are repurchased for market making purposes. 5. EBA shall develop draft regulatory technical standards to specify the following: (a) the meaning of sustainable for the income capacity of the institution; (b) the appropriate bases of limitation of redemption referred to in paragraph 3; (c) the process including the limits and procedures for granting approval in advance by competent authorities for an action listed in Article 77(1), and data requirements for an application by an institution for the permission of the competent authority to carry out an action listed in Article 77, therein, including the process to be applied in the case of redemption of shares issued to members of cooperative societies, and the time period for processing such an application. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 78a
Permission to reduce eligible liabilities instruments
1. The resolution authority shall grant permission for an institution to call, redeem, repay or repurchase eligible liabilities instruments where one of the following conditions is met:
(a) before or at the same time as any of the actions referred to in Article 77(2), the institution replaces the eligible liabilities instruments with own funds or eligible liabilities instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;
(b) the institution has demonstrated to the satisfaction of the resolution authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(2) of this Regulation, exceed the requirements for own funds and eligible liabilities laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU by a margin that the resolution authority, in agreement with the competent authority, considers necessary;
(c) the institution has demonstrated to the satisfaction of the resolution authority that the partial or full replacement of the eligible liabilities with own funds instruments is necessary to ensure compliance with the own funds requirements laid down in this Regulation and in Directive 2013/36/EU for continuing authorisation.
Where an institution provides sufficient safeguards as to its capacity to operate with own funds and eligible liabilities above the amount of the requirements laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU, the resolution authority, after consulting the competent authority, may grant that institution a general prior permission to effect calls, redemptions, repayments or repurchases of eligible liabilities instruments, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the resolution authority. Resolution authorities shall inform the competent authorities about any general prior permission granted.
The resolution authority shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.
2. When assessing the sustainability of the replacement instruments for the income capacity of the institution referred to in point (a) of paragraph 1, resolution authorities shall consider the extent to which those replacement capital instruments or replacement eligible liabilities would be more costly for the institution than those they would replace.
3. EBA shall develop draft regulatory technical standards to specify the following:
(a) the process of cooperation between the competent authority and the resolution authority;
(b) the procedure, including the time limits and information requirements, for granting the permission in accordance with the first subparagraph of paragraph 1;
(c) the procedure, including the time limits and information requirements, for granting the general prior permission in accordance with the second subparagraph of paragraph 1;
(d) the meaning of sustainable for the income capacity of the institution.
For the purposes of point (d) of the first subparagraph of this paragraph, the draft regulatory technical standards shall be fully aligned with the delegated act referred to in Article 78.
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power 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.

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Article 79 Temporary waiver of from deduction from own funds and eligible liabilities 1. Where an institution holds capital instruments or has granted subordinated loans, as applicable, liabilities that qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 own funds instruments in a financial sector entity temporarily or as eligible liabilities instruments in an institution and where the competent authority deems considers those holdings to be for the purposes of a financial assistance operation designed to reorganise and save restore the viability of that entity, entity or that institution, the competent authority may waive on a temporary basis the provisions on deduction that would otherwise apply to those instruments. 2. EBA shall develop draft regulatory technical standards to specify the concept of temporary for the purposes of paragraph 1 and the conditions according to which a competent authority may deem those temporary holdings to be for the purposes of a financial assistance operation designed to reorganise and save a relevant entity. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 79a
Assessment of compliance with the conditions for own funds and eligible liabilities instruments
Institutions shall have regard to the substantial features of instruments and not only their legal form when assessing compliance with the requirements laid down in Part Two. The assessment of the substantial features of an instrument shall take into account all arrangements related to the instruments, even where those are not explicitly set out in the terms and conditions of the instruments themselves, for the purpose of determining that the combined economic effects of such arrangements are compliant with the objective of the relevant provisions.

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Article 80 Continuing review of the quality of own funds and eligible liabilities instruments 1. EBA shall monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union and shall notify the Commission immediately where there is significant evidence of that those instruments do not meeting meet the respective eligibility criteria set out in Article 28 or, where applicable, Article 29. this Regulation. Competent authorities shall, without delay, delay and upon request by EBA, forward all information to EBA that EBA deems considers relevant concerning new capital instruments or new types of liabilities issued in order to enable EBA to monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union. 2. A notification shall include the following: (a) a detailed explanation of the nature and extent of the shortfall identified; (b) technical advice on the action by the Commission that EBA considers to be necessary; (c) significant developments in the methodology of EBA for stress testing the solvency of institutions. 3. EBA shall provide technical advice to the Commission on any significant changes it considers to be required to the definition of own funds and eligible liabilities as a result of any of the following: (a) relevant developments in market standards or practice; (b) changes in relevant legal or accounting standards; (c) significant developments in the methodology of EBA for stress testing the solvency of institutions. 4. EBA shall provide technical advice to the Commission by 1 January 2014 on possible treatments of unrealised gains measured at fair value other than including them in Common Equity Tier 1 without adjustment. Such recommendations shall take into account relevant developments in international accounting standards and in international agreements on prudential standards for banks.

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Article 81 Minority interests that qualify for inclusion in consolidated Common Equity Tier 1 capital 1. Minority interests shall comprise the sum of Common Equity Tier 1 instruments, the share premium accounts related to those instruments, retained earnings and other reserves items of a subsidiary where the following conditions are met: (a) the subsidiary is one of the following: (i) an institution; (ii) an undertaking that is subject by virtue of applicable national law to the requirements of this Regulation and Directive 2013/36/EU; (iii) an intermediate financial holding company in a third country that is subject to prudential requirements as stringent as those applied to credit institutions of that third country and where the Commission has decided in accordance with Article 107(4) that those prudential requirements are at least equivalent to those of this Regulation; (b) the subsidiary is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One; (c) the Common Equity Tier 1 items, referred to in the introductory part of this paragraph paragraph, are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One. 2. Minority interests that are funded directly or indirectly, through a special purpose entity or otherwise, by the parent undertaking of the institution, or its subsidiaries shall not qualify as consolidated Common Equity Tier 1 capital.

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Article 82 Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds shall comprise the minority interest, Additional Tier 1 or Tier 2 instruments, as applicable, plus the related retained earnings and share premium accounts, of a subsidiary where the following conditions are met: (a) the subsidiary is either of the following: (i) an institution; (ii) an undertaking that is subject by virtue of the applicable national law to the requirements of this Regulation and Directive 2013/36/EU; (iii) an intermediate financial holding company in a third country that is subject to prudential requirements as stringent as those applied to credit institutions of that third country and where the Commission has decided in accordance with Article 107(4) that those prudential requirements are at least equivalent to those of this Regulation; (b) the subsidiary is included fully in the scope of consolidation pursuant to Chapter 2 of Title II of Part One; (c) those instruments are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.

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Article 83 Qualifying Additional Tier 1 and Tier 2 capital issued by a special purpose entity 1. Additional Tier 1 and Tier 2 instruments issued by a special purpose entity, and the related share premium accounts, are included until 31 December 2021 in qualifying Additional Tier 1, Tier 1 or Tier 2 capital or qualifying own funds, as applicable, only where the following conditions are met: (a) the special purpose entity issuing those instruments is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One; (b) the instruments, and the related share premium accounts, are included in qualifying Additional Tier 1 capital only where the conditions laid down in Article 52(1) are satisfied; (c) the instruments, and the related share premium accounts, are included in qualifying Tier 2 capital only where the conditions laid down in Article 63 are satisfied; (d) the only asset of the special purpose entity is its investment in the own funds of the parent undertaking or a subsidiary thereof that is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One, the form of which satisfies the relevant conditions laid down in Articles 52(1) or 63, as applicable. Where the competent authority considers the assets of a special purpose entity other than its investment in the own funds of the parent undertaking or a subsidiary thereof that is included in the scope of consolidation pursuant to Chapter 2 of Title II of Part One, to be minimal and insignificant for such an entity, the competent authority may waive the condition specified in point (d) of the first subparagraph. 2. EBA shall develop draft regulatory technical standards to specify the types of assets that can relate to the operation of special purpose entities and the concepts of minimal and insignificant referred to in the second subparagraph of paragraph 1. EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 92a
Requirements for own funds and eligible liabilities for G-SIIs
1. Subject to Articles 93 and 94 and to the exceptions set out in paragraph 2 of this Article, institutions identified as resolution entities and that are a G-SII or part of a G-SII shall at all times satisfy the following requirements for own funds and eligible liabilities:
(a) a risk-based ratio of 18 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with Article 92(3) and (4);
(b) a non-risk-based ratio of 6,75 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure referred to in Article 429(4).
2. The requirements laid down in paragraph 1 shall not apply in the following cases:
(a) within the three years following the date on which the institution or the group of which the institution is part has been identified as a G-SII;
(b) within the two years following the date on which the resolution authority has applied the bail-in tool in accordance with Directive 2014/59/EU;
(c) within the two years following the date on which the resolution entity has put in place an alternative private sector measure referred to in point (b) of Article 32(1) of Directive 2014/59/EU by which capital instruments and other liabilities have been written down or converted into Common Equity Tier 1 items in order to recapitalise the resolution entity without the application of resolution tools.
3. Where the aggregate resulting from the application of the requirement laid down in point (a) of paragraph 1 of this Article to each resolution entity of the same G SII exceeds the requirement for own funds and eligible liabilities calculated in accordance with Article 12a of this Regulation, the resolution authority of the EU parent institution may, after having consulted the other relevant resolution authorities, act in accordance with Article 45d(4) or 45h(1) of Directive 2014/59/EU.

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Article 92b
Requirement for own funds and eligible liabilities for non-EU G-SIIs
1. Institutions that are material subsidiaries of non-EU G-SIIs and that are not resolution entities shall at all times satisfy requirements for own funds and eligible liabilities equal to 90 % of the requirements for own funds and eligible liabilities laid down in Article 92a.
2. For the purpose of complying with paragraph 1, Additional Tier 1, Tier 2 and eligible liabilities instruments shall only be taken into account where those instruments are owned by the ultimate parent undertaking of the non-EU G-SII and have been issued directly or indirectly through other entities within the same group, provided that all such entities are established in the same third country as that ultimate parent undertaking or in a Member State.
3. An eligible liabilities instrument shall only be taken into account for the purpose of complying with paragraph 1 where it fulfils all the following additional conditions:
(a) in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim resulting from the liability ranks below claims resulting from liabilities that do not fulfil the conditions set out in paragraph 2 of this Article and that do not qualify as own funds;
(b) it is subject to the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU.

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Article 104b
Requirements for trading desk
1. For the purposes of the reporting requirements set out in Article 430b(3), institutions shall establish trading desks and shall assign each of their trading book positions to one of those trading desks. Trading book positions shall be attributed to the same trading desk only where they satisfy the agreed business strategy for the trading desk and are consistently managed and monitored in accordance with paragraph 2 of this Article.
2. Institutions' trading desks shall at all times meet all the following requirements:
(a) each trading desk shall have a clear and distinctive business strategy and a risk management structure that is adequate for its business strategy;
(b) each trading desk shall have a clear organisational structure; positions in a given trading desk shall be managed by designated dealers within the institution; each dealer shall have dedicated functions in the trading desk; each dealer shall be assigned to one trading desk only;
(c) position limits shall be set within each trading desk according to the business strategy of that trading desk;
(d) reports on the activities, profitability, risk management and regulatory requirements at the trading desk level shall be produced at least on a weekly basis and communicated to the management body on a regular basis;
(e) each trading desk shall have a clear annual business plan including a well-defined remuneration policy on the basis of sound criteria used for performance measurement;
(f) reports on maturing positions, intra-day trading limit breaches, daily trading limit breaches and actions taken by the institution to address those breaches, as well as assessments of market liquidity, shall be prepared for each trading desk on a monthly basis and made available to the competent authorities.
3. By way of derogation from point (b) of paragraph 2, an institution may assign a dealer to more than one trading desk, provided that the institution demonstrates to the satisfaction of its competent authority that the assignment has been made due to business or resource considerations and the assignment preserves the other qualitative requirements set out in this Article applicable to dealers and trading desks.
4. Institutions shall notify the competent authorities of the manner in which they comply with paragraph 2. Competent authorities may require an institution to change the structure or organisation of its trading desks to comply with this Article.

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Article 117 Exposures to multilateral development banks 1. Exposures to multilateral development banks that are not referred to in paragraph 2 shall be treated in the same manner as exposures to institutions. The preferential treatment for short-term exposures as specified in Articles 119(2), 120(2) and 121(3) shall not be applied. The Inter-American Investment Corporation, the Black Sea Trade and Development Bank, the Central American Bank for Economic Integration and the CAF-Development Bank of Latin America shall be considered multilateral development banks. 2. Exposures to the following multilateral development banks shall be assigned a 0 % risk weight: (a) the International Bank for Reconstruction and Development; (b) the International Finance Corporation; (c) the Inter-American Development Bank; (d) the Asian Development Bank; (e) the African Development Bank; (f) the Council of Europe Development Bank; (g) the Nordic Investment Bank; (h) the Caribbean Development Bank; (i) the European Bank for Reconstruction and Development; (j) the European Investment Bank; (k) the European Investment Fund; (l) the Multilateral Investment Guarantee Agency; (m) the International Finance Facility for Immunisation; (n) the Islamic Development Bank; (o) the International Development Association; (p) the Asian Infrastructure Investment Bank. The Commission is empowered to amend this Regulation by adopting delegated acts in accordance with Article 462 amending, in accordance with international standards, the list of multilateral development banks referred to in the first subparagraph. 3. A risk weight of 20 % shall be assigned to the portion of unpaid capital subscribed to the European Investment Fund.

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Article 118 Exposures to international organisations Exposures to the following international organisations shall be assigned a 0 % risk weight: (a) the Union; European Union and the European Atomic Energy Community; (b) the International Monetary Fund; (c) the Bank for International Settlements; (d) the European Financial Stability Facility; (e) the European Stability Mechanism; (f) an international financial institution established by two or more Member States, which has the purpose to mobilise funding and provide financial assistance to the benefit of its members that are experiencing or threatened by severe financing problems.

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Article 124 Exposures secured by mortgages on immovable property 1. An exposure or any part of an exposure fully secured by mortgage on immovable property shall be assigned a risk weight of 100 %, where the conditions under Article 125 or 126 … 409 unchanged words … criteria that the competent authorities set for exposures referred to in Articles 125, 126 and 199(1)(a). 3. When competent authorities set a higher risk weight or stricter criteria, institutions shall have a 6-month transitional period to apply the new risk weight. 4. EBA EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify: (a) specify the rigorous criteria for the assessment of the mortgage lending value referred to in paragraph 1; (b) 1 and the conditions types of factors to be considered for the assessment of the appropriateness of the risk weights referred to in the first subparagraph of paragraph 2 that competent authorities shall take into account when determining higher risk-weights, in particular the term of financial stability considerations. 2. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2014. 2019. Power is delegated to the Commission to adopt 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. 5. The institutions ESRB may, by means of one Member State shall apply 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 1a of this Article on the risk-weights following: (a) factors which could adversely affect current or future financial stability referred to in the second subparagraph of paragraph 2; and criteria (b) indicative benchmarks that have been determined by the competent authorities of another Member State authority designated in accordance with paragraph 1a is to exposures secured by mortgages on commercial and residential property located in that Member State. take into account when determining higher risk weights.

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Article 132a
Approaches for calculating risk-weighted exposure amounts of CIUs
4. EBA shall develop draft regulatory technical standards to specify how institutions shall calculate the risk-weighted exposure amount referred to in paragraph 2 where one or more of the inputs required for that calculation are not available.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power 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.

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Article 162 Maturity 1. Institutions that have not received permission to use own LGDs and own conversion factors for exposures to corporates, institutions or central governments and central banks shall assign to exposures arising from repurchase transactions or securities or commodities lending or borrowing transactions a maturity value (M) of 0,5 years and to all other exposures M of 2,5 years. Alternatively, as part of the permission referred to in Article 143, the competent authorities shall decide on whether the institution shall use maturity (M) for each exposure as set out under paragraph 2. 2. Institutions that have received the permission of the competent authority to use own LGDs and own conversion factors for exposures to corporates, institutions or central governments and central banks pursuant to Article 143 shall calculate M for each of these exposures as set out in points (a) to (e) of this paragraph and subject to paragraphs 3 to 5 of this Article. M shall be no greater than five years except in the cases specified in Article 384(1) where M as specified there shall be used: (a) for an instrument subject to a cash flow schedule, M shall be calculated in accordance with the following formula: Mmax1, mintt Mmax1,mintt CFttCFt,5 where CFt denotes the cash flows (principal, interest payments and fees) contractually payable by the obligor in period t; (b) for derivatives subject to a master netting agreement, M shall be the weighted average remaining maturity of the exposure, where M … 830 unchanged words … 1 instead of applying paragraph 2. Institutions may replace EUR 500 million total assets with EUR 1000 million total assets for corporates which primarily own and let non-speculative residential property. 5. Maturity mismatches shall be treated as specified in Chapter 4.

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Article 164 Loss Given Default (LGD) 1. Institutions shall provide own estimates of LGDs subject to requirements as specified in Section 6 and permission of the competent authorities granted in accordance with Article 143. For dilution risk of purchased receivables, an LGD … 433 unchanged words … Regulation (EU) No 1093/2010. 7. The institutions of one Member State shall apply the higher minimum LGD values that have been determined by the competent authorities of another Member State to exposures secured by immovable property located in that Member State.8. EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify the conditions that the authority designated in accordance with paragraph 5 shall take into account when assessing the appropriateness of LGD values as part of the assessment referred to in paragraph 6. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2019. Power 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. 9. The ESRB may, 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 5 of this Article on the following: (a) factors which could adversely affect current or future financial stability referred to in paragraph 6; and (b) indicative benchmarks that the authority designated in accordance with paragraph 5 is to take into account when determining higher minimum LGD values.

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02013R0575-20190426 → 02013R0575-20190627

Article 277 Transactions with a linear risk profile 1. Institutions shall map transactions with a linear risk profile to risk positions in accordance with the following provisions: (a) transactions with a linear risk profile with equities (including equity indices), gold, other precious metals or other commodities as the underlying shall be mapped to a risk position in the respective equity (or equity index) or commodity and an interest rate risk position for the payment leg; (b) transactions with a linear risk profile with a debt instrument as the underlying instrument shall be mapped to an interest rate risk position for the debt instrument and another interest rate risk position for the payment leg; (c) transactions with a linear risk profile that stipulate the exchange of payment against payment, including foreign exchange forwards, shall be mapped to an interest rate risk position for each of the payment legs. Where, under a transaction mentioned in point (a), (b) or (c), a payment leg or the underlying debt instrument is denominated in foreign currency, that payment leg or underlying instrument shall also be mapped to a risk position in that currency. 2. For the purposes of paragraph 1, the size of a risk position from a transaction with linear risk profile shall be the effective notional value (market price multiplied by quantity) of the underlying financial instruments or commodities converted to the institution's domestic currency by multiplication with the relevant exchange rate, except for debt instruments. 3. For debt instruments and for payment legs, the size of the risk position shall be the effective notional value of the outstanding gross payments (including the notional amount) converted to the currency of the home Member State, multiplied by the modified duration of the debt instrument or payment leg, as the case may be. 4. The size of a risk position from a credit default swap shall be the notional value of the reference debt instrument multiplied by the remaining maturity of the credit default swap.5. EBA shall develop draft regulatory technical standards to specify: (a) the method for identifying transactions with only one material risk driver; (b) the method for identifying transactions with more than one material risk driver and for identifying the most material of those risk drivers for the purposes of paragraph 3. EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019. Power 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.

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Article 279a
Supervisory delta
3. EBA shall develop draft regulatory technical standards to specify:
(a) in accordance with international regulatory developments, the formula that institutions shall use to calculate the supervisory delta of call and put options mapped to the interest rate risk category compatible with market conditions in which interest rates may be negative as well as the supervisory volatility that is suitable for that formula;
(b) the method for determining whether a transaction is a long or short position in the primary risk driver or in the most material risk driver in the given risk category for transactions referred to in Article 277(3).
EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.
Power 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.

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before (02013R0575-20190426)

Article 325
Allowances for consolidated requirements
1. Subject to paragraph 2 and only for the purpose of calculating net positions and own funds requirements in accordance with this Title on a consolidated basis, institutions may use positions in one institution or undertaking to offset positions in another institution or undertaking.
2. Institutions may apply paragraph 1 only subject to the permission of the competent authorities, which shall be granted if all of the following conditions are met:
(a) there is a satisfactory allocation of own funds within the group;
(b) the regulatory, legal or contractual framework in which the institutions operate is such as to guarantee mutual financial support within the group.
3. Where there are undertakings located in third countries all of the following conditions shall be met in addition to those in paragraph 2:
(a) such undertakings have been authorised in a third country and either satisfy the definition of a credit institution or are recognised third-country investment firms;
(b) such undertakings comply, on an individual basis, with own funds requirements equivalent to those laid down in this Regulation;
(c) no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group.

after (02013R0575-20190627)

Article 325
Approaches for calculating the own funds requirements for market risk
1. An institution shall calculate the own funds requirements for market risk of all trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk in accordance with the following approaches:
(a) the standardised approach referred to in paragraph 2;
(b) the internal model approach set out in Chapter 5 of this Title for those risk categories for which the institution has been granted permission in accordance with Article 363 to use that approach.
2. The own funds requirements for market risk calculated in accordance with the standardised approach referred to in point (a) of paragraph 1 shall mean the sum of the following own funds requirements, as applicable:
(a) the own funds requirements for position risk referred to in Chapter 2;
(b) the own funds requirements for foreign exchange risk referred to in Chapter 3;
(c) the own funds requirements for commodity risk referred to in Chapter 4.
3. An institution that is not exempted from the reporting requirements set out in Article 430b in accordance with Article 325a shall report the calculation in accordance with Article 430b for all trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk in accordance with the following approaches:
(a) the alternative standardised approach set out in Chapter 1a;
(b) the alternative internal model approach set out in Chapter 1b.
4. An institution may use in combination the approaches set out in points (a) and (b) of paragraph 1 of this Article on a permanent basis within a group in accordance with Article 363.
5. Institutions shall not use the approach set out in point (b) of paragraph 3 for instruments in their trading book that are securitisation positions or positions included in the alternative correlation trading portfolio (ACTP) as set out in paragraphs 6, 7 and 8.
6. Securitisation positions and nth-to-default credit derivatives that meet all the following criteria shall be included in the ACTP:
(a) the positions are neither re-securitisation positions, nor options on a securitisation tranche, nor any other derivatives of securitisation exposures that do not provide a pro-rata share in the proceeds of a securitisation tranche;
(b) all their underlying instruments are:
(i) single-name instruments, including single-name credit derivatives, for which a liquid two-way market exists;
(ii) commonly-traded indices based on the instruments referred to in point (i).
A two-way market is considered to exist where there are independent bona fide offers to buy and sell, so that a price that is reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined within one day and settled at that price within a relatively short time conforming to trade custom.
7. Positions with any of the following underlying instruments shall not be included in the ACTP:
(a) underlying instruments that are assigned to the exposure classes referred to in point (h) or (i) of Article 112;
(b) a claim on a special purpose entity, collateralised, directly or indirectly, by a position that, in accordance with paragraph 6, would itself not be eligible for inclusion in the ACTP.
8. Institutions may include in the ACTP positions that are neither securitisation positions nor nth-to-default credit derivatives but that hedge other positions in that portfolio, provided that a liquid two-way market as described in the second subparagraph of paragraph 6 exists for the instrument or its underlying instruments.
9. EBA shall develop draft regulatory technical standards to specify how institutions are to calculate the own funds requirements for market risk for non-trading book positions that are subject to foreign exchange risk or commodity risk in accordance with the approaches set out in points (a) and (b) of paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020.
Power 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.

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Article 325a
Exemptions from specific reporting requirements for market risk
1. An institution shall be exempted from the reporting requirement set out in Article 430b, provided that the size of the institution's on- and off-balance-sheet business that is subject to market risk is equal to or less than each of the following thresholds, on the basis of an assessment carried out on a monthly basis using data as of the last day of the month:
(a) 10 % of the institution's total assets;
(b) EUR 500 million.
2. Institutions shall calculate the size of their on- and off-balance-sheet business that is subject to market risk using data as of the last day of each month in accordance with the following requirements:
(a) all the positions assigned to the trading book shall be included, except credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures and the credit derivative transactions that perfectly offset the market risk of the internal hedges as referred to in Article 106(3);
(b) all non-trading book positions that are subject to foreign exchange risk or commodity risk shall be included;
(c) all positions shall be valued at their market values on that date, except for positions referred to in point (b); where the market value of a position is not available on a given date, institutions shall take a fair value for the position on that date; where the fair value and market value of a position are not available on a given date, institutions shall take the most recent market value or fair value for that position;
(d) all non-trading book positions that are subject to foreign exchange risk shall be considered as an overall net foreign exchange position and valued in accordance with Article 352;
(e) all the non-trading book positions that are subject to commodity risk shall be valued in accordance with Articles 357 and 358;
(f) the absolute value of long positions shall be added to the absolute value of short positions.
3. Institutions shall notify the competent authorities when they calculate, or cease to calculate, their own funds requirements for market risk in accordance with this Article.
4. An institution that no longer meets one or more of the conditions set out in paragraph 1 shall immediately notify the competent authority thereof.
5. The exemption from the reporting requirements laid down in Article 430b shall cease to apply within three months of either of the following cases:
(a) the institution does not meet the condition set out in point (a) or (b) of paragraph 1 for three consecutive months; or
(b) the institution does not meet the condition set out in point (a) or (b) of paragraph 1 during more than 6 out of the last 12 months.
6. Where an institution has become subject to the reporting requirements laid down in Article 430b in accordance with paragraph 5 of this Article, the institution shall only be exempted from those reporting requirements where it demonstrates to the competent authority that all the conditions set out in paragraph 1 of this Article have been met for an uninterrupted full-year period.
7. Institutions shall not enter into, buy or sell a position only for the purpose of complying with any of the conditions set out in paragraph 1 during the monthly assessment.
8. An institution that is eligible for the treatment set out in Article 94 shall be exempted from the reporting requirement set out in Article 430b.

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Article 325b
Permission for consolidated requirements
1. Subject to paragraph 2, and only for the purpose of calculating net positions and own funds requirements in accordance with this Title on a consolidated basis, institutions may use positions in one institution or undertaking to offset positions in another institution or undertaking.
2. Institutions may apply paragraph 1 only with the permission of the competent authorities which shall be granted if all the following conditions are met:
(a) there is a satisfactory allocation of own funds within the group;
(b) the regulatory, legal or contractual framework in which the institutions operate guarantees mutual financial support within the group.
3. Where there are undertakings located in third countries, all the following conditions shall be met in addition to those set out in paragraph 2:
(a) such undertakings have been authorised in a third country and either satisfy the definition of a credit institution or are recognised third-country investment firms;
(b) on an individual basis, such undertakings comply with own funds requirements equivalent to those laid down in this Regulation;
(c) no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group.

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Article 325c
Scope and structure of the alternative standardised approach
1. The alternative standardised approach as set out in this Chapter shall be used only for the purposes of the reporting requirement laid down in Article 430b(1).
2. Institutions shall calculate the own funds requirements for market risk in accordance with the alternative standardised approach for a portfolio of trading book positions or non-trading book positions that are subject to foreign exchange or commodity risk as the sum of the following three components:
(a) the own funds requirement under the sensitivities-based method set out in Section 2;
(b) the own funds requirement for the default risk set out in Section 5 which is only applicable to the trading book positions referred to in that Section;
(c) the own funds requirement for residual risks set out in Section 4 which is only applicable to the trading book positions referred to in that Section.

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Article 325d
Definitions
For the purposes of this Chapter, the following definitions apply:
(1) risk class means one of the following seven categories:
(i) general interest rate risk;
(ii) credit spread risk (CSR) for non-securitisation;
(iii) credit spread risk for securitisation not included in the alternative correlation trading portfolio (non-ACTP CSR);
(iv) credit spread risk for securitisation included in the alternative correlation trading portfolio (ACTP CSR);
(v) equity risk;
(vi) commodity risk;
(vii) foreign exchange risk;
(2) sensitivity means the relative change in the value of a position, as a result of a change in the value of one of the relevant risk factors of the position, calculated with the institution's pricing model in accordance with Subsection 2 of Section 3;
(3) bucket means a sub-category of positions within one risk class with a similar risk profile to which a risk weight as defined in Subsection 1 of Section 3 is assigned.

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Article 325e
Components of the sensitivities-based method
1. Institutions shall calculate the own funds requirement for market risk under the sensitivities-based method by aggregating the following three own funds requirements in accordance with Article 325h:
(a) own funds requirements for delta risk which capture the risk of changes in the value of an instrument due to movements in its non-volatility related risk factors;
(b) own funds requirements for vega risk which capture the risk of changes in the value of an instrument due to movements in its volatility-related risk factors;
(c) own funds requirements for curvature risk which capture the risk of changes in the value of an instrument due to movements in the main non-volatility related risk factors not captured by the own funds requirements for delta risk.
2. For the purpose of the calculation referred to in paragraph 1,
(a) all the positions of instruments with optionality shall be subject to the own funds requirements referred to in points (a), (b) and (c) of paragraph 1;
(b) all the positions of instruments without optionality shall only be subject to the own funds requirements referred to in point (a) of paragraph 1.
For the purposes of this Chapter, instruments with optionality include, among others: calls, puts, caps, floors, swap options, barrier options and exotic options. Embedded options, such as prepayment or behavioural options, shall be considered to be stand-alone positions in options for the purpose of calculating the own funds requirements for market risk.
For the purposes of this Chapter, instruments whose cash flows can be written as a linear function of the underlying's notional amount shall be considered to be instruments without optionality.

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Article 325f
Own funds requirements for delta and vega risks
1. Institutions shall apply the delta and vega risk factors described in Subsection 1 of Section 3 to calculate the own funds requirements for delta and vega risks.
2. Institutions shall apply the process set out in paragraphs 3 to 8 to calculate own funds requirements for delta and vega risks.
3. For each risk class, the sensitivity of all instruments in scope of the own funds requirements for delta or vega risks to each of the applicable delta or vega risk factors included in that risk class shall be calculated by using the corresponding formulas in Subsection 2 of Section 3. If the value of an instrument depends on several risk factors, the sensitivity shall be determined separately for each risk factor.
4. Sensitivities shall be assigned to one of the buckets b within each risk class.
5. Within each bucket b, the positive and negative sensitivities to the same risk factor shall be netted, giving rise to net sensitivities (sk) to each risk factor k within a bucket.
6. The net sensitivities to each risk factor within each bucket shall be multiplied by the corresponding risk weights set out in Section 6, giving rise to weighted sensitivities to each risk factor within that bucket in accordance with the following formula:
WSk = RWk · sk
where:
WSk
the weighted sensitivities;
RWk
the risk weights; and
sk
the risk factor.
7. The weighted sensitivities to the different risk factors within each bucket shall be aggregated in accordance with the formula below, where the quantity within the square root function is floored at zero, giving rise to the bucket-specific sensitivity. The corresponding correlations for weighted sensitivities within the same bucket (ρkl), set out in Section 6, shall be used.
Kbk WS2kkkl ρklWSkWSl
where:
Kb
the bucket-specific sensitivity; and
WS
the weighted sensitivities.
8. The bucket-specific sensitivity shall be calculated for each bucket within a risk class in accordance with paragraphs 5, 6 and 7. Once the bucket-specific sensitivity has been calculated for all buckets, weighted sensitivities to all risk factors across buckets shall be aggregated in accordance with the formula below, using the corresponding correlations γbc for weighted sensitivities in different buckets set out in Section 6, giving rise to the risk-class specific own funds requirement for delta or vega risk:Riskclass specific own funds requirement for delta or vega riskb K2bbcb γbcSbSc
where:
Sb
Σk WSk for all risk factors in bucket b and Sc = Σk WSk in bucket c; where those values for Sb and Sc produce a negative number for the overall sum of bK2bbcb γbcSbSc, the institution shall calculate the risk-class specific own funds requirements for delta or vega risk using an alternative specification whereby
Sb
max [min (Σk WSk, Kb), – Kb] for all risk factors in bucket b and
Sc
max [min (Σk WSk, Kc), – Kc] for all risk factors in bucket c.
The risk-class specific own funds requirements for delta or vega risk shall be calculated for each risk class in accordance with paragraphs 1 to 8.

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Article 325g
Own funds requirements for curvature risk
Institutions shall calculate the own funds requirements for curvature risk in accordance with the delegated act referred to in Article 461a.

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Article 325h
Aggregation of risk-class specific own funds requirements for delta, vega and curvature risks
1. Institutions shall aggregate risk-class specific own funds requirements for delta, vega and curvature risks in accordance with the process set out in paragraphs 2, 3 and 4.
2. The process to calculate the risk-class specific own funds requirements for delta, vega and curvature risks described in Articles 325f and 325g shall be performed three times per risk class, each time using a different set of correlation parameters ρkl (correlation between risk factors within a bucket) and γbc (correlation between buckets within a risk class). Each of those three sets shall correspond to a different scenario, as follows:
(a) the medium correlations scenario, whereby the correlation parameters ρkl and γbc remain unchanged from those specified in Section 6;
(b) the high correlations scenario, whereby the correlation parameters ρkl and γbc that are specified in Section 6 shall be uniformly multiplied by 1,25, with ρkl and γbc subject to a cap at 100 %;
(c) the low correlations scenario shall be specified in the delegated act referred to in Article 461a.
3. Institutions shall calculate the sum of the delta, vega and curvature risk-class specific own funds requirements for each scenario to determine three scenario-specific, own funds requirements.
4. The own funds requirement under the sensitivities-based method shall be the highest of the three scenario-specific own funds requirements referred to in paragraph 3.

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Article 325i
Treatment of index instruments and multi-underlying options
Institutions shall treat the index instruments and multi-underlying options in accordance with the delegated act referred to in Article 461a.

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Article 325j
Treatment of collective investment undertakings
Institutions shall treat the collective investment undertakings in accordance with the delegated act referred to in Article 461a.

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Article 325k
Underwriting positions
1. Institutions may use the process set out in this Article for calculating the own funds requirements for market risk of underwriting positions of debt or equity instruments.
2. Institutions shall apply one of the appropriate multiplying factors listed in Table 1 to the net sensitivities of all the underwriting positions in each individual issuer, excluding the underwriting positions which are subscribed or sub-underwritten by third parties on the basis of formal agreements, and calculate the own funds requirements for market risk in accordance with the approach set out in this Chapter on the basis of the adjusted net sensitivities.
Table 1
Business day 0 0 %
Business day 1 10 %
Business days 2 and 3 25 %
Business day 4 50 %
Business day 5 75 %
After business day 5 100 %
For the purposes of this Article, business day 0 means the business day on which the institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price.
3. Institutions shall notify the competent authorities of the application of the process set out in this Article.

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Article 325l
General interest rate risk factors
1. For all general interest rate risk factors, including inflation risk and cross-currency basis risk, there shall be one bucket per currency, each containing different types of risk factor.
The delta general interest rate risk factors applicable to interest rate-sensitive instruments shall be the relevant risk-free rates per currency and per each of the following maturities: 0,25 years, 0,5 years, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, 30 years. Institutions shall assign risk factors to the specified vertices by linear interpolation or by using a method that is most consistent with the pricing functions used by the independent risk control function of the institution to report market risk or profits and losses to senior management.
2. Institutions shall obtain the risk-free rates per currency from money market instruments held in the trading book of the institution that have the lowest credit risk, such as overnight index swaps.
3. Where institutions cannot apply the approach referred to in paragraph 2, the risk-free rates shall be based on one or more market-implied swap curves used by the institution to mark positions to market, such as the interbank offered rate swap curves.
Where the data on market-implied swap curves described in paragraph 2 and the first subparagraph of this paragraph are insufficient, the risk-free rates may be derived from the most appropriate sovereign bond curve for a given currency.
Where institutions use the general interest rate risk factors derived in accordance with the procedure set out in the second subparagraph of this paragraph for sovereign debt instruments, the sovereign debt instrument shall not be exempted from the own funds requirements for credit spread risk. In those cases, where it is not possible to disentangle the risk-free rate from the credit spread component, the sensitivity to the risk factor shall be allocated both to the general interest rate risk and to credit spread risk classes.
4. In the case of general interest rate risk factors, each currency shall constitute a separate bucket. Institutions shall assign risk factors within the same bucket, but with different maturities, a different risk weight, in accordance with Section 6.
Institutions shall apply additional risk factors for inflation risk to debt instruments whose cash flows are functionally dependent on inflation rates. Those additional risk factors shall consist of one vector of market-implied inflation rates of different maturities per currency. For each instrument, the vector shall contain as many components as there are inflation rates used as variables by the institution's pricing model for that instrument.
5. Institutions shall calculate the sensitivity of the instrument to the additional risk factor for inflation risk referred to in paragraph 4 as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Each currency shall constitute a separate bucket. Within each bucket, institutions shall treat inflation as a single risk factor, regardless of the number of components of each vector. Institutions shall offset all sensitivities to inflation within a bucket, calculated as described in this paragraph, in order to give rise to a single net sensitivity per bucket.
6. Debt instruments that involve payments in different currencies shall also be subject to cross-currency basis risk between those currencies. For the purposes of the sensitivities-based method, the risk factors to be applied by institutions shall be the cross-currency basis risk of each currency over either US dollar or euro. Institutions shall compute cross currency bases that do not relate to either basis over US dollar or basis over euro either on basis over US dollar or basis over euro.
Each cross-currency basis risk factor shall consist of one vector of cross-currency basis of different maturities per currency. For each debt instrument, the vector shall contain as many components as there are cross-currency bases used as variables by the institution's pricing model for that instrument. Each currency shall constitute a different bucket.
Institutions shall calculate the sensitivity of the instrument to the cross-currency basis risk factor as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Each currency shall constitute a separate bucket. Within each bucket there shall be two possible distinct risk factors: basis over euro and basis over US dollar, regardless of the number of components there are in each cross-currency basis vector. The maximum number of net sensitivities per bucket shall be two.
7. The vega general interest rate risk factors applicable to options with underlyings that are sensitive to general interest rate shall be the implied volatilities of the relevant risk-free rates as described in paragraphs 2 and 3, which shall be assigned to buckets depending on the currency and mapped to the following maturities within each bucket: 0,5 years, 1 year, 3 years, 5 years, 10 years. There shall be one bucket per currency.
For netting purposes, institutions shall consider implied volatilities linked to the same risk-free rates and mapped to the same maturities to constitute the same risk factor.
Where institutions map implied volatilities to the maturities as referred to in this paragraph, the following requirements shall apply:
(a) where the maturity of the option is aligned with the maturity of the underlying, a single risk factor shall be considered, which shall be mapped to that maturity;
(b) where the maturity of the option is shorter than the maturity of the underlying, the following risk factors shall be considered as follows:
(i) the first risk factor shall be mapped to the maturity of the option;
(ii) the second risk factor shall be mapped to the residual maturity of the underlying of the option at the expiry date of the option.
8. The curvature general interest rate risk factors to be applied by institutions shall consist of one vector of risk-free rates, representing a specific risk-free yield curve, per currency. Each currency shall constitute a different bucket. For each instrument, the vector shall contain as many components as there are different maturities of risk-free rates used as variables by the institution's pricing model for that instrument.
9. Institutions shall calculate the sensitivity of the instrument to each risk factor used in the curvature risk formula in accordance with Article 325g. For the purposes of the curvature risk, institutions shall consider vectors corresponding to different yield curves and with a different number of components as the same risk factor, provided that those vectors correspond to the same currency. Institutions shall offset sensitivities to the same risk factor. There shall be only one net sensitivity per bucket.
There shall be no curvature risk own funds requirements for inflation and cross currency basis risks.

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Article 325m
Credit spread risk factors for non-securitisation
1. The delta credit spread risk factors to be applied by institutions to non-securitisation instruments that are sensitive to credit spread shall be the issuer credit spread rates of those instruments, inferred from the relevant debt instruments and credit default swaps, and mapped to each of the following maturities: 0,5 years, 1 year, 3 years, 5 years, 10 years. Institutions shall apply one risk factor per issuer and maturity, regardless of whether those issuer credit spread rates are inferred from debt instruments or credit default swaps. The buckets shall be sector buckets, as referred to in Section 6, and each bucket shall include all the risk factors allocated to the relevant sector.
2. The vega credit spread risk factors to be applied by institutions to options with non-securitisation underlyings that are sensitive to credit spread shall be the implied volatilities of the underlying's issuer credit spread rates inferred as laid down in paragraph 1, which shall be mapped to the following maturities in accordance with the maturity of the option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years. The same buckets shall be used as the buckets that were used for the delta credit spread risk for non-securitisation.
3. The curvature credit spread risk factors to be applied by institutions to non-securitisation instruments shall consist of one vector of credit spread rates, representing a credit spread curve specific to the issuer. For each instrument, the vector shall contain as many components as there are different maturities of credit spread rates used as variables in the institution's pricing model for that instrument. The same buckets shall be used as the buckets that were used for the delta credit spread risk for non-securitisation.
4. Institutions shall calculate the sensitivity of the instrument to each risk factor used in the curvature risk formula in accordance with Article 325g. For the purposes of the curvature risk, institutions shall consider vectors inferred from either relevant debt instruments or credit default swaps and with a different number of components as the same risk factor, provided that those vectors correspond to the same issuer.

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Article 325n
Credit spread risk factors for securitisation
1. Institutions shall apply the credit spread risk factors referred to in paragraph 3 to securitisation positions that are included in the ACTP, as referred to in Article 325(6), (7) and (8),
Institutions shall apply the credit spread risk factors referred to in paragraph 5 to securitisation positions that are not included in the ACTP, as referred to in Article 325(6), (7) and (8).
2. The buckets applicable to the credit spread risk for securitisations that are included in the ACTP shall be the same as the buckets applicable to the credit spread risk for non-securitisations, as referred to in Section 6.
The buckets applicable to the credit spread risk for securitisations that are not included in the ACTP shall be specific to that risk-class category, as referred to in Section 6.
3. The credit spread risk factors to be applied by institutions to securitisation positions that are included in the ACTP are the following:
(a) the delta risk factors shall be all the relevant credit spread rates of the issuers of the underlying exposures of the securitisation position, inferred from the relevant debt instruments and credit default swaps, and for each of the following maturities: 0,5 years, 1 year, 3 years, 5 years, 10 years.
(b) the vega risk factors applicable to options with securitisation positions that are included in the ACTP as underlyings shall be the implied volatilities of the credit spreads of the issuers of the underlying exposures of the securitisation position, inferred as described in point (a) of this paragraph, which shall be mapped to the following maturities in accordance with the maturity of the corresponding option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years.
(c) the curvature risk factors shall be the relevant credit spread yield curves of the issuers of the underlying exposures of the securitisation position expressed as a vector of credit spread rates for different maturities, inferred as indicated in point (a) of this paragraph; for each instrument, the vector shall contain as many components as there are different maturities of credit spread rates that are used as variables by the institution's pricing model for that instrument.
4. Institutions shall calculate the sensitivity of the securitisation position to each risk factor used in the curvature risk formula as specified in Article 325g. For the purposes of the curvature risk, institutions shall consider vectors inferred either from relevant debt instruments or credit default swaps and with a different number of components as the same risk factor, provided that those vectors correspond to the same issuer.
5. The credit spread risk factors to be applied by institutions to securitisation positions that are not included in the ACTP shall refer to the spread of the tranche rather than the spread of the underlying instruments and shall be the following:
(a) the delta risk factors shall be the relevant tranche credit spread rates, mapped to the following maturities, in accordance with the maturity of the tranche: 0,5 years, 1 year, 3 years, 5 years, 10 years;
(b) the vega risk factors applicable to options with securitisation positions that are not included in the ACTP as underlyings shall be the implied volatilities of the credit spreads of the tranches, each of them mapped to the following maturities in accordance with the maturity of the option subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years;
(c) the curvature risk factors shall be the same as those described in point (a) of this paragraph; to all those risk factors, a common risk weight shall be applied, as referred to in Section 6.

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Article 325o
Equity risk factors
1. The buckets for all equity risk factors shall be the sector buckets referred to in Section 6.
2. The equity delta risk factors to be applied by institutions shall be all the equity spot prices and all equity repo rates.
For the purposes of equity risk, a specific equity repo curve shall constitute a single risk factor, which is expressed as a vector of repo rates for different maturities. For each instrument, the vector shall contain as many components as there are different maturities of repo rates that are used as variables by the institution's pricing model for that instrument.
Institutions shall calculate the sensitivity of an instrument to an equity risk factor as the change in the value of the instrument, according to its pricing model, as a result of a 1 basis point shift in each of the components of the vector. Institutions shall offset sensitivities to the repo rate risk factor of the same equity security, regardless of the number of components of each vector.
3. The equity vega risk factors to be applied by institutions to options with underlyings that are sensitive to equity shall be the implied volatilities of equity spot prices which shall be mapped to the following maturities in accordance with the maturities of the corresponding options subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years. There shall be no own funds requirements for vega risk for equity repo rates.
4. The equity curvature risk factors to be applied by institutions to options with underlyings that are sensitive to equity are all the equity spot prices, regardless of the maturity of the corresponding options. There shall be no curvature risk own funds requirements for equity repo rates.

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Article 325p
Commodity risk factors
1. The buckets for all commodity risk factors shall be the sector buckets referred to in Section 6.
2. The commodity delta risk factors to be applied by institutions to commodity sensitive instruments shall be all the commodity spot prices per commodity type and per each of the following maturities: 0,25 years, 0,5 years, 1 year, 2 years, 3 years, 5 years, 10 years, 15 years, 20 years, 30 years. Institutions shall only consider two commodity prices of the same type of commodity, and with the same maturity to constitute the same risk factor where the set of legal terms regarding the delivery location are identical.
3. The commodity vega risk factors to be applied by institutions to options with underlyings that are sensitive to commodity shall be the implied volatilities of commodity prices per commodity type, which shall be mapped to the following maturities in accordance with the maturities of the corresponding options subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years. Institutions shall consider sensitivities to the same commodity type and allocated to the same maturity to be a single risk factor which institutions shall then offset.
4. The commodity curvature risk factors to be applied by institutions to options with underlyings that are sensitive to commodity shall be one set of commodity prices with different maturities per commodity type, expressed as a vector. For each instrument, the vector shall contain as many components as there are prices of that commodity that are used as variables by the institution's pricing model for that instrument. Institutions shall not differentiate between commodity prices by delivery location.
The sensitivity of the instrument to each risk factor used in the curvature risk formula shall be calculated as specified in Article 325g. For the purposes of curvature risk, institutions shall consider vectors having a different number of components to constitute the same risk factor, provided that those vectors correspond to the same commodity type.

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Article 325q
Foreign exchange risk factors
1. The foreign exchange delta risk factors to be applied by institutions to foreign exchange sensitive instruments shall be all the spot exchange rates between the currency in which an instrument is denominated and the institution's reporting currency. There shall be one bucket per currency pair, containing a single risk factor and a single net sensitivity.
2. The foreign exchange vega risk factors to be applied by institutions to options with underlyings that are sensitive to foreign exchange shall be the implied volatilities of exchange rates between the currency pairs referred to in paragraph 1. Those implied volatilities of exchange rates shall be mapped to the following maturities in accordance with the maturities of the corresponding options subject to own funds requirements: 0,5 years, 1 year, 3 years, 5 years, 10 years.
3. The foreign exchange curvature risk factors to be applied by institutions to options with underlyings that are sensitive to foreign exchange shall be the same as those referred to in paragraph 1.
4. Institutions shall not be required to distinguish between onshore and offshore variants of a currency for all foreign exchange delta, vega and curvature risk factors.

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Article 325r
Delta risk sensitivities
1. Institutions shall calculate delta general interest rate risk (GIRR) sensitivities as follows:
(a) the sensitivities to risk factors consisting of risk-free rates shall be calculated as follows:
SrktVirkt0,0001, x, y …Virkt, x, y …0,0001
where:
Srkt
the sensitivities to risk factors consisting of risk-free rates;
rkt
the rate of a risk-free curve k with maturity t;
Vi (.)
the pricing function of instrument i; and
x,y
risk factors other than rkt in the pricing function Vi;
(b) the sensitivities to risk factors consisting of inflation risk and cross-currency basis shall be calculated as follows:
SxjVixji0,0001 Im, y, z …Vixji, y, z …0,0001
where:
Sxj
the sensitivities to risk factors consisting of inflation risk and cross-currency basis;
xji
a vector of m components representing the implied inflation curve or the cross-currency basis curve for a given currency j with m being equal to the number of inflation or cross-currency related variables used in the pricing model of instrument i;
Im
the unity matrix of dimension (1 × m);
Vi (.)
the pricing function of the instrument i; and
y, z
other variables in the pricing model.
2. Institutions shall calculate the delta credit spread risk sensitivities for all securitisation and non-securitisation positions as follows:SCSktViCSkt0,0001, x, y …ViCSkt, x, y …0,0001
where:
SCSkt
the delta credit spread risk sensitivities for all securitisation and non-securitisation positions;
cskt
the value of the credit spread rate of an issuer j at maturity t;
Vi (.)
the pricing function of instrument i; and
x,y
risk factors other than cskt in the pricing function Vi.
3. Institutions shall calculate delta equity risk sensitivities as follows:
(a) the sensitivities to risk factors consisting of equity spot prices shall be calculated as follows:
SkVi1,01 EQk, x, y, …ViEQk, x, y, …0,01
where:
sk
the sensitivities to risk factors consisting of equity spot prices;
k
a specific equity security;
EQk
the value of the spot price of that equity security;
Vi (.)
the pricing function of instrument i; and
x,y
risk factors other than EQk in the pricing function Vi;
(b) the sensitivities to risk factors consisting of equity repo rates shall be calculated as follows:
SxkVixki0,0001 Im, y, z …Vixji, y, z …0,0001
where:
Sxk
the sensitivities to risk factors consisting of equity repo rates;
k
the index that denotes the equity;
xki
a vector of m components representing the repo term structure for a specific equity k with m being equal to the number of repo rates corresponding to different maturities used in the pricing model of instrument i;
Im
the unity matrix of dimension (1 · m);
Vi (.)
the pricing function of the instrument i; and
y,z
risk factors other than xki in the pricing function Vi.
4. Institutions shall calculate the delta commodity risk sensitivities to each risk factor k as follows:SkVi1,01 CTYk, γ, z …ViCTYk, γ, z …0,01
where:
sk
the delta commodity risk sensitivities;
k
a given commodity risk factor;
CTYk
the value of risk factor k;
Vi (.)
the market value of instrument i as a function of risk factor k; and
y, z
risk factors other than CTYk in the pricing model of instrument i.
5. Institutions shall calculate the delta foreign exchange risk sensitivities to each foreign exchange risk factor k as follows:SkVi1,01 FXk, y, z …ViFXk, y, z …0,01
where:
sk
the delta foreign exchange risk sensitivities;
k
a given foreign exchange risk factor;
FXk
the value of the risk factor;
Vi (.)
the market value of instrument i as a function of the risk factor k; and
y, z
risk factors other than FXk in the pricing model of instrument i.

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Article 325s
Vega risk sensitivities
1. Institutions shall calculate the vega risk sensitivity of an option to a given risk factor k as follows:SkVi1,01 volk, x, yVivolk, x, y0,01
where:
sk
the vega risk sensitivity of an option;
k
a specific vega risk factor, consisting of an implied volatility;
volk
the value of that risk factor, which should be expressed as a percentage; and
x,y
risk factors other than volk in the pricing function Vi.
2. In the case of risk classes where vega risk factors have a maturity dimension, but where the rules to map the risk factors are not applicable because the options do not have a maturity, institutions shall map those risk factors to the longest prescribed maturity. Those options shall be subject to the residual risks add-on.
3. In the case of options that do not have a strike or barrier and options that have multiple strikes or barriers, institutions shall apply the mapping to strikes and maturity used internally by the institution to price the option. Those options shall also be subject to the residual risks add-on.
4. Institutions shall not calculate the vega risk for securitisation tranches included in the ACTP, as referred to in Article 325(6), (7) and (8), that do not have an implied volatility. Own funds requirements for delta and curvature risk shall be computed for those securitisation tranches.

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Article 325t
Requirements on sensitivity computations
1. Institutions shall derive sensitivities from the institution's pricing models that serve as a basis for reporting profit and loss to senior management, using the formulas set out in this Subsection.
By way of derogation from the first subparagraph, competent authorities may require an institution that has been granted permission to use the alternative internal model approach set out in Chapter 1b to use the pricing functions of the risk-measurement system of their internal model approach in the calculation of sensitivities under this Chapter for the calculation and reporting of the own funds requirements for market risk in accordance with Article 430b(3).
2. When calculating delta risk sensitivities of instruments with optionality as referred to in point (a) of Article 325e(2), institutions may assume that the implied volatility risk factors remain constant.
3. When calculating vega risk sensitivities of instruments with optionality as referred to in point (b) of Article 325e(2), the following requirements shall apply:
(a) for general interest rate risk and credit spread risk, institutions shall assume, for each currency, that the underlying of the volatility risk factors for which vega risk is calculated follows either a lognormal or normal distribution in the pricing models used for those instruments;
(b) for equity risk, commodity risk and foreign exchange risk, institutions shall assume that the underlying of the volatility risk factors for which vega risk is calculated follows a lognormal distribution in the pricing models used for those instruments.
4. Institutions shall calculate all sensitivities except for the sensitivities to credit valuation adjustments.
5. By way of derogation from paragraph 1, subject to the permission of the competent authorities, an institution may use alternative definitions of delta risk sensitivities in the calculation of the own funds requirements of a trading book position under this Chapter, provided that the institution meets all the following conditions:
(a) those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution;
(b) the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities for the position than are the formulas set out in this Subsection, and that the resulting sensitivities do not materially differ from those formulas.
6. By way of derogation from paragraph 1, subject to the permission of the competent authorities, an institution may calculate vega sensitivities on the basis of a linear transformation of alternative definitions of sensitivities in the calculation of the own funds requirements of a trading book position under this Chapter, provided that the institution meets both the following conditions:
(a) those alternative definitions are used for internal risk management purposes and for the reporting of profits and losses to senior management by an independent risk control unit within the institution;
(b) the institution demonstrates that those alternative definitions are more appropriate for capturing the sensitivities for the position than are the formulas set out in this Subsection, and that the linear transformation referred to in the first subparagraph reflects a vega risk sensitivity.

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Article 325u
Own funds requirements for residual risks
1. In addition to the own funds requirements for market risk set out in Section 2, institutions shall apply additional own funds requirements to instruments exposed to residual risks in accordance with this Article.
2. Instruments are considered to be exposed to residual risks where they meet any of the following conditions:
(a) the instrument references an exotic underlying, which, for the purposes of this Chapter, means a trading book instrument referencing an underlying exposure that is not in the scope of the delta, vega or curvature risk treatments under the sensitivities-based method laid down in Section 2 or the own funds requirements for the default risk set out in Section 5;
(b) the instrument is an instrument bearing other residual risks, which, for the purposes of this Chapter, means any of the following instruments:
(i) instruments that are subject to the own funds requirements for vega and curvature risk under the sensitivities-based method set out in Section 2 and that generate pay-offs that cannot be replicated as a finite linear combination of plain-vanilla options with a single underlying equity price, commodity price, exchange rate, bond price, credit default swap price or interest rate swap;
(ii) instruments that are positions that are included in the ACTP referred to in Article 325(6); hedges that are included in that ACTP, as referred to in Article 325(8), shall not be considered.
3. Institutions shall calculate the additional own funds requirements referred to in paragraph 1 as the sum of gross notional amounts of the instruments referred to in paragraph 2, multiplied by the following risk weights:
(a) 1,0 % in the case of instruments referred to in point (a) of paragraph 2;
(b) 0,1 % in the case of instruments referred to in point (b) of paragraph 2.
4. By way of derogation from paragraph 1, institution shall not apply the own funds requirement for residual risks to an instrument that meets any of the following conditions:
(a) the instrument is listed on a recognised exchange;
(b) the instrument is eligible for central clearing in accordance with Regulation (EU) No 648/2012;
(c) the instrument perfectly offsets the market risk of another position in the trading book, in which case the two perfectly matching trading book positions shall be exempted from the own funds requirement for residual risks.
5. EBA shall develop draft regulatory technical standards to specify what an exotic underlying is and which instruments are instruments bearing residual risks for the purposes of paragraph 2.
When developing those draft regulatory technical standards, EBA shall examine whether longevity risk, weather, natural disasters and future realised volatility should be considered as exotic underlyings.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.
Power 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.

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Article 325v
Definitions and general provisions
1. For the purposes of this Section, the following definitions apply:
(a) short exposure means that the default of an issuer or group of issuers leads to a gain for the institution, regardless of the type of instrument or transaction creating the exposure;
(b) long exposure means that the default of an issuer or group of issuers leads to a loss for the institution, regardless of the type of instrument or transaction creating the exposure;
(c) gross jump-to-default (gross JTD) amount means the estimated size of the loss or gain that the default of the obligor would produce for a specific exposure;
(d) net jump-to-default (net JTD) amount means the estimated size of the loss or gain that an institution would incur due to the default of an obligor, after offsetting between gross JTD amounts has taken place,
(e) loss given default or LGD means the loss given default of the obligor on an instrument issued by that obligor expressed as a share of the notional amount of the instrument;
(f) default risk weight means the percentage representing the estimated probability of the default of each obligor, according to the creditworthiness of that obligor.
2. Own funds requirements for the default risk shall apply to debt and equity instruments, to derivative instruments having those instruments as underlyings and to derivatives, the pay-offs or fair values of which are affected by the default of an obligor other than the counterparty to the derivative instrument itself. Institutions shall calculate default risk requirements separately for each of the following types of instruments: non-securitisations, securitisations that are not included in the ACTP, and securitisations that are included in the ACTP. The final own funds requirements for the default risk to be applied by institutions shall be the sum of those three components.

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Article 325w
Gross jump-to-default amounts
1. Institutions shall calculate the gross JTD amounts for each long exposure to debt instruments as follows:
JTDlong = max {LGD Vnotional + P&Llong + Adjustmentlong; 0}
where:
JTDlong
the gross JTD amount for the long exposure;
Vnotional
the notional amount of the instrument;
P&Llong
a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the long exposure; gains shall enter the formula with a positive sign and losses with a negative; and
Adjustmentlong
the amount by which, due to the structure of the derivative instrument, the institution's loss in the event of default would be increased or reduced relative to the full loss on the underlying instrument; increases shall enter the Adjustmentlong term with a positive sign and decreases with a negative sign.
2. Institutions shall calculate the gross JTD amounts for each short exposure to debt instruments as follows:
JTDshort = min {LGD Vnotional + P&Lshort + Adjustmentshort; 0}
where:
JTDshort
the gross JTD amount for the short exposure;
Vnotional
the notional amount of the instrument that shall enter into the formula with a negative sign;
P&Lshort
a term which adjusts for gains or losses already accounted for by the institution due to changes in the fair value of the instrument creating the short exposure; gains shall enter into the formula with a positive sign and losses shall enter into the formula with a negative sign; and
Adjustmentshort
the amount by which, due to the structure of the derivative instrument, the institution's gain in the event of default would be increased or reduced relative to the full loss on the underlying instrument; decreases shall enter the Adjustmentshort term with a positive sign and increases shall enter the Adjustmentshort term with a negative sign.
3. For the purposes of the calculation set out in paragraphs 1 and 2, the LGD for debt instruments to be applied by institutions shall be the following:
(a) exposures to non-senior debt instruments shall be assigned an LGD of 100 %;
(b) exposures to senior debt instruments shall be assigned an LGD of 75 %;
(c) exposures to covered bonds, as referred to in Article 129, shall be assigned an LGD of 25 %.
4. For the purposes of the calculations set out in paragraphs 1 and 2, notional amounts shall be determined as follows:
(a) in the case of debt instruments, the notional amount is the face value of the debt instrument;
(b) in the case of derivative instruments with debt security underlyings, the notional amount is the notional amount of the derivative instrument.
5. For exposures to equity instruments, institutions shall calculate the gross JTD amounts as follows, instead of using the formulas referred to in paragraphs 1 and 2:
JTDlong = max {LGD · V + P&Llong + Adjustmentlong; 0}
JTDshort = min {LGD · V + P&Lshort + Adjustmentshort; 0}
where:
JTDlong
the gross JTD amount for the long exposure;
JTDshort
the gross JTD amount for the short exposure; and
V
the fair value of the equity or, in the case of derivative instruments with equity underlyings, the fair value of the equity underlying.
6. Institutions shall assign an LGD of 100 % to equity instruments for the purposes of the calculation set out in paragraph 5.
7. In the case of exposures to default risk arising from derivative instruments whose pay-offs in the event of default of the obligor are not related to the notional amount of a specific instrument issued by that obligor or to the LGD of the obligor or an instrument issued by that obligor, institutions shall use alternative methodologies to estimate the gross JTD amounts.
8. EBA shall develop draft regulatory technical standards to specify:
(a) how institutions are to calculate JTD amounts for different types of instruments in accordance with this Article;
(b) which alternative methodologies institutions are to use for the purposes of the estimation of gross JTD amounts referred to in paragraph 7.
(c) the notional amounts of instruments other than the ones referred to in points (a) and (b) of paragraph 4.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.
Power 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.

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Article 325x
Net jump-to-default amounts
1. Institutions shall calculate net JTD amounts by offsetting the gross JTD amounts of short exposures and long exposures. Offsetting shall only be possible between exposures to the same obligor where the short exposures have the same seniority as, or lower seniority than, the long exposures.
2. Offsetting shall be either full or partial, depending on the maturities of the offsetting exposures:
(a) offsetting shall be full where all offsetting exposures have maturities of one year or more;
(b) offsetting shall be partial where at least one of the offsetting exposures has a maturity of less than one year, in which case the size of the JTD amount of each exposure with a maturity of less than one year shall be multiplied by the ratio of the exposure's maturity relative to one year.
3. Where no offsetting is possible gross JTD amounts shall equal net JTD amounts in the case of exposures with maturities of one year or more. Gross JTD amounts with maturities of less than one year shall be multiplied by the ratio of the exposure's maturity relative to one year, with a floor of three months, to calculate net JTD amounts.
4. For the purposes of paragraphs 2 and 3, the maturities of the derivative contracts shall be considered, rather than those of their underlyings. Cash equity exposures shall be assigned a maturity of either one year or three months, at the institution's discretion.

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Article 325y
Calculation of the own funds requirements for the default risk
1. Net JTD amounts, irrespective of the type of counterparty, shall be multiplied by the default risk weights that correspond to their credit quality, as specified in Table 2:
Table 2
Credit quality category Default risk weight
Credit quality step 1 0,5 %
Credit quality step 2 3 %
Credit quality step 3 6 %
Credit quality step 4 15 %
Credit quality step 5 30 %
Credit quality step 6 50 %
Unrated 15 %
Defaulted 100 %
2. Exposures which would receive a 0 % risk-weight under the Standardised Approach for credit risk in accordance with Chapter 2 of Title II shall receive a 0 % default risk weight for the own funds requirements for the default risk.
3. The weighted net JTD shall be allocated to the following buckets: corporates, sovereigns, and local governments/municipalities.
4. Weighted net JTD amounts shall be aggregated within each bucket, in accordance with the following formula:
DRCb = max {(Σi ∈ long RWi · net JTDi) – WtS · (Σi ∈ short RWi · |net JTDi|); 0}
where:
DRCb
the own funds requirement for the default risk for bucket b;
i
the index that denotes an instrument belonging to bucket b;
RWi
the risk weight; and
WtS
a ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated as follows:WtS netJTDlong netJTDlongnetJTDshort
For the purposes of calculating the DRCb and the WtS, the long positions and short positions shall be aggregated for all positions within a bucket, regardless of the credit quality step to which those positions are allocated, to produce the bucket-specific own funds requirements for the default risk.
5. The final own funds requirement for the default risk for non-securitisations shall be calculated as the simple sum of the bucket-level own funds requirements.

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Article 325z
Jump-to-default amounts
1. Gross jump-to-default amounts for securitisation exposures shall be their market value or, if their market value is not available, their fair value determined in accordance with the applicable accounting framework.
2. Net jump-to-default amounts shall be determined by offsetting long gross jump-to-default amounts and short gross jump-to-default amounts. Offsetting shall only be possible between securitisation exposures with the same underlying asset pool and belonging to the same tranche. No offsetting shall be permitted between securitisation exposures with different underlying asset pools, even where the attachment and detachment points are the same.
3. Where, by decomposing or combining existing securitisation exposures, other existing securitisation exposures can be perfectly replicated, except for the maturity dimension, the exposures resulting from that decomposition or combination may be used instead of the existing securitisation exposures for the purposes of offsetting.
4. Where, by decomposing or combining existing exposures in underlying names, the entire tranche structure of an existing securitisation exposure can be perfectly replicated, the exposures resulting from that decomposition or combination may be used instead of the existing securitisation exposures for the purposes of offsetting. Where underlying names are used in that manner, they shall be removed from the non-securitisation default risk treatment.
5. Article 325x shall apply to both existing securitisation exposures and to securitisation exposures used in accordance with paragraph 3 or 4 of this Article. The relevant maturities shall be those of the securitisation tranches.

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Article 325aa
Calculation of the own funds requirement for the default risk for securitisations
1. Net JTD amounts of securitisation exposures shall be multiplied by 8 % of the risk weight that applies to the relevant securitisation exposure, including STS securitisations, in the non-trading book in accordance with the hierarchy of approaches set out in Section 3 of Chapter 5 of Title II and irrespective of the type of counterparty.
2. A maturity of one year shall be applied to all tranches, where risk weights are calculated in accordance with the SEC-IRBA and SEC-ERBA.
3. The risk-weighted JTD amounts for individual cash securitisation exposures shall be capped at the fair value of the position.
4. Risk-weighted net JTD amounts shall be assigned to the following buckets:
(a) one common bucket for all corporates, regardless of the region;
(b) 44 different buckets corresponding to one bucket per region for each of the 11 asset classes defined in the second subparagraph.
For the purposes of the first subparagraph, the 11 asset classes are ABCP, auto loans/leases, residential mortgage-backed securities (RMBS), credit cards, commercial mortgage-backed securities (CMBS), collateralised loan obligations, collateralised debt obligations squared (CDO-squared), small and medium-sized enterprises (SMEs), student loans, other retail, other wholesale. The four regions are Asia, Europe, North America, and rest of the world.
5. In order to assign a securitisation exposure to a bucket, institutions shall rely on a classification commonly used in the market. Institutions shall assign each securitisation exposure to only one of the buckets referred to in paragraph 4. Any securitisation exposure that an institution cannot assign to a bucket for an asset class or region shall be assigned to the asset class other retail or other wholesale or to the region rest of the world, respectively.
6. Weighted net JTD amounts shall be aggregated within each bucket in the same manner as for default risk of non-securitisation exposures, using the formula in Article 325y(4), resulting in the own funds requirement for the default risk for each bucket.
7. The final own funds requirement for the default risk for securitisations not included in the ACTP shall be calculated as the simple sum of the bucket-level own funds requirements.

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Article 325ab
Scope
1. For the ACTP, the own funds requirements shall include the default risk for securitisation exposures and for non-securitisation hedges. Those hedges shall be removed from the default risk calculations for non-securitisation. There shall be no diversification benefit between the own funds requirements for the default risk for non-securitisations, the own funds requirements for the default risk for securitisations not included in the ACTP and own funds requirements for the default risk for securitisations included in the ACTP.
2. For traded non-securitisation credit and equity derivatives, JTD amounts by individual constituents shall be determined by applying a look-through approach.

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Article 325ac
Jump-to-default amounts for the ACTP
1. For the purposes of this Article, the following definitions apply:
(a) decomposition with a valuation model means that a single name constituent of a securitisation is valued as the difference between the unconditional value of the securitisation and the conditional value of the securitisation assuming that single name defaults with an LGD of 100 %;
(b) replication means that the combination of individual securitisation index tranches are combined to replicate another tranche of the same index series, or to replicate an untranched position in the index series;
(c) decomposition means replicating an index by a securitisation of which the underlying exposures in the pool are identical to the single name exposures that compose the index.
2. The gross JTD amounts for securitisation exposures and non-securitisation exposures in the ACTP shall be their market value or, if their market value is not available, their fair value determined in accordance with the applicable accounting framework.
3. Nth-to-default products shall be treated as tranched products with the following attachment and detachment points:
(a) attachment point = (N – 1) / Total Names;
(b) detachment point = N / Total Names;
where Total Names shall be the total number of names in the underlying basket or pool.
4. Net JTD amounts shall be determined by offsetting long gross JTD amounts and short gross JTD amounts. Offsetting shall only be possible between exposures that are otherwise identical except for maturity. Offsetting shall only be possible as follows:
(a) for indices, index tranches and bespoke tranches, offsetting shall be possible across maturities within the same index family, series and tranche, subject to the provisions on exposures of less than one year laid down in Article 325x; long gross JTD amounts and short gross JTD amounts that perfectly replicate each other may be offset through decomposition into single name equivalent exposures using a valuation model; in such cases, the sum of the gross JTD amounts of the single name equivalent exposures obtained through decomposition shall be equal to the gross JTD amount of the undecomposed exposure;
(b) offsetting through decomposition as set out is point (a) shall not be allowed for resecuritisations or derivatives on securitisation;
(c) for indices and index tranches, offsetting shall be possible across maturities within the same index family, series and tranche by replication or by decomposition; where the long exposures and short exposures are otherwise equivalent, apart from one residual component, offsetting shall be allowed and the net JTD amount shall reflect the residual exposure;
(d) different tranches of the same index series, different series of the same index and different index families may not be used to offset each other.

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Article 325ad
Calculation of the own funds requirements for the default risk for the ACTP
1. Net JTD amounts shall be multiplied by:
(a) for tranched products, the default risk weights corresponding to their credit quality as specified in Article 325y(1) and (2);
(b) for non-tranched products, the default risk weights referred to in Article 325aa(1).
2. Risk-weighted net JTD amounts shall be assigned to buckets that correspond to an index.
3. Weighted net JTD amounts shall be aggregated within each bucket in accordance with the following formula:
DRCb = max {(Σi ∈ long RWi · net JTDi) – WtSACTP · (Σi ∈ short RWi · |net JTDi|); 0}
where:
DRCb
the own funds requirement for the default risk for bucket b;
i
an instrument belonging to bucket b; and
WtSACTP
the ratio recognising a benefit for hedging relationships within a bucket, which shall be calculated in accordance with the WtS formula set out in Article 325y(4), but using long positions and short positions across the entire ACTP and not just the positions in the particular bucket.
4. Institutions shall calculate the own funds requirements for the default risk for the ACTP by using the following formula:DRCACTPmaxbmaxDRCb, 00,5minDRCb, 00 ; 0
where:
DRCACTP
the own funds requirement for the default risk for the ACTP; and
DRCb
the own funds requirement for the default risk for bucket b.

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Article 325ae
Risk weights for general interest rate risk
1. For currencies not included in the most liquid currency sub-category as referred to in point (b) of Article 325bd(7), the risk weights of the sensitivities to the risk-free rate risk factors for each bucket in Table 3 shall be specified pursuant to the delegated act referred to in Article 461a.
Table 3
Bucket Maturity
1 0,25 years
2 0,5 years
3 1 year
4 2 years
5 3 years
6 5 years
7 10 years
8 15 years
9 20 years
10 30 years
2. A common risk weight both for all the sensitivities to inflation and for cross currency basis risk factors shall be specified in the delegated act referred to in Article 461a.
3. For the currencies included in the most liquid currency sub-category as referred to in point (b) of 325bd(7) and the domestic currency of the institution, the risk weights of the risk-free rate risk factors shall be the risk weights referred to in Table 3 divided by √2.

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Article 325af
Intra bucket correlations for general interest rate risk
1. Between two weighted sensitivities of general interest rate risk factors WSk and WSl within the same bucket, and with the same assigned maturity but corresponding to different curves, correlation ρkl shall be set at 99,90 %.
2. Between two weighted sensitivities of general interest rate risk factors WSk and WSl within the same bucket, corresponding to the same curve, but having different maturities, correlation shall be set in accordance with the following formula:maxeθTkTlminTk; Tl ; 40 %
where:
Tk (respectivelyTl)
the maturity that relates to the risk free rate;
θ
3 %
3. Between two weighted sensitivities of general interest rate risk factors WSk and WSl within the same bucket, corresponding to different curves and having different maturities, the correlation ρkl shall be equal to the correlation parameter specified in paragraph 2, multiplied by 99,90 %.
4. Between any given weighted sensitivity of general interest rate risk factors WSk and any given weighted sensitivity of inflation risk factors WSl, the correlation shall be set at 40 %.
5. Between any given weighted sensitivity of cross-currency basis risk factors WSk and any given weighted sensitivity of general interest rate risk factors WSl, including another cross-currency basis risk factor, the correlation shall be set at 0 %.

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Article 325ag
Correlations across buckets for general interest rate risk
1. The parameter γbc = 50 % shall be used to aggregate risk factors belonging to different buckets.
2. The parameter γbc = 80 % shall be used to aggregate an interest rate risk factor based on a currency as referred to in Article 325av(3) and an interest rate risk factor based on the euro.

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Article 325ah
Risk weights for credit spread risk for non-securitisations
1. Risk weights for the sensitivities to credit spread risk factors for non-securitisations shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 4:
Table 4
Bucket number Credit quality Sector Risk weight
(percentage points)
1 All Central government, including central banks, of a Member State 0,50 %
2 Credit quality step 1 to 3 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 0,5 %
3 Regional or local authority and public sector entities 1,0 %
4 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 5,0 %
5 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 3,0 %
6 Consumer goods and services, transportation and storage, administrative and support service activities 3,0 %
7 Technology, telecommunications 2,0 %
8 Health care, utilities, professional and technical activities 1,5 %
9 Covered bonds issued by credit institutions in Member States 1,0 %
11 Credit quality step 4 to 6 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 12 Regional or local authority and public sector entities 4,0 %
13 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 12,0 %
14 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 7,0 %
15 Consumer goods and services, transportation and storage, administrative and support service activities 8,5 %
16 Technology, telecommunications 5,5 %
17 Health care, utilities, professional and technical activities 5,0 %
18 Other sector 12,0 %
2. To assign a risk exposure to a sector, institutions shall rely on a classification that is commonly used in the market for grouping issuers by sector. Institutions shall assign each issuer to only one of the sector buckets in Table 4. Risk exposures from any issuer that an institution cannot assign to a sector in such a manner shall be assigned to bucket 18 in Table 4.

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Article 325ai
Intra-bucket correlations for credit spread risk for non-securitisations
1. The correlation parameter ρkl between two sensitivities WSk and WSl within the same bucket shall be set as follows:
ρkl = ρkl(name) · ρkl(tenor) · ρkl(basis)
where:
ρkl(name) shall be equal to 1 where the two names of sensitivities k and l are identical, otherwise it shall be equal to 35 %;
ρkl(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 65 %; and
ρkl(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,90 %.
2. The correlation parameters referred to in paragraph 1 of this Article shall not apply to bucket 18 in Table 4 of Article 325ah(1). The capital requirement for the delta risk aggregation formula within bucket 18 shall be equal to the sum of the absolute values of the net weighted sensitivities allocated to that bucket:Kbbucket 18kWSk

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Article 325aj
Correlations across buckets for credit spread risk for non-securitisations
The correlation parameter γbc that applies to the aggregation of sensitivities between different buckets shall be set as follows:
γbc = γbc(rating) · γbc(sector)
where:
γbc(rating) shall be equal to 1 where the two buckets have the same credit quality category (either credit quality step 1 to 3 or credit quality step 4 to 6), otherwise it shall be equal to 50 %; for the purposes of that calculation, bucket 1 shall be considered as belonging to the same credit quality category as buckets that have credit quality step 1 to 3; and
γbc(sector) shall be equal to 1 where the two buckets belong to the same sector, and otherwise shall be equal to the corresponding percentage set out in Table 5:
Table 5
Bucket 1, 2 and 11 3 and 12 4 and 13 5 and 14 6 and 15 7 and 16 8 and 17 9
1, 2 and 11 75 % 10 % 20 % 25 % 20 % 15 % 10 %
3 and 12 5 % 15 % 20 % 15 % 10 % 10 %
4 and 13 5 % 15 % 20 % 5 % 20 %
5 and 14 20 % 25 % 5 % 5 %
6 and 15 25 % 5 % 15 %
7 and 16 5 % 20 %
8 and 17 5 %
9 —

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Article 325ak
Risk weights for credit spread risk for securitisations included in the ACTP
Risk weights for the sensitivities to credit spread risk factors for securitisations included in the ACTP risk factors shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket and shall be specified for each bucket in Table 6 pursuant to the delegated act referred to in Article 461a:
Table 6
Bucket number Credit quality Sector
1 All Central government, including central banks, of Member States
2 Credit quality step 1 to 3 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118
3 Regional or local authority and public sector entities
4 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders
5 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying
6 Consumer goods and services, transportation and storage, administrative and support service activities
7 Technology, telecommunications
8 Health care, utilities, professional and technical activities
9 Covered bonds issued by credit institutions in Member States
10 Covered bonds issued by credit institutions in third countries
11 Credit quality step 4 to 6 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118
12 Regional or local authority and public sector entities
13 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders
14 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying
15 Consumer goods and services, transportation and storage, administrative and support service activities
16 Technology, telecommunications
17 Health care, utilities, professional and technical activities
18 Other sector

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Article 325al
Correlations for credit spread risk for securitisations included in the ACTP
1. The delta risk correlation ρkl shall be derived in accordance with Article 325ai, except that, for the purposes of this paragraph, ρkl(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,00 %.
2. The correlation γbc shall be derived in accordance with Article 325aj.

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Article 325am
Risk weights for credit spread risk for securitisations not included in the ACTP
1. Risk weights for the sensitivities to credit spread risk factors for securitisation not included in the ACTP shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 7 and shall be specified for each bucket in Table 7 pursuant to the delegated act referred to in Article 461a:
Table 7
Bucket number Credit quality Sector
1 Senior and Credit quality step 1 to 3 RMBS - Prime
2 RMBS - Mid-Prime
3 RMBS - Sub-Prime
4 CMBS
5 Asset backed securities (ABS) - Student loans
6 ABS - Credit cards
7 ABS - Auto
8 Collateralised loan obligations (CLO) non-ACTP
9 Non-senior and credit quality step 1 to 3 RMBS - Prime
10 RMBS - Mid-Prime
11 RMBS - Sub-Prime
12 CMBS
13 ABS - Student loans
14 ABS - Credit cards
15 ABS - Auto
16 CLO non-ACTP
17 Credit quality step 4 to 6 RMBS - Prime
18 RMBS - Mid-Prime
19 RMBS - Sub-Prime
20 CMBS
21 ABS - Student loans
22 ABS - Credit cards
23 ABS - Auto
24 CLO non-ACTP
25 Other sector
2. To assign a risk exposure to a sector, institutions shall rely on a classification that is commonly used in the market for grouping issuers by sector. Institutions shall assign each tranche to one of the sector buckets in Table 7. Risk exposures from any tranche that an institution cannot assign to a sector in such a manner shall be assigned to bucket 25.

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Article 325an
Intra-bucket correlations for credit spread risk for securitisations not included in the ACTP
1. Between two sensitivities WSk and WSl within the same bucket, the correlation parameter ρkl shall be set as follows:
ρkl = ρkl(tranche) · ρkl(tenor) · ρkl(basis)
where:
ρkl(thranche) shall be equal to 1 where the two names of sensitivities k and l are within the same bucket and are related to the same securitisation tranche (more than 80 % overlap in notional terms), otherwise it shall be equal to 40 %;
ρkl(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 80 %; and
ρkl(basis) shall be equal to 1 where the two sensitivities are related to the same curves, otherwise it shall be equal to 99,90 %.
2. The correlation parameters referred to in paragraph 1 shall not apply to bucket 25 in Table 7 of Article 325am(1). The own funds requirement for the delta risk aggregation formula within bucket 25 shall be equal to the sum of the absolute values of the net weighted sensitivities allocated to that bucket:Kbbucket 25kWSk

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Article 325ao
Correlations across buckets for credit spread risk for securitisations not included in the ACTP
1. The correlation parameter γbc shall apply to the aggregation of sensitivities between different buckets and shall be set at 0 %.
2. The own funds requirement for bucket 25 shall be added to the overall risk class level capital, with no diversification or hedging effects recognised with any other bucket.

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Article 325ap
Risk weights for equity risk
1. Risk weights for the sensitivities to equity and equity repo rate risk factors shall be specified for each bucket in Table 8 pursuant to the delegated act referred to in Article 461a:
Table 8
Bucket number Market capitalisation Economy Sector
1 Large Emerging market economy Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities
2 Telecommunications, industrials
3 Basic materials, energy, agriculture, manufacturing, mining and quarrying
4 Financials including government-backed financials, real estate activities, technology
5 Advanced economy Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities
6 Telecommunications, industrials
7 Basic materials, energy, agriculture, manufacturing, mining and quarrying
8 Financials including government-backed financials, real estate activities, technology
9 Small Emerging market economy All sectors described under bucket numbers 1, 2, 3 and 4
10 Advanced economy All sectors described under bucket numbers 5, 6, 7 and 8
11 Other sector
2. For the purposes of this Article, what constitutes a small and a large market capitalisation shall be specified in the regulatory technical standards referred to in Article 325bd(7).
3. For the purposes of this Article, EBA shall develop draft regulatory technical standards to specify what constitutes an emerging market and to specify what constitutes an advanced economy.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2021.
Power 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.
4. When assigning a risk exposure to a sector, institutions shall rely on a classification that is commonly used in the market for grouping issuers by sector. Institutions shall assign each issuer to one of the sector buckets in Table 8 and shall assign all issuers from the same industry to the same sector. Risk exposures from any issuer that an institution cannot assign to a sector in such a manner shall be assigned to bucket 11 in Table 8. Multinational or multi-sector equity issuers shall be assigned to a particular bucket on the basis of the most material region and sector in which the equity issuer operates.

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Article 325aq
Intra-bucket correlations for equity risk
1. The delta risk correlation parameter ρkl between two sensitivities WSk and WSl within the same bucket shall be set at 99,90 % where one is a sensitivity to an equity spot price and the other a sensitivity to an equity repo rate, where both are related to the same equity issuer name.
2. In other cases than the cases referred to in paragraph 1, the correlation parameter ρkl between two sensitivities WSk and WSl to equity spot price within the same bucket shall be set as follows:
(a) 15 % between two sensitivities within the same bucket that fall under the category large market capitalisation, emerging market economy (bucket number 1, 2, 3 or 4);
(b) 25 % between two sensitivities within the same bucket that fall under the category large market capitalisation, advanced economy (bucket number 5, 6, 7 or 8);
(c) 7,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, emerging market economy (bucket number 9);
(d) 12,5 % between two sensitivities within the same bucket that fall under the category small market capitalisation, advanced economy (bucket number 10).
3. The correlation parameter ρkl between two sensitivities WSk and WSl to equity repo rate within the same bucket shall be set in accordance with paragraph 2.
4. Between two sensitivities WSk and WSl within the same bucket where one is a sensitivity to an equity spot price and the other a sensitivity to an equity repo rate and both sensitivities relate to a different equity issuer name, the correlation parameter ρkl shall be set to the correlation parameters specified in paragraph 2, multiplied by 99,90 %.
5. The correlation parameters specified in paragraphs 1 to 4 shall not apply to bucket 11. The capital requirement for the delta risk aggregation formula within bucket 11 shall be equal to the sum of the absolute values of the net weighted sensitivities allocated to that bucket:Kbbucket 11kWSk

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Article 325ar
Correlations across buckets for equity risk
The correlation parameter γbc shall apply to the aggregation of sensitivities between different buckets. It shall be set at 15 % where the two buckets fall within buckets 1 to 10.

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Article 325as
Risk weights for commodity risk
Risk weights for sensitivities to commodity risk factors shall be specified for each bucket in Table 9 pursuant to the delegated act referred to in Article 461a:
Table 9
Bucket number Bucket name
1 Energy - solid combustibles
2 Energy - liquid combustibles
3 Energy - electricity and carbon trading
4 Freight
5 Metals – non-precious
6 Gaseous combustibles
7 Precious metals (including gold)
8 Grains and oilseed
9 Livestock and dairy
10 Softs and other agricultural commodities
11 Other commodity

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Article 325at
Intra-bucket correlations for commodity risk
1. For the purposes of this Article, any two commodities shall be considered distinct commodities where there exist in the market two contracts that are differentiated only by the underlying commodity to be delivered against each contract.
2. The correlation parameter ρkl between two sensitivities WSk and WSl within the same bucket shall be set as follows:
ρkl = ρkl(commodity) · ρkl(tenor) · ρkl(basis)
where:
ρkl(commodity) shall be equal to 1 where the two commodities of sensitivities k and l are identical, otherwise it shall be equal to the intra-bucket correlations in Table 10;
ρkl(tenor) shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 99 %; and
ρkl(basis) shall be equal to 1 where the two sensitivities are identical in the delivery location of a commodity, otherwise it shall be equal to 99,90 %.
3. The intra-bucket correlations ρkl(commodity) are:
Table 10
Bucket number Bucket name Correlation
ρkl (commodity)
1 Energy - solid combustibles 55 %
2 Energy - liquid combustibles 95 %
3 Energy - electricity and carbon trading 40 %
4 Freight 80 %
5 Metals – non-precious 60 %
6 Gaseous combustibles 65 %
7 Precious metals (including gold) 55 %
8 Grains and oilseed 45 %
9 Livestock and dairy 15 %
10 Softs and other agricultural commodities 40 %
11 Other commodity 15 %
4. Notwithstanding paragraph 1, the following provisions apply:
(a) two risk factors that are allocated to bucket 3 in Table 10 and that concern electricity which is generated in different regions or is delivered at different periods under the contractual agreement shall be considered distinct commodity risk factors;
(b) two risk factors that are allocated to bucket 4 in Table 10 and that concern freight where the freight route or week of delivery differ shall be considered distinct commodity risk factors.

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Article 325au
Correlations across buckets for commodity risk
The correlation parameter γbc applying to the aggregation of sensitivities between different buckets shall be set at:
(a) 20 % where the two buckets fall within bucket numbers 1 to 10;
(b) 0 % where either of the two buckets is bucket number 11.

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Article 325av
Risk weights for foreign exchange risk
1. Risk weight for all sensitivities to foreign exchange risk factors shall be specified in the delegated act referred to in Article 461a.
2. The risk weight of the foreign exchange risk factors concerning currency pairs which are composed of the euro and the currency of a Member State participating in the second stage of the economic and monetary union (ERM II) shall be one of the following:
(a) the risk weight referred to in paragraph 1, divided by 3;
(b) the maximum fluctuation within the fluctuation band formally agreed by the Member State and the European Central Bank, if that fluctuation band is narrower than the fluctuation band defined under ERM II.
3. Notwithstanding paragraph 2, the risk weight of the foreign exchange risk factors concerning currencies referred to in paragraph 2 which participate in the ERM II with a formally agreed fluctuation band narrower than the standard band of plus or minus 15 % shall equal the maximum percentage fluctuation within that narrower band.
4. The risk weight of the foreign exchange risk factors included in the most liquid currency pairs sub-category as referred to in point (c) of 325bd(7) shall be the risk weight referred to in paragraph 1 of this Article divided by √2.
5. Where the daily exchange-rate data for the preceding three years show that a currency pair composed of euro and a non-euro currency of a Member State is constant and that the institution is always able to face a zero bid/ask spread on the respective trades related to that currency pair, the institution may apply the risk weight referred to in paragraph 1 divided by 2, provided that it has the express permission of its competent authority to do so.

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Article 325aw
Correlations for foreign exchange risk
A uniform correlation parameter γbc equal to 60 % shall apply to the aggregation of sensitivities to foreign exchange risk factors.

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Article 325ax
Vega and curvature risk weights
1. Vega risk factors shall use the delta buckets referred to in Subsection 1.
2. The risk weight for a given vega risk factor k shall be determined as a share of the current value of that risk factor k which represents the implied volatility of an underlying, as described in Section 3.
3. The share referred to in paragraph 2 shall be made dependent on the presumed liquidity of each type of risk factor in accordance with the following formula:RWkValue of risk factor kminRWσLHrisk class10 ; 100%
where:
RWk = the risk weight for a given vega risk factor k;
RWσ shall be set at 55 %; and
LHrisk class is the regulatory liquidity horizon to be prescribed in the determination of each vega risk factor k. LHrisk class is determined in accordance with the following table:
Table 11
Risk class LHrisk class
GIRR 60
CSR non-securitisations 120
CSR securitisations (ACTP) 120
CSR securitisations (non-ACTP) 120
Equity (large cap) 20
Equity (small cap) 60
Commodity 120
Foreign exchange 40
4. Buckets used in the context of delta risk in Subsection 1 shall be used in the curvature risk context unless specified otherwise in this Chapter.
5. For foreign exchange and equity curvature risk factors, the curvature risk weights shall be relative shifts equal to the delta risk weights referred to in Subsection 1.
6. For general interest rate, credit spread and commodity curvature risk factors, the curvature risk weight shall be the parallel shift of all the vertices for each curve on the basis of the highest prescribed delta risk weight referred to in Subsection 1 for the relevant risk class.

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Article 325ay
Vega and curvature risk correlations
1. Between vega risk sensitivities within the same bucket of the general interest rate risk (GIRR) class, the correlation parameter rkl shall be set as follows:ρklminρ kloption maturityρ klunderlying maturity;1
where:
ρkloption maturity shall be equal to eαTkTlminTk; Tl where α shall be set at 1 %, Tk and Tl shall be equal to the maturities of the options for which the vega sensitivities are derived, expressed as a number of years; and
ρklunderlying maturity is equal to eαTUkTUlminTUk; TUl, where α is set at 1 %, TUk and TUl shall be equal to the maturities of the underlyings of the options for which the vega sensitivities are derived, minus the maturities of the corresponding options, expressed in both cases as a number of years.
2. Between vega risk sensitivities within a bucket of the other risk classes, the correlation parameter ρkl shall be set as follows:ρklminρ klDELTAρ kloption maturity;1
where:
ρklDELTA shall be equal to the delta intra-bucket correlation corresponding to the bucket to which vega risk factors k and l would be allocated; and
ρkloption maturity shall be set in accordance with paragraph 1.
3. With regard to vega risk sensitivities between buckets within a risk class (GIRR and non-GIRR), the same correlation parameters for γbc, as specified for delta correlations for each risk class in Section 4, shall be used in the vega risk context.
4. There shall be no diversification or hedging benefit recognised in the standardised approach between vega risk factors and delta risk factors. Vega risk charges and delta risk charges shall be aggregated by simple summation.
5. The curvature risk correlations shall be the square of corresponding delta risk correlations ρkl and γbc referred to in Subsection 1.

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Article 325az
Alternative internal model approach and permission to use alternative internal models
1. The alternative internal model approach as set out in this Chapter shall be used only for the purposes of the reporting requirement laid down in Article 430b(3).
2. After having verified institutions' compliance with the requirements set out in Articles 325bh, 325bi and 325bj, competent authorities shall grant permission to those institutions to calculate their own funds requirements for the portfolio of all positions assigned to trading desks by using their alternative internal models in accordance with Article 325ba, provided that all the following requirements are met:
(a) the trading desks were established in accordance with Article 104b;
(b) the institution has provided to the competent authority a rationale for the inclusion of the trading desks in the scope of the alternative internal model approach;
(c) the trading desks have met the back-testing requirements referred to in Article 325bf(3) for the preceding year;
(d) the institution has reported to its competent authorities the results of the profit and loss attribution (P&L attribution) requirement for the trading desks set out in Article 325bg;
(e) for trading desks that have been assigned at least one of those trading book positions referred to in Article 325bl, the trading desks fulfil the requirements set out in Article 325bm for the internal default risk model;
(f) no securitisation or re-securitisation positions have been assigned to the trading desks.
For the purposes of point (b) of the first subparagraph of this paragraph, not including a trading desk in the scope of the alternative internal model approach shall not be motivated by the fact that the own funds requirement calculated under the alternative standardised approach set out in point (a) of Article 325(3) would be lower than the own funds requirement calculated under the alternative internal model approach.
3. Institutions that have received the permission to use the alternative internal model approach shall report to the competent authorities in accordance with Article 430b(3).
4. An institution that has been granted the permission referred to in paragraph 2 shall immediately notify its competent authorities that one of its trading desks no longer meets at least one of the requirements set out in that paragraph. That institution shall no longer be permitted to apply this Chapter to any of the positions assigned to that trading desk and shall calculate the own funds requirements for market risk in accordance with the approach set out in Chapter 1a for all the positions assigned to that trading desk from the earliest reporting date and until the institution demonstrates to the competent authorities that the trading desk again fulfils all the requirements set out in paragraph 2.
5. By way of derogation from paragraph 4, in extraordinary circumstances, competent authorities may permit an institution to continue using its alternative internal models for the purpose of calculating the own funds requirements for the market risk of a trading desk that no longer meets the conditions referred to in point (c) of paragraph 2 of this Article and in Article 325bg(1). When competent authorities exercise that discretion, they shall notify EBA and substantiate their decision.
6. For positions assigned to the trading desks for which an institution has not been granted permission as referred to in paragraph 2, the own funds requirements for market risk shall be calculated by that institution in accordance with Chapter 1a of this Title. For the purposes of that calculation, all those positions shall be considered on a stand-alone basis as a separate portfolio.
7. Material changes to the use of alternative internal models that an institution has received permission to use, the extension of the use of alternative internal models that the institution has received permission to use, and material changes to the institution's choice of the subset of the modellable risk factors referred to in Article 325bc(2), shall require separate permission from its competent authorities.
Institutions shall notify the competent authorities of all other extensions and changes to the use of the alternative internal models for which the institution has received permission.
8. EBA shall develop draft regulatory technical standards to specify:
(a) the conditions for assessing the materiality of extensions and changes to the use of alternative internal models and changes to the subset of the modellable risk factors referred to in Article 325bc;
(b) the assessment methodology under which competent authorities verify an institution's compliance with the requirements set out in Articles 325bh, 325bi, 325bn, 325bo and 325bp.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2024.
Power 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.
9. EBA shall develop draft regulatory technical standards to specify the extraordinary circumstances under which competent authorities may permit an institution:
(a) to continue using its alternative internal models for the purpose of calculating the own funds requirements for the market risk of a trading desk that no longer meets the conditions referred to in point (c) of paragraph 2 of this Article and in Article 325bg(1);
(b) to limit the add-on to the one resulting from overshootings under back-testing hypothetical changes.
EBA shall submit those draft regulatory technical standards to the Commission by 28 June 2024.
Power 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.

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Article 325ba
Own funds requirements when using alternative internal models
1. An institution using an alternative internal model shall calculate the own funds requirements for the portfolio of all positions assigned to the trading desks for which the institution has been granted permission as referred to in Article 325az(2) as the higher of the following:
(a) the sum of the following values:
(i) the institution's previous day's expected shortfall risk measure, calculated in accordance with Article 325bb (ESt-1), and
(ii) the institution's previous day's stress scenario risk measure, calculated in accordance with Section 5 (SSt-1); or
(b) the sum of the following values:
(i) the average of the institution's daily expected shortfall risk measure, calculated in accordance with Article 325bb for each of the preceding sixty business days (ESavg), multiplied by the multiplication factor (mc); and
(ii) the average of the institution's daily stress scenario risk measure, calculated in accordance with Section 5 for each of the preceding sixty business days (SSavg).
2. Institutions holding positions in traded debt and equity instruments that are included in the scope of the internal default risk model and assigned to the trading desks referred to in paragraph 1 shall fulfil an additional own funds requirement, expressed as the higher of the following values:
(a) the most recent own funds requirement for default risk, calculated in accordance with Section 3;
(b) the average of the amount referred to in point (a) over the preceding 12 weeks.

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Article 325bb
Expected shortfall risk measure
1. Institutions shall calculate the expected shortfall risk measure referred to in point (a) of Article 325ba(1) for any given date t and for any given portfolio of trading book positions as follows:EStρUESt1ρi UESit
where:
ESt
the expected shortfall risk measure;
i
the index that denotes the five broad categories of risk factors listed in the first column of Table 2 of Article 325bd;
UESt
the unconstrained expected shortfall measure calculated as follows:UEStPESRStmaxPESFCtPESRCt , 1
UESti
the unconstrained expected shortfall measure for broad risk factor category i and calculated as follows:UESitPESRS,itmaxPESFC,itPESRC,it , 1
ρ
the supervisory correlation factor across broad categories of risk; ρ = 50 %;
PEStRS
the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2);
PEStRC
the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3);
PEStFC
the partial expected shortfall measure that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(4);
PEStRS,i
the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(2);
PEStRC,i
the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with Article 325bc(3); and
PEStFC,i
the partial expected shortfall measure for broad risk factor category i that shall be calculated for all the positions in the portfolio in accordance with of Article 325bc(4).
2. Institutions shall only apply scenarios of future shocks to the specific set of modellable risk factors applicable to each partial expected shortfall measure, as set out in Article 325bc, when determining each partial expected shortfall measure for the calculation of the expected shortfall risk measure in accordance with paragraph 1.
3. Where at least one transaction of the portfolio has at least one modellable risk factor which has been mapped to the broad risk factor category i in accordance with Article 325bd, institutions shall calculate the unconstrained expected shortfall measure for the broad risk factor category i and include it in the formula for the expected shortfall risk measure referred to in paragraph 1 of this Article.
4. By way of derogation from paragraph 1, an institution may reduce the frequency of the calculation of the unconstrained expected shortfall measures UESit and of the partial expected shortfall measures PESRS,it, PESRC,it and PESFC,it for all broad risk factor categories i from daily to weekly, provided that both of the following conditions are met:
(a) the institution is able to demonstrate to its competent authority that calculating the unconstrained expected shortfall measure UESit does not underestimate the market risk of the relevant trading book positions;
(b) the institution is able to increase the frequency of calculation of UESit, PESRS,it, PESRC,it and PESFC,it from weekly to daily where required by its competent authority.

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Article 325bc
Partial expected shortfall calculations
1. Institutions shall calculate all the partial expected shortfall measures referred to in Article 325bb(1) as follows:
(a) daily calculations of the partial expected shortfall measures;
(b) at 97,5th percentile, one tailed confidence interval;
(c) for a given portfolio of trading book positions, institution shall calculate the partial expected shortfall measure at time t accordance with the following formula:
PEStPEStT2j2PEStT, jLHjLHj110
where:
PESt
the partial expected shortfall measure at time t;
j
the index that denotes the five liquidity horizons listed in the first column of Table 1;
LHj
the length of liquidity horizons j as expressed in days in Table 1;
T
the base time horizon, where T = 10 days;
PESt(T)
the partial expected shortfall measure that is determined by applying scenarios of future shocks with a 10-day time horizon only to the specific set of modellable risk factors of the positions in the portfolio set out in paragraphs 2, 3 and 4 for each partial expected shortfall measure referred to in Article 325bb(1); and
PESt(T, j)
the partial expected shortfall measure that is determined by applying scenarios of future shocks with a 10-day time horizon only to the specific set of modellable risk factors of the positions in the portfolio set out in paragraphs 2, 3 and 4 for each partial expected shortfall measure referred to in Article 325bb(1) and of which the effective liquidity horizon, as determined in accordance with Article 325bd(2), is equal or longer than LHj.
Table 1
Liquidity horizon j Length of liquidity horizon j
(in days)
1 10
2 20
3 40
4 60
5 120
2. For the purpose of calculating the partial expected shortfall measures PESRSt and PESRS,it referred to in Article 325bb(1), in addition to the requirements set out in paragraph 1 of this Article, institutions shall meet the following requirements:
(a) in calculating PESRSt, institutions shall only apply scenarios of future shocks to a subset of the modellable risk factors of the positions in the portfolio which has been chosen by the institution, to the satisfaction of the competent authorities, so that the following condition is met with the sum taken over from the preceding 60 business days:
16059k0PESRCtkPESFCtk75%
An institution that no longer meets the requirement referred to in the first paragraph of this point shall immediately notify the competent authorities thereof and shall update the subset of the modellable risk factors within two weeks in order to meet that requirement; where, after two weeks, that institution has failed to meet that requirement, the institution shall revert to the approach set out in Chapter 1a to calculate the own funds requirements for market risk for some trading desks, until that institution is able to demonstrate to the competent authority that it is meeting the requirement set out in the first subparagraph of this point;
(b) in calculating PESRS,it, institutions shall only apply scenarios of future shocks to the subset of the modellable risk factors of the positions in the portfolio chosen by the institution for the purposes of point (a) of this paragraph and which have been mapped to the broad risk factor category i in accordance with Article 325bd;
(c) the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) shall be calibrated to historical data from a continuous 12-month period of financial stress that shall be identified by the institution in order to maximise the value of PESRSt; for the purpose of identifying that stress period, institutions shall use an observation period starting at least from 1 January 2007, to the satisfaction of the competent authorities; and
(d) the data inputs of PESRS,it shall be calibrated to the 12-month stress period that has been identified by the institution for the purposes of point (c).
3. For the purpose of calculating the partial expected shortfall measures PESRCt and PESRC,it referred to in Article 325bb(1), institutions shall, in addition to the requirements set out in paragraph 1 of this Article, meet the following requirements:
(a) in calculating PESRCt, institutions shall only apply scenarios of future shocks to the subset of the modellable risk factors of the positions in the portfolio referred to in point (a) of paragraph 2;
(b) in calculating PESRC,it, institutions shall only apply scenarios of future shocks to the subset of the modellable risk factors of the positions in the portfolio referred to in point (b) of paragraph 2;
(c) the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) of this paragraph shall be calibrated to historical data referred to in point (c) of paragraph 4; those data shall be updated on at least a monthly basis.
4. For the purpose of calculating the partial expected shortfall measures PESFCt and PESFC,it referred to in Article 325bb(1), institutions shall, in addition to the requirements set out in paragraph 1 of this Article, meet the following requirements:
(a) in calculating PESFCt, institutions shall apply scenarios of future shocks to all the modellable risk factors of the positions in the portfolio;
(b) in calculating PESFC,it, institutions shall apply scenarios of future shocks to all the modellable risk factors of the positions in the portfolio which have been mapped to the broad risk factor category i in accordance with Article 325bd;
(c) the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors referred to in points (a) and (b) shall be calibrated to historical data from the preceding 12-month period; where there is a significant upsurge in the price volatility of a material number of modellable risks factors of an institution's portfolio which are not in the subset of the risk factors referred to in point (a) of paragraph 2, competent authorities may require an institution to use historical data for a period shorter than the preceding 12-months, but such a shorter period shall not be shorter than the preceding six-months; competent authorities shall notify EBA of any decision to require an institution to use historical data from a shorter period than 12 months and shall substantiate that decision.
5. In calculating a given partial expected shortfall measure as referred to in Article 325bb(1), institutions shall maintain the values of the modellable risks factors for which they have not been required to apply scenarios of future shocks for that partial expected shortfall measure under paragraphs 2, 3 and 4 of this Article.

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Article 325bd
Liquidity horizons
1. Institutions shall map each risk factor of positions assigned to the trading desks for which they have been granted permission as referred to in Article 325az(2), or for which they are in the process of being granted such permission, to one of the broad categories of risk factors listed in Table 2 and to one of the broad sub-categories of risk factors listed in that Table.
2. The liquidity horizon of a risk factor of the positions referred to in paragraph 1 shall be the liquidity horizon of the corresponding broad sub-category of risk factors to which it has been mapped.
3. By way of derogation from paragraph 1 of this Article, for a given trading desk, an institution may decide to replace the liquidity horizon of a broad sub-category of risk factors listed in Table 2 of this Article with one of the longer liquidity horizons listed in Table 1 of Article 325bc. Where an institution takes such a decision, the longer liquidity horizon shall apply to all the modellable risk factors of the positions assigned to that trading desk that have been mapped to that broad sub-category of risk factors for the purpose of calculating the partial expected shortfall measures in accordance with point (c) of Article 325bc(1).
An institution shall notify the competent authorities of the trading desks and the broad sub-categories of risk factors to which it decides to apply the treatment referred to in the first subparagraph.
4. For the purpose of calculating the partial expected shortfall measures in accordance with point (c) of Article 325bc(1), the effective liquidity horizon of a given modellable risk factor of a given trading book position shall be calculated as follows:
EffectiveLH = SubCatLH if Mat > LH5
min (SubCatLH, minj{LHj/LHj ≥ Mat}) if LH1 ≤ Mat ≤ LH5
LH1 if Mat < LH1
where:
EffectiveLH
the effective liquidity horizon;
Mat
the maturity of the trading book position;
SubCatLH
the length of liquidity horizon of the modellable risk factor determined in accordance with paragraph 1; and
minj {LHj/LHj ≥ Mat}
the length of one of the liquidity horizons listed in Table 1 of Article 325bc which is the nearest liquidity horizon above the maturity of the trading book position.
5. Currency pairs that are composed of the euro and the currency of a Member State participating in ERM II shall be included in the most liquid currency pairs sub-category within the broad category of foreign exchange risk factor of Table 2.
6. An institution shall verify the appropriateness of the mapping referred to in paragraph 1 on at least a monthly basis.
7. EBA shall develop draft regulatory technical standards to specify:
(a) how institutions are to map the risk factors of the positions referred to in paragraph 1 to broad categories of risk factors and broad sub-categories of risk factors for the purposes of paragraph 1;
(b) which currencies constitute the most liquid currencies sub-category of the broad category of interest rate risk factor of Table 2;
(c) which currency pairs constitute the most liquid currency pairs sub-category of the broad category of foreign exchange risk factor of Table 2;
(d) the definitions of small market capitalisation and large market capitalisation for the purposes of the equity price and volatility sub-category of the broad category of equity risk factor of Table 2.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power 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.
Table 2
Broad categories of risk factors Broad sub-categories of risk factors Liquidity horizons Length of the liquidity horizon (in days)
Interest rate Most liquid currencies and domestic currency 1 10
Other currencies (excluding most liquid currencies) 2 20
Volatility 4 60
Other types 4 60
Credit spread Central government, including central banks, of Member States 2 20
Covered bonds issued by credit institutions in Member States (Investment Grade) 2 20
Sovereign (Investment grade) 2 20
Sovereign (High yield) 3 40
Corporate (Investment grade) 3 40
Corporate (High yield) 4 60
Volatility 5 120
Other types 5 120
Equity Equity price (Large market capitalisation) 1 10
Equity price (Small market capitalisation) 2 20
Volatility (Large market capitalisation) 2 20
Volatility (Small market capitalisation) 4 60
Other types 4 60
Foreign exchange Most liquid currency pairs 1 10
Other currency pairs (excluding most liquid currency pairs) 2 20
Volatility 3 40
Other types 3 40
Commodity Energy price and carbon emissions price 2 20
Precious metal price and non-ferrous metal price 2 20
Other commodity prices (excluding energy price, carbon emissions price, precious metal price and non-ferrous metal price) 4 60
Energy volatility and carbon emissions volatility 4 60
Precious metal volatility and non-ferrous metal volatility 4 60
Other commodity volatilities (excluding energy volatility, carbon emissions volatility, precious metal volatility and non-ferrous metal volatility) 5 120
Other types 5 120

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Article 325be
Assessment of the modellability of risk factors
1. Institutions shall assess the modellability of all the risk factors of the positions assigned to the trading desks for which they have been granted permission as referred to in Article 325az(2) or are in the process of being granted such permission.
2. As part of the assessment referred to in paragraph 1 of this Article, institutions shall calculate the own funds requirements for market risk in accordance with Article 325bk for those risk factors that are not modellable.
3. EBA shall develop draft regulatory technical standards to specify the criteria to assess the modellability of risk factors in accordance with paragraph 1 and to specify the frequency of that assessment.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power 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.

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Article 325bf
Regulatory back-testing requirements and multiplication factors
1. For the purposes of this Article, an overshooting means a one-day change in the value of a portfolio composed of all the positions assigned to the trading desk that exceeds the related value-at-risk number calculated on the basis of the institution's alternative internal model in accordance with the following requirements:
(a) the calculation of the value at risk shall be subject to a one-day holding period;
(b) scenarios of future shocks shall apply to the risk factors of the trading desk's positions referred to in Article 325bg(3) and which are considered modellable in accordance with Article 325be;
(c) data inputs used to determine the scenarios of future shocks applied to the modellable risk factors shall be calibrated to historical data referred to in point (c) of Article 325bc(4);
(d) unless stated otherwise in this Article, the institution's alternative internal model shall be based on the same modelling assumptions as those used for the calculation of the expected shortfall risk measure referred to in point (a) of Article 325ba(1).
2. Institutions shall count daily overshootings on the basis of back-testing of the hypothetical and actual changes in the value of the portfolio composed of all the positions assigned to the trading desk.
3. An institution's trading desk shall be deemed to meet the back-testing requirements where the number of overshootings for that trading desk that occurred over the most recent 250 business days does not exceed any of the following:
(a) 12 overshootings for the value-at-risk number, calculated at a 99th percentile one tailed-confidence interval on the basis of back-testing of the hypothetical changes in the value of the portfolio;
(b) 12 overshootings for the value-at-risk number, calculated at a 99th percentile one tailed-confidence interval on the basis of back-testing of the actual changes in the value of the portfolio;
(c) 30 overshootings for the value-at-risk number, calculated at a 97,5th percentile one tailed-confidence interval on the basis of back-testing of the hypothetical changes in the value of the portfolio;
(d) 30 overshootings for the value-at-risk number, calculated at a 97,5th percentile one tailed-confidence interval on the basis of back-testing of the actual changes in the value of the portfolio.
4. Institutions shall count daily overshootings in accordance with the following:
(a) the back-testing of hypothetical changes in the value of the portfolio shall be based on a comparison between the end-of-day value of the portfolio and, assuming unchanged positions, the value of the portfolio at the end of the subsequent day;
(b) the back-testing of actual changes in the value of the portfolio shall be based on a comparison between the end-of-day value of the portfolio and its actual value at the end of the subsequent day, excluding fees and commissions;
(c) an overshooting shall be counted for each business day for which the institution is not able to assess the value of the portfolio or is not able to calculate the value-at-risk number referred to in paragraph 3.
5. An institution shall calculate, in accordance with paragraphs 6 and 7 of this Article, the multiplication factor (mc) referred to in Article 325ba for the portfolio of all the positions assigned to the trading desks for which it has been granted permission to use alternative internal models as referred to in Article 325az(2).
6. The multiplication factor (mc) shall be the sum of the value of 1,5 and an add-on between 0 and 0,5 in accordance with Table 3. For the portfolio referred to in paragraph 5, that add-on shall be calculated on the basis of the number of overshootings that occurred over the most recent 250 business days as evidenced by the institution's back-testing of the value-at-risk number calculated in accordance with point (a) of this subparagraph. The calculation of the add-on shall be subject to the following requirements:
(a) an overshooting shall be a one-day change in the portfolio's value that exceeds the related value-at-risk number calculated by the institution's internal model in accordance with the following:
(i) a one-day holding period;
(ii) a 99th percentile, one tailed confidence interval;
(iii) scenarios of future shocks shall apply to the risk factors of the trading desks' positions referred to in Article 325bg(3) and which are considered modellable in accordance with Article 325be;
(iv) the data inputs used to determine the scenarios of future shocks applied to the modellable risk factors shall be calibrated to historical data referred to in point (c) of Article 325bc(4);
(v) unless stated otherwise in this Article, the institution's internal model shall be based on the same modelling assumptions as those used for the calculation of the expected shortfall risk measure referred to in point (a) of Article 325ba(1);
(b) the number of overshootings shall be equal to the greater of the number of overshootings under hypothetical and the actual changes in the value of the portfolio.
Table 3
Number of overshootings Add-on
Fewer than 5 0,00
5 0,20
6 0,26
7 0,33
8 0,38
9 0,42
More than 9 0,50
In extraordinary circumstances, competent authorities may limit the add-on to that resulting from overshootings under back-testing hypothetical changes where the number of overshootings under back-testing actual changes does not result from deficiencies in the internal model.
7. Competent authorities shall monitor the appropriateness of the multiplication factor referred to in paragraph 5 and the compliance of trading desks with the back-testing requirements referred to in paragraph 3. Institutions shall promptly notify, the competent authorities of overshootings that result from their back-testing programme and provide an explanation for those overshootings, and in any case shall notify the competent authorities thereof no later than within five business days after the occurrence of an overshooting.
8. By way of derogation from paragraphs 2 and 6 of this Article, competent authorities may permit an institution not to count an overshooting where a one-day change in the value of its portfolio that exceeds the related value-at-risk number calculated by that institution's internal model is attributable to a non-modellable risk factor. To do so, the institution shall demonstrate to its competent authority that the stress scenario risk measure calculated in accordance with Article 325bk for that non-modellable risk factor is higher than the positive difference between the change in the value of the institution's portfolio and the related value-at-risk number.
9. EBA shall develop draft regulatory technical standards to specify the technical elements to be included in the actual and hypothetical changes to the value of the portfolio of an institution for the purposes of this Article.
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power 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.

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Article 325bg
Profit and loss attribution requirement
1. An institution's trading desk meets the P&L attribution requirements where that trading desk complies with the requirements set out in this Article.
2. The P&L attribution requirement shall ensure that 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 the trading desk's portfolio, based on the institution's pricing model.
3. For each position of a given trading desk, an institution's compliance with the P&L attribution requirement shall lead to the identification of a precise list of risk factors that are deemed appropriate for verifying the institution's compliance with the back-testing requirement set out in Article 325bf.
4. EBA shall develop draft regulatory technical standards to specify:
(a) the criteria necessary to ensure that the theoretical changes in the value of a trading desk's portfolio is sufficiently close to the hypothetical changes in the value of a trading desk's portfolio for the purposes of paragraph 2, taking into account international regulatory developments;
(b) the consequences for an institution where the theoretical changes in the value of a trading desk's portfolio are not sufficiently close to the hypothetical changes in the value of a trading desk's portfolio for the purposes of paragraph 2;
(c) the frequency at which the P&L attribution is to be performed by an institution;
(d) the technical elements to be included in the theoretical and hypothetical changes in the value of a trading desk's portfolio for the purposes of this Article;
(e) the manner in which institutions that use the internal model are to aggregate the total own funds requirement for market risk for all their trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk, taking into account the consequences referred to in point (b).
EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020.
Power 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.

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Article 325bh
Requirements on risk measurement
1. Institutions using an internal risk-measurement model that is used to calculate the own funds requirements for market risk as referred to in Article 325ba shall ensure that that model meets all the following requirements:
(a) the internal risk-measurement model shall capture a sufficient number of risk factors, which shall include at least the risk factors referred to in Subsection 1 of Section 3 of Chapter 1a unless the institution demonstrates to the competent authorities that the omission of those risk factors does not have a material impact on the results of the P&L attribution requirement referred to in Article 325bg; an institution shall be able to explain to the competent authorities why it has incorporated a risk factor in its pricing model but not in its internal risk-measurement model;
(b) the internal risk-measurement model shall capture nonlinearities for options and other products as well as correlation risk and basis risk;
(c) the internal risk-measurement model shall incorporate a set of risk factors that correspond to the interest rates in each currency in which the institution has interest rate sensitive on- or off-balance-sheet positions; the institution shall model the yield curves using one of the generally accepted approaches; the yield curve shall be divided into various maturity segments to capture the variations of volatility of rates along the yield curve; for material exposures to interest-rate risk in the major currencies and markets, the yield curve shall be modelled using a minimum of six maturity segments, and the number of risk factors used to model the yield curve shall be proportionate to the nature and complexity of the institution's trading strategies, the model shall also capture the risk spread of less than perfectly correlated movements between different yield curves or different financial instruments on the same underlying issuer;
(d) the internal risk-measurement model shall incorporate risk factors corresponding to gold and to the individual foreign currencies in which the institution's positions are denominated; for CIUs, the actual foreign exchange positions of the CIU shall be taken into account; institutions may rely on third-party reporting of the foreign exchange position of the CIU, provided that the correctness of that report is adequately ensured; foreign exchange positions of a CIU of which an institution is not aware of shall be carved out from the internal models approach and treated in accordance with Chapter 1a;
(e) the sophistication of the modelling technique shall be proportionate to the materiality of the institutions' activities in the equity markets; the internal risk-measurement model shall use a separate risk factor at least for each of the equity markets in which the institution holds significant positions and at least one risk factor that captures systemic movements in equity prices and the dependency of that risk factor on the individual risk factors for each equity market;
(f) the internal risk-measurement model shall use a separate risk factor at least for each commodity in which the institution holds significant positions, unless the institution has a small aggregate commodity position compared to all its trading activities, in which case it may use a separate risk factor for each broad commodity type; for material exposures to commodity markets, the model shall capture the risk of less than perfectly correlated movements between commodities that are similar, but not identical, the exposure to changes in forward prices arising from maturity mismatches, and the convenience yield between derivative and cash positions;
(g) the proxies used shall show a good track record for the actual position held, shall be appropriately conservative, and shall be used only where the available data are insufficient, such as during the period of stress referred to in point (c) of Article 325bc(2);
(h) for material exposures to volatility risks in instruments with optionality, the internal risk-measurement model shall capture the dependency of implied volatilities across strike prices and options' maturities.
2. Institutions 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 the applicable liquidity horizons, and implemented with integrity.
3. By 28 September 2020, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, specifying criteria for the use of data inputs in the risk-measurement model referred to in Article 325bc.

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Article 325bi
Qualitative requirements
1. Any internal risk-measurement model used for the purposes of this Chapter shall be conceptually sound, shall be calculated and implemented with integrity, and shall comply with all the following qualitative requirements:
(a) any internal risk-measurement model used to calculate capital requirements for market risk shall be closely integrated into the daily risk management process of the institution and shall serve as the basis for reporting risk exposures to senior management;
(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 be responsible for designing and implementing any internal risk-measurement model; that unit shall conduct the initial and on-going validation of any internal model used for the purposes of this Chapter and shall be responsible for the overall risk management system; that unit shall produce and analyse daily reports on the output of any internal model used to calculate capital requirements for market risk, as well as reports on the appropriateness of measures to be taken in terms of trading limits;
(c) the management body and senior management shall be actively involved in the risk-control process, and the daily reports produced by the risk control unit shall be reviewed at a level of management with sufficient authority to require the reduction of positions taken by individual traders and to require the reduction of the institution's overall risk exposure;
(d) the institution shall have a sufficient number of staff with a level of skills that is appropriate to the sophistication of the internal risk-measurement models, and a sufficient number of staff with skills in the trading, risk control, audit and back-office areas;
(e) the institution shall have in place a documented set of internal policies, procedures and controls for monitoring and ensuring compliance with the overall operation of its internal risk-measurement models;
(f) any internal risk-measurement model, including any pricing model, shall have a proven track record of being reasonably accurate in measuring risks, and shall not differ significantly from the models that the institution uses for its internal risk management;
(g) the institution shall frequently conduct rigorous programmes of stress testing, including reverse stress tests, which shall encompass any internal risk-measurement model; the results of those stress tests shall be reviewed by senior management at least on a monthly basis and shall comply with the policies and limits approved by the management body; the institution shall take appropriate actions where the results of those stress tests show excessive losses arising from the trading's business of the institution under certain circumstances;
(h) the institution shall conduct an independent review of its internal risk-measurement models, either as part of its regular internal auditing process, or by mandating a third-party undertaking to conduct that review, which shall be conducted to the satisfaction of the competent authorities.
For the purposes of point (h) of the first subparagraph, a third-party undertaking means an undertaking that provides auditing or consulting services to institutions and that has staff who have sufficient skills in the area of market risk in trading activities.
2. The review referred to in point (h) of paragraph 1 shall include both the activities of the business trading units and the independent risk control unit. The institution shall conduct a review of its overall risk management process at least once a year. That review shall assess the following:
(a) the adequacy of the documentation of the risk management system and process and the organisation of the risk control unit;
(b) the integration of risk measures into daily risk management and the integrity of the management information system;
(c) the processes the institution employs for approving the risk-pricing models and valuation systems that are used by front and back-office personnel;
(d) the scope of risks captured by the model, the accuracy and appropriateness of the risk-measurement system, and the validation of any significant changes to the internal risk-measurement model;
(e) the accuracy and completeness of position data, the accuracy and appropriateness of volatility and correlation assumptions, the accuracy of valuation and risk sensitivity calculations, and the accuracy and appropriateness for generating data proxies where the available data are insufficient to meet the requirement set out in this Chapter;
(f) the verification process that the institution employs to evaluate the consistency, timeliness and reliability of the data sources used to run any of its internal risk-measurement models, including the independence of those data sources;
(g) the verification process that the institution employs to evaluate back-testing requirements and P&L attribution requirements that are conducted in order to assess the accuracy of its internal risk-measurement models;
(h) where the review is performed by a third-party undertaking in accordance with point (h) of paragraph 1 of this Article, the verification that the internal validation process set out in Article 325bj fulfils its objectives.
3. Institutions shall update the techniques and practices they use for any of the internal risk-measurement models used for the purposes of this Chapter to take into account the evolution of new techniques and best practices that develop in respect of those internal risk-measurement models.

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Article 325bj
Internal validation
1. Institutions shall have processes in place to ensure that any internal risk-measurement models used for the purposes of this Chapter have been adequately validated by suitably qualified parties that are independent of the development process, in order to ensure that any such models are conceptually sound and adequately capture all material risks.
2. Institutions shall conduct the validation referred to in paragraph 1 in the following circumstances:
(a) when any internal risk-measurement model is initially developed and when any significant changes are made to that model;
(b) on a periodic basis, and where there have been significant structural changes in the market or changes to the composition of the portfolio which might lead to the internal risk-measurement model no longer being adequate.
3. The validation of the internal risk-measurement models of an institution shall not be limited to back-testing and P&L attribution requirements, but shall, at a minimum, include the following:
(a) tests to verify whether the assumptions made in the internal model are appropriate and do not underestimate or overestimate the risk;
(b) own internal model validation tests, including back-testing in addition to the regulatory back-testing programmes, in relation to the risks and structures of their portfolios;
(c) the use of hypothetical portfolios to ensure that the internal risk-measurement model is able to account for particular structural features that may arise, for example, material basis risks and concentration risk, or the risks associated with the use of proxies.

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Article 325bk
Calculation of stress scenario risk measure
1. The stress scenario risk measure of a given non-modellable risk factor means the loss that is incurred in all trading book positions or non-trading book positions that are subject to foreign exchange or commodity risk of the portfolio which includes that non-modellable risk factor when an extreme scenario of future shock is applied to that risk factor.
2. Institutions shall develop appropriate extreme scenarios of future shock for all non-modellable risk factors, to the satisfaction of their competent authorities.
3. EBA shall develop draft regulatory technical standards to specify:
(a) how institutions are to develop extreme scenarios of future shock applicable to non-modellable risk factors and how they are to apply those extreme scenarios of future shock to those risk factors;
(b) a regulatory extreme scenario of future shock for each broad sub-category of risk factors listed in Table 2 of Article 325bd, which institutions may use when they are unable to develop an extreme scenario of future shock in accordance with point (a) of this subparagraph, or which competent authorities may require that institution apply if those authorities are not satisfied with the extreme scenario of future shock developed by the institution;
(c) the circumstances under which institutions may calculate a stress scenario risk measure for more than one non-modellable risk factor;
(d) how institutions are to aggregate the stress scenario risk measures of all non-modellable risk factors included in their trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk.
In developing those draft regulatory technical standards, EBA shall take into consideration the requirement that the level of own funds requirements for market risk of a non-modellable risk factor as set out in this Article shall be as high as the level of own funds requirements for market risk that would have been calculated under this Chapter if that risk factor were modellable.
EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020.
Power 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.

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Article 325bl
Scope of the internal default risk model
1. All the positions of an institution that have been assigned to the trading desks for which the institution has been granted permission as referred to in Article 325az(2) shall be subject to an own funds requirement for default risk where those positions contain at least one risk factor that has been mapped to the broad categories of equity or credit spread risk factors in accordance with Article 325bd(1). That own funds requirement, which is incremental to the risks captured by the own funds requirements referred to in Article 325ba(1), shall be calculated using the institution's internal default risk model. That model which shall comply with the requirements laid down in this Section.
2. For each of the positions referred to in paragraph 1, an institution shall identify one issuer of traded debt or equity instruments related to at least one risk factor.

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Article 325bm
Permission to use an internal default risk model
1. Competent authorities shall grant an institution permission to use an internal default risk model to calculate the own funds requirements referred to in Article 325ba(2) for all the trading book positions referred to in Article 325bl that are assigned to a trading desk for which the internal default risk model complies with the requirements set out in Articles 325bi, 325bj, 325bn, 325bo and 325bp.
2. Where the trading desk of an institution, to which at least one of the trading book positions referred to in Article 325bl has been assigned, does not meet the requirements set out in paragraph 1 of this Article, the own funds requirements for market risk of all positions in that trading desk shall be calculated in accordance with the approach set out in Chapter 1a.

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Article 325bn
Own funds requirements for default risk using an internal default risk model
1. Institutions shall calculate the own funds requirements for default risk using an internal default risk model for the portfolio of all trading book positions as referred to in Article 325bl as follows:
(a) the own funds requirements shall be equal to a value-at-risk number measuring potential losses in the market value of the portfolio caused by the default of issuers related to those positions at the 99,9 % confidence interval over a one-year time horizon;
(b) the potential loss referred to in point (a) means a direct or indirect loss in the market value of a position which was caused by the default of the issuers and which is incremental to any losses already taken into account in the current valuation of the position; the default of the issuers of equity positions shall be represented by the value for the issuers' equity prices being set to zero;
(c) institutions shall determine default correlations between different issuers on the basis of a conceptually sound methodology, using objective historical data on market credit spreads or equity prices that cover at least a 10 year period that includes the stress period identified by the institution in accordance with Article 325bc(2); the calculation of default correlations between different issuers shall be calibrated to a one-year time horizon;
(d) the internal default risk model shall be based on a one-year constant position assumption.
2. Institutions shall calculate the own funds requirement for default risk using an internal default risk model as referred to in paragraph 1 on at least a weekly basis.
3. By way of derogation from points (a) and (c) of paragraph 1, an institution may replace the one-year time horizon with a time horizon of sixty days for the purpose of calculating the default risk of some or all of the equity positions, where appropriate. In such case, the calculation of default correlations between equity prices and default probabilities shall be consistent with a time horizon of sixty days and the calculation of default correlations between equity prices and bond prices shall be consistent with a one-year time horizon.

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Article 325bo
Recognition of hedges in an internal default risk model
1. Institutions may incorporate hedges in their internal default risk model and may net positions where the long positions and short positions relate to the same financial instrument.
2. In their internal default risk models, institutions may only recognise hedging or diversification effects associated with long and short positions involving different instruments or different securities of the same obligor, as well as long and short positions in different issuers by explicitly modelling the gross long and short positions in the different instruments, including modelling of basis risks between different issuers.
3. In their internal default risk models, institutions shall capture material risks between a hedging instrument and the hedged instrument that could occur during the interval between the maturity of a hedging instrument and the one-year time horizon, as well as the potential for significant basis risks in hedging strategies that arise from differences in the type of product, seniority in the capital structure, internal or external ratings, maturity, vintage and other differences. Institutions shall recognise a hedging instrument only to the extent that it can be maintained even as the obligor approaches a credit event or other event.

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Article 325bp
Particular requirements for an internal default risk model
1. The internal default risk model referred to in Article 325bm(1) shall be capable of modelling the default of individual issuers as well as the simultaneous default of multiple issuers, and shall take into account the impact of those defaults in the market values of the positions that are included in the scope of that model. For that purpose, the default of each individual issuer shall be modelled using two types of systematic risk factors.
2. The internal default risk model shall reflect the economic cycle, including the dependency between recovery rates and the systematic risk factors referred to in paragraph 1.
3. The internal default risk model shall reflect the nonlinear impact of options and other positions with material nonlinear behaviour with respect to price changes. Institutions shall also have due regard to the amount of model risk inherent in the valuation and estimation of price risks associated with those products.
4. The internal default risk model shall be based on data that are objective and up-to-date.
5. To simulate the default of issuers in the internal default risk model, the institution's estimates of default probabilities shall meet the following requirements:
(a) the default probabilities shall be floored at 0,03 %;
(b) the default probabilities shall be based on a one-year time horizon, unless stated otherwise in this Section;
(c) the default probabilities shall be measured using, solely or in combination with current market prices, data observed during a historical period of at least five years of actual past defaults and extreme declines in market prices equivalent to default events; default probabilities shall not be inferred solely from current market prices;
(d) an institution that has been granted permission to estimate default probabilities in accordance with Section 1 of Chapter 3 of Title II shall use the methodology set out therein to calculate default probabilities;
(e) an institution that has not been granted permission to estimate default probabilities in accordance with Section 1 of Chapter 3 of Title II shall develop an internal methodology or use external sources to estimate default probabilities; in both situations, the estimates of default probabilities shall be consistent with the requirements set out in this Article.
6. To simulate the default of issuers in the internal default risk model, the institution's estimates of loss given default shall meet the following requirements:
(a) the loss given default estimates are floored at 0 %;
(b) the loss given default estimates shall reflect the seniority of each position;
(c) an institution that has been granted permission to estimate loss given default in accordance with Section 1 of Chapter 3 of Title II shall use the methodology set out therein to calculate loss given default estimates;
(d) an institution that has not been granted permission to estimate loss given default in accordance with Section 1 of Chapter 3 of Title II shall develop an internal methodology or use external sources to estimate loss given default; in both situations, the estimates of loss given default shall be consistent with the requirements set out in this Article.
7. As part of the independent review and validation of the internal models that they use for the purposes of this Chapter, including for the risk-measurement system, institutions shall:
(a) verify that their approach for the modelling of correlations and price changes is appropriate for their portfolio, including the choice and weights of the systematic risk factors in the model;
(b) perform a variety of stress tests, including sensitivity analyses and scenario analyses, to assess the qualitative and quantitative reasonableness of the internal default risk model, in particular with regard to the treatment of concentrations; and
(c) apply appropriate quantitative validation including relevant internal modelling benchmarks.
The tests referred to in point (b) shall not be limited to the range of past events experienced.
8. The internal default risk model shall appropriately reflect issuer concentrations and concentrations that can arise within and across product classes under stressed conditions.
9. The internal default risk model shall be consistent with the institution's internal risk management methodologies for identifying, measuring, and managing trading risks.
10. Institutions shall have clearly defined policies and procedures for determining the default assumptions for correlations between different issuers in accordance with point (c) of Article 325bn(1) and the preferred choice of method for estimating the default probabilities in point (e) of paragraph 5 of this Article and the loss given default in point (d) of paragraph 6 of this Article.
11. Institutions shall document their internal models so that their correlation assumptions and other modelling assumptions are transparent to the competent authorities.
12. EBA shall develop draft regulatory technical standards to specify the requirements that an institution's internal methodology or external sources are to fulfil for estimating default probabilities and losses given default in accordance with point (e) of paragraph 5 and point (d) of paragraph 6.
EBA shall submit those draft regulatory technical standards to the Commission by 28 September 2020.
Power 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.

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Article 390 Calculation of the exposure value 1. Exposures arising from the items referred to in Annex II shall be calculated in accordance with one of the methods set out in Part Three, Title II, Chapter 6. 2. Institutions with a permission to … 671 unchanged words … draft regulatory technical standards to the Commission by 1 January 2014. Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.9. For the purposes of paragraph 5, EBA shall develop draft regulatory technical standards to specify how to determine the exposures arising from derivative contracts listed in Annex II and credit derivative contracts, where the contract was not directly entered into with a client but the underlying debt or equity instrument was issued by that client for their inclusion into the exposures to the client. EBA shall submit those draft regulatory technical standards to the Commission by 28 March 2020. Power 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.

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Article 391 Definition of an institution for large exposures purposes For the purposes of calculating the value of exposures in accordance with this Part the term institution shall include a private or public undertaking, including its branches, which, were it established in the Union, would fulfil the definition of the term institution and has been authorised in a third country that applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.For the purposes of the first paragraph, the Commission may adopt, by means of implementing acts, and subject to the examination procedure referred to in Article 464(2), decisions as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union.

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Article 394 Reporting requirements 1. An institution shall report the following information about every large exposure to the competent authorities, including large exposures exempted from the application of Article 395(1): (a) the identification of the client or the group of connected clients to which an institution has a large exposure; (b) the exposure value before taking into account the effect of the credit risk mitigation, when applicable; (c) where used, the type of funded or unfunded credit protection; (d) the exposure value after taking into account the effect of the credit risk mitigation calculated for the purpose of Article 395(1). Where an institution is subject to Part Three, Title II, Chapter 3 its 20 largest exposures on a consolidated basis, excluding those exempted from the application of Article 395(1) shall be made available to the competent authorities. 2. An institution shall report the following information to the competent authorities, in addition to reporting the information referred to in paragraph 1, in relation to its 10 largest exposures on a consolidated basis to institutions as well as its 10 largest exposures on a consolidated basis to unregulated financial sector entities, including large exposures exempted from the application of Article 395(1): (a) the identification of the client or the group of connected clients to which an institution has a large exposure; (b) the exposure value before taking into account the effect of the credit risk mitigation, when applicable; (c) where used, the type of funded or unfunded credit protection; (d) the exposure value after taking into account the effect of the credit risk mitigation calculated for the purpose of Article 395(1); (e) the expected run-off of the exposure expressed as the amount maturing within monthly maturity buckets up to one year, quarterly maturity buckets up to three years and annually thereafter. 3. Reporting shall be carried out at least twice a year. 4. EBA shall develop draft implementing regulatory technical standards to specify the following: (a) the uniform formats criteria for the reporting identification of shadow banking entities referred to in paragraph 3 which 2. In developing those draft regulatory technical standards, EBA shall be proportionate take into account international developments and internationally agreed standards on shadow banking and shall consider whether: (a) the relation with an individual entity or a group of entities may carry risks to the nature, scale institution's solvency or liquidity position; (b) entities that are subject to solvency or liquidity requirements similar to those imposed by this Regulation and complexity of institutions' activities and Directive 2013/36/EU should be entirely or partially excluded from the instructions for using those formats; (b) the frequencies and dates of the reporting obligation to be reported referred to in paragraph 3; (c) the IT solutions to be applied for the reporting referred to in paragraph 3. 2 on shadow banking entities. EBA shall submit those draft implementing regulatory technical standards to the Commission by 1 January 2014. 28 June 2020. Power is conferred on delegated to the Commission to adopt supplement this Regulation by adopting the implementing regulatory technical standards referred to in the first subparagraph in accordance with Article 15 Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 396 Compliance with large exposures requirements 1. If, in an exceptional case, exposures exceed the limit set out in Article 395(1), the institution shall report the value of the exposure without delay to the competent authorities which may, where the circumstances warrant it, allow the institution a limited period of time in which to comply with the limit. Where the amount of EUR 150 million referred to in Article 395(1) is applicable, the competent authorities may allow on a case-by-case basis the 100 % limit in terms of the institution's eligible capital to be exceeded. 2. Where compliance by an institution on an individual or sub-consolidated basis with the obligations imposed in this Part is waived under Article 7(1), or the provisions of Article 9 are applied in the case of parent institutions in a Member State, measures shall be taken to ensure the satisfactory allocation of risks within the group.3. For the purposes of paragraph 1, EBA shall issue guidelines in accordance with Article 16 of Regulation (EU) No 1093/2010 to specify how the competent authorities may determine: (a) the exceptional cases referred to in paragraph 1 of this Article; (b) the time considered appropriate for returning to compliance; (c) the measures to be taken to ensure the timely return to compliance of the institution.

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Article 403 Substitution approach 1. Where an exposure to a client is guaranteed by a third party, or secured by collateral issued by a third party, an institution may: (a) treat the portion of the exposure which is guaranteed as having been incurred to the guarantor rather than to the client provided that the unsecured exposure to the guarantor would be assigned an equal or lower risk weight than a risk weight of the unsecured exposure to the client under Part Three, Title II, Chapter 2; (b) treat the portion of the exposure collateralised by the market value of recognised collateral as having been incurred to the third party rather than to the client, if the exposure is secured by collateral and provided that the collateralised portion of the exposure would be assigned an equal or lower risk weight than a risk weight of the unsecured exposure to the client under Part Three, Title II, Chapter 2. The approach referred to in point (b) of the first subparagraph shall not be used by an institution where there is a mismatch between the maturity of the exposure and the maturity of the protection. For the purpose of this Part, an institution may use both the Financial Collateral Comprehensive Method and the treatment set out in point (b) of the first subparagraph only where it is permitted to use both the Financial Collateral Comprehensive Method and the Financial Collateral Simple Method for the purposes of Article 92. 2. Where an institution applies point (a) of paragraph 1: (a) where the guarantee is denominated in a currency different from that in which the exposure is denominated the amount of the exposure deemed to be covered shall be calculated in accordance with the provisions on the treatment of currency mismatch for unfunded credit protection set out in Part Three, Title II, Chapter 4; (b) a mismatch between the maturity of the exposure and the maturity of the protection shall be treated in accordance with the provisions on the treatment of maturity mismatch set out in Part Three, Title II, Chapter 4; (c) partial coverage may be recognised in accordance with the treatment set out in Part Three, Title II, Chapter 4.4. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, specifying the conditions for the application of the treatment referred to in paragraph 3 of this Article, including the conditions and frequency for determining, monitoring and revising the limits referred to in point (b) of that paragraph. EBA shall publish those guidelines by 31 December 2019.

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Article 415 Reporting obligation and reporting format 1. Institutions shall report in a single currency, regardless of their actual denomination, to the competent authorities the items referred to in Titles II and III and their components, including the composition of their liquid … 362 unchanged words … monitoring tools for the purpose of monitoring compliance with existing national liquidity standards. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010. 3a. EBA shall develop draft implementing technical standards to specify which additional liquidity monitoring metrics as referred to in paragraph 3 shall apply to small and non-complex institutions. EBA shall submit those draft implementing technical standards to the Commission by 28 June 2020. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010. 4. The competent authorities of the home Member State shall upon request provide in a timely manner and by electronic means the competent authorities and the central bank of the host Member States and EBA with the individual reporting in accordance with this Article. 5. Competent authorities that exercise supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU shall upon request provide in a timely manner and by electronic means the following authorities with all reporting submitted by the institution in accordance with the uniform reporting formats referred to in paragraph 3: (a) the competent authorities and the national central bank of the host Member States in which there are significant branches in accordance with Article 51 of Directive 2013/36/EU of the parent institution or institutions controlled by the same parent financial holding company; (b) the competent authorities that have authorised subsidiaries of the parent institution or institutions controlled by the same parent financial holding company and the central bank of the same Member State; (c) EBA; (d) ECB. 6. The competent authorities that have authorised an institution that is a subsidiary of a parent institution or parent financial holding company shall upon request provide in a timely manner and by electronic means the competent authorities that exercise supervision on a consolidated basis in accordance with Article 111 of Directive 2013/36/EU, the central bank of the Member State where the institution is authorised and EBA all reporting submitted by the institution in accordance with the uniform reporting formats referred to in paragraph 3.

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Article 419 Currencies with constraints on the availability of liquid assets 1. EBA shall assess the availability for institutions of the liquid assets referred to in point (b) of Article 416(1) in the currencies that are relevant for institutions established in the Union. 2. Where the justified needs for liquid assets in light of the requirement in Article 412 are exceeding the availability of those liquid assets in a currency, one or more of the following derogations shall apply: (a) by way of derogation from point (f) of Article 417, the denomination of the liquid assets may be inconsistent with the distribution by currency of liquidity outflows after the deduction of inflows; (b) for currencies of a Member State or third countries, required liquid assets may be substituted by credit lines from the central bank of that Member State or third country, which are contractually irrevocably committed for the next 30 days and are fairly priced, independent of the amount currently drawn, provided that the competent authorities of that Member State or third country do the same and that Member State or third country has comparable reporting requirements in place. 3. The derogations applied in accordance with paragraph 2 shall be inversely proportional to the availability of the relevant assets. The justified needs of institutions shall be assessed taking into account their ability to reduce, by sound liquidity management, the need for those liquid assets and the holdings of those assets by other market participants. 4. EBA shall develop draft implementing technical standards listing the currencies which meet the conditions set out in this Article. EBA shall submit those draft implementing technical standards to the Commission by 31 March 2014. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010. 5. EBA shall develop draft regulatory technical standards to specify the derogations referred to in paragraph 2 2, including the conditions of their application. EBA shall submit those draft regulatory technical standards to the Commission by 31 March 2014. 28 December 2019. Power is delegated to the Commission to adopt 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.

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before (02013R0575-20190426)

Article 430
Reporting requirement
1. Institutions shall submit to the competent authorities all necessary information on the leverage ratio and its components in accordance with Article 429. Competent authorities shall take into account this information when undertaking the supervisory review referred to in Article 97 of Directive 2013/36/EU.
Institutions shall also submit to the competent authorities the information required for the purposes of the preparation of the reports referred to in Article 511.
Competent authorities shall submit the information received from institutions to EBA upon its request to facilitate the review referred to in Article 511.
2. EBA shall develop draft implementing technical standards to determine the uniform reporting template, the instructions on how to use such template, the frequencies and dates of reporting and the IT solutions, for the purposes of the reporting requirement laid down in paragraph 1.
EBA shall submit those draft implementing technical standards to the Commission by 28 July 2013.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

after (02013R0575-20190627)

Article 430
Reporting on prudential requirements and financial information
1. Institutions shall submit to the competent authorities all necessary information on the leverage ratio and its components in accordance with Article 429. Competent authorities shall take into account this information when undertaking the supervisory review referred to in Article 97 of Directive 2013/36/EU.
Institutions shall also submit to the competent authorities the information required for the purposes of the preparation of the reports referred to in Article 511.
Competent authorities shall submit the information received from institutions to EBA upon its request to facilitate the review referred to in Article 511.
2. EBA shall develop draft implementing technical standards to determine the uniform reporting template, the instructions on how to use such template, the frequencies and dates of reporting and the IT solutions, for the purposes of the reporting requirement laid down in paragraph 1.
EBA shall submit those draft implementing technical standards to the Commission by 28 July 2013.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
7. EBA shall develop draft implementing technical standards to specify the uniform reporting formats and templates, the instructions and methodology on how to use those templates, the frequency and dates of reporting, the definitions and the IT solutions for the reporting referred to in paragraphs 1 to 4.
Any new reporting requirements set out in such implementing technical standards shall not be applicable earlier than six months from the date of their entry into force.
For the purposes of paragraph 2, the draft implementing technical standards shall specify which components of the leverage ratio shall be reported using day-end or month-end values. For that purpose, EBA shall take into account both of the following:
(a) how susceptible a component is to significant temporary reductions in transaction volumes that could result in an underrepresentation of the risk of excessive leverage at the reporting reference date;
(b) developments and findings at international level.
EBA shall submit to the Commission the draft implementing technical standards referred to in this paragraph by 28 June 2021, except in relation to the following:
(a) the leverage ratio, which shall be submitted by 28 June 2020;
(b) the obligations laid down in Articles 92a and 92b, which shall be submitted by 28 June 2020.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.
8. EBA shall assess the costs and benefits of the reporting requirements laid down in Commission Implementing Regulation (EU) No 680/2014Commission Implementing Regulation (EU) No 680/2014 of 16 April 2014 laying down implementing technical standards with regard to supervisory reporting of institutions according to Regulation (EU) No 575/2013 of the European Parliament and of the Council (OJ L 191, 28.6.2014, p. 1). in accordance with this paragraph and report its findings to the Commission by 28 June 2020. That assessment shall be carried out in particular in relation to small and non-complex institutions. For those purposes, the report shall:
(a) classify institutions into categories based on their size, complexity and the nature and level of risk of their activities;
(b) measure the reporting costs incurred by each category of institutions during the relevant period to meet the reporting requirements set out in Implementing Regulation (EU) No 680/2014, taking into account the following principles:
(i) the reporting costs shall be measured as the ratio of the reporting costs relative to the institution's total costs during the relevant period;
(ii) the reporting costs shall comprise all expenditure related to the implementation and operation on an on-going basis of the reporting systems, including expenditure on staff, IT systems, legal, accounting, auditing and consultancy services;
(iii) the relevant period shall refer to each annual period during which institutions have incurred reporting costs to prepare for the implementation of the reporting requirements laid down in Implementing Regulation (EU) No 680/2014 and to continue operating the reporting systems on an on-going basis;
(c) assess whether the reporting costs incurred by each category of institutions were proportionate with regard to the benefits delivered by the reporting requirements for the purposes of prudential supervision;
(d) assess the effects of a reduction of reporting requirement on costs and supervisory effectiveness; and
(e) make recommendations on how to reduce reporting requirements at least for small and non-complex institutions, to which end EBA shall target an expected average cost reduction of at least 10 % but ideally a 20 % cost reduction. EBA shall, in particular, assess whether:
(i) the reporting requirements referred to in point (g) of paragraph 1 could be waived for small and non-complex institutions where asset encumbrance was below a certain threshold;
(ii) the reporting frequency required in accordance with points (a), (c), and (g) of paragraph 1 could be reduced for small and non-complex institutions.
EBA shall accompany that report by draft implementing technical standards referred to in paragraph 7.

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Article 430b
Specific reporting requirements for market risk
1. From the date of application of the delegated act referred to in Article 461a, institutions that do not meet the conditions set out in Article 94(1) nor the conditions set out in Article 325a(1) shall report, for all their trading book positions and all their non-trading book positions that are subject to foreign exchange or commodity risks, the results of the calculations based on using the alternative standardised approach set out in Chapter 1a of Title IV of Part Three on the same basis as such institutions report the obligations laid down in points (b)(i) and (c) of Article 92(3).
2. Institutions referred to in paragraph 1 of this Article shall report separately the calculations set out in points (a), (b) and (c) of Article 325c(2) for the portfolio of all trading book positions or non-trading book positions that are subject to foreign exchange and commodity risks.
3. In addition to the requirement set out in paragraph 1 of this Article, from the end of a three-year-period following the date of entry into force of the latest regulatory technical standards referred to in Articles 325bd(7), 325be(3), 325bf(9), 325bg(4), institutions shall report, for those positions assigned to trading desks for which they have been granted permission by the competent authorities to use the alternative internal model approach in accordance with Article 325az(2), the results of the calculations based on using that approach set out in Chapter 1b of Title IV of Part Three on the same basis as such institutions report the obligations laid down in points (b)(i) and (c) of Article 92(3).
4. For the purposes of the reporting requirement in paragraph 3 of this Article, institutions shall report separately the calculations set out in points (a)(i), (a)(ii), (b)(i) and (b)(ii) of Article 325ba(1) and for the portfolio of all trading book positions or non-trading book positions that are subject to foreign exchange and commodity risks assigned to trading desks for which the institution has been granted permission by the competent authorities to use the alternative internal model approach in accordance with Article 325az(2).
5. Institutions may use in combination the approaches referred to in paragraphs 1 and 3 within a group, provided that the calculation under the approach referred to in paragraph 1 does not exceed 90 % of the total calculation. Otherwise, the institution shall use the approach referred to in paragraph 1 for all its trading book positions and all its non-trading book positions that are subject to foreign exchange or commodity risk.
6. EBA shall develop draft implementing technical standards, to specify the uniform reporting templates, the instructions and methodology on how to use the templates, the frequency and dates of reporting, the definitions and the IT solutions for the reporting referred to in this Article.
Any new reporting requirements set out in such implementing technical standards shall not be applicable earlier than six months from the date of their entry into force.
EBA shall submit those draft implementing technical standards to the Commission by 30 June 2020.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

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Article 430c
Feasibility report on the integrated reporting system
1. EBA shall prepare a report on feasibility regarding the development of a consistent and integrated system for collecting statistical data, resolution data and prudential data and report its findings to the Commission by 28 June 2020.
2. When drafting the feasibility report, EBA shall involve competent authorities, as well as authorities that are responsible for deposit guarantee schemes, resolution and in particular the ESCB. The report shall take into account the previous work of the ESCB regarding integrated data collections and shall be based on an overall cost and benefit analysis including as a minimum:
(a) an overview of the quantity and scope of the current data collected by the competent authorities in their jurisdiction and of its origins and granularity;
(b) the establishment of a standard dictionary of the data to be collected, in order to increase the convergence of reporting requirements as regards regular reporting obligations, and to avoid unnecessary queries;
(c) the establishment of a joint committee, including as a minimum EBA and the ESCB, for the development and implementation of the integrated reporting system;
(d) the feasibility and possible design of a central data collection point for the integrated reporting system, including requirements to ensure strict confidentiality of the data collected, strong authentication and management of access rights to the system and cybersecurity, which:
(i) contains a central data register with all statistical data, resolution data and prudential data in the necessary granularity and frequency for the particular institution and is updated at necessary intervals;
(ii) serves as a point of contact for the competent authorities, where they receive, process and pool all data queries, where queries can be matched with existing collected reported data and which allows the competent authorities quick access to the requested information;
(iii) provides additional support to the competent authorities for the transmission of data queries to the institutions and enters the requested data into the central data register;
(iv) holds a coordinating role for the exchange of information and data between competent authorities; and
(v) takes into account the proceedings and processes of competent authorities and transfers them into a standardised system.
3. By one year after the presentation of the report referred to in this Article, the Commission shall, if appropriate and taking into account the feasibility report by EBA, submit to the European Parliament and to the Council a legislative proposal for the establishment of a standardised and integrated reporting system for reporting requirements.

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Article 432 Non-material, proprietary or confidential information 1. Institutions With the exception of the disclosures laid down in point (c) of Article 435(2) and in Articles 437 and 450, institutions may omit one or more of the disclosures listed in Title Titles II if and III where the information provided by such those disclosures is not regarded as material, except for the disclosures laid down in Article 435(2)(c), Article 437 and Article 450. material. Information in disclosures shall be regarded as material if where its omission or misstatement could change or influence the assessment or decision of a user of that information relying on that information it for the purpose of making economic decisions. EBA shall, shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines by 31 December 2014 on how institutions have to apply materiality in relation to the disclosure requirements of Title II. Titles II and III. 2. Institutions may also omit one or more items of information included in the disclosures listed referred to in Titles II and III if where those items include information which that is regarded as proprietary or confidential in accordance with the second and third subparagraphs, this paragraph, except for the disclosures laid down in Articles 437 and 450. Information shall be regarded as proprietary to an institution if institutions where disclosing it publicly would undermine its their competitive position. It Proprietary information may include information on products or systems which, that would render the investments of institutions therein less valuable, if shared with competitors, would render an institution's investments therein less valuable. competitors. Information shall be regarded as confidential if there where the institutions are obligations to obliged by customers or other counterparty relationships binding an institution to confidentiality. keep that information confidential. EBA shall, shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, issue guidelines by 31 December 2014 on how institutions have to apply proprietary and confidentiality in relation to the disclosure requirements of Titles II and III. 3. In the exceptional cases referred to in paragraph 2, the institution concerned shall state in its disclosures the fact that the specific items of information are not disclosed, the reason for non-disclosure, and publish more general information about the subject matter of the disclosure requirement, except where these are to be classified as proprietary or confidential. 4. Paragraphs 1, 2 and 3 are without prejudice to the scope of liability for failure to disclose material information.

inserted text (02013R0575-20190627)

Article 434a
Uniform disclosure formats
EBA shall develop draft implementing technical standards specifying uniform disclosure formats, and associated instructions in accordance with which the disclosures required under Titles II and III shall be made.
Those uniform disclosure formats shall convey sufficiently comprehensive and comparable information for users of that information to assess the risk profiles of institutions and their degree of compliance with the requirements laid down in Parts One to Seven. To facilitate the comparability of information, the implementing technical standards shall seek to maintain consistency of disclosure formats with international standards on disclosures.
Uniform disclosure formats shall be tabular where appropriate.
EBA shall submit those draft implementing technical standards to the Commission by 28 June 2020.
Power is conferred on the Commission to adopt those implementing technical standards in accordance with Article 15 of Regulation (EU) No 1093/2010.

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02013R0575-20190426 → 02013R0575-20190627

Article 460 Liquidity 1. The Commission shall be is empowered to adopt a supplement this Regulation by adopting delegated act acts in accordance with Article 462 to specify in detail the general requirement set out in Article 412(1). The delegated act Delegated acts adopted in accordance with this paragraph shall be based on the items to be reported in accordance with Part Six, Title II of Part Six and Annex III, III and shall specify under which circumstances competent authorities have to impose specific in- and outflow levels on credit institutions in order to capture specific risks to which they are exposed and shall respect the thresholds set out in paragraph 2. 2 of this Article. In particular, the Commission is empowered to supplement this Regulation by adopting delegated acts specifying the detailed liquidity requirements for the purposes of the application of Article 8(3), Articles 411 to 416, 419, 422, 425, 428a, 428f, 428g, 428j to 428n, 428p, 428r, 428s, 428w, 428ae, 428ag, 428ah, 428ak and 451a. 2. The liquidity coverage requirement referred to in Article 412 shall be introduced in accordance with the following phasing-in: (a) 60 % of the liquidity coverage requirement in 2015; (b) 70 % as from 1 January 2016; (c) 80 % as from 1 January 2017; (d) 100 % as from 1 January 2018. For this purpose the Commission shall take into account the reports referred to in Article 509(1), (2) and (3) and international standards developed by international fora as well as Union specificities. The Commission shall adopt the delegated act referred to in paragraph 1 by 30 June 2014. It shall enter into force by 31 December 2014, but shall not apply before 1 January 2015.3. The Commission is empowered to amend this Regulation by adopting delegated acts in accordance with Article 462 amending the list of products or services set out in Article 428f(2) if it considers that assets and liabilities directly linked to other products or services meet the conditions set out in Article 428f(1). The Commission shall adopt the delegated act referred to in the first subparagraph by 28 June 2024.

inserted text (02013R0575-20190627)

Article 461a
Alternative standardised approach for market risk
For the purposes of the reporting requirements set out in Article 430b(1), the Commission is empowered to adopt delegated acts in accordance with Article 462, to amend this Regulation by making technical adjustments to Articles 325e, 325g to 325j, 325p, 325q, 325ae, 325ak, 325am, 325ap to 325at, 325av, 325ax, and specify the risk weight of bucket 11 of Table 4 in Article 325ah and the risk weights of covered bonds issued by credit institutions in third countries in accordance with Article 325ah, and the correlation of covered bonds issued by credit institutions in third countries in accordance with Article 325aj of the alternative standardised approach set out in Chapter 1a of Title IV of Part Three, taking into account developments in international regulatory standards.
The Commission shall adopt the delegated act referred to in paragraph 1 by 31 December 2019.

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Article 462 Exercise of the delegation 1. The power to adopt delegated acts is conferred on the Commission subject to the conditions laid down in this Article. 2. The power to adopt delegated acts referred to in Articles 244(6) and 245(6) and 245(6), in Articles 456 to 460 and in Article 461a shall be conferred on the Commission for an indeterminate period of time from 28 June 2013. 3. The delegation of power referred to in Articles 244(6) and 245(6) and 245(6), in Articles 456 to 460 and in Article 461a may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of the delegated acts already in force. 4. Before adopting a delegated act, the Commission shall consult experts designated by each Member State in accordance with the principles laid down in the Interinstitutional Agreement of 13 April 2016 on Better Law-Making. 5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council. 6. A delegated act adopted pursuant to Articles 244(6) and 245(6) and 245(6), Articles 456 to 460 and in Article 461a shall enter into force only if no objection has been expressed by the European Parliament or the Council within a period of 3 three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by 3 three months at the initiative of the European Parliament or of the Council.

02013R0575-20190426 → 02013R0575-20190627

Article 471 Exemption from Deduction of Equity Holdings in Insurance Companies from Common Equity Tier 1 Items 1. By way of derogation from Article 49(1), during the period from 1 January 2014 31 December 2018 to 31 December 2022, competent authorities 2024, institutions may permit institutions choose not to not deduct equity holdings in insurance undertakings, reinsurance undertakings and insurance holding companies where the following conditions are met: (a) the conditions laid down set out in points (a), (c) and (e) of Article 49(1); (b) the competent authorities are satisfied with the level of risk control and financial analysis procedures specifically adopted by the institution in order to supervise the investment in the undertaking or holding company; (c) the equity holdings of the institution in the insurance undertaking, reinsurance undertaking or insurance holding company do not exceed 15 % of the Common Equity Tier 1 instruments issued by that insurance entity as at 31 December 2012 and during the period from 1 January 2013 to 31 December 2022; 2024; (d) the amount of the equity holding which is not deducted does not exceed the amount held in the Common Equity Tier 1 instruments in the insurance undertaking, reinsurance undertaking or insurance holding company as at 31 December 2012. 2. The equity holdings which are not deducted pursuant to paragraph 1 shall qualify as exposures and be risk weighted at 370 %.

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Article 494
Transitional provisions for eligible capital
By way of derogation from points (71)(a)(ii) and (b)(ii) of Article 4(1), eligible capital may include Tier 2 capital up to the following amounts:
(a) 100 % of Tier 1 capital during the period from 1 January 2014 to 31 December 2014;
(b) 75 % of Tier 1 capital during the period from 1 January 2015 to 31 December 2015;
(c) 50 % of Tier 1 capital during the period from 1 January 2016 to 31 December 2016.

after (02013R0575-20190627)

Article 494
Transitional provisions concerning the requirement for own funds and eligible liabilities
1. By way of derogation from Article 92a, as from 27 June 2019 until 31 December 2021, institutions identified as resolution entities that are G-SIIs or part of a G-SII shall at all times satisfy the following requirements for own funds and eligible liabilities:
(a) a risk-based ratio of 16 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with Article 92(3) and (4);
(b) a non-risk-based ratio of 6 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure referred to in Article 429(4).
2. By way of derogation from Article 72b(3), as from 27 June 2019 until 31 December 2021, the extent to which eligible liabilities instruments referred to in Article 72b(3) may be included in eligible liabilities items shall be 2,5 % of the total risk exposure amount calculated in accordance with Article 92(3) and (4).
3. By way of derogation from Article 72b(3), until the resolution authority assesses for the first time the compliance with the condition set out in point (c) of that paragraph, liabilities shall qualify as eligible liabilities instruments up to an aggregate amount that does not exceed, until 31 December 2021, 2,5 % and, after that date, 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3) and (4), provided that they meet the conditions set out in points (a) and (b) of Article 72b(3).

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Article 494a
Grandfathering of issuances through special purpose entities
1. By way of derogation from Article 52, capital instruments not issued directly by an institution shall qualify as Additional Tier 1 instruments until 31 December 2021 only where all the following conditions are met:
(a) the conditions set out in Article 52(1), except for the condition requiring that the instruments are directly issued by the institution;
(b) the instruments are issued through an entity within the consolidation pursuant to Chapter 2 of Title II of Part One;
(c) the proceeds are immediately available to the institution without limitation and in a form that satisfies the conditions set out in this paragraph.
2. By way of derogation from Article 63, capital instruments not issued directly by an institution shall qualify as Tier 2 instruments until 31 December 2021 only where all the following conditions are met:
(a) the conditions set out in Article 63(1), except for the condition requiring that the instruments are directly issued by the institution;
(b) the instruments are issued through an entity within the consolidation pursuant to Chapter 2 of Title II of Part One;
(c) the proceeds are immediately available to the institution without limitation and in a form that satisfies the conditions set out in this paragraph.

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Article 494b
Grandfathering of own funds instruments and eligible liabilities instruments
1. By way of derogation from Articles 51 and 52, instruments issued prior to 27 June 2019 shall qualify as Additional Tier 1 instruments at the latest until 28 June 2025, where they meet the conditions set out in Articles 51 and 52, except for the conditions referred to in points (p), (q) and (r) of Article 52(1).
2. By way of derogation from Articles 62 and 63, instruments issued prior to 27 June 2019 shall qualify as Tier 2 instruments at the latest until 28 June 2025, where they meet the conditions set out in Articles 62 and 63, except for the conditions referred to in points (n), (o) and (p) of Article 63.
3. By way of derogation from point (a) of Article 72a(1), liabilities issued prior to 27 June 2019 shall qualify as eligible liabilities items where they meet the conditions set out in Article 72b, except for the conditions referred to in point (b)(ii) and points (f) to (m) of Article 72b(2).

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Article 497
Own funds requirements for exposures to CCPs
1. Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 25, 26, 29, 34, 41, 42, 44, 45, 47 and 49 of Regulation (EU) No 648/2012, or until a decision is made under Article 14 of that Regulation on the authorisation of the CCP, whichever is earlier, an institution may consider that CCP to be a QCCP, provided that the CCP was authorised in its Member State of establishment to provide clearing services in accordance with the national law of that Member State before all the regulatory technical standards in Articles 5, 8 to 11, 16, 18, 25, 26, 29, 34, 41, 42, 44, 45, 46, 47, 49, 56 and 81 of that Regulation have been adopted.
2. Until 15 months after the date of entry into force of the latest of the regulatory technical standards referred to in Articles 16, 26, 29, 34, 41, 42, 44, 45, 47 and 49 of Regulation (EU) No 648/2012, or until a decision is made under Article 25 of that Regulation on the recognition of the CCP established in a third country, whichever is earlier, an institution may consider that CCP to be a QCCP,
3. The Commission may adopt an implementing act under Article 5 of Regulation (EU) No 182/2011 extending the transitional provisions in paragraphs 1 and 2 of this Article by a further six months, in exceptional circumstances where it is necessary and proportionate to avoid disruption to international financial markets.
4. Until the deadlines defined in paragraphs 1 and 2, and extended under paragraph 3, as applicable, where a CCP neither has a default fund nor has in place a binding arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, an institution shall substitute the right formula for calculating the own funds requirement (Ki) in Article 308(2) with the following one:Ki1β  NN  2  IMiIM  KCM
where
IMi
the initial margin posted to the CCP by clearing member i
IM
the total amount of initial margin communicated to the institution by the CCP.

after (02013R0575-20190627)

Article 497
Own funds requirements for exposures to CCPs
1. Where a third-country CCP applies for recognition in accordance with Article 25 of Regulation (EU) No 648/2012, institutions may consider that CCP as a QCCP from the date on which it submitted its application for recognition to ESMA and until one of the following dates:
(a) where the Commission has already adopted an implementing act referred to in Article 25(6) of Regulation (EU) No 648/2012 in relation to the third country in which the CCP is established and that implementing act has entered into force, two years after the date of submission of the application;
(b) where the Commission has not yet adopted an implementing act referred to in Article 25(6) of Regulation (EU) No 648/2012 in relation to the third country in which the CCP is established or where that implementing act has not yet entered into force, the earlier of the following dates:
(i) two years after the date of entry into force of the implementing act;
(ii) for CCPs that submitted the application after 27 June 2019, two years after the date of submission of the application;
(iii) for those CCPs that submitted the application before 27 June 2019, 28 June 2021.
2. Until the expiration of the deadline referred to in paragraph 1 of this Article, where a CCP referred to in that paragraph does not have a default fund and does not have in place a binding arrangement with its clearing members that allows it to use all or part of the initial margin received from its clearing members as if they were pre-funded contributions, the institution shall substitute the formula for calculating the own funds requirement in Article 308(2) with the following one:KCMimaxKCCPIMiDFCCPIM ; 8 %2 %IMi
where:
KCMi
the own funds requirement;
KCCP
the hypothetical capital of the QCCP communicated to the institution by the QCCP in accordance with Article 50c of Regulation (EU) No 648/2012;
DFCCP
the pre-funded financial resources of the CCP communicated to the institution by the CCP in accordance with Article 50c of Regulation (EU) No 648/2012;
i
the index denoting the clearing member;
IMi
the initial margin posted with the CCP by clearing member i; and
IM
the total amount of initial margin communicated to the institution by the CCP in accordance with Article 89(5a) of Regulation (EU) No 648/2012.
3. In exceptional circumstances, where it is necessary and proportionate in order to avoid disruption to international financial markets, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision to extend once, by 12 months, the transitional provisions set out in paragraph 1 of this Article.

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Article 500
Transitional provisions — Basel I floor
1. Until 31 December 2017, institutions calculating risk-weighted exposure amounts in accordance with Part Three, Title II, Chapter 3 and institutions using the Advanced Measurement Approaches as specified in Part Three, Title III, Chapter 4 for the calculation of their own funds requirements for operational risk shall meet both of the following requirements:
(a) they shall hold own funds as required by Article 92;
(b) they shall hold own funds which are at all times more than or equal to 80 % of the total minimum amount of own funds that the institution would be required to hold under Article 4 of Directive 93/6/EEC as that Directive and Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutionsOJ L 126, 26.5.2000, p. 1. stood prior to 1 January 2007.
2. Subject to the approval of the competent authorities, the amount referred to in point (b) of paragraph 1 may be replaced by a requirement to hold own funds which are at all times more than or equal to 80 % of the own funds that the institution would be required to hold under Article 92 calculating risk-weighted exposure amounts in accordance with Part Three, Title II, Chapter 2, and Part Three, Title III, Chapter 2 or 3, as applicable, instead of in accordance with Part Three, Title II, Chapter 3, or Part Three, Title III, Chapter 4, as applicable.
3. A credit institution may apply paragraph 2 only if it started to use the IRB Approach or the Advanced Measurements Approaches for the calculation of its capital requirements on or after 1 January 2010.
4. Compliance with the requirements of point (b) of paragraph 1 shall be on the basis of amounts of own funds fully adjusted to reflect differences in the calculation of own funds under Directive 93/6/EEC and Directive 2000/12/EC as those Directives stood prior to 1 January 2007 and the calculation of own funds under this Regulation deriving from the separate treatments of expected loss and unexpected loss under Part Three, Title II, Chapter 3, of this Regulation.
5. The competent authorities may, after consulting EBA, waive the application of point (b) of paragraph 1 to institutions provided that all the requirements for the IRB Approach set out in Part Three, Title II, Chapter 3, Section 6 or the qualifying criteria for the use of the Advanced Measurement Approach set out in Part Three, Title III, Chapter 4, as applicable, are met.
6. By 1 January 2017, the Commission shall submit a report to the European Parliament and the Council on whether it is appropriate to extend the application of the Basel I floor beyond 31 December 2017 to ensure that there is a backstop to internal models, taking into account international developments and internationally agreed standards. That report shall be accompanied by a legislative proposal if appropriate.

after (02013R0575-20190627)

Article 500
Adjustment for massive disposals
1. By way of derogation from point (a) of Article 181(1), an institution may adjust its LGD estimates by partly or fully offsetting the effect of massive disposals of defaulted exposures on realised LGDs up to the difference between the average estimated LGDs for comparable exposures in default that have not been finally liquidated and the average realised LGDs including on the basis of the losses realised due to massive disposals, as soon as all the following conditions are met:
(a) the institution has notified the competent authority of a plan providing the scale, composition and the dates of the disposals of defaulted exposures;
(b) the dates of the disposals of defaulted exposures are after 23 November 2016 but not later than 28 June 2022;
(c) the cumulative amount of defaulted exposures disposed of since the date of the first disposal in accordance with the plan referred to in point (a) has surpassed 20 % of the cumulative amount of all observed defaults as of the date of the first disposal referred to in points (a) and (b).
The adjustment referred to in the first subparagraph may only be carried out until 28 June 2022 and its effects may last for as long as the corresponding exposures are included in the institution's own LGD estimates.
2. Institutions shall notify the competent authority without delay when the condition set out in point (c) of paragraph 1 has been met.

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Article 501a
Adjustment to own funds requirements for credit risk for exposures to entities that operate or finance physical structures or facilities, systems and networks that provide or support essential public services
4. The Commission shall, by 28 June 2022 report on the impact of the own funds requirements laid down in this Regulation on lending to infrastructure project entities and shall submit that report to the European Parliament and to the Council, together with a legislative proposal, if appropriate.
5. For the purposes of paragraph 4, EBA shall report on the following to the Commission:
(a) an analysis of the evolution of the trends and conditions in markets for infrastructure lending and project finance over the period referred to in paragraph 4;
(b) an analysis of the effective riskiness of entities referred to in point (b) of paragraph 1 over a full economic cycle;
(c) the consistency of own funds requirements laid down in this Regulation with the outcomes of the analysis under points (a) and (b) of this paragraph.

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Article 501b
Derogation from reporting requirements
By way of derogation from Article 430, during the period between the date of application of the relevant provisions of this Regulation and the date of the first remittance of reports specified in the implementing technical standards referred to in that Article, a competent authority may waive the requirement to report information in the format specified in the templates contained in the implementing act referred to in Article 430(7) where those templates have not been updated to reflect the provisions of this Regulation.

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Article 501c
Prudential treatment of exposures related to environmental and/or social objectives
EBA, after consulting the ESRB, shall assess, on the basis of available data and the findings of the Commission High-Level Expert Group on Sustainable Finance, whether a dedicated prudential treatment of exposures related to assets or activities associated substantially with environmental and/or social objectives would be justified. In particular, EBA shall assess:
(a) methodologies for the assessment of the effective riskiness of exposures related to assets and activities associated substantially with environmental and/or social objectives compared to the riskiness of other exposure;
(b) the development of appropriate criteria for the assessment of physical risks and transition risks, including the risks related to the depreciation of assets due to regulatory changes;
(c) the potential effects of a dedicated prudential treatment of exposures related to assets and activities which are associated substantially with environmental and/or social objectives on financial stability and bank lending in the Union.
EBA shall submit a report on its findings to the European Parliament, to the Council and to the Commission by 28 June 2025.
On the basis of that report, the Commission shall, if appropriate, submit to the European Parliament and to the Council a legislative proposal.

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Article 504a
Holdings of eligible liabilities instruments
By 28 June 2022, EBA shall report to the Commission on the amounts and distribution of holdings of eligible liabilities instruments among institutions identified as G-SIIs or O-SIIs and on potential impediments to resolution and the risk of contagion in relation to those holdings.
Based on the report by EBA the Commission shall, by 28 June 2023, report to the European Parliament and to the Council on the appropriate treatment of such holdings, accompanied by a legislative proposal, where appropriate.

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Article 507
Large exposures
By 31 December 2015, the Commission shall review and report on the application of Article 400(1)(j) and Article 400(2), including whether the exemptions set out in Article 400(2) is to be discretionary, and shall submit that report to the European Parliament and to the Council, together with a legislative proposal, if appropriate.
With respect to the potential elimination of the national discretion under Article 400(2)(c) and its potential application at the Union level, the review shall in particular take into account the efficiency of group risk management while ensuring that sufficient safeguards are in place to ensure financial stability in all Member States in which an entity belonging to a group is incorporated.

after (02013R0575-20190627)

Article 507
Large exposures
1. EBA shall monitor the use of exemptions set out in point (b) of Article 390(6), points (f) to (m) of Article 400(1), point (a) and points (c) to (g), (i), (j) and (k) of Article 400(2) and by 28 June 2021 submit a report to the Commission assessing the quantitative impact that the removal of those exemptions or the setting of a limit on their use would have. That report shall assess, in particular, for each exemption provided for in those Articles:
(a) the number of large exposures exempted in each Member State;
(b) the number of institutions that make use of the exemption in each Member State;
(c) the aggregate amount of exposures exempted in each Member State.
2. By 31 December 2023, the Commission shall submit a report to the European Parliament and to the Council on the application of the derogations referred to in Articles 390(4) and 401(2) concerning the methods for the calculation of exposure value of securities financing transactions, and in particular the need to take account of amendments in international standards determining the methods for such calculation.

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Article 510
Net Stable Funding Requirements
1. By 31 December 2015, EBA shall report to the Commission, on the basis of the items to be reported in accordance with Part Six, Title III, on whether and how it would be appropriate to ensure that institutions use stable sources of funding, including an assessment of the impact on the business and risk profile of institutions established in the Union or on financial markets or the economy and bank lending, with a particular focus on lending to SMEs and on trade financing, including lending under official export credit insurance schemes and pass through financing models, including match funded mortgage lending. In particular EBA shall analyse the impact of stable sources of funding on the refinancing structures of different banking models in the Union.
2. By 31 December 2015, EBA shall also report to the Commission, on the basis of the items to be reported in accordance with Part Six, Title III and, in accordance with the uniform reporting formats referred to in point (a) of Article 415(3) and after consulting the ESRB, on methodologies for determining the amount of stable funding available to and required by institutions and on appropriate uniform definitions for calculating such a net stable funding requirement, examining in particular the following:
(a) the categories and weightings applied to sources of stable funding in Article 427(1);
(b) the categories and weightings applied to determine the requirement for stable funding in Article 428(1);
(c) methodologies shall provide incentives and disincentives as appropriate to encourage a more stable longer term funding of assets, business activities, investment and funding of institutions;
(d) the need to develop different methodologies for different types of institutions.
3. By 31 December 2016, the Commission shall, if appropriate, taking into account the reports referred to in paragraphs 1 and 2, and taking full account of the diversity of the banking sector in the Union, submit a legislative proposal to the European Parliament and the Council on how to ensure that institutions use stable sources of funding.

after (02013R0575-20190627)

Article 510
Net Stable Funding Requirements
1. By 31 December 2015, EBA shall report to the Commission, on the basis of the items to be reported in accordance with Part Six, Title III, on whether and how it would be appropriate to ensure that institutions use stable sources of funding, including an assessment of the impact on the business and risk profile of institutions established in the Union or on financial markets or the economy and bank lending, with a particular focus on lending to SMEs and on trade financing, including lending under official export credit insurance schemes and pass through financing models, including match funded mortgage lending. In particular EBA shall analyse the impact of stable sources of funding on the refinancing structures of different banking models in the Union.
2. By 31 December 2015, EBA shall also report to the Commission, on the basis of the items to be reported in accordance with Part Six, Title III and, in accordance with the uniform reporting formats referred to in point (a) of Article 415(3) and after consulting the ESRB, on methodologies for determining the amount of stable funding available to and required by institutions and on appropriate uniform definitions for calculating such a net stable funding requirement, examining in particular the following:
(a) the categories and weightings applied to sources of stable funding in Article 427(1);
(b) the categories and weightings applied to determine the requirement for stable funding in Article 428(1);
(c) methodologies shall provide incentives and disincentives as appropriate to encourage a more stable longer term funding of assets, business activities, investment and funding of institutions;
(d) the need to develop different methodologies for different types of institutions.
3. By 31 December 2016, the Commission shall, if appropriate, taking into account the reports referred to in paragraphs 1 and 2, and taking full account of the diversity of the banking sector in the Union, submit a legislative proposal to the European Parliament and the Council on how to ensure that institutions use stable sources of funding.
4. EBA shall monitor the amount of required stable funding covering the funding risk linked to the derivative contracts listed in Annex II and credit derivatives over the one-year horizon of the net stable funding ratio, in particular the future funding risk for those derivative contracts set out in Articles 428s(2) and 428at(2), and report to the Commission on the opportunity to adopt a higher required stable funding factor or a more risk-sensitive measure by 28 June 2024. That report shall at least assess:
(a) the opportunity to distinguish between margined and unmargined derivative contracts;
(b) the opportunity to remove, increase or replace the requirement set out in Articles 428s(2) and 428at(2);
(c) the opportunity to change more broadly the treatment of derivative contracts in the calculation of the net stable funding ratio, as set out in Article 428d, Articles 428k(4) and 428s(2), points (a) and (b) of Article 428ag, Articles 428ah(2), 428al(4) and 428at(2), points (a) and (b) of Article 428ay and Article 428az(2), to better capture the funding risk linked to those contracts over the one-year horizon of the net stable funding ratio;
(d) the impact of the proposed changes on the amount of stable funding required for institutions' derivative contracts.
5. If international standards affect the treatment of derivative contracts listed in Annex II and credit derivatives for the calculation of the net stable funding ratio, the Commission shall, if appropriate and taking into account the report referred to in paragraph 4, those changes of international standards and the diversity of the banking sector in the Union, submit a legislative proposal to the European Parliament and to the Council on how to amend the provisions regarding the treatment of derivative contracts listed in Annex II and credit derivatives for the calculation of the net stable funding ratio as set out in Title IV of Part Six to take better account of the funding risk linked to those transactions.
6. EBA shall monitor the amount of stable funding required to cover the funding risk linked to securities financing transactions, including to the assets received or given in those transactions, and to unsecured transactions with a residual maturity of less than six months with financial customers and report to the Commission on the appropriateness of that treatment by 28 June 2023. That report shall at least assess:
(a) the opportunity to apply higher or lower stable funding factors to securities financing transactions with financial customers and to unsecured transactions with a residual maturity of less than six months with financial customers to take better account of their funding risk over the one-year horizon of the net stable funding ratio and of the possible contagion effects between financial customers;
(b) the opportunity to apply the treatment set out in point (g) of Article 428r(1) to securities financing transactions collateralised by other types of assets;
(c) the opportunity to apply stable funding factors to off-balance-sheet items used in securities financing transactions as an alternative to the treatment set out in Article 428p(5);
(d) the adequacy of the asymmetric treatment between liabilities with a residual maturity of less than six months provided by financial customers that are subject to a 0 % available stable funding factor in accordance with point (c) of Article 428k(3) and assets resulting from transactions with a residual maturity of less than six months with financial customers that are subject to a 0 %, 5 % or 10 % required stable funding factor in accordance with point (g) of Article 428r(1), point (c) of Article 428s(1) and point (b) of Article 428v;
(e) the impact of the introduction of higher or lower required stable funding factors for securities financing transactions, in particular with a residual maturity of less than six months with financial customers, on the market liquidity of assets received as collateral in those transactions, in particular of sovereign and corporate bonds;
(f) the impact of the proposed changes on the amount of stable funding required for those institutions' transactions, in particular for securities financing transactions with a residual maturity of less than six months with financial customers where sovereign bonds are received as collateral in those transactions.
7. By 28 June 2024, the Commission shall, where appropriate and taking into account the report referred to in paragraph 6, any international standards and the diversity of the banking sector in the Union, submit a legislative proposal to the European Parliament and to the Council on how to amend the provisions regarding the treatment of securities financing transactions, including of the assets received or given in those transactions, and the treatment of unsecured transactions with a residual maturity of less than six months with financial customers for the calculation of the net stable funding ratio as set out in Title IV of Part Six where it considers it appropriate regarding the impact of the existing treatment on institutions' net stable funding ratio and to take better account of the funding risk linked to those transactions.
8. By 28 June 2025, the required stable funding factors applied to the transactions referred to in point (g) of Article 428r(1), point (c) of Article 428s(1) and in point (b) of Article 428v, shall be raised from 0 % to 10 %, from 5 % to 15 % and from 10 % to 15 % respectively, unless otherwise specified in a legislative act adopted on the basis of a proposal by the Commission, in accordance with paragraph 7 of this Article.
9. EBA shall monitor the amount of stable funding required to cover the funding risk linked to institutions' holdings of securities to hedge derivative contracts. EBA shall report on the appropriateness of the treatment by 28 June 2023. That report shall at least assess:
(a) the possible impact of the treatment on investors' ability to gain exposure to assets and the impact of the treatment on credit supply in the capital markets union;
(b) the opportunity to apply adjusted stable funding requirements to securities that are held to hedge derivatives which are funded by initial margin, either wholly or in part;
(c) the opportunity to apply adjusted stable funding requirements to securities that are held to hedge derivatives which are not funded by initial margin.
10. By 28 June 2023 or a year after an agreement on international standards that is developed by the BCBS, whichever is the earliest, the Commission shall, where appropriate and taking into account the report referred to in paragraph 9, any international standards developed by the BCBS, the diversity of the banking sector in the Union and the aims of the capital markets union, submit a legislative proposal to the European Parliament and to the Council on how to amend the provisions regarding the treatment of institutions' holdings of securities to hedge derivative contracts for the calculation of the net stable funding ratio as set out in Title IV of Part Six where it considers it appropriate regarding the impact of the existing treatment on institutions' net stable funding ratio and to take better account of the funding risk linked to those transactions.
11. EBA shall assess whether it would be justified to reduce the required stable funding factor for assets used for providing clearing and settlement services of precious metals such as gold, silver, platinum and palladium or assets used for providing financing transactions of precious metals such as gold, silver, platinum and palladium of a term of 180 days or less. EBA shall submit its report to the Commission by 28 June 2021.

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Article 511
Leverage
1. Based on the results of the report referred to in paragraph 3, the Commission shall submit by 31 December 2016 a report on the impact and effectiveness of the leverage ratio to the European Parliament and the Council.
2. Where appropriate, the report shall be accompanied by a legislative proposal on the introduction of an appropriate number of levels of the leverage ratio that institutions following different business models would be required to meet, suggesting an adequate calibration for those levels and any appropriate adjustments to the capital measure and the total exposure measure as referred to in Article 429, together with any connected flexibility measures if necessary, including appropriate amendments to Article 458 to introduce the leverage ratio within the scope of measures included in that Article.
3. For the purposes of paragraph 1, EBA shall report to the Commission by 31 October 2016 on at least the following:
(a) whether the leverage ratio framework provided by this Regulation and by Articles 87 and 98 of Directive 2013/36/EU is the appropriate tool to eliminate the risk of excessive leverage on the part of the institutions in a satisfactory manner and degree;
(b) on identifying business models that reflect the overall risk profiles of the institutions and on introducing differentiated levels of the leverage ratio for those business models;
(c) whether the requirements laid out in Articles 76 and 87 of Directive 2013/36/EU in accordance with Articles 73 and 97 of Directive 2013/36/EU for addressing the risk of excessive leverage are sufficient to ensure sound management of this risk by institutions and, if not, which further enhancements are needed in order to ensure these objectives;
(d) whether and, if so, which, changes to the calculation methodology referred to in Article 429 would be necessary to ensure that the leverage ratio can be used as an appropriate indicator of an institution's risk of excessive leverage;
(e) whether, in the context of the calculation of the total exposure measure of the leverage ratio, the exposure value of contracts listed in Annex II determined by using the Original Exposure Method differs in a material way from the exposure value determined by using the Mark-to-Market Method;
(f) whether using either own funds or Common Equity Tier 1 capital as the capital measure of the leverage ratio could be more appropriate for the intended purpose of tracking the risk of excessive leverage and, if so, what would be the appropriate calibration of the leverage ratio;
(g) whether the conversion factor referred to in point (a) of Article 429(10) for undrawn credit facilities, which may be cancelled unconditionally at any time without notice, is appropriately conservative based on the evidence collected during the observation period;
(h) whether the frequency and format of the disclosure of items referred to in Article 451 are adequate;
(i) the appropriate level of the leverage ratio for each of the business models identified in accordance with point (b);
(j) whether a range for each level of the leverage ratio should be established;
(k) whether introducing the leverage ratio as a requirement for institutions would necessitate any, and, if so, which, changes to the leverage ratio framework provided by this Regulation;
(l) whether introducing the leverage ratio as a requirement for institutions would effectively constrain the risk of excessive leverage on the part of those institutions, and, if so, whether the level for the leverage ratio should be the same for all institutions or should be determined in accordance with the risk profile and business model as well as the size of institutions and, with regard to this, which additional calibrations or transitional period would be required.
4. The report referred to in paragraph 3 shall cover at least the period from 1 January 2014 until 30 June 2016 and shall take account of at least the following:
(a) the impact of introducing the leverage ratio, determined in accordance with Article 429, as a requirement that institutions would have to meet on:
(i) financial markets in general and markets for repurchase transactions, derivatives and covered bonds in particular;
(ii) the robustness of institutions;
(iii) the business models and the balance-sheet structures of institutions; in particular as regards low-risk areas of business, such as promotional credit by public development banks, municipal loans, financing of residential property and other low-risk areas regulated under national law;
(iv) the migration of exposures to entities which are not subject to prudential supervision;
(v) financial innovation, in particular the development of instruments with embedded leverage;
(vi) institutions' risk-taking behaviour;
(vii) clearing, settlement and custody activities and the operation of a central counterparty;
(viii) cyclicality of the capital measure and the total exposure measure of the leverage ratio;
(ix) bank lending, with a particular focus on lending to SMEs, local authorities, regional governments and public sector entities and on trade financing, including lending under official export credit insurance schemes;
(b) the interaction of the leverage ratio with the risk-based own funds requirements and the liquidity requirements as specified in this Regulation;
(c) the impact of accounting differences between accounting standards applicable under Regulation (EC) No 1606/2002, accounting standards applicable under Directive 86/635/EEC and other applicable accounting framework and other relevant accounting frameworks on the comparability of the leverage ratio.

after (02013R0575-20190627)

Article 511
Leverage
1. The Commission shall by 31 December 2020 submit a report to the European Parliament and to the Council on whether:
(a) it is appropriate to introduce a leverage ratio surcharge for O-SIIs; and
(b) the definition and calculation of the total exposure measure referred to in Article 429(4), including the treatment of central bank reserves, is appropriate.
2. For the purposes of the report referred to in paragraph 1, the Commission shall take into account international developments and internationally agreed standards. Where appropriate, that report shall be accompanied by a legislative proposal.

02013R0575-20190426 → 02013R0575-20190627

Article 513 Macroprudential rules 1. By 30 June 2014, 2022, and every five years thereafter, the Commission shall, after consulting the ESRB and EBA, review whether the macroprudential rules contained in this Regulation and in Directive 2013/36/EU are sufficient to mitigate systemic risks in sectors, regions and Member States including assessing: (a) whether the current macroprudential tools in this Regulation and in Directive 2013/36/EU are effective, efficient and transparent; (b) whether the coverage and the possible degrees of overlap between different macroprudential tools for targeting similar risks in this Regulation and in Directive 2013/36/EU are adequate and, if appropriate, propose new macroprudential rules; (c) how internationally agreed standards for systemic institutions interacts interact with the provisions in this Regulation and in Directive 2013/36/EU and, if appropriate, propose new rules taking into account those internationally agreed standards. standards; (d) whether other types of instruments, such as borrower-based instruments, should be added to the macroprudential tools provided for in this Regulation and in Directive 2013/36/EU to complement capital-based instruments and to allow for the harmonised use of the instruments in the internal market; taking into account whether harmonised definitions of those instruments and the reporting of respective data at Union level are a prerequisite for the introduction of such instruments; (e) whether the leverage ratio buffer requirement as referred to in Article 92(1a) should be extended to systemically important institutions other than G-SIIs, whether its calibration should be different from the calibration for G-SIIs, and whether its calibration should depend on the level of systemic importance of the institution; (f) whether the current voluntary reciprocity of macroprudnetial measures should be turned into mandatory reciprocity and whether the current ESRB framework for voluntary reciprocity is an appropriate basis for that; (g) how relevant Union and national macroprudential authorities can be mandated with tools to address new emerging systemic risks arising from credit institutions exposures to the non-banking sector, in particular from derivatives and securities financing transactions markets, the asset management sector and the insurance sector. 2. By 31 December 2014, 2022, and every five years thereafter, the Commission shall, on the basis of the consultation of with the ESRB and EBA, report to the European Parliament and to the Council on the assessment referred to in paragraph 1 and, where appropriate, submit a legislative proposal to the European Parliament and to the Council.

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before (02013R0575-20190426)

Article 514
Counterparty credit risk and the Original Exposure Method
By 31 December 2016, the Commission shall review and report on the application of Article 275 and shall submit that report to the European Parliament and the Council, and, if appropriate, a legislative proposal.

after (02013R0575-20190627)

Article 514
Method for the calculation of the exposure value of derivative transactions
1. EBA shall, by 28 June 2023, report to the Commission on the impact and the relative calibration of the approaches set out in Sections 3, 4 and 5 of Chapter 6 of Title II of Part Three to calculate the exposure values of derivative transactions.

inserted text (02013R0575-20190627)

Article 518a
Review of cross-default provisions
By 28 June 2022, the Commission shall review and assess whether it is appropriate to require that eligible liabilities may be bailed-in without triggering cross-default clauses in other contracts, with a view to reinforcing as much as possible the effectiveness of the bail-in tool and to assessing whether a no-cross-default provision referring to eligible liabilities should be included in the terms or contracts governing other liabilities. Where appropriate, that review and assessment shall be accompanied by a legislative proposal.

inserted text (02013R0575-20190627)

Article 519b
Own funds requirements for market risk
1. By 30 September 2019, EBA shall report on the impact, on institutions in the Union, of international standards to calculate the own funds requirements for market risk.
2. By 30 June 2020, the Commission shall, taking into account the results of the report referred to in paragraph 1 and the international standards and the approaches set out in Chapters 1a and 1b of Title IV of Part Three, submit a report together with a legislative proposal, where appropriate, to the European Parliament and to the Council on how to implement international standards on adequate own funds requirements for market risk.

inserted text (02013R0575-20190627)

Article 519c
Compliance tool
1. EBA shall develop an electronic tool aimed at facilitating institutions' compliance with this Regulation and Directive 2013/36/EU, as well as with regulatory technical standards, implementing technical standards, guidelines and templates adopted to implement this Regulation and that Directive.
2. The tool referred to in paragraph 1 shall at least enable each institution to:
(a) rapidly identify the relevant provisions to comply with in relation to the institution's size and business model;
(b) follow the changes made in legislative acts and in the related implementing provisions, guidelines and templates.

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