Capital Requirements Regulation

02013R0575-20240709 → 02013R0575-20250101

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 consists of any of the following: (a) to take deposits or other repayable funds from the public and to grant credits for its own account; (b) to carry out any of the activities referred to in Annex I, Section A, points (3) and (6) of Section A of Annex I (6), to 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)., where one of the following applies, but the undertaking is not a commodity and emission allowance dealer, a collective investment undertaking undertaking, an insurance undertaking, or an insurance undertaking: investment firm for which the authorisation as a credit institution is waived in accordance with Article 8a of Directive 2013/36/EU: (i) the total value of the consolidated assets of the undertaking established in the Union, including any of its branches and subsidiaries established in a third country, is equal to or exceeds EUR 30 billion; (ii) the total value of the assets of the undertaking established in the Union, including any of its branches and subsidiaries established in a third country, is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in that group that are established in the Union, including any of their branches and subsidiaries established in a third country, that individually have total assets of less than EUR 30 billion and that carry out any of the activities referred to in Annex I, Section A, points (3) and (6) of Section A of Annex I (6), to Directive 2014/65/EU is equal to or exceeds EUR 30 billion; or (iii) the total value of the assets of the undertaking established in the Union, including any of its branches and subsidiaries established in a third country, is less than EUR 30 billion, and the undertaking is part of a group in which the total value of the consolidated assets of all undertakings in the group that carry out any of the activities referred to in Annex I, Section A, points (3) and (6) of Section A of Annex I (6), to Directive 2014/65/EU 2014/65/EU, is equal to or exceeds EUR 30 billion, where the consolidating supervisor, in consultation with the supervisory college, so decides in order to address potential risks of circumvention and or potential risks for the financial stability of the Union; for the purposes of points (b)(ii) and (b)(iii), where the undertaking is part of a third‐country group, the total assets of each branch of the third‐country group authorised in the Union shall be included in the … 528 unchanged words … 347, 28.12.2017, p. 35).; (14) sponsor means a sponsor as defined in point (5) of Article 2 of Regulation (EU) 2017/2402; (14a) original lender means an original lender as defined in point (20) of Article 2 of Regulation (EU) 2017/2402; (15) parent undertaking means: (a) a parent means an undertaking that controls, within the meaning of Articles 1 and 2 of Directive 83/349/EEC; (b) for the purposes of Section II of Chapters 3 and 4 of Title VII and Title VIII of Directive 2013/36/EU and Part Five of this Regulation, a parent point (37), one or more undertakings; (16) subsidiary means an undertaking that is controlled, within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which effectively exercises a dominant influence over point (37), by another undertaking; (16) subsidiary means: (a) a subsidiary undertaking within the meaning of Articles 1 and 2 of Directive 83/349/EEC; (b) a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which a parent undertaking effectively exercises a dominant influence. Subsidiaries subsidiaries of subsidiaries shall also be considered to be subsidiaries of the undertaking that is their original parent undertaking; (17) branch means a place of business which forms a legally dependent part of an institution and which carries out directly all or some of the transactions inherent in the business of institutions; (18) ancillary services undertaking means an undertaking the principal activity of which, whether provided to undertakings inside the group or to clients outside the group, consists of any of the following: (a) a direct extension of banking; (b) operational leasing, the ownership or management of property, the provision of data processing services or any other activity insofar as those activities are ancillary to banking; (c) any other activity considered similar by EBA to those referred to in points (a) and (b); (19) asset management company means an asset management company as defined in point (5) of Article 2 of Directive 2002/87/EC or an AIFM as defined in Article 4(1)(b) of Directive 2011/61/EU, including, unless otherwise provided, third-country entities that carry out similar activities and that are subject to 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 an undertaking that meets all of the following conditions: (a) it is a financial institution, the subsidiaries of which are exclusively or mainly institutions or financial institutions, and which institution; (b) it is not a mixed financial holding company; the subsidiaries of a financial institution are mainly institutions or financial institutions where (c) it has at least one of them subsidiary that is an institution and where institution; (d) more than 50 % of any of the financial institution's equity, consolidated assets, revenues, personnel or other indicator considered relevant by the competent authority following indicators are associated associated, on a steady basis, with subsidiaries that are institutions or financial institutions; institutions, and with activities carried out by the undertaking itself that are not related to the acquisition or owning of holdings in subsidiaries when those activities are of the same nature as the ones carried out by institutions or financial institutions: (i) the undertaking’s equity based on its consolidated situation; (ii) the undertaking’s assets based on its consolidated situation; (iii) the undertaking’s revenues based on its consolidated situation; (iv) the undertaking’s personnel based on its consolidated situation; (v) other indicators considered relevant by the competent authority. The competent authority may decide that an entity does not qualify as a financial holding company even if one of the indicators referred to in the first paragraph, points (i) to (iv), is met, where the competent authority considers that the relevant indicator does not convey a fair and true view of the main activities and risks of the group. Before making such decision, the competent authority shall consult EBA and provide a substantiated and detailed qualitative and quantitative justification. The competent authority shall have due regard to EBA’s opinion and, where it decides to deviate from it, shall within three months of the date of receipt of EBA’s opinion, provide to EBA the rationale for deviating from the relevant opinion; (20a) investment holding company means an investment holding company as defined in Article 4(1), point (23), of Regulation (EU) 2019/2033; (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 that meets both of the following conditions: (a) it is not an institution and other than institution, a pure industrial holding company, a securitisation special purpose entity, an insurance holding company as defined in Article 212(1), point (f), of Directive 2009/138/EC or a mixed-activity insurance holding company as defined in Article 212(1), point (g), of that Directive, except where a mixed-activity insurance holding company has a subsidiary institution; (b) it meets one or more of the following conditions: (i) the principal activity of which the undertaking is to acquire or own holdings or to pursue one or more of the activities listed in Annex I, points 2 to 12 and point 15 of Annex I points 15, 16 and 17, to Directive 2013/36/EU, including or to pursue one or more of the services or activities listed in Annex I, Section A or B, to Directive 2014/65/EU in relation to financial instruments listed in Annex I, Section C, to Directive 2014/65/EU; (ii) the undertaking is an investment firm, a financial holding company, a mixed financial holding company, an investment holding company, a payment institution within the meaning services provider as categorised under Article 1(1), points (a) to (d), of Directive (EU) 2015/2366 of the European Parliament and of the CouncilDirective (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal 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 337, 23.12.2015, p. 35)., an asset management company or an ancillary services undertaking; (26a) pure industrial holding company means an undertaking that meets all of the following conditions: (a) its principal activity is to acquire or own holdings; (b) it is not referred to in point (27)(a), or point (27)(d) to (l), of this paragraph and is not an investment firm or an asset management company, but excluding insurance holding companies and mixed‐activity insurance holding companies or a payment service provider as defined in categorised under Article 1(1), points (f) and (g) of Article 212(1) (a) to (d), of Directive 2009/138/EC; (EU) 2015/2366; (c) it does not hold any participations in a financial sector entity; (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 an institution, institution or a financial institution or an ancillary services undertaking as a subsidiary subsidiary, or which holds a participation in an institution, financial institution or ancillary services undertaking, financial institution, 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 undertaking in a Member State that is an investment firm; (29b) EU parent investment firm means an EU parent undertaking 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 set up in the same Member State; (31) EU parent financial holding company means a parent financial holding company in a Member State which is not a subsidiary of an institution authorised in any Member State or of another financial holding company or mixed financial holding company set up in any Member State; (32) parent mixed financial holding company in a Member State means a mixed 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 set up in that same Member State; (33) EU parent mixed financial holding company means a parent mixed financial holding company in a Member State which is not a subsidiary of an institution authorised in any Member State or of another financial holding company or mixed financial holding company set up in any Member State; (34) central counterparty or CCP means a CCP as defined in point (1) of Article 2 of Regulation (EU) No 648/2012; (35) participation means participation within the meaning a participating interest as defined in Article 2, point (2), of Directive 2013/34/EU of the first sentence European Parliament and of Article 17 the CouncilDirective 2013/34/EU of Fourth the European Parliament and of the Council Directive 78/660/EEC of 25 July 1978 26 June 2013 on the annual accounts financial statements, consolidated financial statements and related reports of certain types of companiesOJ 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 222, 14.8.1978, 182, 29.6.2013, p. 11., 19)., or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking; (36) qualifying holding means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking; (37) control means the relationship between a parent undertaking and a subsidiary, as defined described in Article 1 22 of Directive 83/349/EEC, 2013/34/EU, or in the accounting standards to which an institution is subject under Regulation (EC) No 1606/2002, 1606/2002 of the European Parliament and of the CouncilRegulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (OJ L 243, 11.9.2002, p. 1)., or a similar relationship between any natural or legal person and an undertaking; (38) close links means a situation in which two or more natural or legal persons are linked in any of the following ways: (a) participation in the form of … 709 unchanged words … an index; (51) initial capital means the amounts and types of own funds specified in Article 12 of Directive 2013/36/EU; (52) operational risk means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, including, but not limited to, legal risk, model risk or information and communication technology (ICT) risk, but excluding strategic and reputational risk; (52a) legal risk means the risk of loss, including, expenses, fines, penalties or punitive damages, which an institution might incur as a consequence of events that result in legal proceedings, including the following: (a) supervisory actions and private settlements; (b) failure to act where action is necessary to comply with a legal obligation; (c) action taken to avoid compliance with a legal obligation; (d) misconduct events, which are events that arise from wilful or negligent misconduct, including inappropriate supply of financial services or the provision of inadequate or misleading information on the financial risk of products sold by the institution; (e) non-compliance with any requirement derived from national or international statutory or legislative provisions; (f) non-compliance with any requirement derived from contractual arrangements, or with internal rules and codes of conduct established in accordance with national or international rules and practices; (g) non-compliance with rules on ethics; (52b) model risk means the risk of loss resulting from decisions that are principally based on the output of internal models, due to errors in the design, development, parameter estimation, implementation, use or monitoring of such models, including the following: (a) the improper design of a selected internal model and its characteristics; (b) the inadequate verification of a selected internal model’s suitability for the financial instrument to be evaluated or for the product to be priced, or of the selected internal model’s suitability for the applicable market conditions; (c) errors in the implementation of a selected internal model; (d) incorrect mark-to-market valuations and risk measurement as a result of an error when booking a trade into the trading system; (e) the use of a selected internal model or of its outputs for a purpose for which that model was not intended or designed, including manipulation of the modelling parameters; (f) the untimely or ineffective monitoring or validation of model performance or of the predictive ability to assess whether the selected internal model remains fit for purpose; (52c) ICT risk means the risk of loss related to any reasonably identifiable circumstances related to the use of network and information systems which, if materialised, might compromise the security of the network and information systems, of any technology-dependent tool or process, of operations and processes, or of the provision of services, by producing adverse effects in the digital or physical environment; (52d) environmental, social and governance risk or ESG risk means the risk of any negative financial impact on an institution stemming from the current or prospective impact of environmental, social or governance (ESG) factors on that institution’s counterparties or invested assets; ESG risks materialise through the traditional categories of financial risks; (52e) environmental risk means the risk of any negative financial impact on an institution stemming from the current or prospective impact of environmental factors on that institution’s counterparties or invested assets, including factors related to the transition towards the objectives set out in Article 9 of Regulation (EU) 2020/852 of the European Parliament and of the CouncilRegulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13).; environmental risk includes legal both physical risk and transition risk; (52f) physical risk, as part of the environmental risk, means the risk of any negative financial impact on an institution stemming from the current or prospective impact of the physical effects of environmental factors on that institution’s counterparties or invested assets; (52g) transition risk, as part of the environmental risk, means the risk of any negative financial impact on an institution stemming from the current or prospective impact of the transition to an environmentally sustainable economy on that institution’s counterparties or invested assets; (52h) social risk means the risk of any negative financial impact on an institution stemming from the current or prospective impact of social factors on its counterparties or invested assets; (52i) governance risk means the risk of any negative financial impact on an institution stemming from the current or prospective impact of governance factors on that institution’s counterparties or invested assets; (53) dilution risk means the risk that an amount receivable is reduced through cash or non-cash credits to the obligor; (54) probability of default or PD means the probability of default of an obligor or, where applicable, of a counterparty credit facility over a one-year period, and, in the context of dilution risk, the probability of dilution over a one-year period; (55) loss given default or LGD means the ratio of the loss on an exposure related to a single facility due to the default of an obligor or, where applicable, of a counterparty credit facility to the amount outstanding at default; default or at a given reference date after the date of default, and, in the context of dilution risk, the loss given dilution meaning the ratio of the loss on an exposure related to a purchased receivable due to dilution, to the amount outstanding of the purchased receivable; (56) conversion factor or credit conversion factor or CCF means the ratio of the currently undrawn amount of a commitment from a single facility that could be drawn from that single facility from a certain point in time before default and that would therefore be outstanding at default to the currently undrawn amount of the commitment, commitment from that facility, the extent of the commitment being determined by the advised limit, unless the unadvised limit is higher; (57) credit risk mitigation means a technique used by an institution to reduce the credit risk associated with an exposure or exposures which that institution continues to hold; (58) funded credit protection or FCP means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution derives is derived from the right of that institution, in the event of the default of the counterparty obligor or the credit facility, or on the occurrence of other specified credit events relating to the counterparty, obligor, to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the institution; (59) unfunded credit protection or UFCP means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of an institution derives is derived from the obligation of a third party to pay an amount in the event of the default of the borrower obligor or the credit facility, or the occurrence of other specified credit events; (60) cash assimilated instrument means a certificate of deposit, a bond, including a covered bond, or any other non‐subordinated non-subordinated instrument, which has been issued by an institution or an investment firm, a lending institution, for which the that lending institution or investment firm has already received full payment and which is to shall be unconditionally reimbursed by the institution or investment firm at its nominal value; (60a) gold bullion means gold in the form of a commodity, including gold bars, ingots and coins, commonly accepted by the bullion market, where liquid markets for bullion exist, and the value of which is determined by the value of the gold content, defined by purity and mass, rather than by its interest to numismatists; (61) securitisation means a securitisation as defined in point (1) of Article 2 of Regulation (EU) 2017/2402; (62) securitisation position means a securitisation position as defined in point (19) of Article 2 of Regulation (EU) 2017/2402; (63) resecuritisation means a resecuritisation as … 422 unchanged words … immovable property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property; (74a) property value means the value of a residential property or commercial immovable property determined in accordance with Article 229(1); (75) residential property means a residence which is occupied by the owner or the lessee any of the residence, including following: (a) an immovable property which has the nature of a dwelling and satisfies all applicable laws and regulations enabling the property to be occupied for housing purposes; (b) an immovable property which has the nature of a dwelling and is still under construction, provided that there is the expectation that the property will satisfy all applicable laws and regulations enabling the property to be occupied for housing purposes; (c) the right to inhabit an apartment in housing cooperatives located in Sweden; (d) land accessory to a property referred to in point (a), (b) or (c); (75a) commercial immovable property means any immovable property that is not residential property; (75b) income producing real estate exposure or IPRE exposure means an exposure secured by one or more residential properties or commercial immovable properties where the fulfilment of the credit obligations related to the exposure materially depends on the cash flows generated by those immovable properties securing that exposure, rather than on the capacity of the obligor to fulfil the credit obligations from other sources; the primary source of such cash flows being lease or rental payments, or proceeds from the sale of the residential property or commercial immovable property; (75c) non-income-producing real estate exposure or non-IPRE exposure means any exposure secured by one or more residential properties or commercial immovable properties that is not an IPRE exposure; (75d) exposure secured by residential property or exposure secured by a mortgage on residential property means an exposure secured by residential property or an exposure regarded as such in accordance with Article 108(4); (75e) exposure secured by commercial immovable property or exposure secured by a mortgage on commercial immovable property means an exposure secured by a commercial immovable property; (75f) exposure secured by immovable property or exposure secured by a mortgage on immovable property, or exposure secured by immovable property collateral means an exposure secured by a residential property or commercial immovable property or an exposure regarded as such in accordance with Article 108(4); (76) market value means, for the purposes of immovable property, the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion; (77) applicable accounting framework means the accounting standards to which the institution is subject under Regulation (EC) No 1606/2002 or Directive 86/635/EEC; (78) one-year default rate means the ratio between the number of defaults obligors or, where the definition of default is applied at credit facility level pursuant to Article 178(1), second subparagraph, credit facilities in respect of which a default is considered to have occurred during a period that starts from one year prior to a date T of observation T, and the number of obligors obligors, or where the definition of default is applied at credit facility level pursuant to Article 178(1), second subparagraph, credit facilities assigned to this grade or pool one year prior to that date; date of observation T; (78a) land acquisition, development and construction exposures, or ADC exposures, means exposures to corporates or special purpose entities financing any land acquisition for development and construction purposes, or financing the development and construction of any residential property or commercial immovable property; (78b) non-ADC exposure means any exposure secured by one or more residential properties or commercial immovable properties that is not an ADC exposure; (79) speculative immovable property financing means loans for the purposes of the acquisition of or development or construction on land in relation to immovable property, or of and in relation to such property, with the intention of reselling for profit; (80) … 1,089 unchanged words … as under Article 38 of Directive 86/635/EEC; (113) goodwill has the same meaning as under the applicable accounting framework; (114) indirect holding means any exposure to an intermediate entity that has an exposure to capital instruments issued by a financial sector entity or to liabilities issued by an institution where, in the event the capital instruments issued by the financial sector entity or the liabilities issued by the institution were permanently written off, the loss that the institution would incur as a result would not be materially different from the loss the institution would incur from a direct holding of those capital instruments issued by the financial sector entity; entity or of those liabilities issued by the institution; (115) intangible assets has the same meaning as under the applicable accounting framework and includes goodwill; (116) other capital instruments means capital instruments issued by financial sector entities that do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments or Tier 1 own-fund insurance items, additional Tier 1 own-fund insurance items, Tier 2 own-fund insurance items or Tier 3 own-fund insurance items; (117) other reserves means reserves within the meaning of the applicable accounting framework that are required to be disclosed under the applicable accounting standard, excluding any amounts already included in accumulated other comprehensive income or retained earnings; (118) own funds means the sum of Tier 1 capital and Tier 2 capital; (119) own funds instruments means capital instruments issued by the institution that qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments; (120) minority interest means the amount of Common Equity Tier 1 capital of a subsidiary of an institution that is attributable to natural or legal persons other than those included in the prudential scope of consolidation of the institution; (121) profit has the same meaning as under the applicable accounting framework; (122) reciprocal cross holding means a holding by an institution of the own funds instruments or other capital instruments issued by financial sector entities where those entities also hold own funds instruments issued by the institution; (123) retained earnings means profits and losses brought forward as a result of the final application of profit or loss under the applicable accounting framework; (124) share premium account has the same meaning as under the applicable accounting framework; (125) temporary differences has the same meaning as under the applicable accounting framework; (126) synthetic holding means an investment by an institution in a financial instrument the value of which is directly linked to the value of the capital instruments issued by a financial sector entity; entity or to the value of the liabilities issued by an institution; (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) 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) 22 of Directive 83/349/EEC 2013/34/EU 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 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 … 761 unchanged words … 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 established by the institution in accordance with Article 104b(1) to jointly manage a portfolio of trading book positions, or the non-trading book positions referred to in paragraphs (5) and (6) of that Article, 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 the institution’s consolidated assets or liabilities relating to activities with counterparties located in the European Economic Area, excluding intragroup exposures in the European Economic Area, exceed 75 % of both the institution's 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; exposures; (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).; (150) commodity and emission allowance dealer means an undertaking the main business of which consists exclusively of the provision of investment services or activities in relation to commodity derivatives or commodity derivative contracts referred to in points (5), (6), (7), (9) and (10), derivatives of emission allowances referred to in point (4), or emission allowances referred to in point (11) of Section C of Annex I to Directive 2014/65/EU. (151) revolving exposure means any exposure whereby the borrower’s outstanding balance is permitted to fluctuate based on its decisions to borrow and repay, up to an agreed limit; (152) transactor exposure means any revolving exposure that has at least 12 months of repayment history and that is one of the following: (a) an exposure for which, on a regular basis of at least every 12 months, the balance to be repaid at the next scheduled repayment date is determined as the drawn amount at a predefined reference date, with a scheduled repayment date not later than after 12 months, provided that the balance has been repaid in full at each scheduled repayment date for the previous 12 months; (b) an overdraft facility where there have been no drawdowns over the previous 12 months; (153) fossil fuel sector entity means a company, enterprise or undertaking statistically classified as having its principal economic activity in the coal, oil or gas sector of economic activities, as set out in Annex XXXIX, Template 3, to Commission Implementing Regulation (EU) 2021/637Commission Implementing Regulation (EU) 2021/637 of 15 March 2021 laying down implementing technical standards with regard to public disclosures by institutions of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 of the European Parliament and of the Council and repealing Commission Implementing Regulation (EU) No 1423/2013, Commission Delegated Regulation (EU) 2015/1555, Commission Implementing Regulation (EU) 2016/200 and Commission Delegated Regulation (EU) 2017/2295 (OJ L 136, 21.4.2021, p. 1). and as identified by reference to the statistical classification of economic activities (NACE Revision 2) codes listed in Annex I, Sections B, C, D and G, to Regulation (EC) No 1893/2006 of the European Parliament and of the CouncilRegulation (EC) No 1893/2006 of the European Parliament and of the Council of 20 December 2006 establishing the statistical classification of economic activities NACE Revision 2 and amending Council Regulation (EEC) No 3037/90 as well as certain EC Regulations on specific statistical domains (OJ L 393, 30.12.2006, p. 1).; where the principal economic activity of a company, enterprise or undertaking is not classified using the NACE Revision 2 codes set out in Regulation (EC) No 1893/2006, or a national classification derived therefrom, institutions shall conservatively determine whether such company, enterprise or undertaking has its principal activity in one of those sectors; (154) exposures subject to the impact of environmental or social factors means exposures hindering the ambition of the Union to achieve its regulatory objectives relating to ESG factors, in a way that could have a negative financial impact on institutions in the Union; (155) shadow banking entity means an entity that carries out banking activities outside the regulated framework. For the purposes of the first subparagraph, points (1)(b)(ii) and (iii), where the undertaking is part of a third-country group, the total assets of each branch of the third-country group authorised in the Union shall be included in the combined total value of the assets of all undertakings in the group. For the purposes of the first subparagraph, point (1)(b)(iii), the consolidating supervisor may request all relevant information from the undertaking in order to take its decision. For the purposes of the first subparagraph, point (52a), legal risk shall not comprise refunds to third parties or employees and goodwill payments due to business opportunities, where no breach of any rules or ethical conduct has occurred and where the institution has fulfilled its obligations on a timely basis. Nor shall legal risk comprise external legal costs where the event giving rise to those external costs is not an operational risk event. For the purposes of the first subparagraph, point (145)(e), of this paragraph, an institution may exclude derivative positions it entered with its non-financial clients and the derivative positions it uses to hedge those positions, provided that the combined value of the excluded positions calculated in accordance with Article 273a(3) does not exceed 10 % of the institution’s total on- and off-balance-sheet assets. 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. 5. By 10 January 2026, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, specifying the criteria for the identification of activities referred to in paragraph 1, first subparagraph, point (18) of this Article.

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Article 13 Application of disclosure requirements on a consolidated basis 1. EU parent institutions shall comply with Part Eight on the basis of their consolidated situation. Large subsidiaries of EU parent institutions shall disclose the information specified in Articles 437, 438, 440, 442, 449a, 449b, 450, 451, 451a and 453 on an individual basis or, where applicable in accordance with this Regulation and Directive 2013/36/EU, on a sub-consolidated basis. 2. Institutions identified as resolution entities that are G-SII entities shall comply with Article 437a and point (h) of Article 447 on the basis of the consolidated situation of their resolution group. 3. The first subparagraph of paragraph 1 shall not apply to EU parent institutions, EU parent financial holding companies, EU parent mixed financial holding companies or resolution entities where they are included in equivalent disclosures 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 applies, the central body referred to in that Article shall comply with 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 subsidiaries of the central body.

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Article 18 Methods of prudential consolidation 1. Institutions, financial holding companies and mixed financial holding companies that are required to comply with the requirements referred to in Section 1 of this Chapter on the basis of their consolidated situation shall carry out a full consolidation of all institutions and financial institutions that are their subsidiaries. Paragraphs 3 to 6 and paragraph 9 of this Article shall not apply where Part Six and point (d) of Article 430(1) apply on the basis of the consolidated situation of an institution, financial holding company or mixed financial holding company or on the sub-consolidated situation of a liquidity sub-group as set out in Articles 8 and 10. 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. Ancillary services undertakings shall be included in consolidation in the cases, and in accordance with the methods, laid down in this Article. 3. Where undertakings are related within the meaning of Article 22(7) of Directive 2013/34/EU, competent authorities shall determine how consolidation is to be carried out. 4. The consolidating supervisor shall require the proportional consolidation according to the share of capital held of participations Participations in institutions and financial institutions managed by an undertaking included in the consolidation together with one or more undertakings not included in the consolidation, consolidation shall be consolidated proportionally according to the share of capital held, where the liability of those undertakings is limited to the share of the capital they hold. 5. In the case of participations or capital ties other than those referred to in paragraphs 1 and 4, competent authorities shall determine whether and how consolidation is to be carried out. In particular, they may permit or require the use of the equity method. That method shall not, however, constitute inclusion of the undertakings concerned in supervision on a consolidated basis. 6. Competent authorities shall determine whether and how consolidation is to be carried out in the following cases: (a) where, in the opinion of the competent authorities, an institution exercises a significant influence over one or more institutions or financial institutions, but without holding a participation or other capital ties in those institutions; and (b) where two or more institutions or financial institutions are placed under single management other than pursuant to a contract, clauses of their memoranda or articles of association. In particular, competent authorities may permit or require the use of the method provided for in Article 22(7), (8) and (9) of Directive 2013/34/EU. That method shall not, however, constitute inclusion of the undertakings concerned in consolidated supervision. 7. Where an institution has a subsidiary which is an undertaking other than an institution, institution or a financial institution or an ancillary services undertaking or holds a participation in such an undertaking, it shall apply the equity method to that subsidiary or participation the equity method. participation. That method shall not, however, constitute inclusion of the undertakings concerned in supervision on a consolidated basis. By way of derogation from the first subparagraph, competent authorities may allow or require institutions to apply a different method to such subsidiaries or participations, including the method required by the applicable accounting framework, provided that: (a) the institution does not already apply the equity method on 28 December 2020; (b) it would be unduly burdensome to apply the equity method or the equity method does not adequately reflect the risks that the undertaking referred to in the first subparagraph poses to the institution; and (c) the method applied does not result in full or proportional consolidation of that undertaking. 8. Competent authorities may require full or proportional consolidation of a subsidiary or an undertaking in which an institution holds a participation where that subsidiary or undertaking is not an institution, institution or a financial institution or ancillary services undertaking and where all of the following conditions are met: (a) the undertaking is not an insurance undertaking, a third-country insurance undertaking, a reinsurance undertaking, a third-country reinsurance undertaking, an insurance holding company or an undertaking excluded from the scope of Directive 2009/138/EC in accordance with Article 4 of that Directive; (b) there is a substantial risk that the institution decides to provide financial support to that undertaking in stressed conditions, in the absence of, or in excess of any contractual obligations to provide such support. 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. 10. EBA shall submit a report to the Commission by 10 July 2025 on the completeness and appropriateness of the definitions and provisions of this Regulation concerning the supervision of all types of risks to which institutions are exposed at a consolidated level. EBA shall assess in particular any possible remaining discrepancies in those definitions and provisions alongside their interaction with the applicable accounting framework, and any remaining aspect that might pose unintended constraints to a consolidated supervision that is comprehensive and adaptable to new sources or types of risks or structures that might lead to regulatory arbitrage. EBA shall update its report at least once every two years. In light of EBA’s findings, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal to make adjustments to the relevant definitions or the scope of prudential consolidation.

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Article 19 Entities excluded from the scope of prudential consolidation 1. An institution, institution or a financial institution or an ancillary services undertaking which is a subsidiary or an undertaking in which a participation is held, need not to be included in the consolidation where the total amount of assets and off-balance sheet off-balance-sheet items of the undertaking concerned is less than the smaller of the following two amounts: (a) EUR 10 million; (b) 1 % of the total amount of assets and off-balance sheet items of the parent undertaking or the undertaking that holds the participation. 2. The competent authorities responsible for exercising supervision on a consolidated basis pursuant to Article 111 of Directive 2013/36/EU may on a case-by-case basis decide in the following cases that an institution, or a financial institution or ancillary services undertaking which is a subsidiary or in which a participation is held need not be included in the consolidation: (a) where the undertaking concerned is situated in a third country where there are legal impediments to the transfer of the necessary information; (b) where the undertaking concerned is of negligible interest only with respect to the objectives of monitoring institutions; (c) where, in the opinion of the competent authorities responsible for exercising supervision on a consolidated basis, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of institutions are concerned. 3. Where, in the cases referred to in paragraph 1 and point (b) of paragraph 2, several undertakings meet the criteria set out therein, they shall nevertheless be included in the consolidation where collectively they are of non-negligible interest with respect to the specified objectives.

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Article 20 Joint decisions on prudential requirements 1. The competent authorities shall work together, in full consultation: (a) in the case of applications for the permissions referred to in Article 143(1), Article 151(4) 151(9), Article 283 and (9), Article 283, Article 312(2) and Article363 respectively 325az submitted by an EU parent institution and its subsidiaries, or jointly by the subsidiaries of an EU parent financial holding company or EU parent mixed financial holding company, to decide whether or not to grant the permission sought and to … 703 unchanged words … the end of the six-month period or after a joint decision has been reached. 6. Where an EU parent institution and its subsidiaries, the subsidiaries of an EU parent financial holding company or an EU parent mixed financial holding company use an Advanced Measurement Approach referred to in Article 312(2) or an the IRB Approach referred to in Article 143 on a unified basis, the competent authorities shall allow the parent and its subsidiaries, considered together, to meet the qualifying criteria set out in Articles 321 and 322 or in Part Three, Title II, Chapter 3, Section 6 respectively to be met by the parent and its subsidiaries considered together, in a way that is consistent with the structure of the group and its risk management systems, processes and methodologies. 7. The decisions referred to in paragraphs 2, 4 and 5 shall be recognised as determinative and applied by the competent authorities in the Member States concerned. 8. EBA shall develop draft implementing technical standards to specify the joint decision process referred to in paragraph 1, point (a), of this Article with regard to the applications for permissions referred to in Article 143(1), Article 151(9) and Articles 283 and 325az with a view to facilitating joint decisions. EBA shall submit those draft implementing technical standards to the Commission by 10 July 2025. Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

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Article 22 Sub-consolidation in the case of entities in third countries 1. Subsidiary institutions or subsidiary intermediate financial holding companies or subsidiary intermediate mixed financial holding companies shall apply the requirements laid down in Articles 89, 90 and 91 and Parts Three, Four and Seven and the associated reporting requirements laid down in Part Seven A on the basis of their sub-consolidated situation if those institutions, or their parent undertaking where the parent undertaking is a financial holding company or mixed financial holding company, they have an institution or a financial institution as a subsidiary in a third country, or hold a participation in such an undertaking. 2. By way of derogation from paragraph 1 of this Article, subsidiary institutions or subsidiary intermediate financial holding companies or subsidiary intermediate mixed financial holding companies may choose not to apply the requirements laid down in Articles 89, 90 and 91 and Parts Three, Four and Seven and the associated reporting requirements laid down in Part Seven A on the basis of their sub-consolidated situation where the total assets and off-balance-sheet items of the subsidiaries and participations in third countries are less than 10 % of the total amount of the assets and off-balance-sheet items of the subsidiary institution. institution or subsidiary intermediate financial holding company or subsidiary intermediate mixed financial holding company.

No text on either side: this unit was named by a signal that carries no text, and only the structural diff carries any.

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Article 34 Additional value adjustments 1. Institutions shall apply the requirements of Article 105 to all their assets measured at fair value when calculating the amount of their own funds and shall deduct from Common Equity Tier 1 capital the amount of any additional value adjustments necessary. 2. By way of derogation from paragraph 1, in extraordinary circumstances, the existence of which shall be determined by an opinion provided by EBA in accordance with paragraph 3, institutions may reduce the total additional value adjustments in the calculation of the total amount to be deducted from Common Equity Tier 1 capital. 3. For the purpose of providing the opinion referred to in paragraph 2, EBA shall monitor the market conditions to assess whether extraordinary circumstances have occurred and, if so, shall notify the Commission thereof immediately. 4. EBA, in consultation with ESMA, shall develop draft regulatory technical standards to specify the indicators and conditions that EBA will use to determine the extraordinary circumstances referred to in paragraph 2 and to specify the reduction of the total aggregated additional value adjustments referred to in that paragraph. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph 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 with the exception of prudently valued software assets the value of which is not negatively affected by resolution, insolvency or liquidation of the institution; (c) deferred tax assets that rely on future profitability; (d) for institutions calculating risk-weighted exposure amounts using the Internal Ratings Based Approach (the IRB Approach), negative amounts resulting from the calculation of expected loss amounts laid down IRB shortfall, where applicable, calculated in Articles 158 and accordance with Article 159; (e) defined benefit pension fund assets on the balance sheet of the institution; (f) direct, indirect and synthetic holdings by an institution of own Common Equity Tier 1 instruments, including own Common Equity Tier 1 instruments that an institution is under an actual or contingent obligation to purchase by virtue of an existing contractual obligation; (g) direct, indirect and synthetic holdings of the Common Equity Tier 1 instruments of financial sector entities where those entities have a reciprocal cross holding with the institution that the competent authority considers to have been designed to inflate artificially the own funds of the institution; (h) the applicable amount of direct, indirect and synthetic holdings by the institution of Common Equity Tier 1 instruments of financial sector entities where the institution does not have a significant investment in those entities; (i) the applicable amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of financial sector entities where the institution has a significant investment in those entities; (j) the amount of items required to be deducted from Additional Tier 1 items pursuant to Article 56 that exceeds the Additional Tier 1 items of the institution; (k) the exposure amount of the following items which qualify for a risk weight of 1250 %, where the institution deducts that exposure amount from the amount of Common Equity Tier 1 items as an alternative to applying a risk weight of 1250 %: (i) qualifying holdings outside the financial sector; (ii) securitisation positions, in accordance with point (b) of Article 244(1), point (b) of Article 245(1) and Article 253; (iii) free deliveries, in accordance with Article 379(3); (iv) positions in a basket for which an institution cannot determine the risk weight under the IRB Approach, in accordance with Article 153(8); (v) equity exposures under an internal models approach, in accordance with Article 155(4). (vi) exposures in the form of units or shares in a CIU that are assigned a risk weight of 1250 % in accordance with Article 132(2), second subparagraph; (l) any tax charge relating to Common Equity Tier 1 items foreseeable at the moment of its calculation, except where the institution suitably adjusts the amount of Common Equity Tier 1 items insofar as such tax charges reduce the amount … 369 unchanged words … 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 1093/2010.5. For the sole purpose of calculating the applicable amount of insufficient coverage for non-performing exposures in accordance with paragraph 1, point (m), of this Article, by way of derogation from Article 47c and after having notified the competent authority, the applicable amount of insufficient coverage for non-performing exposures purchased by a specialised debt restructurer shall be zero. The derogation set out in this subparagraph shall apply on an individual basis and, in the case of groups in which all institutions qualify as specialised debt restructurers, on a consolidated basis. For the purposes of this paragraph, specialised debt restructurer means an institution that, during the preceding financial year, complied with all of the following conditions on both an individual and on a consolidated basis: (a) the main activity of the institution is the purchase, management and restructuring of non-performing exposures in accordance with a clear and effective internal decision process implemented by its management body; (b) the accounting value measured without taking into account any credit risk adjustments of its own originated loans does not exceed 15 % of its total assets; (c) at least 5 % of the accounting value measured without taking into account any credit risk adjustments’ of its own originated loans constitutes a total or partial refinancing, or the adjustment of relevant terms, of the purchased non-performing exposures that qualifies as a forbearance measure in accordance with Article 47b; (d) the total value of the assets of the institution does not exceed EUR 20 billion; (e) the institution maintains, on an ongoing basis, a net stable funding ratio of at least 130 %; (f) the sight deposits of the institution do not exceed 5 % of the total liabilities of the institution. The specialised debt restructurer shall notify the competent authority, without delay, if one or more of the conditions set out in the second subparagraph are no longer met. Competent authorities shall notify EBA at least on an annual basis of the application of this paragraph by institutions under their supervision. EBA shall establish, maintain, and publish a list of specialised debt restructurers. EBA shall monitor the activity of specialised debt restructurers and shall report by 31 December 2028 to the Commission on the results of such monitoring and, where appropriate, shall advise the Commission as to whether the conditions to qualify as specialised debt restructurer are sufficiently risk-based and appropriate in view of favouring the secondary market for non-performing loans, and assess if additional conditions are necessary.

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Article 46 Deduction of holdings of Common Equity Tier 1 instruments where an institution does not have a significant investment in a financial sector entity 1. For the purposes of point (h) of Article 36(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 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the aggregate amount of Common Equity Tier 1 items of the institution calculated after applying the following to Common Equity Tier 1 items: (i) Articles 32 to 35; (ii) the deductions referred to in Article 36(1), points (a) to (g), points (k)(ii) to (v) (vi) and point (l) of Article 36(1), points (l), (m) and (n), 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 Common Equity Tier 1 instruments of those financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities. 2. Institutions shall exclude underwriting positions held for five working days or fewer from the amount referred to in point (a) of paragraph 1 and from the calculation of the factor referred to in point (b) of paragraph 1. 3. The amount to be deducted pursuant to paragraph 1 shall be apportioned across all Common Equity Tier 1 instruments held. Institutions shall determine the amount of each Common Equity Tier 1 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 Common Equity Tier 1 instruments of financial sector entities in which the institution does not have a significant investment represented by each Common Equity Tier 1 instrument held. 4. The amount of holdings referred to in point (h) of Article 36(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) to (iii) of paragraph 1 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 Common Equity Tier 1 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph: (a) the amount of holdings required to be risk weighted pursuant to paragraph 4; (b) the proportion resulting from the calculation in point (b) of paragraph 3.

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Article 47c Deduction for non-performing exposures 1. For the purposes of point (m) of Article 36(1), institutions shall determine the applicable amount of insufficient coverage separately for each non-performing exposure to be deducted from Common Equity Tier 1 items by subtracting the … 787 unchanged words … be applied as of the first day of the tenth year following its classification as non-performing. 4. By way of derogation from paragraph 3 of this Article, the following factors shall apply to the part of the non-performing exposure guaranteed or insured by an official export credit agency or guaranteed or counter-guaranteed by an eligible protection provider referred to in Article 201(1), points (a) to (e) of Article 201(1), (e), the unsecured exposures to which would be assigned a risk weight of 0 % under Part Three, Title II, Chapter 2 of Title II of Part Three: 2: (a) 0 for the secured part of the non-performing exposure to be applied during the period between one year and seven years following its classification as non-performing; and (b) 1 for the secured part of the non-performing exposure to be applied as of the first day of the eighth year following its classification as non-performing. non-performing, unless the eligible protection provider agreed to fulfil all payment obligations of the obligor towards the institution in full and in accordance with the original contractual payment schedule, in which case a factor of 0 for the secured part of the non-performing exposure shall apply. 4a. By way of derogation from paragraph 3, the part of the non-performing exposure guaranteed or insured by an official export credit agency shall not be subject to the requirements laid down in this Article. 5. EBA shall assess the range of practices applied for the valuation of secured non-performing exposures and may develop guidelines to specify a common methodology, including possible minimum requirements for re-valuation in terms of timing and ad hoc methods, for the prudential valuation of eligible forms of funded and unfunded credit protection, in particular regarding assumptions pertaining to their recoverability and enforceability. Those guidelines may also include a common methodology for the determination of the secured part of a non-performing exposure, as referred to in paragraph 1. Those guidelines shall be issued in accordance with Article 16 of Regulation (EU) No 1093/2010. 6. By way of derogation from paragraph 2, where an exposure has, between one year and two years following its classification as non-performing, been granted a forbearance measure, the factor applicable in accordance with paragraph 2 on the date on which the forbearance measure is granted shall be applicable for an additional period of one year. By way of derogation from paragraph 3, where an exposure has, between two and six years following its classification as non-performing, been granted a forbearance measure, the factor applicable in accordance with paragraph 3 on the date on which the forbearance measure is granted shall be applicable for an additional period of one year. This paragraph shall only apply in relation to the first forbearance measure that has been granted since the classification of the exposure as non-performing.

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Article 48 Threshold exemptions from deduction from Common Equity Tier 1 items 1. In making the deductions required pursuant to points (c) and (i) of Article 36(1), institutions are not required to deduct the amounts of the items listed in points (a) and (b) of this paragraph which in aggregate are equal to or less than the threshold amount referred to in paragraph 2: (a) deferred tax assets that are dependent on future profitability and arise from temporary differences, and in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following: (i) Articles 32 to 35; (ii) Article 36(1), points (a) to (h), points (k)(ii) to (v) (vi) and point (l) of Article 36(1), points (l), (m) and (n), excluding deferred tax assets that rely on future profitability and arise from temporary differences. differences; (b) where an institution has a significant investment in a financial sector entity, the direct, indirect and synthetic holdings of that institution of the Common Equity Tier 1 instruments of those entities that in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following: (i) Article 32 to 35; (ii) Article 36(1), points (a) to (h), points (k)(ii) to (v) (vi) and point points (l), of Article 36(1) (m) and (n), excluding deferred tax assets that rely on future profitability and arise from temporary differences. 2. For the purposes of paragraph 1, the threshold amount shall be equal to the amount referred to in point (a) of this paragraph multiplied by the percentage referred to in point (b) of this paragraph: (a) the residual amount of Common Equity Tier 1 items after applying the adjustments and deductions in Articles 32 to 36 in full and without applying the threshold exemptions specified in this Article; (b) 17,65 %. 3. For the purposes of paragraph 1, an institution shall determine the portion of deferred tax assets in the total amount of items that is not required to be deducted by dividing the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph: (a) the amount of deferred tax assets that are dependent on future profitability and arise from temporary differences, and in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution; (b) the sum of the following: (i) the amount referred to in point (a); (ii) the amount of direct, indirect and synthetic holdings by the institution of the own funds instruments of financial sector entities in which the institution has a significant investment, and in aggregate are equal to or less than 10 % of the Common Equity Tier 1 items of the institution. The proportion of significant investments in the total amount of items that is not required to be deducted is equal to one minus the proportion referred to in the first subparagraph. 4. The amounts of the items that are not deducted pursuant to paragraph 1 shall be risk weighted at 250 %.

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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 … 785 unchanged words … 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, 1 shall qualify as exposures and shall be risk weighted in accordance with Part Three, Title II, Chapter 2. The holdings in respect of which deduction is not made in accordance with paragraph 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. at 100 %. 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 60 Deduction of holdings of Additional Tier 1 instruments where an institution does not have a significant investment in a financial sector entity 1. For the purposes of point (c) of Article 56, 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 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following: (i) Article 32 to 35; (ii) Article 36(1), points (a) to (g), points (k)(ii) to (v) (vi) and point (l) of Article 36(1), points (l), (m) and (n), excluding 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 Additional Tier 1 instruments of those financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of all direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities. 2. Institutions shall exclude underwriting positions held for five working days or fewer from the amount referred to in point (a) of paragraph 1 and from the calculation of the factor referred to in point (b) of paragraph 1. 3. The amount to be deducted pursuant to paragraph 1 shall be apportioned across all Additional Tier 1 instruments held. Institutions shall determine the amount of each Additional Tier 1 instrument to be 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 Additional Tier 1 instruments of financial sector entities in which the institution does not have a significant investment represented by each Additional Tier 1 instrument held. 4. The amount of holdings referred to in point (c) of Article 56 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), (ii) and (iii) of paragraph 1 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 Additional Tier 1 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph: (a) the amount of holdings required to be risk weighted pursuant to paragraph 4; (b) the proportion resulting from the calculation in point (b) of paragraph 3.

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Article 62 Tier 2 items Tier 2 items shall consist of the following: (a) capital instruments where the conditions set out in Article 63 are 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 in accordance with Part Three, positive amounts, Title II, Chapter 3, the IRB excess, where applicable, gross of tax effects, resulting from the calculation laid down calculated in Articles 158 and 159 accordance with Article 159, of up to 0,6 % of risk-weighted exposure amounts calculated under in accordance with Part Three, Title II, Chapter 3 of Title II of Part Three. 3. Items included under point (a) shall not qualify as Common Equity Tier 1 or Additional Tier 1 items.

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Article 70 Deduction of Tier 2 instruments where an institution does not have a significant investment in a relevant entity 1. For the purposes of point (c) of Article 66, 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 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following: (i) Articles 32 to 35; (ii) Article 36(1), points (a) to (g), points (k)(ii) to (v) (vi) and point (l) of Article 36(1), points (l), (m) and (n), 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 Tier 2 instruments of financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of all direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities. 2. Institutions shall exclude underwriting positions held for five working days or fewer from the amount referred to in point (a) of paragraph 1 and from the calculation of the factor referred to in point (b) of paragraph 1. 3. The amount to be deducted pursuant to paragraph 1 shall be apportioned across each Tier 2 instrument held. Institutions shall determine the amount to be deducted from each Tier 2 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 total 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 Tier 2 instruments of financial sector entities in which the institution does not have a significant investment represented by each Tier 2 instrument held. 4. The amount of holdings referred to in point (c) of Article 66(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) to (iii) of paragraph 1 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 Tier 2 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph: (a) the amount of holdings required to be risk weighted pursuant to paragraph 4; (b) the proportion resulting from the calculation in point (b) of paragraph 3.

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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 … 811 unchanged words … 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), 92(3), 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 … 429 unchanged words … 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 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) Article 36(1), points (a) to (g), points (k)(ii) to (k)(v) (vi) and point (l) of Article 36(1), points (l), (m) and (n), 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 74 Holdings of capital instruments issued by regulated financial sector entities that do not qualify as regulatory capital Institutions shall not deduct from any element of own funds direct, indirect or synthetic holdings of capital instruments issued by a regulated financial sector entity that do not qualify as regulatory capital of that entity. Institutions shall apply risk weights to such holdings in accordance with Chapter 2 or 3 of Title II of Part Three, as applicable. Title II, Chapter 2.

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Article 84 Minority interests included in consolidated Common Equity Tier 1 capital 1. Institutions shall determine the amount of minority interests of a subsidiary that is included in consolidated Common Equity Tier 1 capital by subtracting from the minority interests of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows: (a) the Common Equity Tier 1 capital of the subsidiary minus the lower of the following: (i) the amount of Common Equity Tier 1 capital of that subsidiary required to meet the following: (1) where the subsidiary is one of those listed in Article 81(1), point (a), of this Regulation but not an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 92(1), point (a) of Article 92(1) (a), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, 2013/36/EU and the combined buffer requirement defined in Article 128, point (6) of Article 128 (6), of that Directive, and or any additional local supervisory regulations in third countries insofar as those requirements are to be met by Common Equity Tier 1 capital, capital; (2) where the subsidiary is an investment firm, firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a) of Article 39(2) (a), of Directive (EU) 2019/2034 and 2019/2034, or any additional local supervisory regulations in third countries, insofar as those requirements are to be met by Common Equity Tier 1 capital; (ii) the amount of consolidated Common Equity Tier 1 capital that relates to that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (a) of Article 92(1) (a), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, 2013/36/EU and the combined buffer requirement defined in Article 128, point (6) of Article 128 (6), of that Directive, and or any additional local supervisory regulations in third countries countries, insofar as those requirements are to be met by Common Equity Tier 1 capital; (b) the minority interests of the subsidiary expressed as a percentage of all Common Equity Tier 1 items of that undertaking. By way of derogation from the first subparagraph, point (a), the competent authority may allow an institution to subtract either of the amounts referred to in point (a)(i) or (ii), once that institution has demonstrated to the satisfaction of the competent authority that the additional amount of minority interest is available to absorb losses at consolidated level. 2. The calculation referred to in paragraph 1 shall be undertaken on a sub-consolidated basis for each subsidiary referred to in Article 81(1). An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the minority interest of that subsidiary may not be included in consolidated Common Equity Tier 1 capital. 3. Where a competent authority derogates from the application of prudential requirements on an individual basis, as laid down in Article 7 of this Regulation or, as applicable, as laid down in Article 6 of Regulation (EU) 2019/2033, minority interests within the subsidiaries to which the waiver is applied shall not be recognised in own funds at the sub‐consolidated or at the consolidated level, as applicable. 4. EBA shall develop draft regulatory technical standards to specify the sub-consolidation calculation required in accordance with paragraph 2 of this Article, Articles 85 and 87. 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. 5. Competent authorities may grant a waiver from the application of this Article to a parent financial holding company that satisfies all the following conditions: (a) its principal activity is to acquire holdings; (b) it is subject to prudential supervision on a consolidated basis; (c) it consolidates a subsidiary institution in which it has only a minority holding by virtue of the control relationship defined in within the meaning of Article 1 of Directive 83/349/EEC; 4(1), point (37); (d) more than 90 % of the consolidated required Common Equity Tier 1 capital arises from the subsidiary institution referred to in point c) calculated on a sub-consolidated basis. Where, after 28 June 2013, a parent financial holding company that meets the conditions laid down in the first subparagraph becomes a parent mixed financial holding company, competent authorities may grant the waiver referred to in the first subparagraph to that parent mixed financial holding company provided that it meets the conditions laid down in that subparagraph. 6. Where credit institutions permanently affiliated in a network to a central body and institutions established within an institutional protection scheme subject to the conditions laid down in Article 113(7) have set up a cross-guarantee scheme that provides that there is no current or foreseen material, practical or legal impediment to the transfer of the amount of own funds above the regulatory requirements from the counterparty to the credit institution, these institutions are exempted from the provisions of this Article regarding deductions and may recognise any minority interest arising within the cross-guarantee scheme in full.

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Article 85 Qualifying Tier 1 instruments included in consolidated Tier 1 capital 1. Institutions shall determine the amount of qualifying Tier 1 capital of a subsidiary that is included in consolidated own funds by subtracting from the qualifying Tier 1 capital of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows: (a) the Tier 1 capital of the subsidiary minus the lower of the following: (i) the amount of Tier 1 capital of the subsidiary required to meet the following: (1) where the subsidiary is one of those listed in Article 81(1), point (a), of this Regulation but not an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 92(1), point (b) of Article 92(1) (b), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, 2013/36/EU and the combined buffer requirement defined in Article 128, point (6) of Article 128 (6), of that Directive, and or any additional local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 Capital, capital; (2) where the subsidiary is an investment firm, firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a) of Article 39(2) (a), of Directive (EU) 2019/2034, and or any additional local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 capital; (ii) the amount of consolidated Tier 1 capital that relates to the that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (b) of Article 92(1) (b), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, 2013/36/EU and the combined buffer requirement defined in Article 128, point (6) of Article 128 (6), of that Directive, and or any additional local supervisory regulations in third countries countries, insofar as those requirements are to be met by Tier 1 Capital; capital; (b) the qualifying Tier 1 capital of the subsidiary expressed as a percentage of all Common Equity Tier 1 and Additional Tier 1 items of that undertaking. By way of derogation from the first subparagraph, point (a), the competent authority may allow an institution to subtract either of the amounts referred to in point (a)(i) or (ii), once that institution has demonstrated to the satisfaction of the competent authority that the additional amount of Tier 1 capital is available to absorb losses at consolidated level. 2. The calculation referred to in paragraph 1 shall be undertaken on a sub-consolidated basis for each subsidiary referred to in Article 81(1). An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the qualifying Tier 1 capital of that subsidiary may not be included in consolidated Tier 1 capital. 3. Where a competent authority derogates from the application of prudential requirements on an individual basis, as laid down in Article 7 of this Regulation or, where applicable, as laid down in Article 6 of Regulation (EU) 2019/2033, Tier 1 instruments within the subsidiaries to which the waiver is applied shall not be recognised as own funds at the sub‐consolidated or at the consolidated level, as applicable.

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Article 87 Qualifying own funds included in consolidated own funds 1. Institutions shall determine the amount of qualifying own funds of a subsidiary that is included in consolidated own funds by subtracting from the qualifying own funds of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows: (a) the own funds of the subsidiary minus the lower of the following: (i) the amount of own funds of the subsidiary required to meet the following: (1) where the subsidiary is one of those listed in Article 81(1), point (a), of this Regulation but not an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 92(1), point (c) of Article 92(1) (c), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, 2013/36/EU and the combined buffer requirement defined in Article 128, point (6) of Article 128 (6), of that Directive, and or any additional local supervisory regulations in third countries, countries insofar as those requirements are to be met by own funds; (2) where the subsidiary is an investment firm, firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a) of Article 39(2) (a), of Directive (EU) 2019/2034, and or any additional local supervisory regulations in third countries; countries insofar as those requirements are to be met by own funds; (ii) the amount of own funds that relates to the that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (c) of Article 92(1) (c), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, 2013/36/EU and the combined buffer requirement defined in Article 128, point (6) of Article 128 (6), of that Directive, and or any additional local supervisory own funds requirement regulations in third countries; countries, insofar as those requirements are to be met by own funds; (b) the qualifying own funds of the undertaking, expressed as a percentage of the sum of all the Common Equity Tier 1 items, Additional Tier 1 items and Tier 2 items, excluding the amounts referred to in points (c) and (d) of Article 62, of that undertaking. By way of derogation from the first subparagraph, point (a), the competent authority may allow an institution to subtract either of the amounts referred to in point (a)(i) or (ii), once that institution has demonstrated to the satisfaction of the competent authority that the additional amount of own funds is available to absorb losses at consolidated level. 2. The calculation referred to in paragraph 1 shall be undertaken on a sub-consolidated basis for each subsidiary referred to in Article 81(1). An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the qualifying own funds of that subsidiary may not be included in consolidated own funds. 3. Where a competent authority derogates from the application of prudential requirements on an individual basis, as laid down in Article 7 of this Regulation or, as applicable, as laid down in Article 6 of Regulation (EU) 2019/2033, own funds instruments within the subsidiaries to which the waiver is applied shall not be recognised as own funds at the sub‐consolidated or at the consolidated level, as applicable.

inserted text (02013R0575-20250101)

Article 88b
Undertakings in third countries
For the purposes of this Title, the terms investment firm and institution shall be understood to include undertakings established in third countries, which would, if established in the Union, fall under the definitions of those terms in this Regulation.

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Article 89 Risk weighting and prohibition of qualifying holdings outside the financial sector 1. A qualifying holding, the amount of which exceeds 15 % of the eligible capital of the institution, in an undertaking which is not one of the following a financial sector entity, shall be subject to the provisions laid down in paragraph 3: (a) a financial sector entity; (b) an undertaking, that is not a financial sector entity, carrying on activities which the competent authority considers to be any of the following: (i) a direct extension of banking; (ii) ancillary to banking; (iii) leasing, factoring, the management of unit trusts, the management of data processing services or any other similar activity. 3. 2. The total amount of the qualifying holdings of an institution in undertakings other than those referred to in points (a) and (b) of paragraph 1 that exceeds 60 % of its eligible capital shall be subject to the provisions laid down in paragraph 3. 3. Competent authorities shall apply the requirements laid down in point (a) or (b) to qualifying holdings of institutions referred to in paragraphs 1 and 2: (a) for the purpose of calculating the capital requirement in accordance with Part Three, institutions shall apply a risk weight of 1250 % to the greater of the following: (i) the amount of qualifying holdings referred to in paragraph 1 in excess of 15 % of eligible capital; (ii) the total amount of qualifying holdings referred to in paragraph 2 that exceed 60 % of the eligible capital of the institution; (b) the competent authorities shall prohibit institutions from having qualifying holdings referred to in paragraphs 1 and 2 the amount of which exceeds the percentages of eligible capital laid down in those paragraphs. Competent authorities shall publish their choice of (a) or (b). 4. For the purposes of point (b) of paragraph 1, EBA shall issue guidelines specifying the following concepts: (a) activities that are a direct extension of banking; (b) activities ancillary to banking; (c) similar activities. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.

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Article 92 Own funds requirements 1. Subject to Articles 93 and 94, institutions shall at all times satisfy the following own funds requirements: (a) a Common Equity Tier 1 capital ratio of 4,5 %; (b) a Tier 1 capital ratio of 6 %; (c) a total capital ratio of 8 %; (d) a leverage ratio of 3 %. 1a. In addition to the requirement laid down in point (d) of paragraph 1 of this Article, a G-SII shall maintain a leverage ratio buffer equal to the G-SIIs total exposure measure referred to in Article 429(4) of this Regulation multiplied by 50 % of the G-SII buffer rate applicable to the G-SII in accordance with Article 131 of Directive 2013/36/EU. A G-SII shall meet the leverage ratio buffer requirement with Tier 1 capital only. Tier 1 capital that is used to meet the leverage ratio buffer requirement shall not be used towards meeting any of the leverage based requirements set out in this Regulation and in Directive 2013/36/EU, unless explicitly otherwise provided therein. Where a G-SII does not meet the leverage ratio buffer requirement, it shall be subject to the capital conservation requirement in accordance with Article 141b of Directive 2013/36/EU. Where a G-SII does not meet at the same time the leverage ratio buffer requirement and the combined buffer requirement as defined in point (6) of Article 128 of Directive 2013/36/EU, it shall be subject to the higher of the capital conservation requirements in accordance with Articles 141 and 141b of that Directive. 2. Institutions shall calculate their capital ratios as follows: (a) the Common Equity Tier 1 capital ratio is the Common Equity Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount; (b) the Tier 1 capital ratio is the Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount; (c) the total capital ratio is the own funds of the institution expressed as a percentage of the total risk exposure amount. 3. Total Institutions shall calculate the total risk exposure amount as follows: TREA = max{U-TREA; x ‏‏‏· S-TREA} where: TREA = the total risk exposure amount of the entity; U-TREA = the un-floored total risk exposure amount of the entity calculated in accordance with paragraph 4; S-TREA = the standardised total risk exposure amount of the entity calculated in accordance with paragraph 5; x = 72,5 %. By way of derogation from the first subparagraph of this paragraph, a Member State may decide that the total risk exposure amount shall be the un-floored total risk exposure amount, calculated in accordance with paragraph 4, for institutions which are part of a group with a parent institution in the same Member State, provided that that parent institution or, in the case of groups composed of a central body and permanently affiliated institutions, the whole as constituted by the central body together with its affiliated institutions, calculates its total risk exposure amount in accordance with the first subparagraph of this paragraph on a consolidated basis. 4. The un-floored total risk exposure amount shall be calculated as the sum of points (a) to (f) (g) of this paragraph after taking having taken into account the provisions laid down in paragraph 4: 6 of this Article: (a) the risk-weighted exposure amounts for credit risk risk, including counterparty credit risk, and dilution risk, calculated in accordance with Title II of this Part and Article 379, in respect of all the business activities of an institution, excluding risk-weighted exposure amounts from the trading book trading-book business of the institution; (b) the own funds requirements for the trading-book business of an institution for the following: (i) market risk as determined risk, calculated in accordance with Title IV of this Part, excluding the approaches set out in Chapters 1a and 1b of that Title; Part; (ii) large exposures exceeding the limits specified in Articles 395 to 401, to the extent that an institution is permitted to exceed those limits, as determined in accordance with Part Four; (c) the own funds requirements for market risk as determined risk, calculated in accordance with Title IV of this Part, excluding the approaches set out in Chapters 1a and 1b of that Title, Part for all non-trading book business activities that are subject to foreign exchange risk or commodity risk; (ca) the own funds requirements calculated in accordance with Title V of this Part, with the exception of Article 379 for settlement risk; (d) the own funds requirements for settlement risk, calculated in accordance with Articles 378 and 380; (e) the own funds requirements for credit valuation adjustment risk, calculated in accordance with Title VI for credit valuation adjustment risk of OTC derivative instruments other than credit derivatives recognised to reduce risk-weighted exposure amounts for credit risk; (e) this Part; (f) the own funds requirements determined for operational risk, calculated in accordance with Title III for operational risk; (f) of this Part; (g) the risk-weighted exposure amounts determined in accordance with Title II for counterparty credit risk arising from the trading book business of the institution for the following types of transactions and agreements: agreements, calculated in accordance with Title II of this Part: (i) contracts listed in Annex II and credit derivatives; (ii) repurchase transactions, securities or commodities lending or borrowing transactions based on securities or commodities; (iii) margin lending transactions based on securities or commodities; (iv) long settlement transactions. 4. 5. The standardised total risk exposure amount shall be calculated as the sum of paragraph 4, points (a) to (g), after having taken into account paragraph 6 and the following requirements: (a) the risk-weighted exposure amounts for credit risk, including counterparty credit risk, and dilution risk, referred to in paragraph 4, point (a), and for counterparty credit risk arising from the trading book business of the institution as referred to in point (g) of that paragraph shall be calculated without using any of the following approaches: (i) the internal model approach for master netting agreements set out in Article 221; (ii) the Internal Ratings Based Approach set out in Title II, Chapter 3; (iii) the Securitisation Internal Ratings Based Approach set out in Articles 258, 259 and 260 and the Internal Assessment Approach set out in Article 265; (iv) the Internal Model Method set out in Title II, Chapter 6, Section 6; (b) the own funds requirements for market risk for the trading book business referred to in paragraph 4, point (b)(i), shall be calculated without using: (i) the alternative internal model approach set out in Title IV, Chapter 1b; or (ii) any approach listed under point (a) of this paragraph, where applicable; (c) the own funds requirements for all non-trading book business activities of an institution that are subject to foreign exchange risk or commodity risk referred to in paragraph 4, point (c), of this Article shall be calculated without using the alternative internal model approach set out in Title IV, Chapter 1b. 6. The following provisions shall apply in to the calculation calculations of the un-floored total risk exposure amount referred to in paragraph 3: 4 and of the standardised total risk exposure amount referred to in paragraph 5: (a) the own funds requirements referred to in paragraph 4, points (c), (d) (d), (e) and (e) of that paragraph (f), shall include those arising from all the business activities of an institution; (b) institutions shall multiply the own funds requirements set out in paragraph 4, points (b) to (e) of that paragraph (f), by 12,5.

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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 G-SII entities 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); 92(3); (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(2) of Directive 2014/59/EU.

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Article 94 Derogation for small trading book business 1. By way of derogation from Article 92(4), point (b) of (b), and Article 92(3), 92(5), point (b), institutions may calculate the own funds requirement for their trading-book business in accordance with paragraph 2 of this Article, provided that the size of the institutions' institutions’ on- and off-balance-sheet trading-book business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month: (a) 5 % of the institution's total assets; (b) EUR 50 million. 2. Where both conditions set out in points (a) and (b) of paragraph 1 are met, institutions may calculate the own funds requirement for their trading-book business as follows: (a) for the contracts listed in point 1 of Annex II, point 1, contracts relating to equities which are referred to in point 3 of that Annex and credit derivatives, institutions may exempt those positions from the own funds requirement referred to in Article 92(4), point (b) of (b), and Article 92(3); 92(5), point (b); (b) for trading book positions other than those referred to in point (a) of this paragraph, institutions may replace the own funds requirement referred to in Article 92(4), point (b) of (b), and Article 92(3) 92(5), point (b), with the requirement calculated in accordance with Article 92(4), point (a) of (a), and Article 92(3). 92(5), point (a). 3. Institutions shall calculate the size of their on- and off-balance-sheet trading book business on the basis of data as of the last day of each month for the purposes of paragraph 1 in accordance with the following requirements: (a) all the positions assigned to the trading book in accordance with Article 104 shall be included in the calculation except for the following: (i) positions concerning foreign exchange and commodities; (ii) positions in credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures or counterparty risk exposures and the credit derivate transactions that perfectly offset the market risk of those internal hedges as referred to in Article 106(3); (b) all positions included in the calculation in accordance with point (a) shall be valued at their market value on that given date; 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 market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position; (c) the absolute value of the aggregated long positions position shall be summed with the absolute value of the aggregated short positions. position. For the purposes of the first subparagraph, a long position is one where the market value of the position increases when the value of its main risk driver increases, and a short position is one where the market value of the position decreases when the value of its main risk driver increases. For the purposes of the first subparagraph, the value of the aggregated long (short) position shall be equal to the sum of the values of the individual long (short) positions included in the calculation in accordance with point (a). 4. Where both conditions set out in points (a) and (b) of paragraph 1 of this Article are met, irrespective of the obligations set out in Articles 74 and 83 of Directive 2013/36/EU, Article 102(3) and (4), Articles 103 and 104b of this Regulation shall not apply. 5. Institutions shall notify the competent authorities when they calculate, or cease to calculate, the own funds requirements of their trading-book business in accordance with paragraph 2. 6. An institution that no longer meets one or more of the conditions set out in paragraph 1 shall immediately notify the competent authority thereof. 7. An institution shall cease to calculate the own funds requirements of its trading-book business in accordance with paragraph 2 within three months of one of the following occurring: (a) the institution does not meet the conditions set out in point (a) or (b) of paragraph 1 for three consecutive months; (b) the institution does not meet the conditions set out in point (a) or (b) of paragraph 1 during more than 6 out of the last 12 months. 8. Where an institution has ceased to calculate the own funds requirements of its trading-book business in accordance with this Article, it shall only be permitted to calculate the own funds requirements of its trading-book business in accordance with this Article where it demonstrates to the competent authority that all the conditions set out in paragraph 1 have been met for an uninterrupted full-year period. 9. Institutions shall not enter into, buy or sell a trading-book position for the sole purpose of complying with any of the conditions set out in paragraph 1 during the monthly assessment. 10. EBA shall develop draft regulatory technical standards to specify the method for identifying the main risk driver of a position and for determining whether a transaction represents a long or a short position as referred to in paragraph 3 of this Article, and Articles 273a(3) and 325a(2). In developing those draft regulatory technical standards, EBA shall take into consideration the method developed for the regulatory technical standards mandated in accordance with Article 279a(3), point (b). EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 95 Own funds requirements for investment firms with limited authorisation to provide investment services 1. For the purposes of Article 92(3), investment firms that are not 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 use the calculation of the total risk exposure amount specified in paragraph 2. 2. Investment firms referred to in paragraph 1 of this Article and firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC shall calculate the total risk exposure amount as the higher of the following: (a) the sum of the items referred to in Article 92(4), points (a) to (d) (e) and (f) of Article 92(3) point (g), after applying Article 92(4); 92(6); (b) 12,5 multiplied by the amount specified in Article 97. Firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC shall meet the requirements in Article 92(1) and (2) based on the total risk exposure amount referred to in the first subparagraph. Competent authorities may set the own funds requirements for firms referred to in point (2)(c) of Article 4(1) that provide the investment services and activities listed in points (2) and (4) of Section A of Annex I to Directive 2004/39/EC as the own funds requirements that would be binding on those firms according to the national transposition measures in force on 31 December 2013 for Directives 2006/49/EC and 2006/48/EC. 3. Investment firms referred to in paragraph 1 are subject to all other provisions regarding operational risk laid down in Title VII, Chapter 2, Section II, Sub-section 2 of Directive 2013/36/EU.

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Article 96 Own funds requirements for investment firms which hold initial capital as laid down in Article 28(2) of Directive 2013/36/EU 1. For the purposes of Article 92(3), the following categories of investment firm which hold initial capital in accordance with Article 28(2) of Directive 2013/36/EU shall use the calculation of the total risk exposure amount specified in paragraph 2 of this Article: (a) investment firms that deal on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; (b) investment firms that meet all the following conditions: (i) they do not hold client money or securities; (ii) they undertake only dealing on own account; (iii) they have no external customers; (iv) their execution and settlement transactions take place under the responsibility of a clearing institution and are guaranteed by that clearing institution. 2. For investment firms referred to in paragraph 1, total risk exposure amount shall be calculated as the sum of the following: (a) Article 92(4), points (a) to (d) (e) and (f) of Article 92(3) point (g), after applying Article 92(4); 92(6); (b) the amount referred to in Article 97 multiplied by 12,5. 3. Investment firms referred to in paragraph 1 are subject to all other provisions regarding operational risk laid down in Title VII, Chapter 3, Section II, Sub-section 1 of Directive 2013/36/EU.

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Article 102 Requirements for the trading book 1. Positions in the trading book shall be either free of restrictions on their tradability or able to be hedged. 2. Trading intent shall be evidenced on the basis of the strategies, policies and procedures set up by the institution to manage the position or portfolio in accordance with Articles 103, 104 and 104a. 3. Institutions shall establish and maintain systems and controls to manage their trading book in accordance with Article 103. 4. For the purposes purpose of calculating the reporting own funds requirements set out for market risk in accordance with the approach referred to in Article 430b(3), 325(1), point (b), trading book positions shall be assigned to trading desks established in accordance with Article 104b. desks. 5. Positions in the trading book shall be subject to the requirements for prudent valuation specified in Article 105. 6. Institutions shall treat internal hedges in accordance with Article 106.

texts differ too much for an inline diff; shown separately

before (02013R0575-20240709)

Article 104
Inclusion in the trading book
1. Institutions shall have in place clearly defined policies and procedures for determining which position to include in the trading book for the purposes of calculating their capital requirements, in accordance with the requirements set out in Article 102 and the definition of trading book in accordance with point (86) of Article 4(1), taking into account the institution's risk management capabilities and practices. The institution shall fully document its compliance with these policies and procedures and shall subject them to periodic internal audit.
2. Institutions shall have in place clearly defined policies and procedures for the overall management of the trading book. These policies and procedures shall at least address:
(a) the activities the institution considers to be trading and as constituting part of the trading book for own funds requirement purposes;
(b) the extent to which a position can be marked-to-market daily by reference to an active, liquid two-way market;
(c) for positions that are marked-to-model, the extent to which the institution can:
(i) identify all material risks of the position;
(ii) hedge all material risks of the position with instruments for which an active, liquid two-way market exists;
(iii) derive reliable estimates for the key assumptions and parameters used in the model;
(d) the extent to which the institution can, and is required to, generate valuations for the position that can be validated externally in a consistent manner;
(e) the extent to which legal restrictions or other operational requirements would impede the institution's ability to effect a liquidation or hedge of the position in the short term;
(f) the extent to which the institution can, and is required to, actively manage the risks of positions within its trading operation;
(g) the extent to which the institution may transfer risk or positions between the non-trading and trading books and the criteria for such transfers.
9. EBA shall develop draft regulatory technical standards to further specify the process that institutions are to use to calculate and monitor net short credit or net short equity positions in the non-trading book referred to in the paragraph 2, point (b).
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 104
Inclusion in the trading book
1. An institution shall have in place clearly defined policies and procedures for determining which positions to include in the trading book to calculate its own funds requirements, in accordance with Article 102 and this Article, taking into account its risk management capabilities and practices. An institution shall fully document its compliance with those policies and procedures, shall subject them to an internal audit on at least a yearly basis and shall make the results of that audit available to the competent authorities.
An institution shall have in place an independent risk control function which shall evaluate, on an ongoing basis, whether its instruments are being properly assigned to the trading book or the non-trading book.
2. Institutions shall assign positions in the following instruments to the trading book:
(a) instruments that meet the criteria set out in Article 325(6), (7) and (8), for the inclusion in the alternative correlation trading portfolio (ACTP);
(b) instruments that would give rise to a net short credit or net short equity position in the non-trading book, with the exception of the own liabilities of the institution, unless such positions meet the criteria referred to in point (e);
(c) instruments resulting from securities underwriting commitments, where those underwriting commitments relate only to securities that are expected to be purchased by the institution on the settlement date;
(d) instruments classified unambiguously as having a trading purpose under the accounting framework applicable to the institution;
(e) instruments resulting from market-making activities;
(f) positions held with trading intent in CIUs, provided that those CIUs meet at least one of the conditions set out in paragraph 8;
(g) listed equities;
(h) trading-related securities financing transactions;
(i) options, or other derivatives, embedded in the own liabilities of the institution in the non-trading book that relate to credit risk or equity risk.
For the purposes of the first subparagraph, point (b), an institution shall have a net short equity position where a decrease in the equity’s price results in a profit for the institution. An institution shall have a net short credit position where the credit spread increase, or the deterioration in the creditworthiness of the issuer or group of issuers, results in a profit for the institution. Institutions shall continuously monitor whether instruments give rise to a net short credit or net short equity position in the non-trading book.
For the purposes of the first subparagraph, point (i), an institution shall split the embedded option, or other derivative, from its own liability in the non-trading book that relates to credit risk or equity risk. It shall assign the embedded option, or other derivative, to the trading book and shall leave the own liability in the non-trading book. Where, due to its nature, it is not possible to split the instrument, an institution shall assign the whole instrument to the trading book. In such a case, it shall duly document the reason for applying that treatment.
3. Institutions shall not assign positions in the following instruments to the trading book:
(a) instruments designated for securitisation warehousing;
(b) real estate holdings-related instruments;
(c) unlisted equities;
(d) instruments related to retail and SME credit;
(e) positions in other CIUs than those referred to in paragraph 2, point (f);
(f) derivative contracts and CIUs with one or more of the underlying instruments referred to in points (a) to (d) of this paragraph;
(g) instruments held for hedging a particular risk of one or more positions in an instrument referred to in points (a) to (f), (h) and (i) of this paragraph;
(h) own liabilities of the institution, unless such instruments meet the criteria referred to in paragraph 2, point (e), or the criteria referred to in paragraph 2, third subparagraph;
(i) instruments in hedge funds.
4. By way of derogation from paragraph 2, an institution may assign to the non-trading book a position in an instrument referred to in points (d) to (i) of that paragraph, subject to the approval of its competent authority. The competent authority shall give its approval where the institution has demonstrated to the satisfaction of its competent authority that the position is not held with trading intent or does not hedge positions held with trading intent.
5. By way of derogation from paragraph 3, an institution may assign to the trading book a position in an instrument referred to in point (i) of that paragraph, subject to the approval of its competent authority. The competent authority shall give its approval where the institution has demonstrated to the satisfaction of its competent authority that the position is held with trading intent, or hedges positions held with trading intent, and that the institution meets at least one of the conditions set out in paragraph 8 for that position.
6. Where an institution has assigned to the trading book a position in an instrument other than the instruments referred to in paragraph 2, point (a), (b) or (c), the institution’s competent authority may ask the institution to provide evidence to justify such assignment. Where the institution fails to provide suitable evidence, its competent authority may require the institution to reassign that position to the non-trading book.
7. Where an institution has assigned to the non-trading book a position in an instrument other than the instruments referred to in paragraph 3, the institution’s competent authority may ask the institution to provide evidence to justify such assignment. Where the institution fails to provide suitable evidence, its competent authority may require the institution to reassign that position to the trading book.
8. An institution shall assign to the trading book a position in a CIU, other than the positions referred to in paragraph 3, point (f), that is held with trading intent, where the institution meets any of the following conditions:
(a) the institution is able to obtain sufficient information about the individual underlying exposures of the CIU;
(b) the institution is not able to obtain sufficient information about the individual underlying exposures of the CIU, but the institution has knowledge of the content of the mandate of the CIU and is able to obtain daily price quotes for the CIU.
9. EBA shall develop draft regulatory technical standards to further specify the process that institutions are to use to calculate and monitor net short credit or net short equity positions in the non-trading book referred to in the paragraph 2, point (b).
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 104a Reclassification of a position 1. Institutions shall have in place clearly defined policies for identifying the exceptional circumstances which justify the reclassification of a trading book position as a non-trading book position or, conversely, the reclassification of a non-trading book … 379 unchanged words … requirements immediately before the reclassification, each calculated in accordance with Article 92. The calculation shall not take into account the effects of any factors other than the reclassification. 5. The reclassification of a position in accordance with this Article shall be irrevocable. irrevocable, except in the exceptional circumstances referred to in paragraph 1. 6. By way of derogation from paragraph 1 of this Article, an institution may reclassify a non-trading book position as a trading book position pursuant to Article 104(2), point (d), without seeking permission from its competent authority. In such a case, the requirements laid down in paragraphs 3 and 4 of this Article shall continue to apply to the institution. The institution shall immediately notify its competent authority where such a reclassification has occurred.

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Article 104b Requirements for trading desk 1. For the purposes purpose of calculating the reporting own funds requirements set out for market risk in accordance with the approach referred to in Article 430b(3), 325(1), point (b), institutions shall establish trading desks and shall assign each of their trading book positions and their non-trading book positions referred to in paragraphs 5 and 6 of this Article to one of those trading desks. Trading book positions shall be attributed to the same trading desk only where they satisfy those positions are in compliance with the agreed business strategy for the that 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.5. To calculate their own funds requirements for market risk, institutions shall assign each of their non-trading book positions that are subject to foreign exchange risk or commodity risk to trading desks established in accordance with paragraph 1 that manage risks that are similar to the risks of those positions. 6. By way of derogation from paragraph 5, institutions may, when calculating their own funds requirements for market risk, establish one or more trading desks to which they assign exclusively non-trading book positions that are subject to foreign exchange risk or commodity risk. Those trading desks shall not be subject to the requirements set out in paragraphs 1, 2 and 3.

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Article 104c Treatment of foreign exchange risk hedges of capital ratios 1. An institution which has deliberately taken a risk position in order to hedge, at least partially, against adverse movements in foreign exchange rates on any of its capital ratios as referred to in Article 92(1), points (a), (b) and (c), may, subject to the permission of its competent authority, exclude that risk position from the own funds requirements for foreign exchange risk referred to in Article 325(1), provided that all of the following conditions are met: (a) the maximum amount of the risk position that is excluded from the own funds requirements for market risk is limited to the amount of the risk position that neutralises the sensitivity of any of the capital ratios to the adverse movements in foreign exchange rates; (b) the risk position is excluded from the own funds requirements for market risk for at least six months; (c) the institution has established an appropriate risk management framework for hedging the adverse movements in foreign exchange rates on any of its capital ratios, including a clear hedging strategy and governance structure; (d) the institution has provided to the competent authority a justification for excluding a risk position from the own funds requirements for market risk, the details of that risk position and the amount to be excluded. 2. Any exclusion of risk positions from the own funds requirements for market risk in accordance with paragraph 1 shall be applied consistently. 3. The competent authority shall approve any changes by the institution to the risk management framework referred to in paragraph 1, point (c), and to the details of the risk positions referred to in paragraph 1, point (d). 4. EBA shall develop draft regulatory technical standards to specify: (a) the risk positions that an institution can deliberately take in order to hedge, at least partially, against the adverse movements of foreign exchange rates on any of its capital ratios referred to in paragraph 1; (b) how to determine the maximum amount referred to in paragraph 1, point (a), of this Article and the manner in which an institution is to exclude that amount for each of the approaches referred to in Article 325(1); (c) the criteria to be met by an institution’s risk management framework referred to in paragraph 1, point (c), in order to be considered appropriate for the purposes of this Article. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 106 Internal Hedges 1. An internal hedge shall in particular meet the following requirements: (a) it shall not be primarily intended to avoid or reduce own funds requirements; (b) it shall be properly documented and subject to particular internal approval and audit procedures; (c) it shall be dealt with at market conditions; (d) the market risk that is generated by the internal hedge shall be dynamically managed in the trading book within the authorised limits; (e) it shall be carefully monitored in accordance with adequate procedures. 2. The requirements set out in paragraph 1 shall apply without prejudice to the requirements applicable to the hedged position in the non-trading book or in the trading book, where relevant. 3. Where an institution hedges a non-trading book credit risk exposure or counterparty risk exposure using a credit derivative booked in its trading book, that credit derivative position shall be recognised as an internal hedge of the non-trading book credit risk exposure or counterparty risk exposure for the purpose of calculating the risk-weighted exposure amounts referred to in Article 92(4), point (a) of Article 92(3) (a), where the institution enters into another credit derivative transaction with an eligible third party protection provider that meets the requirements for unfunded credit protection in the non-trading book and perfectly offsets the market risk of the internal hedge. Both an internal hedge recognised in accordance with the first subparagraph and the credit derivative entered into with the eligible third party protection provider shall be included in the trading book for the purpose of calculating the own funds requirements for market risk. For calculating the own funds requirements for market risk using the approach referred to in Article 325(1), point (b), both positions shall be assigned to the same trading desk that manages similar risks. 4. Where an institution hedges a non-trading book equity risk exposure using an equity derivative booked in its trading book, that equity derivative position shall be recognised as an internal hedge of the non-trading book equity risk exposure for the purpose of calculating the risk-weighted exposure amounts referred to in Article 92(4), point (a) of Article 92(3) (a), where the institution enters into another equity derivative transaction with an eligible third party protection provider that meets the requirements for unfunded credit protection in the non-trading book and perfectly offsets the market risk of the internal hedge. Both an internal hedge recognised in accordance with the first subparagraph of this paragraph and the equity derivative entered into with the eligible third party protection provider shall be included in the trading book for the purpose of calculating the own funds requirements for market risk. For calculating the own funds requirements for market risk using the approach referred to in Article 325(1), point (b), both positions shall be assigned to the same trading desk that manages similar risks. 4a. For the purposes of paragraphs 3 and 4, the credit or equity derivative transaction entered into by an institution may be composed of multiple transactions with multiple eligible third party protection providers, provided that the resulting aggregated transaction meets the conditions set out in those paragraphs. 5. Where an institution hedges non-trading book interest rate risk exposures using an interest rate risk position booked in its trading book, that interest rate risk position shall be considered to be an internal hedge for the purpose of assessing to assess the interest rate risk arising from non-trading book positions in accordance with Articles 84 and 98 of Directive 2013/36/EU where the following conditions are met: (a) for calculating the own funds requirements for market risk using the approaches referred to in Article 325(1), points (a), (b) and (c), the position has been assigned to a separate portfolio from the other trading book position, positions, the business strategy of which is solely dedicated to manage managing and mitigate mitigating the market risk of internal hedges of interest rate risk exposure; (b) for that purpose, calculating the institution may assign to that portfolio other interest rate risk positions entered into with third parties, or its own trading book as long as the institution perfectly offsets the funds requirements for market risk of those interest rate risk positions entered into with its own trading book by entering into opposite interest rate risk positions with third parties; (b) for using the purposes of the reporting requirements set out approach referred to in Article 430b(3), 325(1), point (b), the position has been assigned to a trading desk established in accordance with Article 104b the business strategy of which is solely dedicated to manage managing and mitigate mitigating the market risk of internal hedges of interest rate risk exposure; for that purpose, that trading desk may enter into other interest rate risk positions with third parties or other trading desks of the institution, as long as those other trading desks perfectly offset the market risk of those other interest rate risk positions by entering into opposite interest rate risk positions with third parties; (c) the institution has fully documented how the position mitigates the interest rate risk arising from non-trading book positions for the purposes of the requirements laid down in Articles 84 and 98 of Directive 2013/36/EU. 5a. For the purposes of paragraph 5, point (a), the institution may assign to that portfolio other interest rate risk positions entered into with third parties, or with its own trading book, as long as the institution perfectly offsets the market risk of those interest rate risk positions entered into with its own trading book by entering into opposite interest rate risk positions with third parties. 5b. The following requirements shall apply to the trading desk referred to in paragraph 5, point (b), of this Article: (a) that trading desk may enter into other interest rate risk positions with third parties or with other trading desks of the institution, as long as those positions meet the requirements for inclusion in the trading book referred to in Article 104 and those other trading desks perfectly offset the market risk of those other interest rate risk positions by entering into opposite interest rate risk positions with third parties; (b) no trading book positions other than those referred to in point (a) of this paragraph are assigned to that trading desk; (c) by way of derogation from Article 104b, that trading desk shall not be subject to the requirements set out in paragraphs 1, 2 and 3 of that Article. 6. The own funds requirements for the market risk of all the positions assigned to a the separate portfolio as referred to in paragraph 5, point (a), or to the trading desk referred to in point (a) (b) of paragraph 5 that paragraph, shall be calculated on a stand-alone basis and shall be basis, in addition to the own funds requirements for the other trading book positions. 7. For Where an institution hedges a credit valuation adjustment (CVA) risk exposure using a derivative instrument entered into with its trading book, the purposes position in that derivative instrument shall be recognised as an internal hedge for the CVA risk exposure for the purpose of calculating the own funds requirements for CVA risk in accordance with the approaches set out in Article 383 or 384, where the following conditions are met: (a) the derivative position is recognised as an eligible hedge in accordance with Article 386; (b) where the derivative position is subject to any of the reporting requirements set out in Article 430b, 325c(2), point (b) or (c), or in Article 325e(1), point (c), the calculation institution perfectly offsets the market risk of that derivative position by entering into opposite positions with third parties. The opposite trading book position of the internal hedge recognised in accordance with the first subparagraph shall be included in the institution’s trading book to calculate the own funds requirements for market risk of all the positions assigned to the separate portfolio as referred to in point (a) of paragraph 5 of this Article or to the trading desk or entered into by the trading desk referred to in point (b) of paragraph 5 of this Article, where appropriate, shall be calculated on a stand-alone basis as a separate portfolio and shall be additional to the calculation of own funds requirements for the other trading book positions. risk.

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Article 107 Approaches to credit risk 1. Institutions shall apply either the Standardised Approach provided for in Chapter 2 or, if where permitted by the competent authorities in accordance with Article 143, the Internal Ratings Based Approach provided for in Chapter 3 to calculate their risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f) of Article 92(3). (g). 2. For trade exposures and for default fund contributions to a central counterparty, institutions shall apply the treatment set out in Chapter 6, Section 9 9, to calculate their risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (f) of Article 92(3). (g). For all other types of exposures to a central counterparty, institutions shall treat those exposures as follows: (a) as exposures to an institution for other types of exposures to a qualifying CCP; (b) as exposures to a corporate for other types of exposures to a non-qualifying CCP. 3. For the purposes of this Regulation, exposures to a third-country investment firm, a firms, third-country credit institution institutions and a third-country exchange exchanges, as well as exposures to third-country financial institutions authorised and supervised by third-country authorities and subject to prudential requirements comparable to those applied to institutions in terms of robustness, shall be treated as exposures to an institution only where if the third country applies prudential and supervisory requirements to that entity that are at least equivalent to those applied in the Union. 4. For the purposes of paragraph 3, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to treat exposures to the entities referred to in paragraph 3 as exposures to institutions provided that the relevant competent authorities have approved the third country as eligible for that treatment before 1 January 2014.

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before (02013R0575-20240709)

Article 108
Use of credit risk mitigation technique under the Standardised Approach and the IRB Approach
1. For an exposure to which an institution applies the Standardised Approach under Chapter 2 or applies the IRB Approach under Chapter 3 but without using its own estimates of loss given default (LGD) and conversion factors under Article 151, the institution may use credit risk mitigation in accordance with Chapter 4 in the calculation of risk-weighted exposure amounts for the purposes of points (a) and (f) of Article 92(3) or, as relevant, expected loss amounts for the purposes of the calculation referred to in point (d) of Article 36(1) and point (c) of Article 62.
2. For an exposure to which an institution applies the IRB Approach by using their own estimates of LGD and conversion factors under Article 151, the institution may use credit risk mitigation in accordance with Chapter 3.

after (02013R0575-20250101)

Article 108
Use of credit risk mitigation techniques under the Standardised Approach and the IRB Approach for credit risk and dilution risk
1. For an exposure to which an institution applies the Standardised Approach under Chapter 2 or applies the IRB Approach under Chapter 3 but without using its own estimates of LGD under Article 143, the institution may take into account the effect of funded credit protection in accordance with Chapter 4 in the calculation of risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (g) and, where relevant, expected loss amounts for the purposes of the calculation referred to in Article 36(1), point (d), and Article 62, point (d).
2. For an exposure to which an institution applies the IRB Approach by using its own estimates of LGD under Article 143, the institution may take into account the effect of funded credit protection in accordance with Chapter 3 in the calculation of risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (g), and, where relevant, expected loss amounts for the purposes of the calculation referred to in Article 36(1), point (d), and Article 62, point (d).
3. Where an institution applies the IRB Approach by using its own estimates of LGD under Article 143 for both the original exposure and for comparable direct exposures to the protection provider, the institution may take into account the effect of unfunded credit protection in accordance with Chapter 3 in the calculation of risk-weighted exposure amounts for the purposes of Article 92(4), points (a) and (g), and, where relevant, expected loss amounts for the purposes of the calculation referred to in Article 36(1), point (d), and Article 62, point (d). In all other cases, for those purposes, the institution may take into account the effect of unfunded credit protection in the calculation of risk-weighted exposure amounts and expected loss amounts in accordance with Chapter 4.
4. Subject to the conditions set out in paragraph 5, institutions may regard loans to natural persons as exposures secured by a mortgage on residential property, instead of being treated as guaranteed exposures, for the purposes of Title II, Chapters 2, 3 and 4, as applicable, where in a Member State the following conditions for those loans have been fulfilled:
(a) the majority of loans to natural persons for the purchase of residential properties in that Member State are not provided as mortgages in legal form;
(b) the majority of loans to natural persons for the purchase of residential properties in that Member State are guaranteed by a protection provider with a credit assessment by a nominated ECAI corresponding to credit quality step 1 or 2, that is required to repay the institution in full where the original borrower defaults;
(c) the institution has the legal right to take a mortgage on the residential property in the event that the protection provider referred to in point (b) does not meet or becomes unable to meet its obligations under the guarantee provided.
Competent authorities shall inform EBA where the conditions set out in the first subparagraph, points (a), (b) and (c), of this paragraph are met in the national territories of their jurisdictions, and shall provide the names of protection providers eligible for that treatment that fulfil the conditions of this paragraph and paragraph 5.
EBA shall publish the list of all such eligible protection providers on its website and update that list yearly.
5. For the purposes of paragraph 4, loans referred to in that paragraph may be treated as exposures secured by a mortgage on residential property, instead of being treated as guaranteed exposures, where all of the following conditions are met:
(a) for an exposure that is treated under the Standardised Approach, the exposure meets all of the requirements to be assigned to the Standardised Approach exposures secured by mortgages on immovable property exposure class pursuant to Articles 124 and 125 with the exception that the institution granting the loan does not hold a mortgage over the residential property;
(b) for an exposure that is treated under the IRB Approach, the exposure meets all of the requirements to be assigned to the IRB exposure class retail exposures secured by residential property referred to in Article 147(2), point (d)(ii), with the exception that the institution granting the loan does not hold a mortgage over the residential property;
(c) there is no mortgage lien on the residential property when the loan is granted and for the loans granted from 1 January 2014 the borrower is contractually committed not to grant any mortgage lien without the consent of the institution that originally granted the loan;
(d) the protection provider is an eligible protection provider as referred to in Article 201, and has a credit assessment by a nominated ECAI corresponding to credit quality step 1 or 2;
(e) the protection provider is an institution or a financial sector entity subject to own funds requirements comparable to those applicable to institutions or insurance undertakings;
(f) the protection provider has established a fully-funded mutual guarantee fund or equivalent protection for insurance undertakings to absorb credit risk losses, the calibration of which is periodically reviewed by its competent authority and is subject to periodic stress testing, at least every two years;
(g) the institution is contractually and legally empowered to take a mortgage on the residential property in the event that the protection provider does not meet or becomes unable to meet its obligations under the guarantee provided.
6. Institutions that use the option provided for in paragraph 4 for a given eligible protection provider under the mechanism referred to in that paragraph shall do so for all its exposures to natural persons guaranteed by that protection provider under that mechanism.

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Article 110a
Monitoring of contractual arrangements that are not commitments
Institutions shall monitor contractual arrangements that meet all of the conditions set out in Article 5, points (10)(a) to (e), and shall document to the satisfaction of their competent authorities their compliance with all those conditions.

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Article 111 Exposure value 1. The exposure value of an asset item shall be its accounting value remaining after specific credit risk adjustments in accordance with Article 110, additional value adjustments in accordance with Articles Article 34 and 105, related to the non-trading book business of the institution, amounts deducted in accordance with Article 36(1), point (m) Article 36(1) (m), and other own funds reductions related to the asset item have been applied. 2. The exposure value of an off-balance sheet off-balance-sheet item listed in Annex I shall be the following percentage of its the item’s nominal value after reduction the deduction of specific credit risk adjustments in accordance with Article 110 and amounts deducted in accordance with Article 36(1), point (m): (a) 100 % for items in bucket 1; (b) 50 % for items in bucket 2; (c) 40 % for items in bucket 3; (d) 20 % for items in bucket 4; (e) 10 % for items in bucket 5. 3. The exposure value of a commitment on an off-balance-sheet item as referred to in paragraph 2 of this Article shall be the lower of the following percentages of the commitment’s nominal value after the deduction of specific credit risk adjustments and amounts deducted in accordance with Article 36(1), point (m) Article 36(1): (m): (a) 100 % if it is a full-risk item; (b) 50 % if it is a medium-risk item; (c) 20 % if it is a medium/low-risk item; (d) 0 % if it is a low-risk item. The off-balance sheet items the percentage referred to in paragraph 2 of this Article that is applicable to the second sentence item on which the commitment is made; (b) the percentage referred to in paragraph 2 of this Article that is applicable to the first subparagraph type of commitment. 4. Contractual arrangements offered by an institution, but not yet accepted by the client, that would become commitments if accepted by the client, shall be assigned treated as commitments and the percentage applicable shall be the one provided for in accordance with paragraph 2. For contractual arrangements that meet the conditions set out in Article 5, points (10)(a) to risk categories as indicated in Annex I. When (e), the applicable percentage shall be 0 %. 5. Where an institution is using the Financial Collateral Comprehensive Method under referred to in Article 223, the exposure value of securities or commodities sold, posted or lent under a repurchase securities financing transaction or under a securities or commodities lending or borrowing transaction, and margin lending transactions shall be increased by the volatility adjustment appropriate to such securities or commodities as prescribed in accordance with Articles 223 to 225. 2. and 224. 6. The exposure value of a derivative instrument listed in Annex II shall be determined in accordance with Chapter 6 with 6, taking into account the effects of contracts of novation and other netting agreements taken into account for the purposes as specified in that Chapter. The exposure value of those methods securities financing transactions and long settlement transactions may be determined in accordance with Chapter 4 or 6. The exposure value of repurchase transaction, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions may be determined either in accordance with Chapter 6 or Chapter 4. 3. 7. Where an the exposure is subject to covered by a funded credit protection, the exposure value applicable to that item may be amended in accordance with Chapter 4. 8. EBA shall develop draft regulatory technical standards to specify: (a) the criteria that institutions are to use to assign off-balance-sheet items, with the exception of items already included in Annex I, to the buckets 1 to 5 referred to in Annex I; (b) the factors that might constrain institutions’ ability to cancel the unconditionally cancellable commitments referred to in Annex I; (c) the process for notifying EBA about institutions’ classification of other off-balance-sheet items carrying similar risks as those referred to in Annex I. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 112 Exposure classes Each exposure shall be assigned to one of the following exposure classes: (a) exposures to central governments or central banks; (b) exposures to regional governments or local authorities; (c) exposures to public sector entities; (d) exposures to multilateral development banks; (e) exposures to international organisations; (f) exposures to institutions; (g) exposures to corporates; (h) retail exposures; (i) exposures secured by mortgages on immovable property; property and ADC exposures; (j) exposures in default; (k) exposures associated with particularly high risk; subordinated debt exposures; (l) exposures in the form of covered bonds; (m) items representing securitisation positions; (n) exposures to institutions and corporates with a short-term credit assessment; (o) exposures in the form of units or shares in collective investment undertakings (CIUs); (p) equity exposures; (q) other items.

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Article 113 Calculation of risk-weighted exposure amounts 1. To calculate risk-weighted exposure amounts, risk weights shall be applied to all exposures, unless those exposures are deducted from own funds or are subject to the treatment set out in Article 72e(5), first subparagraph, in accordance with the provisions of Section 2. 2 of this Regulation. The application of risk weights shall be based on the exposure class to which the exposure is assigned and, to the extent specified in Section 2, its credit quality. Credit quality may be determined by reference to the credit assessments of ECAIs or the credit assessments of export credit agencies in accordance with Section 3. With the exception of exposures assigned to the exposure classes set out in Article 112, points (a), (b), (c) and (e), of this Regulation where the assessment in accordance with Article 79, point (b), of Directive 2013/36/EU reflects higher risk characteristics than those implied by the credit quality step to which the exposure would be assigned based on the applicable credit assessment of the nominated ECAI or export credit agency, the institution shall assign a risk weight at least one credit quality step higher than the risk weight implied by the credit assessment of the nominated ECAI or export credit agency. 2. For the purposes of applying a risk weight, as referred to in paragraph 1, the exposure value shall be multiplied by the risk weight specified or determined in accordance with Section 2. 3. Where an exposure is subject to credit protection protection, the exposure value or the risk weight applicable to that item exposure, as appropriate, may be amended in accordance with this Chapter and Chapter 4. 4. Risk-weighted exposure amounts for securitised exposures shall be calculated in accordance with Chapter 5. 5. Exposures The exposure value of any item for which no calculation risk weight is provided in Section 2 for under this Chapter shall be assigned a risk-weight risk weight of 100 %. 6. With the exception of exposures giving rise to Common Equity Tier 1, Additional Tier 1 or Tier 2 items, an institution may, subject to the prior approval of the competent authorities, decide not to apply the requirements of paragraph 1 of this Article to the exposures of that institution to a counterparty which is its parent undertaking, its subsidiary, a subsidiary of its parent undertaking undertaking, or an undertaking linked to the institution by a relationship within the meaning of Article 12(1) 22(7) of Directive 83/349/EEC. 2013/34/EU. Competent authorities are empowered to grant approval if the following conditions are fulfilled: (a) the counterparty is an institution, institution or a financial institution or an ancillary services undertaking subject to appropriate prudential requirements; (b) the counterparty is included in the same consolidation as the institution on a full basis; (c) the counterparty is subject to the same risk evaluation, measurement and control procedures as the institution; (d) the counterparty is established … 424 unchanged words … (c) and (d) is approved and monitored at regular intervals by the relevant competent authorities. Where the institution, in accordance with this paragraph, decides not to apply the requirements of paragraph 1, it may assign a risk weight of 0 %.

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Article 115 Exposures to regional governments or local authorities -1. Exposures to regional governments or local authorities for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 1 which corresponds to the credit assessment of the ECAI in accordance with Article 136. Table 1 Credit quality step 1 2 3 4 5 6 Risk weight 20 % 50 % 50 % 100 % 100 % 150 % 1. Exposures to regional governments or local authorities for which a credit assessment by a nominated ECAI is not available shall be risk-weighted as exposures to institutions unless they are treated as exposures to central governments under paragraphs 2 or 4 or receive assigned a risk weight as specified in paragraph 5. The preferential treatment for short-term accordance with the credit quality step to which exposures specified to the central government of the jurisdiction in Article 119(2) which regional governments or local authorities are incorporated are assigned in accordance with Table 2. Table 2 Credit quality step 1 2 3 4 5 6 Risk weight 20 % 50 % 100 % 100 % 100 % 150 % For exposures referred to in the first subparagraph, a risk weight of 100 % shall be assigned where the central government of the jurisdiction in which regional governments or local authorities are incorporated is unrated. 2. By way of derogation from paragraphs - 1 and Article 120(2) shall not be applied. 2. Exposures 1, exposures to regional governments or local authorities shall be treated as exposures to the central government in whose jurisdiction they are established where there is no difference in risk between such exposures because of the specific revenue-raising powers of the former, and the existence of specific institutional arrangements the effect of which is to reduce their risk of default. EBA shall maintain a publicly available database of all regional governments and local authorities within the Union which relevant competent authorities treat as exposures to their central governments. 3. Exposures to churches or religious communities constituted in the form of a legal person under public law shall, in so far as they raise taxes in accordance with legislation legal acts conferring on them the right to do so, be treated as exposures to regional governments and local authorities. In this that case, paragraph 2 shall not apply and, for the purposes apply. 4. By way of Article 150(1)(a), permission to apply the Standardised Approach shall not be excluded. 4. When derogation from paragraphs - 1 and 1, where competent authorities of a third country jurisdiction third-country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Union treat exposures to regional governments or local authorities as exposures to their central government and there is no difference in risk between such exposures because of the specific revenue-raising powers of regional government or local authorities and to specific institutional arrangements to reduce the risk of default, institutions may risk weight exposures to such regional governments and local authorities in the same manner. For the purposes of this paragraph, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to the third country where the relevant competent authorities had approved the third country as eligible for that treatment before 1 January 2014. 5. Exposures By way of derogation from paragraphs - 1 and 1, exposures to regional governments or local authorities of the Member States that are not referred to in paragraphs 2 to 2, 3 and 4 and are denominated and funded in the domestic currency of that regional government and or local authority shall be assigned a risk weight of 20 %.

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Article 116 Exposures to public sector entities 1. Exposures to public sector entities for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight in accordance with the credit quality step to which exposures to the central government of the jurisdiction in which the public sector entity is incorporated are assigned in accordance with the following Table 2: Table 2 Credit quality step to which central government is assigned 1 2 3 4 5 6 Risk weight 20 % 50 % 100 % 100 % 100 % 150 % For exposures to public sector entities incorporated in countries where the central government is unrated, the risk weight shall be 100 %. 2. Exposures to public sector entities for which a credit assessment by a nominated ECAI is available shall be treated in accordance with Article 120. The preferential treatment for short-term exposures specified in Articles 119(2) and 120(2), shall not be applied to those entities. 115(-1). 3. For exposures to public sector entities with an original maturity of three months or less, the risk weight shall be 20 %. 4. In exceptional circumstances, exposures to public-sector entities may be treated as exposures to the central government, regional government or local authority in whose jurisdiction they are established where in the opinion of the competent authorities of this jurisdiction there is no difference in risk between such exposures because of the existence of an appropriate guarantee by the central government, regional government or local authority. EBA shall maintain a publicly available database of all public sector entities within the Union referred to in the first subparagraph. 5. When competent authorities of a third country jurisdiction, which apply supervisory and regulatory arrangements at least equivalent to those applied in the Union, treat exposures to public sector entities in accordance with paragraph 1 or 2, institutions may risk weight exposures to such public sector entities in the same manner. Otherwise the institutions shall apply a risk weight of 100 %. For the purposes of this paragraph, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to the third country where the relevant competent authorities had approved the third country as eligible for that treatment before 1 January 2014.

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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 and for which a credit assessment by a nominated ECAI is available shall be treated assigned a risk weight in the same manner as exposures accordance with Table 1. Exposures to institutions. The preferential treatment multilateral development banks that are not referred to in paragraph 2 for short-term exposures as specified in Articles 119(2), 120(2) and 121(3) which a credit assessment by a nominated ECAI is not available shall not be applied. assigned a risk weight of 50 %. Table 1 Credit quality step 1 2 3 4 5 6 Risk weight 20 % 30 % 50 % 100 % 100 % 150 % 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.

No text on either side: this unit was named by a signal that carries no text, and only the structural diff carries any.

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Article 120 Exposures to rated institutions 1. Exposures to institutions with a residual maturity of more than three months for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 3 1 which corresponds to the credit assessment of the ECAI in accordance with Article 136. Table 3 1 Credit quality step 1 2 3 4 5 6 Risk weight 20 % 50 30 % 50 % 100 % 100 % 150 % 2. Exposures to institutions with an institution original maturity of up to three months residual maturity or less for which a credit assessment by a nominated ECAI is available and exposures which arise from the movement of goods across national borders with an original maturity of six months or less and for which a credit assessment by a nominated ECAI is available, shall be assigned a risk-weight risk weight in accordance with Table 4 2 which corresponds to the credit assessment of the ECAI in accordance with Article 136: 136. Table 4 2 Credit quality step 1 2 3 4 5 6 Risk weight 20 % 20 % 20 % 50 % 50 % 150 % 3. The interaction between the treatment of short term credit assessment under Article 131 and the general preferential treatment for short term exposures set out in paragraph 2 shall be as follows: (a) If there is no short-term exposure assessment, the general preferential treatment for short-term exposures as specified in paragraph 2 shall apply to all exposures to institutions of up to three months residual maturity; (b) If there is a short-term assessment and such an assessment determines the application of a more favourable or identical risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the short-term assessment shall be used for that specific exposure only. Other short-term exposures shall follow the general preferential treatment for short-term exposures, as specified in paragraph 2; (c) If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in paragraph 2, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment.

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before (02013R0575-20240709)

Article 121
Exposures to unrated institutions
1. Exposures to institutions for which a credit assessment by a nominated ECAI is not available shall be assigned a risk weight in accordance with the credit quality step to which exposures to the central government of the jurisdiction in which the institution is incorporated are assigned in accordance with Table 5.
Table 5
Credit quality step to which central government is assigned 1 2 3 4 5 6
Risk weight of exposure 20 % 50 % 100 % 100 % 100 % 150 %
2. For exposures to unrated institutions incorporated in countries where the central government is unrated, the risk weight shall be 100 %.
3. For exposures to unrated institutions with an original effective maturity of three months or less, the risk weight shall be 20 %.
4. Notwithstanding paragraphs 2 and 3, for trade finance exposures referred to in point (b) of the second subparagraph of Article 162(3) to unrated institutions, the risk weight shall be 50 % and where the residual maturity of these trade finance exposures to unrated institutions is three months or less, the risk weight shall be 20 %.

after (02013R0575-20250101)

Article 121
Exposures to unrated institutions
1. Exposures to institutions for which a credit assessment by a nominated ECAI is not available shall be assigned to one of the following grades:
(a) where all of the following conditions are met, exposures to institutions shall be assigned to Grade A:
(i) the institution has adequate capacity to meet its financial commitments, including repayments of principal and interest, in a timely manner, for the projected life of the assets or exposures and irrespective of economic cycles and business conditions;
(ii) the institution meets or exceeds the requirement laid down in Article 92(1) of this Regulation, taking into account Article 458(2), points (d)(i) and (vi), and Article 459, point (a), of this Regulation where applicable, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, the combined buffer requirement defined in Article 128, point (6), of Directive 2013/36/EU, or any equivalent and additional local supervisory or regulatory requirements in third countries insofar as those requirements are published and are to be met by Common Equity Tier 1 capital, Tier 1 capital or own funds, as applicable;
(iii) information about whether the requirements referred to in point (ii) of this point are met or exceeded by the institution is publicly disclosed or otherwise made available to the lending institution;
(iv) the assessment performed by the lending institution in accordance with Article 79 of Directive 2013/36/EU has not revealed that the institution does not meet the conditions set out in points (i) and (ii) of this point;
(b) where all of the following conditions are met and at least one of the conditions in point (a) of this paragraph is not met, exposures to institutions shall be assigned to Grade B:
(i) the institution is subject to substantial credit risk, including repayment capacities that are dependent on stable or favourable economic or business conditions;
(ii) the institution meets or exceeds the requirement laid down in Article 92(1) of this Regulation, taking into account Article 458(2), point (d)(i), and Article 459, point (a), of this Regulation, where applicable, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU, or any equivalent and additional local supervisory or regulatory requirements in third countries insofar as those requirements are published and are to be met by Common Equity Tier 1 capital, Tier 1 capital or own funds, as applicable;
(iii) information about whether the requirements referred to in point (ii) of this point are met or exceeded by the institution is publicly disclosed or otherwise made available to the lending institution;
(iv) the assessment performed by the lending institution in accordance with Article 79 of Directive 2013/36/EU has not revealed that the institution does not meet the conditions set out in points (i) and (ii) of this point.
(c) where exposures to institutions are not assigned to Grade A or B, or where any of the following conditions is met, exposures to institutions shall be assigned to Grade C:
(i) the institution has material default risks and limited margins of safety;
(ii) adverse business, financial or economic conditions are very likely to lead, or have led, to the institution’s inability to meet its financial commitments;
(iii) where audited financial statements are required by law for the institution, the external auditor has issued an adverse audit opinion or has expressed substantial doubt about the institution’s ability to continue as a going concern in its audited financial statements or audited reports within the previous 12 months.
For the purposes of the first subparagraph, point (b)(ii), of this paragraph, equivalent and additional local supervisory or regulatory requirements shall not include capital buffers equivalent to those defined in Article 128 of Directive 2013/36/EU.
2. For exposures to financial institutions that are treated as exposures to institutions in accordance with Article 119(5), for the purpose of assessing whether the conditions set out in paragraph 1, points (a)(ii) and (b)(ii), of this Article are met by those financial institutions, institutions shall assess whether those financial institutions meet or exceed any comparable prudential requirements.
3. Exposures assigned to Grade A, B or C in accordance with paragraph 1 shall be assigned a risk weight as follows:
(a) exposures assigned to Grade A, B or C which meet any of the following conditions shall be assigned a risk weight for short-term exposures in accordance with Table 1:
(i) the exposure has an original maturity of three months or less;
(ii) the exposure has an original maturity of six months or less and arises from the movement of goods across national borders;
(b) exposures assigned to Grade A which are not short term shall be assigned a risk weight of 30 % where all of the following conditions are met:
(i) the exposure does not meet any of the conditions set out in point (a);
(ii) the institution’s Common Equity Tier 1 capital ratio is equal to or higher than 14 %;
(iii) the institution’s leverage ratio is equal to or higher than 5 %;
(c) exposures assigned to Grade A, B or C that do not meet the conditions set out in point (a) or (b) shall be assigned a risk weight in accordance with Table 1.
Where an exposure to an institution is not denominated in the domestic currency of the jurisdiction of incorporation of that institution, or where that institution has booked the credit obligation in a branch in a different jurisdiction and the exposure is not in the domestic currency of the jurisdiction in which the branch operates, the risk weight assigned in accordance with point (a), (b) or (c), to exposures other than those with a maturity of one year or less stemming from self-liquidating, trade-related contingent items that arise from the movement of goods across national borders shall not be lower than the risk weight of an exposure to the central government of the country where the institution is incorporated.
Table 1
Credit risk assessment Grade A Grade B Grade C
Risk weight for short-term exposures 20 % 50 % 150 %
Risk weight 40 % 75 % 150 %

02013R0575-20240709 → 02013R0575-20250101

Article 122 Exposures to corporates 1. Exposures for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 6 which corresponds to the credit assessment of the ECAI in accordance with Article 136. Table 6 1 Credit quality step 1 2 3 4 5 6 Risk weight 20 % 50 % 100 75 % 100 % 150 % 150 % 2. Exposures for which such a credit assessment is not available shall be assigned a 100 % risk weight or the risk weight of exposures to the central government of the jurisdiction in which the corporate is incorporated, whichever is the higher. 100 %.

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before (02013R0575-20240709)

Article 122a
Specialised lending exposures
4. EBA shall develop draft regulatory technical standards to further specify the conditions under which the criteria set out in paragraph 3, point (c)(ii), are met.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 122a
Specialised lending exposures
1. Within the corporate exposure class referred to in Article 112, point (g), institutions shall separately identify as specialised lending exposures, exposures with all of the following characteristics:
(a) the exposure is to an entity which was created specifically to finance or operate physical assets or is an exposure that is economically comparable to such an exposure;
(b) the exposure is not related to the financing of residential property or commercial immovable property and is within the definitions of object finance, project finance or commodity finance exposures laid down in paragraph 3;
(c) the contractual arrangements governing the obligation related to the exposure give the institution a substantial degree of control over the assets and the income that they generate;
(d) the primary source of repayment of the obligation related to the exposure is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.
2. Specialised lending exposures for which a directly applicable credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 1.
Table 1
Credit quality step 1 2 3 4 5 6
Risk weight 20 % 50 % 75 % 100 % 150 % 150 %
3. Specialised lending exposures for which a directly applicable credit assessment by a nominated ECAI is not available shall be assigned a risk weight as follows:
(a) where the purpose of a specialised lending exposure is to finance the acquisition of physical assets, including ships, aircraft, satellites, railcars, and fleets, and the income to be generated by those assets comes in the form of cash flows generated by the specific physical assets that have been financed and pledged or assigned to the lender (object finance exposures), institutions shall apply a risk weight of 100 %;
(b) where the purpose of a specialised lending exposure is to provide for short-term financing of reserves, inventories or receivables of exchange-traded commodities, including crude oil, metals or crops, and the income to be generated by those reserves, inventories or receivables is to be the proceeds from the sale of the commodity (commodity finance exposures), institutions shall apply a risk weight of 100 %;
(c) where the purpose of a specialised lending exposure is to finance an individual project, either in the form of construction of a new capital installation or refinancing of an existing installation, with or without improvements, for the development or acquisition of large, complex and expensive installations, including power plants, chemical processing plants, mines, transportation infrastructure, environment, and telecommunications infrastructure, in which the lending institution looks primarily to the revenues generated by the financed project, both as the source of repayment and as security for the loan (project finance exposures), institutions shall apply the following risk weights:
(i) 130 % where the project to which the exposure is related is in the pre-operational phase;
(ii) provided that the adjustment to own funds requirements for credit risk referred to in Article 501a is not applied, 80 % where the project to which the exposure is related is in the operational phase and the exposure meets all of the following criteria:
(1) there are contractual restrictions on the ability of the obligor to perform activities that might be detrimental to lenders, including the restriction that new debt cannot be issued without the consent of existing debt providers;
(2) the obligor has sufficient reserve funds fully funded in cash, or other financial arrangements with an entity, to cover the contingency funding and working capital needs over the lifetime of the project being financed, provided that the entity is assigned an ECAI rating by a recognised ECAI with a credit quality step of at least 3 or, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts in accordance with Chapter 3, where the entity does not have a credit assessment by a recognised ECAI, that entity is assigned with an internal credit rating equivalent to a credit quality step of at least 3 by the institution, provided that that entity is internally rated by the institution in accordance with the provisions of Chapter 3, Section 6;
(3) the project to which the exposure is related generates cash flows that are predictable and cover all future loan repayments;
(4) where the revenues of the obligor are not funded by payments from a large number of users, the source of repayment of the obligation depends on one main counterparty and that main counterparty is one of the following:
a central bank, a central government, a regional government or a local authority, provided that they are assigned a risk weight of 0 % in accordance with Articles 114 and 115, or are assigned an ECAI rating with a credit quality step of at least 3 by a recognised ECAI; or, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts in accordance with Chapter 3, where the central bank, central government, regional government or local authority do not have a credit assessment by a recognised ECAI, they are assigned with an internal credit rating equivalent to a credit quality step of at least 3 by the institution, provided that they are internally rated by the institution in accordance with the provisions of Chapter 3, Section 6;
a public sector entity, provided that that entity is assigned a risk weight of 20 % or below in accordance with Article 116, or is assigned an ECAI rating with a credit quality step of at least 3 by a recognised ECAI or, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts in accordance with Chapter 3, where the public sector entity does not have a credit assessment by a recognised ECAI, that public sector entity is assigned with an internal credit rating equivalent to a credit quality step of at least 3 by the institution, provided that that public sector entity is internally rated by the institution in accordance with Chapter 3, Section 6,
a corporate entity which has been assigned an ECAI rating with a credit quality step of at least 3 by a recognised ECAI, or, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts in accordance with Chapter 3, where the corporate entity does not have a credit assessment by a recognised ECAI, that corporate entity is assigned an internal credit rating equivalent to a credit quality step of at least 3 by the institution, provided that that corporate entity is internally rated by the institution in accordance with the provisions of Chapter 3, Section 6;
(5) the contractual provisions governing the exposure to the obligor provide for a high degree of protection for the lending institution in the case of a default of the obligor;
(6) the main counterparty, or other counterparties which similarly comply with the eligibility criteria for the main counterparty, effectively protect the lending institution against losses resulting from the termination of the project;
(7) all assets and contracts necessary to operate the project have been pledged to the lending institution to the extent permitted by applicable law;
(8) the lending institution is able to take control of the obligor entity in the case of a default event;
(iii) 100 % where the project to which the exposure is related is in the operational phase and the exposure does not meet the conditions set out in point (ii);
(d) for the purposes of point (c)(ii)(3), the cash flows generated shall not be considered predictable unless a substantial part of the revenues satisfies one or more of the following conditions:
(i) the revenues are availability-based, meaning that, once construction is completed, the obligor is entitled, as long as the contractual conditions are fulfilled, to payments from its contractual counterparties which cover operating and maintenance costs, debt service costs and equity returns as the obligor operates the project, and those payments are not subject to swings in demand, such as traffic levels, and are adjusted typically only for lack of performance or lack of availability of the asset to the public;
(ii) the revenues are subject to a rate-of-return regulation;
(iii) the revenues are subject to a take-or-pay contract;
(e) for the purposes of point (c), the operational phase shall mean the phase in which the entity that was specifically created to finance the project, or that is economically comparable, meets both of the following conditions:
(i) the entity has a positive net cash flow that is sufficient to cover any remaining contractual obligation;
(ii) the entity has a declining long term debt.
4. EBA shall develop draft regulatory technical standards to further specify the conditions under which the criteria set out in paragraph 3, point (c)(ii), are met.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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before (02013R0575-20240709)

Article 123
Retail exposures
1. Exposures that comply with the following criteria shall be assigned a risk weight of 75 %:
(a) the exposure shall be either to a natural person or persons, or to a small or medium-sized enterprise (SME);
(b) the exposure shall be one of a significant number of exposures with similar characteristics such that the risks associated with such lending are substantially reduced;
(c) the total amount owed to the institution and parent undertakings and its subsidiaries, including any exposure in default, by the obligor client or group of connected clients, but excluding exposures fully and completely secured on residential property collateral that have been assigned to the exposure class laid down in point (i) of Article 112, shall not, to the knowledge of the institution, exceed EUR 1 million. The institution shall take reasonable steps to acquire this knowledge.
Securities shall not be eligible for the retail exposure class.
Exposures that do not comply with the criteria referred to in points (a) to (c) of the first subparagraph shall not be eligible for the retail exposures class.
The present value of retail minimum lease payments is eligible for the retail exposure class.
Exposures due to loans granted by a credit institution to pensioners or employees with a permanent contract against the unconditional transfer of part of the borrower's pension or salary to that credit institution shall be assigned a risk weight of 35 %, provided that all the following conditions are met:
(a) in order to repay the loan, the borrower unconditionally authorises the pension fund or employer to make direct payments to the credit institution by deducting the monthly payments on the loan from the borrower's monthly pension or salary;
(b) the risks of death, inability to work, unemployment or reduction of the net monthly pension or salary of the borrower are properly covered through an insurance policy underwritten by the borrower to the benefit of the credit institution;
(c) the monthly payments to be made by the borrower on all loans that meet the conditions set out in points (a) and (b) do not in aggregate exceed 20 % of the borrower's net monthly pension or salary;
(d) the maximum original maturity of the loan is equal to or less than ten years.
By 10 July 2025, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify proportionate diversification methods under which an exposure is to be considered as one of a significant number of similar exposures as specified in the first subparagraph, point (c), of this paragraph.

after (02013R0575-20250101)

Article 123
Retail exposures
1. Exposures that comply with all of the following criteria shall be considered retail exposures:
(a) the exposure is to one or more natural persons or to an SME;
(b) the total amount owed to the institution, its parent undertakings and its subsidiaries, by the obligor or group of connected clients, including any exposure in default but excluding exposures secured by residential property, up to the property value shall not, to the knowledge of the institution, which shall take reasonable steps to confirm the situation, exceed EUR 1 million;
(c) the exposure represents one of a significant number of exposures with similar characteristics, such that the risks associated with such exposure are substantially reduced;
(d) the institution concerned treats the exposure in its risk management framework and manages the exposure internally as a retail exposure consistently over time and in a manner that is similar to the treatment by the institution of other retail exposures.
The present value of retail minimum lease payments shall be eligible for the retail exposure class.
Exposures that do not comply with the criteria referred to in points (a) to (c) of the first subparagraph shall not be eligible for the retail exposures class.
By 10 July 2025, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify proportionate diversification methods under which an exposure is to be considered as one of a significant number of similar exposures as specified in the first subparagraph, point (c), of this paragraph.
2. The following exposures shall not be considered to be retail exposures:
(a) non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer;
(b) debt exposures and other securities, partnerships, derivatives, or other vehicles, the economic substance of which is similar to the exposures specified in point (a);
(c) all other exposures in the form of securities.
3. Retail exposures as referred to in paragraph 1 shall be assigned a risk weight of 75 %, with the exception of transactor exposures, which shall be assigned a risk weight of 45 %.
4. Where any of the criteria referred to in paragraph 1 are not met for an exposure to one or more natural persons, the exposure shall be considered a retail exposure and shall be assigned a risk weight of 100 %.
5. By way of derogation from paragraph 3, exposures due to loans granted by an institution to pensioners or employees with a permanent contract against the unconditional transfer of part of the borrower’s pension or salary to that institution shall be assigned a risk weight of 35 %, provided that all of the following conditions are met:
(a) to repay the loan, the borrower unconditionally authorises the pension fund or employer to make direct payments to the institution by deducting the monthly payments on the loan from the borrower’s monthly pension or salary;
(b) the risks of death, inability to work, unemployment or reduction of the net monthly pension or salary of the borrower are properly covered through an insurance policy to the benefit of the institution;
(c) the monthly payments to be made by the borrower on all loans that meet the conditions set out in points (a) and (b) do not in aggregate exceed 20 % of the borrower’s net monthly pension or salary;
(d) the maximum original maturity of the loan is equal to or less than 10 years.

inserted text (02013R0575-20250101)

Article 123a
Exposures with a currency mismatch
1. For exposures to natural persons that are assigned to the exposure class referred to in Article 112, point (h), or for exposures to natural persons that qualify as exposures secured by mortgages on residential property that are assigned to the exposure class referred to in Article 112, point (i), the risk weight assigned in accordance with this Chapter shall be multiplied by a factor of 1,5, whereby the resulting risk weight shall not be higher than 150 %, where the following conditions are met:
(a) the exposure is denominated in a currency which is different from the currency of the obligor’s source of income;
(b) the obligor does not have a hedge for its payment risk due to the currency mismatch, either by a financial instrument or foreign currency income that matches the currency of the exposure, or the total of such hedges available to the borrower covers less than 90 % of each instalment for this exposure.
Where an institution is unable to single out those exposures with a currency mismatch, the risk weight multiplier of 1,5 shall apply to all unhedged exposures where the currency of the exposures is different from the domestic currency of the country of residence of the obligor.
2. For the purposes of this Article, source of income refers to any source that generates cash flows to the obligor, including from remittances, rental incomes or salaries, whilst excluding proceeds from selling assets or similar recourse actions by the institution.
3. By way of derogation from paragraph 1, where the pair of currencies referred to in paragraph 1, point (a), is composed of the euro and the currency of a Member State participating in the second stage of economic and monetary union (ERM II), the risk weight multiplier of 1,5 shall not apply.

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before (02013R0575-20240709)

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 set out in Article 125 or 126 are not met, except for any part of the exposure which is assigned to another exposure class. The part of the exposure that exceeds the mortgage value of the immovable property shall be assigned the risk weight applicable to the unsecured exposures of the counterparty involved.
The part of an exposure that is treated as fully secured by immovable property shall not be greater than the pledged amount of the market value or in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, the mortgage lending value of the immovable property in question.
1a. Member States shall designate an authority to be responsible for the application of paragraph 2. That authority shall be the competent authority or the designated authority.
Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority's intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 2.
Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim at avoiding any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as ensuring that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account.
2. Based on the data collected under Article 430a and on any other relevant indicators, the authority designated in accordance with paragraph 1a of this Article shall periodically, and at least annually, assess whether the risk weight of 35 % for exposures to one or more property segments secured by mortgages on residential property referred to in Article 125 located in one or more parts of the territory of the Member State of the relevant authority and the risk weight of 50 % for exposures secured by mortgages on commercial immovable property referred to in Article 126 located in one or more parts of the territory of the Member State of the relevant authority are appropriately based on:
(a) the loss experience of exposures secured by immovable property;
(b) forward-looking immovable property markets developments.
Where, on the basis of the assessment referred to in the first subparagraph of this paragraph, the authority designated in accordance with paragraph 1a of this Article concludes that the risk weights set out in Article 125(2) or 126(2) do not adequately reflect the actual risks related to exposures to one or more property segments fully secured by mortgages on residential property or on commercial immovable property located in one or more parts of the territory of the Member State of the relevant authority, and if it considers that the inadequacy of the risk weights could adversely affect current or future financial stability in its Member State, it may increase the risk weights applicable to those exposures within the ranges determined in the fourth subparagraph of this paragraph or impose stricter criteria than those set out in Article 125(2) or 126(2).
The authority designated in accordance with paragraph 1a of this Article shall notify EBA and the ESRB of any adjustments to risk weights and criteria applied pursuant to this paragraph. Within one month of receipt of that notification, EBA and the ESRB shall provide their opinion to the Member State concerned. EBA and the ESRB shall publish the risk weights and criteria for exposures referred to in Articles 125, 126 and point (a) of Article 199(1) as implemented by the relevant authority.
For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 1a may set the risk weights within the following ranges:
(a) 35 % to 150 % for exposures secured by mortgages on residential property;
(b) 50 % to 150 % for exposures secured by mortgages on commercial immovable property.
3. Where the authority designated in accordance with paragraph 1a sets higher risk weights or stricter criteria pursuant to the second subparagraph of paragraph 2, institutions shall have a six-month transitional period to apply them.
4. EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify the rigorous criteria for the assessment of the mortgage lending value referred to in paragraph 1 and the types of factors to be considered for the assessment of the appropriateness of the risk weights referred in the first subparagraph of paragraph 2.
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.
5. 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 1a of this Article on the following:
(a) factors which could adversely affect current or future financial stability referred to in the second subparagraph of paragraph 2; and
(b) indicative benchmarks that the authority designated in accordance with paragraph 1a is to take into account when determining higher risk weights.
6. The institutions of a Member State shall apply the risk weights and criteria that have been determined by the authorities of another Member State in accordance with paragraph 2 to all their corresponding exposures secured by mortgages on residential property or commercial immovable property located in one or more parts of that Member State.
11. EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify the types of factors to be considered for the assessment of the appropriateness of the risk weights referred to in paragraph 9.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
12. 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 8 of this Article on both of the following:
(a) factors which could adversely affect current or future financial stability referred to in paragraph 9, second subparagraph;
(b) indicative benchmarks that the authority designated in accordance with paragraph 8 is to take into account when determining higher risk weights.
14. EBA shall develop draft regulatory technical standards to specify what constitutes an equivalent legal mechanism in place to ensure that the property under construction is completed within a reasonable timeframe, in accordance with paragraph 3, point (a)(iii)(2).
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 124
Exposures secured by mortgages on immovable property
1. A non-ADC exposure that does not meet all of the conditions set out in paragraph 3, or any part of a non-ADC exposure that exceeds the nominal amount of the lien on the property, shall be treated as follows:
(a) a non-IPRE exposure shall be risk weighted as an exposure to the counterparty that is not secured by the immovable property concerned;
(b) an IPRE exposure shall be assigned a risk weight of 150 %.
2. A non-ADC exposure, up to the nominal amount of the lien on the property, where all of the conditions set out in paragraph 3 of this Article are met, shall be treated as follows:
(a) where the exposure is secured by a residential property,
(i) a non-IPRE exposure shall be treated in accordance with Article 125(1):
(ii) an IPRE exposure shall be treated in accordance with Article 125(1) where it meets any of the following conditions:
(1) the immovable property securing the exposure is the obligor’s primary residence, either where the immovable property as a whole constitutes a single housing unit or where the immovable property securing the exposure is a housing unit that is a separated part within the immovable property;
(2) the exposure is to a natural person and is secured by an income-producing residential housing unit, either where the immovable property as a whole constitutes a single housing unit or where the housing unit is a separated part within the immovable property, and total exposures of the institution to that natural person are not secured by more than four immovable properties, including those which are not residential properties or which do not meet any of the criteria set out in this point, or separate housing units within immovable properties;
(3) the exposure is to associations or cooperatives of natural persons that are regulated by national law and exist with the sole purpose of granting their members the use of a primary residence in the property securing the loan;
(4) the exposure is to public housing companies or not-for-profit associations that are regulated by law and exist to serve social purposes and to offer tenants long-term housing;
(iii) an IPRE exposure which does not meet any of the conditions set out in point (ii) of this point, shall be treated in accordance with Article 125(2);
(b) where the exposure is secured by commercial immovable property, it shall be treated as follows:
(i) a non-IPRE exposure shall be treated in accordance with Article 126(1);
(ii) an IPRE exposure shall be treated in accordance with Article 126(2).
3. In order to be eligible for the treatment referred to in paragraph 2, an exposure secured by an immovable property shall fulfil all of the following conditions:
(a) the immovable property securing the exposure meets any of the following conditions:
(i) the immovable property has been fully completed;
(ii) the immovable property is forest or agricultural land;
(iii) the lending is to a natural person and the immovable property is either a residential property under construction or it is land upon which a residential property is planned to be constructed where that plan has been legally approved by all relevant authorities, as applicable, and where any of the following conditions is met:
(1) the immovable property does not have more than four residential housing units and will be the primary residence of the obligor and the lending to the natural person is not indirectly financing ADC exposures;
(2) a central government, regional government or local authority or a public sector entity is involved, exposures to which are treated in accordance with Article 115(2) or Article 116(4), respectively, and has the legal powers and ability to ensure that the property under construction will be finished within a reasonable time frame and is required, or has committed in a legally binding manner, to ensure completion where the construction would otherwise not be finished within such reasonable time frame; alternatively, there is an equivalent legal mechanism in place to ensure that the property under construction is completed within a reasonable timeframe;
(b) the exposure is secured by a first lien held by the institution on the immovable property, or the institution holds the first lien and any sequentially lower ranking lien on that property;
(c) the property value is not materially dependent upon the credit quality of the obligor;
(d) all information required at origination of the exposure and for monitoring purposes is properly documented, including information on the ability of the obligor to repay and on the valuation of the property;
(e) the requirements set out in Article 208 are met and the valuation rules set out in Article 229(1) are complied with.
For the purposes of the first subparagraph, point (c), institutions may exclude situations where purely macro-economic factors affect both the property value and the performance of the obligor.
For the purposes of the first subparagraph, point (d), institutions shall put in place underwriting policies with respect to the origination of exposures secured by immovable property that include the assessment of the ability of the borrower to repay. The underwriting policies shall include the relevant metrics for that assessment and their respective maximum levels.
4. By way of derogation from paragraph 3, point (b), in jurisdictions where junior liens provide the holder with a claim on collateral that is legally enforceable and constitutes an effective credit risk mitigant, junior liens held by an institution other than the one holding the senior lien may also be recognised, including where the institution does not hold the senior lien or does not hold a lien ranking between a more senior lien and a more junior lien both held by the institution.
For the purposes of the first subparagraph, the rules governing the liens shall ensure all of the following:
(a) each institution holding a lien on a property can initiate the sale of the property independently from other entities holding a lien on the property;
(b) where the sale of the property is not carried out by means of a public auction, entities holding a senior lien take reasonable steps to obtain a fair market value or the best price that may be obtained in the circumstances when exercising any power of sale on their own.
5. For the purpose of calculating risk-weighted exposure amounts for undrawn facilities, liens that satisfy all eligibility requirements set out in paragraph 3 and, where applicable, paragraph 4, may be recognised where drawing under the facility is conditional on the prior or simultaneous filing of a lien to the extent of the institution’s interest in the lien once the facility is drawn, such that the institution does not have any interest in the lien to the extent that the facility is not drawn.
6. For the purposes of Article 125(2) and Article 126(2), the exposure-to-value (ETV) ratio shall be calculated by dividing the gross exposure amount by the property value subject to the following conditions:
(a) the gross exposure amount shall be calculated as the accounting value of the asset item related to the exposure secured by immovable property and any undrawn but committed amount that, once drawn, would increase the exposure value of the exposure which is secured by immovable property; that gross exposure amount shall be calculated without taking into account:
(i) specific credit risk adjustments in accordance with Article 110;
(ii) additional value adjustments in accordance with Article 34 related to the non-trading book business of the institution;
(iii) amounts deducted in accordance with Article 36(1), point (m); and
(iv) other own funds reductions related to the asset item;
(b) the gross exposure amount shall be calculated without taking into account any type of funded or unfunded credit protection, except for pledged deposits accounts with the lending institution that meet all requirements for on-balance-sheet netting, either under master netting agreements in accordance with Articles 196 and 206 or under other on-balance-sheet netting agreements in accordance with Articles 195 and 205 and have been unconditionally and irrevocably pledged for the sole purpose of fulfilling the credit obligation related to the exposure secured by immovable property;
(c) for exposures that are required to be treated in accordance with Article 125(2) or Article 126(2) where a party other than the institution holds a senior lien and a junior lien held by the institution is recognised under paragraph 4 of this Article, the gross exposure amount shall be calculated as the sum of the gross exposure amount of the lien held by the institution and of the gross exposure amounts for all other liens of equal or higher ranking seniority than the lien held by the institution.
For the purposes of the first subparagraph, point (a), where an institution has more than one exposure secured by the same immovable property and those exposures are secured by liens on that immovable property that are sequential in ranking order without any lien held by a third party ranking in-between, the exposures shall be treated as a single combined exposure and the gross exposure amounts for the individual exposures shall be summed up to calculate the gross exposure amount for the single combined exposure.
For the purposes of the first subparagraph, point (c), where there is insufficient information to be able to ascertain the ranking of the other liens, the institution shall treat those liens as ranking pari passu with the junior lien held by the institution. The institution shall first determine the risk weight in accordance with Article 125(2) or Article 126(2) (the base risk weight), as applicable. It shall then adjust this risk weight by a multiplier of 1,25, for the purposes of calculating the risk-weighted amounts of junior liens. Where the base risk weight corresponds to the lowest exposure-to-value bucket, the multiplier shall not be applied. The risk weight resulting from multiplying the base risk weight by 1,25 shall be capped at the risk weight that would be applied to the exposure if the requirements in paragraph 3 were not met.
7. Exposures to a tenant under an immovable property leasing transaction under which the institution is the lessor and the tenant has an option to purchase shall qualify as exposures secured by immovable property and shall be treated in accordance with the treatment set out in Article 125 or 126 if the applicable conditions set out in this Article are met, provided that the exposure of the institution is secured by its ownership of the property.
8. Member States shall designate an authority to be responsible for the application of paragraph 9. That authority shall be the competent authority or the designated authority.
Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority’s intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 9.
Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all information that might be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim to avoid any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as to ensure that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account.
9. Based on the data collected under Article 430a and on any other relevant indicators, the authority designated in accordance with paragraph 8 of this Article shall periodically, and at least annually, assess whether the risk weights laid down in Articles 125 and 126 for exposures secured by immovable property located in the territory of the Member State of that authority are appropriately based on:
(a) the loss experience of exposures secured by immovable property;
(b) forward-looking immovable property market developments.
Where, on the basis of the assessment referred to in the first subparagraph, the authority designated in accordance with paragraph 8 of this Article concludes that the risk weights set out in Article 125 or 126 do not adequately reflect the actual risks related to exposures to one or more property segments secured by mortgages on residential property or on commercial immovable property located in one or more parts of the territory of the Member State of that authority, and if it considers that the inadequacy of the risk weights could adversely affect current or future financial stability in its Member State, it may increase the risk weights applicable to those exposures within the ranges determined in the fourth subparagraph of this paragraph or impose stricter criteria than those set out in paragraph 3 of this Article.
The authority designated in accordance with paragraph 8 of this Article shall notify EBA and the ESRB of any adjustments to risk weights and criteria applied pursuant to this paragraph. Within one month of receipt of that notification, EBA and the ESRB shall provide their opinion to the Member State concerned and may indicate in that opinion, where necessary, whether they consider that the adjustments to risk weights and criteria are also recommended for other Member States. EBA and the ESRB shall publish the risk weights and criteria for exposures referred to in Articles 125 and 126 and Article 199(1), point (a), as implemented by the relevant authority.
For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 8 of this Article may increase the risk weights laid down in Article 125(1), first subparagraph, Article 125(2), first subparagraph, Article 126(1), first subparagraph, or Article 126(2), first subparagraph, or impose stricter criteria than those set out in paragraph 3 of this Article for exposures to one or more property segments secured by mortgages on immovable property located in one or more parts of the territory of the Member State of that authority. That authority shall not increase those risk weights to more than 150 %.
For the purposes of the second subparagraph of this paragraph, the authority designated in accordance with paragraph 8 of this Article may also reduce the percentages of the property value referred to in Article 125(1) or Article 126(1) or the exposure-to-value percentages that define the exposure-to-value risk weight bucket set out in in Article 125(2), Table 1, or in Article 126(2), Table 1. The relevant authority shall ensure consistency across all exposure-to-value risk weight buckets, such that the risk weight of a lower exposure-to-value risk weight bucket is always lower or equal to the risk weight of an upper exposure-to-value risk weight bucket.
10. Where the authority designated in accordance with paragraph 8 sets higher risk weights or stricter criteria pursuant to paragraph 9, institutions shall have a six-month transitional period to apply them.
11. EBA, in close cooperation with the ESRB, shall develop draft regulatory technical standards to specify the types of factors to be considered for the assessment of the appropriateness of the risk weights referred to in paragraph 9.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
12. 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 8 of this Article on both of the following:
(a) factors which could adversely affect current or future financial stability referred to in paragraph 9, second subparagraph;
(b) indicative benchmarks that the authority designated in accordance with paragraph 8 is to take into account when determining higher risk weights.
13. Institutions established in a Member State shall apply the risk weights and criteria that have been determined by the authorities of another Member State in accordance with paragraph 9 to their corresponding exposures secured by mortgages on residential property or commercial immovable property located in one or more parts of that other Member State.
14. EBA shall develop draft regulatory technical standards to specify what constitutes an equivalent legal mechanism in place to ensure that the property under construction is completed within a reasonable timeframe, in accordance with paragraph 3, point (a)(iii)(2).
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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before (02013R0575-20240709)

Article 125
Exposures fully and completely secured by mortgages on residential property
1. Unless otherwise decided by the competent authorities in accordance with Article 124(2), exposures fully and completely secured by mortgages on residential property shall be treated as follows:
(a) exposures or any part of an exposure fully and completely secured by mortgages on residential property which is or shall be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, shall be assigned a risk weight of 35 %;
(b) exposures to a tenant under a property leasing transaction concerning residential property under which the institution is the lessor and the tenant has an option to purchase, shall be assigned a risk weight of 35 % provided that the exposure of the institution is fully and completely secured by its ownership of the property.
2. Institutions shall consider an exposure or any part of an exposure as fully and completely secured for the purposes of paragraph 1 only if the following conditions are met:
(a) the value of the property shall not materially depend upon the credit quality of the borrower. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence;
(b) the risk of the borrower shall not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence, the repayment of the facility shall not materially depend on any cash flow generated by the underlying property serving as collateral. For those other sources, institutions shall determine maximum loan-to-income ratios as part of their lending policy and obtain suitable evidence of the relevant income when granting the loan;
(c) the requirements set out in Article 208 and the valuation rules set out in Article 229(1) are met;
(d) unless otherwise determined under Article 124(2), the part of the loan to which the 35 % risk weight is assigned does not exceed 80 % of the market value of the property in question or 80 % of the mortgage lending value of the property in question in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions.
3. Institutions may derogate from point (b) of paragraph 2 for exposures fully and completely secured by mortgages on residential property which is situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established residential property market is present in that territory with loss rates which do not exceed the following limits:
(a) losses stemming from lending collateralised by residential property up to 80 % of the market value or 80 % of the mortgage lending value, unless otherwise decided under Article 124(2), do not exceed 0,3 % of the outstanding loans collateralised by residential property in any given year;
(b) overall losses stemming from lending collateralised by residential property do not exceed 0,5 % of the outstanding loans collateralised by residential property in any given year.
4. Where either of the limits referred to in paragraph 3 is not satisfied in a given year, the eligibility to use paragraph 3 shall cease and the condition contained in point (b) of paragraph 2 shall apply until the conditions in paragraph 3 are satisfied in a subsequent year.

after (02013R0575-20250101)

Article 125
Exposures secured by mortgages on residential property
1. For an exposure secured by residential property as referred to in Article 124(2), point (a)(i) or (ii), the part of the exposure up to 55 % of the property value shall be assigned a risk weight of 20 %.
Where an institution holds a junior lien and there are more senior liens not held by that institution, to determine the part of the institution’s exposure that is eligible for the 20 % risk weight, the amount of 55 % of the property value shall be reduced by the amount of the more senior liens not held by the institution.
Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 20 % risk weight, the amount of 55 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of:
(a) 55 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and
(b) the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens.
Where, in accordance with Article 124(9), the competent authority or designated authority has set a higher risk weight or a lower percentage of the property value than those referred to in this paragraph, institutions shall use the risk weight or percentage set in accordance with Article 124(9).
The remaining part of the exposure referred to in the first subparagraph, if any, shall be risk weighted as an exposure to the counterparty that is not secured by residential property.
2. An exposure as referred to in Article 124(2), point (a)(iii), shall be assigned the risk weight set in accordance with the respective exposure-to-value risk weight bucket in Table 1.
For the purposes of this paragraph, where, in accordance with Article 124(9), the competent authority or designated authority, has set a higher risk weight or a lower exposure-to-value percentage than those referred to in this paragraph, institutions shall use the risk weight or percentage set in accordance with Article 124(9).
Table 1
ETV ETV ≤ 50 % 50 % < ETV ≤ 60 % 60 % < ETV ≤ 80 % 80 % < ETV ≤ 90 % 90 % < ETV ≤ 100 % ETV > 100 %
Risk weight 30 % 35 % 45 % 60 % 75 % 105 %
By way of derogation from the first subparagraph of this paragraph, institutions may apply the treatment referred to in paragraph 1 of this Article to exposures secured by residential property which is situated within the territory of a Member State, where the competent authority of that Member State has published in accordance with Article 430a(3) loss rates for such exposures which, based on the aggregate data reported by institutions in that Member State for that national immovable property market, do not exceed any of the following limits for losses aggregated across such exposures existing in the previous year:
(a) the aggregated amount reported by institutions under Article 430a(1), point (a), divided by the aggregated amount reported by institutions under Article 430a(1), point (c), does not exceed 0,3 %;
(b) the aggregated amount reported by institutions under Article 430a(1), point (b), divided by the aggregated amount reported by institutions under Article 430a(1), point (c), does not exceed 0,5 %.
3. Institutions may also apply the derogation referred to in paragraph 2, third subparagraph, of this Article in cases where the competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Union as determined in a decision of the Commission adopted in accordance with Article 107(4), publishes corresponding loss rates for exposures secured by residential property situated within the territory of that third country.
Where a competent authority of a third country does not publish corresponding loss rates for exposures secured by residential property situated within the territory of that third country, EBA may publish such information for that third country, provided that valid statistical data, that are statistically representative of the corresponding residential property market, are available.

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before (02013R0575-20240709)

Article 126
Exposures fully and completely secured by mortgages on commercial immovable property
1. Unless otherwise decided by the competent authorities in accordance with Article 124(2), exposures fully and completely secured by mortgages on commercial immovable property shall be treated as follows:
(a) exposures or any part of an exposure fully and completely secured by mortgages on offices or other commercial premises may be assigned a risk weight of 50 %;
(b) exposures related to property leasing transactions concerning offices or other commercial premises under which the institution is the lessor and the tenant has an option to purchase may be assigned a risk weight of 50 % provided that the exposure of the institution is fully and completely secured by its ownership of the property.
2. Institutions shall consider an exposure or any part of an exposure as fully and completely secured for the purposes of paragraph 1 only if the following conditions are met:
(a) the value of the property shall not materially depend upon the credit quality of the borrower. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence;
(b) the risk of the borrower shall not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence, the repayment of the facility shall not materially depend on any cash flow generated by the underlying property serving as collateral;
(c) the requirements set out in Article 208 and the valuation rules set out in Article 229(1) are met;
(d) the 50 % risk weight unless otherwise provided under Article 124(2) shall be assigned to the part of the loan that does not exceed 50 % of the market value of the property or 60 % of the mortgage lending value unless otherwise provided under Article 124(2) of the property in question in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions.
3. Institutions may derogate from point (b) of paragraph 2 for exposures fully and completely secured by mortgages on commercial immovable property which is situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established commercial immovable property market is present in that territory with loss rates which do not exceed the following limits:
(a) losses stemming from lending collateralised by commercial immovable property up to 50 % of the market value or 60 % of the mortgage lending value, unless otherwise determined under Article 124(2), do not exceed 0,3 % of the outstanding loans collateralised by commercial immovable property;
(b) overall losses stemming from lending collateralised by commercial immovable property do not exceed 0,5 % of the outstanding loans collateralised by commercial immovable property.
4. Where either of the limits referred to in paragraph 3 is not satisfied in a given year, the eligibility to use paragraph 3 shall cease and the condition contained in point (b) of paragraph 2 shall apply until the conditions in paragraph 3 are satisfied in a subsequent year.

after (02013R0575-20250101)

Article 126
Exposures secured by mortgages on commercial immovable property
1. For an exposure secured by commercial immovable property as referred to in Article 124(2), point (b)(i), the part of the exposure up to 55 % of the property value shall be assigned a risk weight of 60 %.
Where an institution holds a junior lien and there are more senior liens not held by that institution, to determine the part of the institution’s exposure that is eligible for the 60 % risk weight, the amount of 55 % of the property value shall be reduced by the amount of the more senior liens not held by the institution.
Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 60 % risk weight, the amount of 55 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of:
(a) 55 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and
(b) the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens.
Where, in accordance with Article 124(9), the competent authority or designated authority, has set a higher risk weight or a lower percentage of the property value than those referred to in this paragraph, institutions shall use the risk weight or percentage set in accordance with Article 124(9).
The remaining part of the exposure referred to in the first subparagraph, if any, shall be risk weighted as an exposure to the counterparty that is not secured by commercial immovable property.
2. An exposure as referred to in Article 124(2), point (b)(ii), shall be assigned the risk weight set in accordance with the respective exposure-to-value risk weight bucket in Table 1.
For the purposes of this paragraph, where, in accordance with Article 124(9), the competent authority or designated authority, has set a higher risk weight or a lower exposure-to-value percentage than those referred to in this paragraph, institutions shall use the risk weight or percentage set in accordance with Article 124(9).
Table 1
ETV ≤ 60 % 60 % < ETV ≤ 80 % ETV > 80 %
Risk weight 70 % 90 % 110 %
By way of derogation from the first subparagraph of this paragraph, institutions may apply the treatment referred to in paragraph 1 of this Article to exposures secured by commercial immovable property which is situated within the territory of a Member State, where the competent authority of that Member State has published in accordance with Article 430a(3), loss rates for such exposures which, based on the aggregate data reported by institutions in that Member State for that national immovable property market, do not exceed any of the following limits for losses aggregated across such exposures existing in the previous year:
(a) the aggregated amount reported by institutions under Article 430a(1), point (d), divided by the aggregated amount reported by institutions under Article 430a(1), point (f), does not exceed 0,3 %;
(b) the aggregated amount reported by institutions under Article 430a(1), point (e), divided by the aggregated amount reported by institutions under Article 430a(1), point (f), does not exceed 0,5 %.
3. Institutions may apply the derogation referred to in paragraph 2, third subparagraph, of this Article also in cases where the competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Union as determined in a decision of the Commission adopted in accordance with Article 107(4), publishes corresponding loss rates for exposures secured by commercial immovable property situated within the territory of that third country.
Where a competent authority of a third country does not publish corresponding loss rates for exposures secured by commercial immovable property situated within the territory of that third country, EBA may publish such information for a third country, provided that valid statistical data, that are statistically representative of the corresponding commercial immovable property market, are available.
4. EBA shall assess the appropriateness of adjusting the treatment of exposures secured by mortgages on commercial immovable property, including IPRE and non-IPRE exposures, taking into account the appropriateness of risk weights and the relative differences in risk of exposures secured by residential property, the differences in risk sensitivity of IPRE exposures secured by residential property referred to in in Article 125(2), Table 1, and IPRE exposures secured by commercial immovable property referred to in Table 1 in this Article and the recommendations of the ESRB on the vulnerabilities in the commercial immovable property sector in the Union. EBA shall submit a report on its findings to the Commission by 31 December 2027.
On the basis of the report referred to in the first subparagraph and taking due account of the related internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2028.

02013R0575-20240709 → 02013R0575-20250101

Article 126a Land acquisition, development and construction exposures 1. An ADC exposure shall be assigned a risk weight of 150 %. 2. ADC exposures to residential property may be assigned a risk weight of 100 %, provided that the institution applies sound origination and monitoring standards which meet the requirements laid down in Articles 74 and 79 of Directive 2013/36/EU and where at least one of the following conditions is met: (a) legally binding pre-sale or pre-lease contracts for which the purchaser or tenant has made a substantial cash deposit which is subject to forfeiture if the contract is terminated or where the financing is ensured in an equivalent manner, or legally binding sale or lease contracts, including where the payment is made by instalments as the construction works progress, amount to a significant portion of total contracts; (b) the obligor has substantial equity at risk, which is represented as an appropriate amount of obligor-contributed equity to the residential property value upon completion. 3. By 10 July 2025, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, specifying the terms substantial cash deposits, financing ensured in an equivalent manner, significant portion of total contracts and appropriate amount of obligor-contributed equity, taking into account the specificities of institutions’ lending to public housing or not-for-profit entities across the Union that are regulated by law and that exist to serve social purposes and to offer tenants long-term housing.

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before (02013R0575-20240709)

Article 128
Items associated with particular high risk
1. Institutions shall assign a 150 % risk weight to exposures that are associated with particularly high risks.
2. For the purposes of this Article, institutions shall treat any of the following exposures as exposures associated with particularly high risks:
(a) investments in venture capital firms, except where those investments are treated in accordance with Article 132;
(b) investments in private equity, except where those investments are treated in accordance with Article 132;
(c) speculative immovable property financing.
3. When assessing whether an exposure other than exposures referred to in paragraph 2 is associated with particularly high risks, institutions shall take into account the following risk characteristics:
(a) there is a high risk of loss as a result of a default of the obligor;
(b) it is impossible to assess adequately whether the exposure falls under point (a).
EBA shall issue guidelines specifying which types of exposures are associated with particularly high risk and under which circumstances.
Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 128
Subordinated debt exposures
1. The following exposures shall be treated as subordinated debt exposures:
(a) debt exposures which are subordinated to claims of ordinary unsecured creditors;
(b) own funds instruments to the extent that those instruments are not considered to be equity exposures in accordance with Article 133(1); and
(c) exposures arising from the institution’s holding of eligible liabilities instruments that meet the conditions set out in Article 72b.
2. Subordinated debt exposures shall be assigned a risk weight of 150 %, unless those subordinated debt exposures are deducted from own funds or subject to the treatment set out in Article 72e(5), first subparagraph.

02013R0575-20240709 → 02013R0575-20250101

Article 129 Exposures in the form of covered bonds 1. To be eligible for the preferential treatment set out in paragraphs 4 and 5 of this Article, covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162 of … 815 unchanged words … nominal amount of outstanding covered bonds of the issuing institution, provided that significant potential concentration problems in the Member States concerned can be documented due to the application of the credit quality step 1 requirement referred to in that point. Without prejudice to the first subparagraph, point (c), of this paragraph, until 1 July 2027, indirect exposures to credit institutions without an external rating that guarantee mortgage loans until their registration shall be treated for the purposes of that point as exposures to credit institutions that qualify for credit quality step 1, provided that they are short-term exposures assigned to grade A under Article 121 and that the guaranteed mortgage loans will, once registered, be eligible for the preferential treatment pursuant to the first subparagraph, points (d), (e) and (f), of this paragraph. 1a. For the purposes of point (c) of the first subparagraph of paragraph 1, the following shall apply: (a) for exposures to credit institutions that qualify for credit quality step 1, the exposure shall not exceed 15 % of the nominal … 430 unchanged words … this Regulation, the requirements set out in Article 208 shall be met. The monitoring of property values in accordance with point (a) of Article 208(3) shall be carried out frequently and at least annually for all immovable property and ships. For the purpose of valuing immovable property, the competent authorities designated pursuant to Article 18(2) of Directive (EU) 2019/2162 may allow that property to be valued at or at less than the market value, or in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, at the mortgage lending value of that property, without applying the limits set out in Article 229(1), point (e), of this Regulation. 3a. In addition to being collateralised by the eligible assets listed in paragraph 1 of this Article, covered bonds shall be subject to a minimum level of 5 % of overcollateralisation as defined in point (14) of Article 3 of Directive (EU) 2019/2162. For the purposes of the first subparagraph of this paragraph, the total nominal amount of all cover assets as defined in point (4) of Article 3 of that Directive shall be at least of the same value as the total nominal amount of outstanding covered bonds (nominal principle), and shall consist of eligible assets as set out in paragraph 1 of this Article. Member States may set a lower minimum level of overcollateralisation for covered bonds or authorise their competent authorities to set such a level, provided that: (a) either the calculation of overcollateralisation is based on a formal approach where the underlying risk of the assets is taken into account, or the valuation of the assets is subject to the mortgage lending value; and (b) the minimum level of overcollateralisation is not lower than 2 %, based on the nominal principle referred to in Article 15(6) and (7) of Directive (EU) 2019/2162. The assets contributing to a minimum level of overcollateralisation shall not be subject to the limits on exposure size set out in paragraph 1a and shall not count towards those limits. 3b. Eligible assets listed in paragraph 1 of this Article may be included in the cover pool as substitution assets as defined in point (13) of Article 3 of Directive (EU) 2019/2162, subject to the limits on credit quality and exposure size set out in paragraphs 1 and 1a of this Article. 4. Covered bonds for which a directly applicable credit assessment by a nominated ECAI is available shall be assigned a risk weight in accordance with Table 6a 1 which corresponds to the credit assessment of the ECAI in accordance with Article 136. Table 6a 1 Credit quality step 1 2 3 4 5 6 Risk weight 10 % 20 % 20 % 50 % 50 % 100 % 5. Covered bonds for which a directly applicable credit assessment by a nominated ECAI is not available shall be assigned a risk weight on the basis of the risk weight assigned to senior unsecured exposures to the institution which issues them. The following correspondence between risk weights shall apply: (a) if the exposures to the institution are assigned a risk weight of 20 %, the covered bond shall be assigned a risk weight of 10 %; (aa) if the exposures to the institution are assigned a risk weight of 30 %, the covered bond shall be assigned a risk weight of 15 %; (ab) if the exposures to the institution are assigned a risk weight of 40 %, the covered bond shall be assigned a risk weight of 20 %; (b) if the exposures to the institution are assigned a risk weight of 50 %, the covered bond shall be assigned a risk weight of 20 25 %; (ba) if the exposures to the institution are assigned a risk weight of 75 %, the covered bond shall be assigned a risk weight of 35 %; (c) if the exposures to the institution are assigned a risk weight of 100 %, the covered bond shall be assigned a risk weight of 50 %; (d) if the exposures to the institution are assigned a risk weight of 150 %, the covered bond shall be assigned a risk weight of 100 %. 6. Covered bonds issued before 31 December 2007 shall not be subject to the requirements laid down in paragraphs 1, 1a, 3, 3a and 3b. They shall be eligible for preferential treatment under paragraphs 4 and 5 until their maturity. 7. Covered bonds issued before 8 July 2022 that comply with the requirements laid down in this Regulation as applicable at the date of their issue shall not be subject to the requirements laid down in paragraphs 3a and 3b. They shall be eligible for preferential treatment under paragraphs 4 and 5 until their maturity.

02013R0575-20240709 → 02013R0575-20250101

Article 132a Approaches for calculating risk-weighted exposure amounts of CIUs 1. Where the conditions set out in Article 132(3) are met, institutions that have sufficient information about the individual underlying exposures of a CIU shall look through to those exposures to calculate the risk-weighted exposure amount of the CIU, risk weighting all underlying exposures of the CIU as if they were directly held by those institutions. 2. Where the conditions set out in Article 132(3) are met, institutions that do not have sufficient information about the individual underlying exposures of a CIU to use the look-through approach may calculate the risk-weighted exposure amount of those exposures in accordance with the limits set in the CIU's mandate and relevant law. Institutions shall carry out the calculations referred to in the first subparagraph under the assumption that the CIU first incurs exposures to the maximum extent allowed under its mandate or relevant law in the exposures attracting the highest own funds requirement and then continues incurring exposures in descending order until the maximum total exposure limit is reached, and that the CIU applies leverage to the maximum extent allowed under its mandate or relevant law, where applicable. Institutions shall carry out the calculations referred to in the first subparagraph in accordance with the methods set out in this Chapter, in Chapter 5, and in Section 3, 4 or 5 of Chapter 6 of this Title. 3. By way of derogation from Article 92(4), point (d) of Article 92(3), (e), institutions that calculate the risk-weighted exposure amount of a CIU's CIU’s exposures in accordance with paragraph 1 or 2 of this Article may calculate the own funds requirement for the credit valuation adjustment risk of derivative exposures of that CIU as an amount equal to 50 % of the own funds requirement for those derivative exposures calculated in accordance with Chapter 6, Section 3, 4 or 5 of Chapter 6 5, of this Title, as applicable. By way of derogation from the first subparagraph, an institution may exclude from the calculation of the own funds requirement for credit valuation adjustment risk derivative exposures which would not be subject to that requirement if they were incurred directly by the institution. 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 132b Exclusions from the approaches for calculating risk-weighted exposure amounts of CIUs 1. Institutions may exclude from the calculations referred to in Article 132 Common Equity Tier 1, Additional Tier 1, Tier 2 instruments and eligible liabilities instruments held by a CIU which institutions shall deduct in accordance with Article 36(1) and Articles 56, 66 and 72e respectively. 2. Institutions may exclude from the calculations referred to in Article 132 equity exposures underlying exposures in the form of units or shares in CIUs to entities whose credit obligations are assigned a 0 % risk weight under this Chapter, including those publicly sponsored entities where a 0 % risk weight can be applied, and equity exposures referred to in points (g) and (h) of Article 150(1) 133(5), and instead apply the treatment set out in Article 133 to those equity exposures.

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Article 132c Treatment of off-balance-sheet exposures to CIUs 1. Institutions shall calculate the risk-weighted exposure amount for their off-balance-sheet items with the potential to be converted into exposures in the form of units or shares in a CIU by multiplying the exposure values of those exposures calculated in accordance with Article 111, with the following risk weight: (a) for all exposures for which institutions use one of the approaches set out in Article 132a: RW*iRWAEiE*iAiEQi where: RW*i the risk weight; i the index denoting the CIU: RWAEi the amount calculated in accordance with Article 132a for a CIUi; E*i the exposure value of the exposures of CIUi; Ai the accounting value of assets of CIUi; and EQi the accounting value of the equity of CIUi. (b) for all other exposures, RW*i1250 %. 2. Institutions shall calculate the exposure value of a minimum value commitment that meets the conditions set out in paragraph 3 of this Article as the discounted present value of the guaranteed amount using a default discount factor that is derived from a risk-free discount factor. rate pursuant to Article 325l(2) or (3), as applicable. Institutions may reduce the exposure value of the minimum value commitment by any losses recognised with respect to the minimum value commitment under the applicable accounting standard. Institutions shall calculate the risk-weighted exposure amount for off-balance-sheet exposures arising from minimum value … 321 unchanged words … limit the potential for a further reduction of the excess in other ways; (e) the ultimate direct or indirect beneficiary of the minimum value commitment is typically a retail client as defined in point (11) of Article 4(1) of Directive 2014/65/EU.;

texts differ too much for an inline diff; shown separately

before (02013R0575-20240709)

Article 133
Equity exposures
1. The following exposures shall be considered equity exposures:
(a) non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer;
(b) debt exposures and other securities, partnerships, derivatives, or other vehicles, the economic substance of which is similar to the exposures specified in point (a).
2. Equity exposures shall be assigned a risk weight of 100 %, unless they are required to be deducted in accordance with Part Two, assigned a 250 % risk weight in accordance with Article 48(4), assigned a 1250 % risk weight in accordance with Article 89(3) or treated as high risk items in accordance with Article 128.
3. Investments in equity or regulatory capital instruments issued by institutions shall be classified as equity claims, unless deducted from own funds or attracting a 250 % risk weight under Article 48(4) or treated as high risk items in accordance with Article 128.

after (02013R0575-20250101)

Article 133
Equity exposures
1. All of the following shall be classified as equity exposures:
(a) any exposure that meets all of the following conditions:
(i) it is irredeemable in the sense that the return of invested funds can be achieved only by the sale of the investment or sale of the rights to the investment or by the liquidation of the issuer;
(ii) it does not embody an obligation on the part of the issuer;
(iii) it conveys a residual claim on the assets or income of the issuer;
(b) instruments that would qualify as Tier 1 items if issued by an institution;
(c) instruments that embody an obligation on the part of the issuer and meet any of the following conditions:
(i) the issuer is able to defer the settlement of the obligation indefinitely;
(ii) the obligation requires, or permits at the issuer’s discretion, settlement by issuance of a fixed number of the issuer’s equity shares;
(iii) the obligation requires, or permits at the issuer’s discretion, settlement by issuance of a variable number of the issuer’s equity shares and, ceteris paribus, any change in the value of the obligation is attributable to, comparable to, and in the same direction as, the change in the value of a fixed number of the issuer’s equity shares;
(iv) the holder of the instrument has the option of requiring that the obligation be settled in equity shares, unless one of the following conditions is met:
(1) in the case of a traded instrument, the institution has demonstrated to the satisfaction of the competent authority that the instrument is traded on the market more like the debt of the issuer than like its equity;
(2) in the case of non-traded instruments, the institution has demonstrated to the satisfaction of the competent authority that the instrument should be treated as a debt position;
(d) debt obligations and other securities, partnerships, derivatives or other vehicles structured in such a way that the economic substance is similar to the exposures referred to in points (a), (b) and (c), including liabilities from which the return is linked to that of equities;
(e) equity exposures that are recorded as a loan but arise from a debt-equity swap made as part of the orderly realisation or restructuring of the debt.
For the purposes of the first subparagraph, point (c)(iii), obligations include those that require or permit settlement by issuance of a variable number of the issuer’s equity shares, for which the change in the monetary value of the obligation is equal to the change in the fair value of a fixed number of equity shares multiplied by a specified factor, where both the factor and the referenced number of shares are fixed.
For the purposes of the first subparagraph, point (c)(iv), where one of the conditions laid down in that point is met, the institution may decompose the risks for regulatory purposes, subject to the prior permission of the competent authority.
2. Equity investments shall not be treated as equity exposures in any of the following cases:
(a) the equity investments are structured in such a way that their economic substance is similar to the economic substance of debt holdings which do not meet the criteria set out in paragraph 1;
(b) the equity investments constitute securitisation exposures.
3. Equity exposures, other than those referred to in paragraphs 4 to 7, shall be assigned a risk weight of 250 %, unless those exposures are required to be deducted or risk weighted in accordance with Part Two.
4. The following equity exposures to unlisted companies shall be assigned a risk weight of 400 %, unless those exposures are required to be deducted or risk weighted in accordance with Part Two:
(a) investments for short-term resale purposes;
(b) investments in venture capital firms or similar investments which are acquired in anticipation of significant short-term capital gains.
By way of derogation from the first subparagraph of this paragraph, long-term equity investments, including investments in equities of corporate clients with which the institution has or intends to establish a long-term business relationship and debt-equity swaps for corporate restructuring purposes shall be assigned a risk weight in accordance with paragraph 3 or 5, as applicable. For the purposes of this Article, a long-term equity investment is an equity investment that is held for three years or longer or incurred with the intention to be held for three years or longer as approved by the institution’s senior management.
5. Institutions that have received the prior permission of the competent authorities may assign a risk weight of 100 % to equity exposures incurred under legislative programmes to stimulate specified sectors of the economy, up to the part of such equity exposures that in aggregate does not exceed 10 % of the institutions’ own funds, that comply with all of the following conditions:
(a) the legislative programmes provide significant subsidies or guarantees, including by multilateral development banks, public development credit institutions as defined in Article 429a(2) or international organisations, for the investment to the institution;
(b) the legislative programmes involve some form of government oversight;
(c) the legislative programmes involve restrictions on the equity investment, such as limitations on the size and types of businesses in which the institution is investing, on allowable amounts of ownership interests, on the geographical location and on other relevant factors that limit the potential risk of the investment for the investing institution.
6. Equity exposures to central banks shall be assigned a risk weight of 0 %.
7. An equity holding that is recorded as a loan but that has arisen from a debt-equity swap made as part of the orderly realisation or restructuring of the debt shall not be assigned a risk weight lower than the risk weight that would apply if the equity holding were treated as a debt exposure.

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Article 134 Other items 1. Tangible assets within the meaning of item 10 under the heading 'Assets' in Article 4 of Directive 86/635/EEC shall be assigned a risk weight of 100 %. 2. Prepayments and accrued income for which an institution is unable to determine the counterparty in accordance with Directive 86/635/EEC, shall be assigned a risk weight of 100 %. 3. Cash items in the process of collection shall be assigned a 20 % risk weight. Cash owned and held by the institution, or in hand transit, and equivalent cash items shall be assigned a 0 % risk weight. 4. Gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities shall be assigned a 0 % risk weight. 5. In the case of asset sale and repurchase agreements and outright forward purchases, the risk weight shall be that assigned to the assets in question and not to the counterparties to the transactions. 6. Where an institution provides credit protection for a number of exposures subject to the condition that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures, up to a maximum of 1250 % and multiplied by the nominal amount of the protection provided by the credit derivative to obtain the risk-weighted exposure amount. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation. 7. The exposure value for leases shall be the discounted minimum lease payments. Minimum lease payments are the payments over the lease term that the lessee is or can be required to make and any bargain option the exercise of which is reasonably certain. A party other than the lessee may be required to make a payment related to the residual value of a leased property and that payment obligation fulfils the set of conditions in Article 201 regarding the eligibility of protection providers as well as the requirements for recognising other types of guarantees provided in Articles 213 to 215, that payment obligation may be taken into account as unfunded credit protection under Chapter 4. These exposures shall be assigned to the relevant exposure class in accordance with Article 112. When the exposure is a residual value of leased assets, the risk-weighted exposure amounts shall be calculated as follows: 1/t * 100 % * residual value, where t is the greater of 1 and the nearest number of whole years of the lease remaining.

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Article 138 General requirements An institution may nominate one or more ECAIs to be used for the determination of risk weights to be assigned to assets and off-balance sheet items. An institution may revoke its nomination of an ECAI. An institution shall substantiate the revocation if there are concrete indications that the intention underlying the revocation is to reduce the capital adequacy requirements. Credit assessments shall not be used selectively. An institution shall use solicited credit assessments. However it may use unsolicited credit assessments if EBA has confirmed that unsolicited credit assessments of an ECAI do not differ in quality from solicited credit assessments of this ECAI. EBA shall refuse or revoke this confirmation in particular if the ECAI has used an unsolicited credit assessment to put pressure on the rated entity to place an order for a credit assessment or other services. In using credit assessment, institutions shall comply with the following requirements: (a) an institution which decides to use the credit assessments produced by an ECAI for a certain class of items shall use those credit assessments consistently for all exposures belonging to that class; (b) an institution which decides to use the credit assessments produced by an ECAI shall use them in a continuous and consistent way over time; (c) an institution shall only use ECAIs credit assessments that take into account all amounts both in principal and in interest owed to it; (d) where only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the risk weight for that item; (e) where two credit assessments are available from nominated ECAIs and the two correspond to different risk weights for a rated item, the higher risk weight shall be assigned; (f) where more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest risk weights shall be referred to. If the two lowest risk weights are different, the higher risk weight shall be assigned. If the two lowest risk weights are the same, that risk weight shall be assigned. assigned; (g) for exposures to institutions, an institution shall not use an ECAI credit assessment that incorporates assumptions of implicit government support, unless the respective ECAI credit assessment refers to an institution owned by or set up and sponsored by central governments, regional governments or local authorities. For the purposes of the first paragraph, point (g), in the case of institutions, other than institutions owned by or set up and sponsored by central governments, regional governments or local authorities, for which only ECAI credit assessments exist which incorporate assumptions of implicit government support, exposures to such institutions shall be treated as exposures to unrated institutions in accordance with Article 121. Implicit government support means that the central government, regional government or local authority would act to prevent creditors of the institution from incurring losses in the event of the institution’s default or distress.

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Article 139 Issuer and issue credit assessment 1. Where a credit assessment exists for a specific issuing programme or facility to which the item constituting the exposure belongs, this credit assessment shall be used to determine the risk weight to be assigned to that item. 2. Where no directly applicable credit assessment exists for a certain item, but a credit assessment exists for a specific issuing programme or facility to which the item constituting the exposure does not belong or a general credit assessment exists for the issuer, then that credit assessment shall be used in either of the following cases: (a) it the credit assessment produces a higher risk weight than would otherwise be the case if the exposure were treated as unrated and the exposure in question concerned: (i) is not a specialised lending exposure; (ii) ranks pari passu or junior in all respects to the specific issuing program programme or facility or to senior unsecured exposures of that issuer, as relevant; (b) it the credit assessment produces a lower risk weight than would be the case if the exposure were treated as unrated and the exposure in question concerned: (i) is not a specialised lending exposure; (ii) ranks pari passu or senior in all respects to the specific issuing programme or facility or to senior unsecured exposures of that issuer, as relevant. In all other cases, the exposure shall be treated as unrated. 3. Paragraphs 1 and 2 are not to prevent the application of Article 129. 4. Credit assessments for issuers within a corporate group cannot be used as credit assessment of another issuer within the same corporate group.

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Article 141 Domestic and foreign currency items 1. A credit assessment that refers to an item denominated in the obligor's obligor’s domestic currency cannot shall not be used to derive a risk weight for another an exposure on that same obligor that is denominated in a foreign currency. When 2. By way of derogation from paragraph 1, where an exposure arises through an institution's institution’s participation in a loan that has been extended by by, or has been guaranteed against convertibility and transfer risk by, a multilateral development bank whose listed in Article 117(2) the preferred creditor status of which is recognised in the market, the credit assessment on the obligors' obligor’s domestic currency item may be used to derive a risk weight for an exposure on that same obligor that is denominated in a foreign currency. For the purposes of the first subparagraph, where the exposure denominated in a foreign currency is guaranteed against convertibility and transfer risk, the credit assessment on the obligor’s domestic currency item may only be used for risk weighting purposes. purposes on the guaranteed part of that exposure. The part of that exposure that is not guaranteed shall be risk weighted based on a credit assessment on the obligor that refers to an item denominated in that foreign currency.

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Article 142 Definitions 1. For the purposes of this Chapter, the following definitions shall apply: (1) rating system means all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to rating grades or pools, and the quantification of default and loss estimates that have been developed for a certain type of exposures; (1a) exposure class means any of the exposure classes referred to in Article 147(2), point (a), point (aa)(i) or (ii), point (b), point (c)(i), (ii) or (iii), point (d)(i), (ii), (iii) or (iv), point (e), (ea), (f) or (g); (1b) corporate exposure means an exposure assigned to any of the exposure classes referred to in Article 147(2), point (c)(i), (ii) or (iii); (1c) retail exposure means an exposure assigned to any of the exposure classes referred to in Article 147(2), point (d)(i), (ii), (iii) or (iv); (1d) regional governments, local authorities and public sector entities exposure means an exposure assigned to any of the exposure classes referred to in Article 147(2), point (aa)(i) or (ii); (2) type of exposures means a group of homogeneously managed exposures which are formed by a certain type of facilities and exposures, which may be limited to a single entity or a single sub-set of entities within a group provided that the same type of exposures is managed differently in other entities of the group; (3) business unit means any separate organisational or legal entities, business lines, geographical locations; (4) large regulated financial sector entity means any a financial sector entity which meets all of the following conditions: (a) its the entity’s total assets, or the total assets of its parent company where the entity has a parent company, calculated on an individual or consolidated basis, are greater than or equal to a EUR 70 billion threshold, billion, using the most recent audited financial statement or consolidated financial statement in order to determine asset size; and (b) it is, or one of its subsidiaries is, the entity is subject to prudential regulation requirements, directly on an individual or consolidated basis, or indirectly from the prudential consolidation of its parent undertaking, in the Union accordance with this Regulation, Regulation (EU) 2019/2033, Directive 2009/138/EC, or to the laws legal prudential requirements of a third country which applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union; Union acts; (5) unregulated financial sector entity means an entity that is not a regulated financial sector entity but that performs, as its main business, one does not fulfil the condition set out in point (4)(b); (5a) large corporate means any corporate undertaking having consolidated annual sales of more than EUR 500 million or belonging to a group where the total annual sales for the consolidated group is more of the activities listed in Annex I to Directive 2013/36/EU or in Annex I to Directive 2004/39/EC; than EUR 500 million; (6) obligor grade means a risk category within the obligor rating scale of a rating system, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of probability of default (PD) are derived; (7) facility grade means a risk category within a rating system's facility scale, to which exposures are assigned on the basis of a specified and distinct set of rating criteria, from which own estimates of LGD are derived. derived; (8) servicer means an entity that manages a pool of purchased receivables or the underlying credit exposures on a day-to-day basis. (8a) PD/LGD modelling adjustment approach means an adjustment of the LGD or modelling an adjustment of both the PD and the LGD of the underlying exposure; (9) protection-provider-RW-floor means the risk weight applicable to a comparable, direct exposure to the protection provider; (10) for an exposure to which an institution applies the IRB Approach by using its own estimates of LGD under Article 143, recognised unfunded credit protection means an unfunded credit protection whose effect on the calculation of risk-weighted exposure amounts or expected loss amounts of the underlying exposure is taken into account with one of the following methods, in accordance with Article 108(3): (a) PD/LGD modelling adjustment approach; (b) substitution of risk parameters approach under A-IRB as defined in Article 192, point (5); (11) SA-CCF means the percentage applicable under Chapter 2 in accordance with Article 111(2); (12) IRB-CCF means own estimates of credit conversion factor. For the purposes of the first subparagraph, point (5a), in making the assessment for the sales threshold, the amounts shall be reported, as they are, in the audited financial statements of the corporates or, for corporates that are part of consolidated groups, their consolidated groups according to the accounting standard applicable to the ultimate parent undertaking of the consolidated group. The figures shall be based on the average amounts calculated over the prior three years, or on the latest amounts updated every three years by the institution. 2. For the purposes of point (4)(b) of paragraph 1 of this Article, the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies supervisory and regulatory arrangements at least equivalent to those applied in the Union. In the absence of such a decision, until 1 January 2015, institutions may continue to apply the treatment set out in this paragraph to a third country where the relevant competent authorities had approved the third country as eligible for this treatment before 1 January 2014.

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Article 143 Permission to use the IRB Approach 1. Where the conditions set out in this Chapter are met, the competent authority shall permit institutions to calculate their risk-weighted exposure amounts using the Internal Ratings Based Approach (hereinafter referred to as IRB Approach). 2. Prior permission to use the IRB Approach, including own estimates of LGD and conversion factors, IRB-CCF, shall be required for each exposure class and for each rating system and internal models approaches to equity exposures and for each approach to estimating LGDs and conversion factors CCFs used. 3. Institutions shall obtain the prior permission of the competent authorities for the following: (a) material changes to the range of application of a rating system or an internal models approach to equity exposures that the institution has received permission to use; (b) material changes to a rating system or an internal models approach to equity exposures that the institution has received permission to use. The range of application of a rating system shall comprise all exposures of the relevant type of exposure for which that rating system was developed. 4. Institutions shall notify the competent authorities of all changes to rating systems and internal models approaches to equity exposures. systems. 5. EBA shall develop draft regulatory technical standards to specify the conditions for assessing the materiality of the use of an existing rating system for other additional exposures not already covered by that rating system and changes to rating systems under the IRB Approach. EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 144 Competent authorities' assessment of an application to use an IRB Approach 1. The competent authority shall grant permission pursuant to Article 143 for an institution to use the IRB Approach, including to use own estimates of LGD and conversion factors, only if the competent authority is satisfied that requirements laid down in this Chapter are met, in particular those laid down in Section 6, and that the systems of the institution for the management and rating of credit risk exposures are sound and implemented with integrity and, in particular, that the institution has demonstrated to the satisfaction of the competent authority that the following standards are met: (a) the institution's rating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk; (b) internal ratings and default and loss estimates used in the calculation of own funds requirements and associated systems and processes play an essential role in the risk management and decision-making process, and in the credit approval, internal capital allocation and corporate governance functions of the institution; (c) the institution has a credit risk control unit responsible for its rating systems that is appropriately independent and free from undue influence; (d) the institution collects and stores all relevant data to provide effective support to its credit risk measurement and management process; (e) the institution documents its rating systems and the rationale for their design and validates its rating systems; (f) the institution has validated each rating system and each internal models approach for equity exposures during an appropriate time period prior to the permission to use this that rating system or internal models approach to equity exposures, system, has assessed during this time that period whether the each rating system or internal models approaches for equity exposures are is suited to the range of application of the that rating system or internal models approach for equity exposures, system, and has made the necessary changes to these each rating systems or internal models approaches for equity exposures system following from its assessment; (g) the institution has calculated under the IRB Approach the own funds requirements resulting from its risk parameters estimates and is able to submit the reporting as required by Article 430; (h) the institution has assigned and continues with assigning to assign each exposure in the range of application of a rating system to a rating grade or pool of this that rating system; the institution has assigned and continues with assigning each exposure in the range of application of an approach for equity exposures to this internal models approach. system. The requirements to use an IRB Approach, including own estimates of LGD and conversion factors, apply also where an institution has implemented a rating system, or model used within a rating system, that it has purchased from a third-party vendor. 2. EBA shall develop draft regulatory technical standards to specify the assessment methodology competent authorities are to follow when assessing the compliance of an institution with the requirements to use the IRB Approach. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 147 Methodology to assign exposures to exposure classes 1. The methodology used by the institution for assigning exposures to different exposure classes shall be appropriate and consistent over time. 2. Each exposure shall be assigned to one of the following exposure classes: (a) exposures to central governments and central banks; (aa) exposures to regional governments, local authorities and public sector entities, to be assigned to the following exposure classes: (i) exposures to regional governments and local authorities; (ii) exposures to public sector entities; (b) exposures to institutions; (c) exposures to corporates, to be assigned to the following exposure classes: (i) general corporates; (ii) specialised lending exposures; (iii) corporate purchased receivables; (d) retail exposures, to be assigned to the following exposure classes: (i) qualifying revolving retail exposures (QRREs); (ii) retail exposures secured by residential property; (iii) retail purchased receivables; (iv) other retail exposures; (e) equity exposures; (ea) exposures in the form of units or shares in a CIU; (f) items representing securitisation positions; (g) other non credit-obligation assets. 3. The following exposures shall be assigned to the class laid down in point (a) of paragraph 2: (a) exposures to regional governments, local authorities or public sector entities which are treated as exposures to central governments under Articles 115 and 116; (b) exposures to multilateral development banks referred to in Article 117(2); (c) exposures to International Organisations which attract a risk weight of 0 % under Article 118. 3a. By way of derogation from paragraph 2 of this Article, exposures to regional governments, local authorities and public sector entities shall be assigned to the exposure class referred to in paragraph 2, point (a), of this Article where those exposures are treated as exposures to central governments in accordance with Article 115 or 116. 4. The following exposures shall be assigned to the class laid down in point (b) of paragraph 2: (a) exposures to regional governments and local authorities which are not treated as exposures to central governments in accordance with Article 115(2) and (4); (b) exposures to public sector entities which are not treated as exposures to central governments in accordance with Article 116(4); (c) exposures to multilateral development banks which are not assigned a 0 % risk weight under Article 117; and (d) exposures to financial institutions which are treated as exposures to institutions in accordance with Article 119(5). 5. To be eligible for the retail exposure class laid down in point (d) of paragraph 2, exposures shall meet the following criteria: (a) they shall be one of the following: (i) exposures to one or more natural persons; (ii) exposures to an SME, provided in that case that the total amount owed to the institution and parent undertakings and its subsidiaries, including any past due exposure, exposure in default, by the obligor client or group of connected clients, but excluding exposures secured on by residential property, up to the property collateral, shall value does not, to the knowledge of the institution, which shall have taken take reasonable steps to confirm verify the situation, amount of that exposure, exceed EUR 1 million; (iii) exposures secured by residential property, including first and subsequent liens, term loans, revolving home equity lines of credit, and exposures as referred to in Article 108(4) and (5), regardless of the exposure size, provided that the exposure is either of the following: (1) an exposure to a natural person; (2) an exposure to associations or cooperatives of individuals that are regulated under national law and exist with the sole purpose of granting their members the use of a primary residence in the property securing the loan; (b) they are treated by the institution in its risk management consistently over time and in a similar manner; (c) they are not managed just as individually as exposures in the corporate exposure class; classes referred to in paragraph 2, point (c)(i), (ii) or (iii); (d) they each represent one of a significant number of similarly managed exposures. In addition to the exposures listed in the first subparagraph, the present value of retail minimum lease payments shall be included in the retail exposure class. 6. The following exposures Exposures fulfilling all of the conditions set out in the first subparagraph, point (a)(iii), points (b), (c) and (d), of this paragraph shall be assigned to the equity exposure class laid down referred to in paragraph 2, point (e) (d)(ii). By way of derogation from the third subparagraph of this paragraph, competent authorities may exclude from the exposure class referred to in paragraph 2: (a) non-debt exposures conveying a subordinated, residual claim on 2, point (d)(ii), loans to natural persons who have mortgaged more than four immovable properties or housing units, including the assets or income loans to natural persons referred to in Article 108(4), and assign those loans to one of the issuer; (b) debt exposure classes referred to in paragraph 2, point (c)(i), (ii) or (iii). 5a. Retail exposures and other securities, partnerships, derivatives, or other vehicles, belonging to a type of exposures meeting all of the economic substance of which is similar following conditions shall be assigned to the exposure class referred to in paragraph 2, point (d)(i): (a) the exposures specified of that type of exposures are to one or more natural persons; (b) the exposures of that type of exposures are revolving, unsecured, and, to the extent they are not drawn immediately and unconditionally, cancellable by the institution; (c) the maximum exposure in that type of exposure to a single natural person is EUR 100000 or less; (d) that type of exposures has exhibited low volatility of loss rates, relative to its average level of loss rates, especially within the low PD bands; (e) the treatment of exposures assigned to that type of exposures as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of that type of exposures. By way of derogation from the first subparagraph, point (a). (b), the requirement to be unsecured shall not apply in respect of collateralised credit facilities linked to a wage account. In that case, amounts recovered from the collateral shall not be taken into account in the LGD estimates. Institutions shall identify within the exposure class referred to in paragraph 2, point (d)(i) transactor exposures (QRRE transactors) and exposures that are not transactor exposures (QRRE revolvers). In particular, QRREs with less than 12 months of repayment history shall be identified as QRRE revolvers. 6. Unless they are assigned to the exposure class referred to in paragraph 2, point (ea), of this Article the exposures referred to in Article 133(1) shall be assigned to the exposure class referred to in paragraph 2, point (e), of this Article. 7. Any credit obligation not assigned to the exposure classes laid down referred to in points paragraph 2, point (a), point (aa)(i) or (ii), point (b), (d), (e) and (f) of paragraph 2 point (d)(i), (ii), (iii) or (iv), point (e), (ea) or (f), shall be assigned to one of the corporate exposure class classes referred to in point (c) (c)(i), (ii) or (iii) of that paragraph. 8. Within the corporate exposure class laid down in point (c) of paragraph 2, institutions shall separately identify as specialised lending exposures, exposures which possess the following characteristics: (a) the exposure is to an entity which was created specifically to finance or operate physical assets or is an economically comparable exposure; (b) the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate; (c) the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise. Those exposures shall be assigned to the exposure class referred to in paragraph 2, point (c)(ii), and shall be categorised as follows: project finance (PF), object finance (OF), commodity finance (CF) and income-producing real estate (IPRE). 9. The residual value of leased properties shall be assigned to the exposure class laid down in point (g) of paragraph 2, except to the extent that residual value is already included in the lease exposure laid down in Article 166(4). 10. The exposure from providing protection under an nth-to-default basket credit derivative shall be assigned to the same class laid down in paragraph 2 to which the exposures in the basket would be assigned, except if the individual exposures in the basket would be assigned to various exposure classes in which case the exposure shall be assigned to the corporates exposure class laid down in point (c) of paragraph 2.11. EBA shall develop draft regulatory technical standards to specify the following: (a) the categorisation to PF, OF and CF, consistently with the definitions of Chapter 2; (b) the determination of the IPRE category, in particular specifying which ADC exposures and exposures secured by immovable property may or shall be categorised as IPRE. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 12. EBA shall develop draft regulatory technical standards to further specify the conditions and criteria for assigning exposures to the classes referred to in paragraph 2 and, where necessary, to further specify those exposure classes. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 148 Conditions for implementing the IRB Approach across different classes of exposure and business units 1. Institutions and An institution that is permitted to apply the IRB Approach in accordance with Article 107(1) shall, together with any parent undertaking and its subsidiaries shall subsidiaries, implement the IRB Approach for at least one of the exposure classes referred to in Article 147(2), point (a), point (aa)(i) or (ii), point (b), point (c)(i), (ii) or (iii), point (d)(i), (ii), (iii) or (iv), or point (g). Once an institution has implemented the IRB Approach for a certain type of exposures within an exposure class, it shall do so for all exposures, exposures within that exposure class, unless they have it has received the permission of the competent authorities authority to permanently use the Standardised Approach permanently in accordance with Article 150. Subject to the prior permission of the competent authorities, implementation of the IRB Approach may be carried out sequentially across the different types of exposures within a certain exposure classes referred to in Article 147 class within the same business unit, unit and across different business units in the same group group, or for the use of own estimates of LGDs LGD or conversion factors for the calculation use of risk weights for exposures to corporates, institutions, and central governments and central banks. In the case of the retail exposure class referred to in Article 147(5), implementation may be carried out sequentially across the categories of exposures to which the different correlations in Article 154 correspond. IRB-CCF. 2. Competent authorities shall determine the time period over which an institution and any parent undertaking and its subsidiaries shall be required to implement the IRB Approach for all exposures. This time exposures within a certain exposure class across different types of exposures within the same business unit and across different business units in the same group, or for the use of own estimates of LGD or for the use of IRB-CCF. That period shall be one that competent authorities consider to be appropriate on the basis of the nature and scale of the activities of the institutions, institution concerned, or of any parent undertaking and its subsidiaries, and the number and nature of rating systems to be implemented. 3. Institutions shall carry out implementation of the IRB Approach in accordance with conditions determined by the competent authorities. The competent authority shall design those conditions such in a way that they ensure that the flexibility under paragraph 1 is not used selectively for the purposes purpose of achieving reduced own funds requirements in respect of those exposure classes types of exposures or business units that are yet to be included in the IRB Approach or in the use of own estimates of LGDs and conversion factors. LGD or in the use of IRB-CCF. 4. Institutions that have begun to use the IRB Approach only after 1 January 2013 or that have until that date been required by the competent authorities to be able to calculate their capital requirements using the Standardised Approach shall retain their ability to calculate capital requirements using the Standardised Approach for all their exposures during the implementation period until the competent authorities notify them that they are satisfied that the implementation of the IRB Approach will be completed with reasonable certainty. 5. An institution that is permitted to use the IRB Approach for any exposure class shall use the IRB Approach for the equity exposure class laid down in point (e) of Article 147(2), except where that institution is permitted to apply the Standardised Approach for equity exposures pursuant to Article 150 and for the other non credit-obligation assets exposure class laid down in point (g) of Article 147(2). 6. EBA shall develop draft regulatory technical standards to specify the conditions according to which competent authorities shall determine the appropriate nature and timing of the sequential roll out of the IRB Approach across exposure classes referred to in paragraph 3. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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.

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Article 149 Conditions to revert to the use of less sophisticated approaches 1. An institution that uses the IRB Approach for a particular exposure class or type of exposure shall not stop using that approach and use instead the Standardised Approach for the calculation of risk-weighted exposure amounts unless the following conditions are met: (a) the institution has demonstrated to the satisfaction of the competent authority that the use of the Standardised Approach is not proposed made with a view to engaging in order to reduce regulatory arbitrage, including by unduly reducing the own funds requirement requirements of the institution, is necessary on the basis of the nature and complexity of the institution's institution’s total exposures of this that type and would not have a material adverse impact on the solvency of the institution or its ability to manage risk effectively; (b) the institution has received the prior permission of the competent authority. 2. Institutions which have obtained permission under Article 151(9) to use own estimates of LGDs and conversion factors, shall not revert to the use of LGD values and conversion factors referred to in Article 151(8) unless the following conditions are met: (a) the institution has demonstrated to the satisfaction of the competent authority that the use of LGDs and conversion factors laid down in Article 151(8) for a certain exposure class or type of exposure is not proposed in order to reduce the own funds requirement of the institution, is necessary on the basis of nature and complexity of the institution's total exposures of this type and would not have a material adverse impact on the solvency of the institution or its ability to manage risk effectively; (b) the institution has received the prior permission of the competent authority. 3. The application of paragraphs 1 and 2 is subject to the conditions for rolling out the IRB Approach determined by the competent authorities in accordance with Article 148 and the permission for permanent partial use referred to in Article 150.

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Article 150 Conditions for permanent partial use 1. Where Institutions shall apply the Standardised Approach for all of the following exposures: (a) exposures assigned to the exposure class referred to in Article 147(2), point (e); (b) exposures assigned to exposure classes or belonging to types of exposures within an exposure class, for which institutions have not received the prior permission of the competent authorities, institutions authorities to use the IRB Approach for the calculation of the risk-weighted exposure amounts and expected loss amounts. An institution that is permitted to use the IRB Approach in for the calculation of risk-weighted exposure amounts and expected loss amounts for one or more a given exposure classes may class may, subject to the competent authority’s prior permission, apply the Standardised Approach for the following exposures: (a) the exposure class laid down in Article 147(2)(a), where the number of material counterparties is limited and it would be unduly burdensome for the institution to implement a rating system for these counterparties; (b) the exposure class laid down in Article 147(2)(b), where the number of material counterparties is limited and it would be unduly burdensome for the institution to implement a rating system for these counterparties; (c) exposures in non-significant business units as well as exposure classes or some types of exposures within that exposure class, including exposures of foreign branches and different product groups, where those types of exposures are immaterial in terms of size and perceived risk profile; (d) exposures to central governments and central banks of the Member States and their regional governments, local authorities, administrative bodies and public sector entities provided that: (i) there is no difference in risk between the exposures to that central government and central bank and those other exposures because of specific public arrangements; and (ii) exposures to central governments and central banks are assigned a 0 % risk weight under Article 114(2) or (4); (e) exposures of an institution to a counterparty which is its parent undertaking, its subsidiary or a subsidiary of its parent undertaking provided that the counterparty is an institution or a financial holding company, mixed financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC; (f) exposures between institutions which meet the requirements set out in Article 113(7); (g) equity exposures to entities whose credit obligations are assigned a 0 % risk weight under Chapter 2 including those publicly sponsored entities where a 0 % risk weight can be applied; (h) equity exposures incurred under legislative programmes to promote specified sectors of the economy that provide significant subsidies for the investment to the institution and involve some form of government oversight and restrictions on the equity investments where such exposures may in aggregate be excluded from the IRB Approach only up to a limit of 10 % of own funds; (i) the exposures identified in Article 119(4) meeting the conditions specified therein; (j) State and State-reinsured guarantees referred to in Article 215(2). The competent authorities shall permit the application of Standardised Approach for equity exposures referred to in points (g) and (h) of the first subparagraph which have been permitted for that treatment in other Member States. EBA shall publish on its website and regularly update a list of the exposures referred to in those points to be treated according to the Standardised Approach. profile. 1a. In addition to the exposures referred to in paragraph 1, second subparagraph, an institution may, subject to the competent authority’s prior permission, apply the Standardised Approach for the following exposures where the IRB Approach is applied for other types of exposures within the same exposure class: (a) exposures to central governments and central banks of the Member States and their regional governments, local authorities, and public sector entities, provided that: (i) there is no difference in risk between the exposures to that central government and central bank and those other exposures because of specific public arrangements; and (ii) exposures to central governments and central banks are assigned a 0 % risk weight under Article 114(2) or (4); (b) exposures of an institution to a counterparty which is its parent undertaking, its subsidiary or a subsidiary of its parent undertaking, provided that the counterparty is an institution or a financial holding company, mixed financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements or an undertaking linked by a relationship within the meaning of Article 22(7) of Directive 2013/34/EU; (c) exposures between institutions which meet the requirements set out in Article 113(7). An institution that is permitted to use the IRB Approach for the calculation of risk-weighted exposure amounts for only some types of exposures within an exposure class shall apply the Standardised Approach for the remaining types of exposures within that exposure class. In addition to the exposures referred to in paragraph 1, second subparagraph, of this Article and in this paragraph, an institution may apply the Standardised Approach for exposures to churches and religious communities which meet the requirements set out in Article 115(3). 2. For the purposes of paragraph 1, the equity exposure class of an institution shall be material if their aggregate value, excluding equity exposures incurred under legislative programmes as referred to in point (h) of paragraph 1, exceeds on average over the preceding year 10 % of the own funds of the institution. Where the number of those equity exposures is less than 10 individual holdings, that threshold shall be 5 % of the own funds of the institution. 2a. By 10 July 2028, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on what constitutes types of exposures that are immaterial in terms of size and perceived risk profile. 3. EBA shall develop draft regulatory technical standards to determine the conditions of application of points (a), (b) and (c) of paragraph 1. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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. 4. EBA shall issue guidelines on the application of point (d) of paragraph 1 in 2018, recommending limits in terms of a percentage of total balance sheet and/or risk weighted assets to be calculated in accordance with the Standardised Approach. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010.

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Article 151 Treatment by exposure class 1. The risk-weighted exposure amounts for credit risk for exposures belonging to one of the exposure classes referred to in Article 147(2), points (a) to (e) and point (a), point (aa)(i) or (ii), point (b), point (c)(i), (ii) or (iii), point (d)(i), (ii), (iii) or (iv) or point (g), shall, unless those exposures are deducted from own funds or are subject to the treatment set out in Article 72e(5), first subparagraph, be calculated in accordance with Sub-section 2. 2. The risk-weighted exposure amounts for dilution risk for purchased receivables shall be calculated in accordance with Article 157. Where an institution has full recourse to the seller of purchased receivables for default risk and for dilution risk, the provisions of this Article and Article 152 and Article 158(1) to (4) in relation to purchased receivables shall not apply and the exposure shall be treated as a collateralised exposure. 3. The calculation of risk-weighted exposure amounts for credit risk and dilution risk shall be based on the relevant parameters associated with the exposure in question. These shall include PD, LGD, maturity (hereinafter referred to as M) and exposure value of the exposure. PD and LGD may be considered separately or jointly, in accordance with Section 4. 4. Institutions shall calculate risk-weighted exposure amounts for credit risk for all exposures belonging to the exposure class equity referred to in point (e) of Article 147(2) in accordance with Article 155. Institutions may use the approaches set out in Article 155(3) and (4) where they have received the prior permission of the competent authorities. Competent authorities shall grant permission for an institution to use the internal models approach set out in Article 155(4) provided that the institution meets the requirements set out in Sub-section 4 of Section 6. 5. The calculation of risk weighted exposure amounts for credit risk for specialised lending exposures may be calculated in accordance with Article 153(5). 6. For exposures belonging to the exposure classes referred to in points (a) to (d) of Article 147(2), institutions shall provide their own estimates of PDs in accordance with Article 143 and Section 6. 7. For exposures belonging to the exposure class referred to in point (d) of Article 147(2), retail exposures, institutions shall provide own estimates of LGDs LGD, and conversion factors IRB-CCF where applicable pursuant to Article 166(8) and (8b), in accordance with Article 143 and Section 6. Institutions shall use SA-CCFs where Article 166(8) and (8b) do not allow for the use of IRB-CCF. 8. For the following exposures, institutions shall apply the LGD values set out in Article 161(1) and SA-CCFs in accordance with Article 166(8), (8a) and (8b): (a) exposures assigned to the exposure class referred to in Article 147(2), point (b); (b) exposures to financial sector entities other than those referred to in point (a) of this subparagraph; (c) exposures to large corporates not assigned to the exposure class referred to in Article 147(2), point (c)(ii). For exposures belonging to the exposure classes referred to in points (a) to (c) of Article 147(2), point (a), point (aa)(i) or (ii) or point (c)(i), (ii) or (iii), except for the exposures referred to in the first subparagraph of this paragraph, institutions shall apply the LGD values set out in Article 161(1), 161(1) and the conversion factors set out SA-CCFs in accordance with Article 166(8)(a) to (d), 166(8), (8a) and (8b), unless it has they have been permitted to use its their own estimates of LGDs LGD and conversion factors IRB-CCF for those exposure classes exposures in accordance with paragraph 9. 9 of this Article. 9. For all the exposures belonging to the exposure classes referred to in points (a) to (c) paragraph 8, second subparagraph, of Article 147(2), this Article, the competent authority shall permit institutions to use own estimates of LGDs LGD, and conversion factors IRB-CCF where applicable pursuant to Article 166(8) and (8b), in accordance with Article 143 and Section 6. 10. The risk-weighted exposure amounts for securitised exposures and for exposures belonging to the exposure class referred to in point (f) of Article 147(2) shall be calculated in accordance with Chapter 5.11. For exposures in the form of shares or units in a CIU belonging to the exposure class referred to in Article 147(2), point (ea), institutions shall apply the treatment set out in Article 152, unless those exposures are deducted from own funds or are subject to the treatment set out in Article 72e(5), first subparagraph.

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Article 152 Treatment of exposures in the form of units or shares in CIUs 1. Institutions shall calculate the risk-weighted exposure amounts for their exposures in the form of units or shares in a CIU by multiplying the risk-weighted exposure amount of the CIU, calculated in accordance with the approaches set out in paragraphs 2 and 5, with the percentage of units or shares held by those institutions. 2. Where the conditions set out in Article 132(3) are met, institutions that have sufficient information about the individual underlying exposures of a CIU shall look through to those underlying exposures to calculate the risk-weighted exposure amount of the CIU, risk weighting all underlying exposures of the CIU as if they were directly held by the institutions. 3. By way of derogation from Article 92(4), point (d) of Article 92(3), (e), institutions that calculate the risk-weighted exposure amount of the CIU in accordance with paragraph 1 or 2 of this Article may calculate the own funds requirement for credit valuation adjustment risk of derivative exposures of that CIU as an amount equal to 50 % of the own funds requirement for those derivative exposures calculated in accordance with Chapter 6, Section 3, 4 or 5 of Chapter 6 5, of this Title, as applicable. By way of derogation from the first subparagraph, an institution may exclude from the calculation of the own funds requirement for credit valuation adjustment risk derivative exposures which would not be subject to that requirement if they were incurred directly by the institution. 4. Institutions that apply the look-through approach in accordance with paragraphs 2 and 3 of this Article and that meet the conditions for permanent partial use in accordance with Article 150, or that do not meet the conditions for using use the methods set out in this Chapter or one or more of the methods set out in Chapter 5 5, as applicable, for all or parts of the underlying exposures of the CIU, CIU shall calculate risk-weighted exposure amounts and expected loss amounts for all or those parts of the underlying exposures in accordance with the following principles: (a) for underlying exposures that would be assigned to the equity exposure class referred to in point (e) of Article 147(2), point (e), institutions shall apply the simple risk-weight approach set out Standardised Approach laid down in Article 155(2); Chapter 2; (b) for exposures assigned to the items representing securitisation positions referred to in point (f) of Article 147(2), point (f), institutions shall apply the treatment set out in Article 254 as if those exposures were directly held by those institutions; (c) for all other underlying exposures, institutions shall apply the Standardised Approach laid down in Chapter 2 of this Title. For the purposes of point (a) of the first subparagraph, where the institution is unable to differentiate between private equity exposures, exchange-traded exposures and other equity exposures, it shall treat the exposures concerned as other equity exposures. 2. 5. Where the conditions set out in Article 132(3) are met, institutions that do not have sufficient information about the individual underlying exposures of a CIU may calculate the risk-weighted exposure amount for those exposures in accordance with the mandate-based … 374 unchanged words … upon request. 9. For the purposes of this Article, Article 132(5) and (6) and Article 132b shall apply. For the purposes of this Article, Article 132c shall apply, using the risk weights calculated in accordance with Chapter 3 of this Title.

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Article 153 Risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks banks, exposures to regional governments, local authorities and public sector entities, exposures to institutions and exposures to corporates 1. Subject to the application of the specific treatments laid down in paragraphs 2, 3 2 and 4, the risk-weighted exposure amounts for exposures to corporates, institutions and central governments and central banks banks, exposures to regional governments, local authorities and public sector entities, exposures to institutions and exposures to corporates shall be calculated according to the following formulae: Risk – weighted exposure amount = RW · exposure value where the risk weight RW is defined as (i) if PD = 0, RW shall be 0; (ii) if PD = 1, i.e., for defaulted exposures: where institutions apply the LGD values set out in Article 161(1), RW shall be 0; where institutions use own estimates of LGDs, RW shall be RWmax 0;12.5LGD ELBE; where the expected loss best estimate (hereinafter referred to as ELBE) shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h); (iii) if 0 < PD < 1 RWLGD N11 R GPDR1 R G0.999 LGD PD 1 M 2,5 b1 1,5 b 12,5 1,06 1, then: where: N(x) N = the cumulative distribution function for a standard normal random variable (i.e. variable, i.e. N(x) equals the probability that a normal random variable with mean zero of 0 and variance of one 1, is less than or equal to x); G(Z) denotes x; G = the inverse cumulative distribution function for a standard normal random variable (i.e. variable, i.e. if x = G(z), x is the value x such that N(x) = z) z; R denotes = the coefficient of correlation, which is defined asR0.12 1 e 50 PD1 e 500.24 1 1 e 50 PD1 e 50 as: b = the maturity adjustment factor, which is defined as b0.11852 0.05478 lnPD2. as: b = [0,11852 – 0,05478 ‏‏‏· ln(PD)]2; M = the maturity, expressed in years and determined in accordance with Article 162. 2. For all exposures to large regulated financial sector entities, the co-efficient of correlation of paragraph 1(iii) is multiplied by 1,25. For all exposures entities and to unregulated financial sector entities, the coefficients coefficient of correlation set out R referred to in paragraph 1(iii) and 1, point (iii), or paragraph 4, as relevant, are applicable, shall be multiplied by 1,25. 1,25 when calculating the risk weights of those exposures. 3. The risk-weighted exposure amount for each exposure which meets the requirements set out in Articles 202 and 217 may be adjusted in accordance with the following formula: Risk – weighted exposure amount = RW · exposure value · (0.15 + 160 · PDpp) where: PDpp PD of the protection provider. RW shall be calculated using the relevant risk weight formula set out in point 1 for the exposure, the PD of the obligor and the LGD of a comparable direct exposure to the protection provider. The maturity factor (b) shall be calculated using the lower of the PD of the protection provider and the PD of the obligor. 4. For exposures to companies where the total annual sales for the consolidated group of which the firm is a part is less than EUR 50 million, institutions may use the following correlation formula in paragraph 1 (iii) for the calculation of risk weights for corporate exposures. In this formula S is expressed as total annual sales in millions of euro with EUR 5 million ≤ S ≤ EUR 50 million. Reported sales of less than EUR 5 million shall be treated as if they were equivalent to EUR 5 million. For purchased receivables the total annual sales shall be the weighted average by individual exposures of the pool.R0.12 1 e 50 e50 PD1 e 500.24 e500.24 1 1 e 50 e50 PD1 e 50 0.04 e500.04 1 minmax5,S,50 545 Institutions shall substitute total assets of the consolidated group for total annual sales when total annual sales are not a meaningful indicator of firm size and total assets are a more meaningful indicator than total annual sales. 5. For … 502 unchanged words … by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 154 Risk-weighted exposure amounts for retail exposures 1. The risk-weighted exposure amounts for retail exposures shall be calculated in accordance with the following formulae: Risk – weighted exposure amount = RW · exposure value where the risk weight RW is defined as follows: (i) if PD = 1, i.e., for defaulted exposures, RW shall be RWmax 0;12.5 RWmax0;12.5 LGD ELBE; where ELBE shall be the institution's best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h); (ii) if 0 < PD < 1, i.e., for any possible value for PD other than under (i) RWLGD N11 R GPDR1 R G0.999 LGD PD 12,5 1,06 then: where: N(x) N = the cumulative distribution function for a standard normal random variable (i.e. variable, i.e. N(x) equals the probability that a normal random variable with mean zero of 0 and variance of one 1, is less than or equal to x); G(Z) x; G = the inverse cumulative distribution function for a standard normal random variable (i.e. variable, i.e. if x = G(z), x is the value x such that N(x) = z); z; R = the coefficient of correlation correlation, which is defined asR0.03 1 e 35 PD1 e 350.16 1 1 e 35 PD1 e 35 as: 2. The risk-weighted exposure amount for each exposure to an SME as referred to in Article 147(5) which meets the requirements set out in Articles 202 and 217 may be calculated in accordance with Article 153(3). 3. For retail exposures that are not in default and are secured or partially secured by immovable property collateral residential property, a coefficient of correlation R of 0,15 shall replace the figure produced by the coefficient of correlation formula in paragraph 1. The risk weight calculated for an exposure partially secured by residential property pursuant to paragraph 1, point (ii), taking into account a coefficient of correlation R as set out in the first subparagraph of this paragraph, shall be applied both to the secured and the unsecured part of that exposure. 4. For qualifying revolving retail exposures QRREs that are not in accordance with points (a) to (e), default, a coefficient of correlation R of 0,04 shall replace the figure produced by the coefficient of correlation formula in paragraph 1. Exposures shall qualify as qualifying revolving retail exposures if they meet the following conditions: (a) the exposures are to individuals; (b) the exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the institution. In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the institution. Undrawn commitments may be considered as unconditionally cancellable if the terms permit the institution to cancel them to the full extent allowable under consumer protection and related legislation; (c) the maximum exposure to a single individual in the sub-portfolio is EUR 100000 or less; (d) the use of the correlation of this paragraph is limited to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands; (e) the treatment as a qualifying revolving retail exposure shall be consistent with the underlying risk characteristics of the sub-portfolio. By way of derogation from point (b), the requirement to be unsecured does not apply in respect of collateralised credit facilities linked to a wage account. In this case amounts recovered from the collateral shall not be taken into account in the LGD estimate. Competent authorities shall review the relative volatility of loss rates across QRREs belonging to the qualifying revolving retail sub-portfolios, same type of exposures, as well as across the aggregate qualifying revolving retail portfolio, QRRE exposure class, and shall share information on the typical characteristics of qualifying revolving retail loss rates across with Member States. States and with EBA. 5. To be eligible for the retail treatment, purchased receivables shall comply with the requirements set out in Article 184 and the following conditions: (a) the institution has purchased the receivables from unrelated third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the institution itself; (b) the purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible; (c) the purchasing institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and (d) the portfolio of purchased receivables is sufficiently diversified. 6. For purchased retail receivables, refundable purchase price discounts, collaterals or partial guarantees that provide first loss protection for default losses, dilution losses, or both, may be treated as a first loss protection by the purchaser of the receivables or by the beneficiary of the collateral or of the partial guarantee in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. The seller providing the refundable purchase price discount and the provider of a collateral or a partial guarantee shall treat those as an exposure to a first loss position in accordance with Subsections 2 and 3 of Section 3 of Chapter 5. 7. For hybrid pools of purchased retail receivables where purchasing institutions cannot separate exposures secured by immovable property collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply.

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Article 158 Treatment by exposure type 1. The calculation of expected loss amounts shall be based on the same input figures of PD, LGD and the exposure value for each exposure as are used for the calculation of risk-weighted exposure amounts in accordance with Article 151. 2. The expected loss amounts for securitised exposures shall be calculated in accordance with Chapter 5. 3. The expected loss amount for exposures belonging to the other non credit obligations assets exposure class referred to in point (g) of Article 147(2) shall be zero. 4. The expected loss amounts for exposures in the form of shares or units of a CIU referred to in Article 152 shall be calculated in accordance with the methods set out in this Article. 5. The expected loss (EL) and expected loss amounts for exposures to corporates, institutions, central governments and central banks banks, regional governments, local authorities and public sector entities and retail exposures shall be calculated in accordance with the following formulae: Expected expected loss (EL) = PD * LGD Expected expected loss amount = EL [multiplied by] exposure value. For defaulted exposures (PD = 100 %) where institutions use own estimates of LGDs, LGD, EL shall be ELBE, the institution's institution’s best estimate of expected loss for the defaulted exposure in accordance with Article 181(1)(h). For exposures subject to the treatment set out in Article 153(3), EL shall be 0 %. 181(1), point (h). 6. The EL values for specialised lending exposures where institutions use the methods set out in Article 153(5) for assigning risk weights shall be assigned in accordance with Table 2. Table 2 Remaining Maturity Category 1 Category 2 Category 3 Category 4 Category 5 Less than 2,5 years 0 % 0,4 % 2,8 % 8 % 50 % Equal to or more than 2,5 years 0,4 % 0,8 % 2,8 % 8 % 50 % 7. The expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the simple risk weight approach shall be calculated in accordance with the following formula: Expected loss amount = EL · exposure value The EL values shall be the following: Expected loss (EL) 0,8 % for private equity exposures in sufficiently diversified portfolios Expected loss (EL) 0,8 % for exchange traded equity exposures Expected loss (EL) 2,4 % for all other equity exposures. 8. The expected loss and expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the PD/LGD approach shall be calculated in accordance with the following formula: Expected loss (EL) = PD · LGD Expected loss amount = EL · exposure value 9. The expected loss amounts for equity exposures where the risk-weighted exposure amounts are calculated in accordance with the internal models approach shall be zero. 9a. The expected loss amount for a minimum value commitment that meets all the requirements set out in Article 132c(3) shall be zero. 10. The expected loss amounts for dilution risk of purchased receivables shall be calculated in accordance with the following formula: Expected loss (EL) = PD · LGD Expected loss amount = EL · exposure value

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before (02013R0575-20240709)

Article 159
Treatment of expected loss amounts
Institutions shall subtract the expected loss amounts calculated in accordance with Article 158(5), (6) and (10) from the general and specific credit risk adjustments in accordance with Article 110, additional value adjustments in accordance with Articles 34 and 105 and other own funds reductions related to those exposures except for the deductions made in accordance with point (m) Article 36(1). Discounts on balance sheet exposures purchased when in default in accordance with Article 166(1) shall be treated in the same manner as specific credit risk adjustments. Specific credit risk adjustments on exposures in default shall not be used to cover expected loss amounts on other exposures. Expected loss amounts for securitised exposures and general and specific credit risk adjustments related to those exposures shall not be included in that calculation.

after (02013R0575-20250101)

Article 159
Treatment of expected loss amounts, IRB shortfall and IRB excess
1. Institutions shall subtract the expected loss amounts of exposures referred to in Article 158(5), (6) and (10) from the sum of all of the following:
(a) the general and specific credit risk adjustments related to those exposures, calculated in accordance with Article 110;
(b) additional value adjustments due to counterparty default determined in accordance with Article 34 and related to exposures for which the expected loss amounts are calculated in accordance with Article 158(5), (6) and (10);
(c) other own funds reductions related to those exposures other than the deductions made in accordance with Article 36(1), point (m).
Where the calculation performed in accordance with the first subparagraph results in a positive amount, the amount obtained shall be called IRB excess. Where the calculation performed in accordance with the first subparagraph results in a negative amount, the amount obtained shall be called IRB shortfall.
2. For the purposes of the calculation referred to in the paragraph 1 of this Article, institutions shall treat discounts determined in accordance with Article 166(1) on balance-sheet exposures purchased when in default in the same manner as specific credit risk adjustments. Discounts on balance-sheet exposures purchased when not in default shall not be allowed to be included in the calculation of the IRB shortfall or IRB excess. Specific credit risk adjustments on exposures in default shall not be used to cover expected loss amounts on other exposures. Expected loss amounts for securitised exposures and general and specific credit risk adjustments related to those exposures shall not be included in the calculation of the IRB shortfall or IRB excess.

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Article 159a
Non-application of PD, LGD and CCF input floors
For the purposes of Chapter 3, and in particular with regard to Articles 160(1), 161(4), 164(4) and 166(8c), where an exposure is covered by an eligible guarantee provided by a central government or central bank or by the ECB, the PD, LGD and CCF input floors shall not apply to the part of the exposure covered by that guarantee. However, the part of the exposure that is not covered by that guarantee shall be subject to the PD, LGD and CCF input floors concerned.

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Article 160 Probability of default (PD) 1. The For exposures assigned to the exposure classes referred to in Article 147(2), point (b), or point (c)(i), (ii) or (iii), for the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, in particular for the purposes of Articles 153 and 157, and Article 158(1), (5) and (10), the PD value that is used for each exposure as an input of the risk-weighted exposure amounts and expected loss formulae shall not be less than the following PD input floor value: 0,05 %. 1a. For exposures assigned to the exposure classes referred to in Article 147(2), point (aa)(i) or (ii), for the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, the PD value that is used for each exposure as an input of the risk-weighted exposure to a corporate or an institution amounts and expected loss formulae shall not be at least less than the following PD input floor value: 0,03 %. 2. For purchased corporate receivables in respect of which an institution is not able to estimate PDs or an institution's PD estimates do not meet the requirements set out in Section 6, the PDs for these exposures shall be determined in accordance with the following methods: (a) for senior claims on purchased corporate receivables PD shall be the institutions estimate of EL divided by LGD for these receivables; (b) for subordinated claims on purchased corporate receivables PD shall be the institution's estimate of EL; (c) an institution that has received the permission of the competent authority to use own LGD estimates for corporate exposures pursuant to Article 143 and that can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a manner that the competent authority considers to be reliable, may use the PD estimate that results from this decomposition. 3. The PD of obligors in default shall be 100 %. 4. Institutions For an exposure covered by an unfunded credit protection, an institution using own estimates of LGD under Article 143 for both the exposure that is covered by the unfunded credit protection and for comparable direct exposures to the protection provider may take into account recognise the unfunded credit protection in the PD in accordance with the provisions of Chapter 4. For dilution risk, in addition to the protection providers referred to in Article 201(1)(g) the seller of the purchased receivables is eligible if the following conditions are met: (a) the corporate entity has a credit assessment by an ECAI which has been determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2; (b) the corporate entity, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, does not have a credit assessment by a recognised ECAI and is internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by EBA to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2. 183. 5. Institutions using own LGD estimates may recognise unfunded credit protection by adjusting PDs subject to Article 161(3). 6. For dilution risk of purchased corporate receivables, PD shall be set equal to the EL estimate estimates of the institution for dilution risk. An institution that has received permission from the competent authority pursuant to Article 143 to use own estimates of LGD estimates for corporate exposures that can decompose its EL estimates for dilution risk of purchased corporate receivables into PDs and LGDs in a manner that the competent authority considers to be reliable, may use the PD estimate estimates that results result from this that decomposition. Institutions may recognise unfunded credit protection in the PD in accordance with the provisions of Chapter 4. For dilution risk, in addition to the protection providers referred to in Article 201(1)(g), the seller of the purchased receivables is eligible provided that the conditions set out in paragraph 4 are met. 7. By way of derogation from Article 201(1)(g), the corporate entities that meet the conditions set out in paragraph 4 are eligible. An institution that has received the permission of the competent authority pursuant to Article 143 to use own estimates of LGD estimates for dilution risk of purchased corporate receivables, receivables may recognise unfunded credit protection by adjusting PDs subject to Article 161(3).

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before (02013R0575-20240709)

Article 161
Loss Given Default (LGD)
1. Institutions shall use the following LGD values:
(a) senior exposures without eligible collateral: 45 %;
(b) subordinated exposures without eligible collateral: 75 %;
(c) institutions may recognise funded and unfunded credit protection in the LGD in accordance with Chapter 4;
(d) covered bonds eligible for the treatment set out in Article 129(4) or (5) may be assigned an LGD value of 11,25 %;
(e) for senior purchased corporate receivables exposures where an institution is not able to estimate PDs or the institution's PD estimates do not meet the requirements set out in Section 6: 45 %;
(f) for subordinated purchased corporate receivables exposures where an institution is not able to estimate PDs or the institution's PD estimates do not meet the requirements set out in Section 6: 100 %;
(g) for dilution risk of purchased corporate receivables: 75 %.
2. For dilution and default risk if an institution has received permission from the competent authority to use own LGD estimates for corporate exposures pursuant to Article 143 and it can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a manner the competent authority considers to be reliable, the LGD estimate for purchased corporate receivables may be used.
3. If an institution has received the permission of the competent authority to use own LGD estimates for exposures to corporates, institutions, central governments and central banks pursuant to Article 143, unfunded credit protection may be recognised by adjusting PD or LGD subject to requirements as specified in Section 6 and permission of the competent authorities. An institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor.
4. For the purposes of the undertakings referred to in Article 153(3), the LGD of a comparable direct exposure to the protection provider shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively.

after (02013R0575-20250101)

Article 161
Loss Given Default (LGD)
1. Institutions shall use the following LGD values:
(a) senior exposures without eligible funded credit protection to central governments and central banks, to financial sector entities and to regional governments, local authorities and public sector entities: 45 %;
(aa) senior exposures without eligible funded credit protection to corporates which are not financial sector entities: 40 %;
(b) subordinated exposures without eligible collateral: 75 %;
(c) institutions may recognise funded and unfunded credit protection in the LGD in accordance with Chapter 4;
(d) covered bonds eligible for the treatment set out in Article 129(4) or (5) may be assigned an LGD value of 11,25 %;
(e) for senior purchased corporate receivables exposures where an institution is not able to estimate PDs or where the institution’s PD estimates do not meet the requirements set out in Section 6: 40 %;
(f) for subordinated purchased corporate receivables exposures where an institution is not able to estimate PDs or the institution's PD estimates do not meet the requirements set out in Section 6: 100 %;
(g) for dilution risk of purchased corporate receivables: 100 %.
2. For dilution and default risk if an institution has received permission from the competent authority to use own LGD estimates for corporate exposures pursuant to Article 143 and it can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a manner the competent authority considers to be reliable, the LGD estimate for purchased corporate receivables may be used.
3. For an exposure covered by an unfunded credit protection, an institution using own estimates of LGD pursuant to Article 143 for both the exposure that is covered by an unfunded credit protection and for comparable direct exposures to the protection provider may recognise the unfunded credit protection in the LGD in accordance with Article 183.
4. For exposures assigned to the exposure classes referred to in Article 147(2), point (c)(i), (ii) or (iii), for the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, and in particular for the purposes of Article 153(1), point (iii), Article 157, and Article 158(1), (5) and (10), where own estimates of LGD are used, the LGD values for each exposure used as an input of the risk-weighted exposure amounts and expected loss formulae shall not be less than the following LGD input floor values, calculated in accordance with paragraph 6 of this Article.
Table 1
LGD input floors (LGDfloor) for exposures belonging to the exposure classes referred to in Article 147(2), point (c)(i), (ii) or (iii)
Exposure without eligible FCP (LGDU-floor) Exposure fully secured by eligible FCP (LGDS-floor)
25 % financial collateral 0 %
receivables 10 %
residential property or commercial immovable property 10 %
other physical collateral 15 %
5. For exposures assigned to the exposure classes referred to in Article 147(2), point (aa)(i) or (ii), for the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, and in particular for the purposes of Article 153(1), point (iii), Article 157, and Article 158(1), (5) and (10), where own estimates of LGD are used, the LGD value used as an input of the risk-weighted exposure amounts and expected loss formulae for exposures without eligible FCP shall not be less than the following LGD input floor value: 5 %.
6. For the purposes of paragraph 4 of this Article, the LGD input floors in Table 1 in that paragraph for exposures fully secured by eligible funded credit protection shall apply when the value of the funded credit protection, after the application of the volatility adjustments Hc and Hfx concerned in accordance with Article 230, is equal to or exceeds the value of the underlying exposure.
For the purposes of paragraph 4 of this Article and for the purposes of the application of the relevant related adjustments, Hc and Hfx, in accordance with Article 230, funded credit protection shall be eligible pursuant to this Chapter. In that case, the type of funded credit protection other physical collateral in Article 230, Table 1, shall be understood as other physical and other eligible collateral.
The applicable LGD input floor (LGDfloor) for an exposure partially secured by FCP is calculated as the weighted average of LGDU-floor for the part of the exposure without FCP and LGDS-floor for the fully secured part, as follows:
where:
LGDU-floor and LGDS-floor are the relevant floor values in Table 1;
E, ES, EU and HE are determined in accordance with Article 230.
7. Where an institution that uses own estimates of LGD for a given type of unsecured exposures to corporates and unsecured exposures to regional governments, local authorities and public sector entities is not able to take into account the effect of the funded credit protection securing one of the exposures of that type of exposures in the own estimate of LGD due to lack of data on recoveries for that funded credit protection, the institution shall be permitted to apply the formula set out in Article 230, with the exception that the LGDU in that formula shall be the institution’s own estimate of LGD for unsecured exposures. In that case, the funded credit protection shall be eligible in accordance with Chapter 4 and the institution’s own estimate of LGD used as LGDU shall be calculated based on underlying loss data excluding any recoveries arising from that funded credit protection.

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Article 162 Maturity 1. Institutions that have For exposures for which an institution has 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 estimates of LGD, the maturity value (M) shall be applied consistently and, either be set at 2,5 years, except for exposures to corporates, institutions or central governments and central banks pursuant to Article 143 arising from securities financing transactions, for which M shall calculate M be 0,5 years, or, alternatively, be calculated in accordance with paragraph 2. 2. For exposures for each which an institution applies own estimates of these exposures LGD, the maturity value (M) shall be calculated using periods expressed in years, as set out in points (a) to (e) of this paragraph and subject to paragraphs 3 to 3, 4 and 5 of this Article. M shall be no greater than five years years, except in the cases specified in Article 384(1) 384(2) where M as specified there therein shall be used: used. M shall be calculated as follows in each of the following cases: (a) for an instrument subject to a cash flow schedule, M shall be calculated in accordance with the following formula: 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 shall be at least 1 year, and the notional amount of each exposure shall be used for weighting the maturity; (c) for exposures arising from fully or nearly-fully collateralised derivative instruments listed in Annex II and fully or nearly-fully collateralised margin lending transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least 10 days; (d) for repurchase transactions or securities or commodities lending or borrowing transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least five days. The notional amount of each transaction shall be used for weighting the maturity; (da) for secured lending transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least 20 days; the notional amount of each transaction shall be used for weighting the maturity; (db) for a master netting agreement including more than one of the transaction types corresponding to point (c), (d) or (da) of this paragraph, M shall be the weighted average remaining maturity of the transactions where M shall be at least the longest holding period, expressed in years, applicable to such transactions as provided for in Article 224(2), either 10 days or 20 days, depending on the cases; the notional amount of each transaction shall be used for weighting the maturity; (e) an institution that has received the permission of the competent authority pursuant to Article 143 to use own PD estimates for purchased corporate receivables, for drawn amounts M shall equal the purchased receivables exposure weighted average maturity, where M shall be at least 90 days. This same value of M shall also be used for undrawn amounts under a committed purchase facility provided that the facility contains effective covenants, early amortisation triggers, or other features that protect the purchasing institution against a significant deterioration in the quality of the future receivables it is required to purchase over the facility's term. Absent such effective protections, M for undrawn amounts shall be calculated as the sum of the longest-dated potential receivable under the purchase agreement and the remaining maturity of the purchase facility, where M shall be at least 90 days; (f) for any instrument other than those referred to in this paragraph or when an institution is not in a position to calculate M as set out in point (a), M shall be the maximum remaining time (in years) time, in years, that the obligor is permitted to take to fully discharge its contractual obligations, including the principal, interest, and fees, where M shall be at least one year; (g) for institutions using the Internal Model Method set out in Section 6 of Chapter 6 to calculate the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year in accordance with the following formula: MminkEffective EEtk Δtk dftk stkkEEtk stkk EEtk Δtk dftk1 stkkEffective EEtk Δtk dftk stk,5 where: Stk a dummy variable whose value at future period tk is equal to 0 if tk > 1 year and to 1 if tk ≤ 1; EEtk the expected exposure at the future period tk; Effective EEtk the effective expected exposure at the future period tk; dftk the risk-free discount factor for future time period tk; Δtk tk tk1; Δtktktk1; (h) an institution that uses an internal model to calculate a one-sided credit valuation adjustment (CVA) may use, subject to the permission of the competent authorities, the effective credit duration estimated by the internal model as M. Subject to paragraph 2, for netting sets in which all contracts have an original maturity of less than one year the formula in point (a) shall apply; (i) for institutions using the Internal Model Method set out approaches referred to in Section 6 of Chapter 6, Article 382a(1), point (a) or (b), to calculate the exposure values and having an internal model permission own funds requirements for specific the CVA risk associated of transactions with traded debt positions in accordance with Part Three, Title IV, Chapter 5, a given counterparty, M shall be set to no greater than 1 in the formula laid set out in Article 153(1), provided that an institution can demonstrate point (iii), for the purpose of calculating the risk-weighted exposure amounts for counterparty risk for the same transactions, as referred to the competent authorities that its internal model for Specific risk associated with traded debt positions applied in Article 383 contains effects of rating migrations; 92(4), point (a) or (g), as applicable; (j) for the purposes of Article 153(3), revolving exposures, M shall be determined using the effective maturity maximum contractual termination date of the credit protection but at least 1 year. facility; institutions shall not use the repayment date of the current drawing if that date is not the maximum contractual termination date of the facility. 3. Where the documentation requires daily re-margining and daily revaluation and includes provisions that allow for the prompt liquidation or set off of collateral in the event of default or failure to remargin, M shall be the weighted average remaining maturity of the transactions and M shall be at least one-day one day for: (a) fully or nearly-fully collateralised derivative instruments listed in Annex II; (b) fully or nearly-fully collateralised margin lending transactions; (c) repurchase transactions, securities or commodities lending or borrowing transactions. In addition, for qualifying short-term exposures which are not part of the institution's ongoing financing of the obligor, M shall be at least one-day. Qualifying short term exposures shall include the following: (a) exposures to institutions or investment firms arising from the settlement of foreign exchange obligations; (b) self-liquidating short-term trade finance transactions connected to and corporate purchased receivables, provided that the exchange of goods or services with respective exposures have a residual maturity of up to one year as referred to in point (80) of Article 4(1); year; (c) exposures arising from settlement of securities purchases and sales within the usual delivery period or two business days; (d) exposures arising from cash settlements by wire transfer and settlements of electronic payment transactions and prepaid cost, including overdrafts arising from failed transactions that do not exceed a short, fixed agreed number of business days. days; (e) issued as well as confirmed letters of credit that are short term, that is, they have a maturity below one year, and are self-liquidating. 4. For exposures to corporates situated established in the Union and having consolidated sales and consolidated assets of less than EUR 500 million, which are not large corporates, institutions may choose to consistently set for all such exposures M as set out in paragraph 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 4.6. For the purpose of expressing in years the minimum numbers of days referred to in paragraph 2, points (c) to (db), and paragraph 3, the minimum numbers of days shall be divided by 365,25.

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Article 163 Probability of default (PD) 1. The For the sole purpose of calculating risk-weighted exposure amounts and the expected loss amounts of those exposures, and in particular for the purposes of Articles 154 and 157, and Article 158(1), (5) and (10), the PD for each exposure that is used as an input of an the risk-weighted exposure amounts and expected loss formulae shall be at least 0,03 %. the higher of the one-year PD associated with the internal borrower grade or pool to which the retail exposure is assigned and the following PD input floor values: (a) 0,1 % for QRRE revolvers; (b) 0,05 % for retail exposures which are not QRRE revolvers. 2. The PD of obligors or, where an obligation approach is used, of exposures in default shall be 100 %. 3. For dilution risk of purchased receivables PD shall be set equal to EL estimates for dilution risk. If an institution can decompose its EL estimates for dilution risk of purchased receivables into PDs and LGDs in a manner the competent authorities consider to be reliable, the PD estimate may be used. 4. Unfunded For an exposure covered by an unfunded credit protection may be taken into account by adjusting PDs subject to protection, an institution using own estimates of LGD under Article 164(2). For dilution risk, in addition 143 for comparable direct exposures to the protection providers referred to provider may recognise the unfunded credit protection in the PD in accordance with Article 201(1)(g), the seller of the purchased receivables is eligible if the conditions set out in Article 160(4) are met. 183.

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Article 164 Loss Given Default (LGD) 1. Institutions shall provide own estimates of LGDs LGD subject to the requirements specified in Section 6 of this Chapter and to permission of the competent authorities granted in accordance with Article 143. For dilution risk of purchased receivables, an LGD value of 75 100 % shall be used. If Where an institution can decompose its EL expected loss estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the institution may use its own estimates of LGD. 2. Institutions using own estimates of LGD estimate. 2. Unfunded pursuant to Article 143 for comparable direct exposures to the protection provider may recognise the unfunded credit protection may be recognised as eligible by adjusting PD or in the LGD estimates subject to requirements as specified in accordance with Article 183(1), (2) and (3) and the permission of the competent authorities either in support of an individual exposure or a pool of exposures. An institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor. 183. 3. For the purposes of Article 154(2), the LGD of a comparable direct exposure to the protection provider referred to in Article 153(3) shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether, in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively. 4. The exposure-weighted average For the sole purpose of calculating risk-weighted exposure amounts and expected loss amounts for retail exposures, and in particular pursuant to Article 154(1), point (ii), Article 157, and Article 158(1), (5) and (10), the LGD values for all each exposure used as an input of the risk-weighted exposure amounts and expected loss formulae shall not be less than the LGD input floor values set out in Table 1, calculated in accordance with paragraph 4a of this Article: Table 1 LGD input floors (LGDfloor) for retail exposures Exposure without FCP (LGDU-floor) Exposure secured by FCP (LGDS-floor) Retail exposure secured by residential property N/A Retail exposure secured by residential property 5 % QRRE 50 % QRRE N/A Other retail exposure 30 % Other retail exposure secured by financial collateral 0 % Other retail exposure secured by receivables 10 % Other retail exposure secured by residential property or commercial immovable property 10 % Other retail exposure secured by other physical collateral 15 % 4a. For the purposes of paragraph 4, the following shall apply: (a) LGD input floors in paragraph 4, Table 1 shall be applicable for exposures secured by funded credit protection when the funded credit protection is eligible pursuant to this Chapter; (b) except for retail exposures secured by residential property property, the LGD input floors in paragraph 4, Table 1, of this Article shall be applicable to exposures fully secured by funded credit protection where the value of the FCP, after the application of the relevant volatility adjustments in accordance with Article 230, is equal to or exceeds the exposure value of the underlying exposure; for the purpose of the application of the relevant related adjustments, Hc and not benefiting from guarantees from central governments Hfx, in accordance with Article 230, funded credit protection shall not be lower than 10 %. The exposure-weighted average LGD eligible pursuant to this Chapter; (c) except for all retail exposures secured by commercial immovable property and not benefiting from guarantees from central governments residential property, the applicable LGD input floor for an exposure partially secured by funded credit protection is calculated in accordance with the formula set out in Article 161(6); (d) for retail exposures secured by residential property, the applicable LGD input floor shall not be lower than 15 %. fixed at 5 % irrespective of the level of collateral provided by the residential property. 5. Member States shall designate an authority to be responsible for the application of paragraph 6. That authority shall be the competent authority or the designated authority. Where the authority designated by the Member State for the application of this Article is the competent authority, it shall ensure that the relevant national bodies and authorities which have a macroprudential mandate are duly informed of the competent authority's intention to make use of this Article, and are appropriately involved in the assessment of financial stability concerns in its Member State in accordance with paragraph 6. Where the authority designated by the Member State for the application of this Article is different from the competent authority, the Member State shall adopt the necessary provisions to ensure proper coordination and exchange of information between the competent authority and the designated authority for the proper application of this Article. In particular, authorities shall be required to cooperate closely and to share all the information that may be necessary for the adequate performance of the duties imposed upon the designated authority pursuant to this Article. That cooperation shall aim at avoiding any form of duplicative or inconsistent action between the competent authority and the designated authority, as well as ensuring that the interaction with other measures, in particular measures taken under Article 458 of this Regulation and Article 133 of Directive 2013/36/EU, is duly taken into account. 6. Based on the data collected under Article 430a and on any other relevant indicators, and taking into account forward-looking immovable property market developments the authority designated in accordance with paragraph 5 of this Article shall periodically, and at least annually, assess whether the minimum LGD input floor values referred to in paragraph 4 of this Article, Article are appropriate for retail exposures secured by mortgages on residential property or other retail exposures secured by residential property or commercial immovable property located in one or more parts of the territory of the Member State of the relevant that authority. Where, on the basis of the assessment referred to in the first subparagraph of this paragraph, the authority designated in accordance with paragraph 5 concludes that the minimum LGD input floor values referred to in paragraph 4 are not adequate, and if it considers that the inadequacy of LGD input floor values could adversely affect current or future financial stability in its Member State, it may set higher minimum LGD input floor values for those exposures located in one or more parts of the territory of the Member State of the relevant that authority. Those higher minimum LGD input floor values may also be applied at the level of one or more property segments of such exposures. The authority designated in accordance with paragraph 5 shall notify EBA and the ESRB before making the decision referred to in the second subparagraph of this paragraph. Within one month of receipt of that notification notification, EBA and the ESRB shall provide their opinion to the Member State concerned. EBA and the ESRB shall publish those the higher LGD values. input floor values referred to in the second subparagraph of this paragraph. 7. Where the authority designated in accordance with paragraph 5 sets higher minimum LGD input floor values pursuant to paragraph 6, institutions shall have a six-month transitional period to apply them. 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. 10. The institutions of a Member State shall apply the higher minimum LGD values that have been determined by the authorities of another Member State in accordance with paragraph 6 to all their corresponding exposures secured by mortgages on residential property or commercial immovable property located in one or more parts of that Member State.

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Article 166 Exposures to corporates, institutions, central governments and central banks banks, regional governments, local authorities and public sector entities and retail exposures 1. Unless noted otherwise, the exposure value of on-balance sheet exposures shall be the accounting value measured without taking into account any credit risk adjustments made. This rule also applies to assets purchased at a price different than the … 378 unchanged words … commodities, as set out therein. The exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions may be determined either in accordance with Chapter 6 or Article 220(2). 8. The exposure value for the following of off-balance-sheet items which are not contracts as listed in Annex II shall be calculated by using either IRB-CCF or SA-CCFs, in accordance with paragraphs 8a and 8b of this Article and Article 151(8). Where only the drawn balances of revolving facilities have been securitised, institutions shall ensure that they continue to hold the required amount of own funds against the undrawn balances associated with the securitisation. An institution that has not received permission to use IRB-CCF shall calculate the exposure value as the committed but undrawn amount multiplied by the SA-CCF concerned. An institution that uses IRB-CCF shall calculate the exposure value for undrawn commitments as the undrawn amount multiplied by IRB-CCF. 8a. For an exposure for which an institution has not received permission to use IRB-CCF, the applicable CCF shall be the SA-CCF as provided for in Chapter 2 for the same types of items as laid down in Article 111. The amount to which the SA-CCF is to be applied shall be the lower of the value of the committed but undrawn amount and the value that reflects any possible constraining of the availability of the facility, including the existence of an upper limit on the potential lending amount which is related to an obligor’s reported cash flow. Where a conversion factor. Institutions shall use the following conversion factors facility is constrained in accordance with Article 151(8) for exposures to corporates, institutions, central governments and central banks: (a) for credit lines that are unconditionally cancellable at any time by way, the institution without prior notice, or shall have sufficient line monitoring and management procedures to support the existence of that effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect deterioration in the credit quality of the obligor. Undrawn credit lines may be considered as unconditionally cancellable if the terms permit the institution to cancel them constraining. 8b. Subject to the full extent allowable under consumer protection and related legislation; (b) for short-term letters permission of credit arising from the movement of goods, a conversion factor of 20 % shall apply for both the issuing and confirming institutions; (c) for undrawn purchase commitments for revolving purchased receivables competent authorities, institutions that are able to be unconditionally cancelled or that effectively provide for automatic cancellation at any time by the institution without prior notice, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor; (d) for other credit lines, note issuance facilities (NIFs), and revolving underwriting facilities (RUFs), a conversion factor of 75 % shall apply. Institutions which meet the requirements for the use of own estimates of conversion factors IRB-CCF as specified in Section 6 may shall use their own estimates IRB-CCF for exposures arising from undrawn revolving commitments treated under the IRB Approach provided that those exposures would not be subject to a SA-CCF of conversion factors across different product types 100 % under the Standardised Approach. SA-CCFs shall be used for: (a) all other off-balance-sheet items, in particular undrawn non-revolving commitments; (b) exposures where the minimum requirements for calculating IRB-CCF as mentioned specified in Section 6 are not met by the institution or where the competent authority has not permitted the use of IRB-CCF. For the purposes of this Article, a commitment shall be deemed revolving where it lets an obligor obtain a loan where the obligor has the flexibility to decide how often to withdraw from the loan and at what intervals, allowing the obligor to drawdown, repay and redraw loans advanced to it. Contractual arrangements that allow prepayments and subsequent redraws of those prepayments shall be considered revolving. 8c. Where IRB-CCF are used for the sole purpose of calculating risk-weighted exposure amounts and expected loss amounts of exposures arising from revolving commitments other than exposures assigned to the exposure class in accordance with Article 147(2), point (a), in particular pursuant to Article 153(1), Article 157 and Article 158(1), (5) and (10), the exposure value for each exposure used as an input of the risk-weighted exposure amount and expected loss formulae shall not be less than the sum of: (a) the drawn amount of the revolving commitment; (b) 50 % of the off-balance exposure amount of the remaining undrawn part of the revolving commitment calculated using the applicable SA-CCF provided for in Article 111. The sum of points (a) and (b) shall be referred to (d), subject to permission of as the competent authorities. CCF input floor. 9. Where a commitment refers to the extension of another commitment, the lower of the two conversion factors associated with the individual commitment shall be used. 10. For all off-balance sheet items other than those mentioned in paragraphs 1 to 8, the exposure value shall be the following percentage of its value: (a) 100 % if it is a full risk item; (b) 50 % if it is a medium-risk item; (c) 20 % if it is a medium/low-risk item; (d) 0 % if it is a low-risk item. For the purposes of this paragraph the off-balance sheet items shall be assigned to risk categories as indicated in Annex I.

No text on either side: this unit was named by a signal that carries no text, and only the structural diff carries any.

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Article 169 General principles 1. Where an institution uses multiple rating systems, the rationale for assigning an obligor or a transaction to a rating system shall be documented and applied in a manner that appropriately reflects the level of risk. 2. Assignment criteria and processes shall be periodically reviewed to determine whether they remain appropriate for the current portfolio and external conditions. 3. Where an institution uses direct estimates of risk parameters for individual obligors or exposures these may be seen as estimates assigned to grades on a continuous rating scale.EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on how to apply in practice the requirements on model design, risk quantification, validation and application of risk parameters using continuous or very granular rating scales for each risk parameter.

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Article 170 Structure of rating systems 1. The structure of rating systems for exposures to corporates, institutions and institutions, central governments and central banks banks, and regional governments, local authorities and public sector entities shall comply with the following requirements: (a) a rating system shall take into account obligor and transaction risk characteristics; (b) a rating system shall have an obligor rating scale which reflects exclusively quantification of the risk of obligor default. The obligor rating … 412 unchanged words … level. For purchased receivables the grouping shall reflect the seller's underwriting practices and the heterogeneity of its customers. 4. Institutions shall consider the following risk drivers when assigning exposures to grades or pools: (a) obligor risk characteristics; (b) transaction risk characteristics, including product or collateral types or both. Institutions and funded credit protection types, recognised unfunded credit protection, loan-to-value measures, seasoning and seniority; institutions shall explicitly address cases where several exposures benefit from the same collateral; funded or unfunded credit protection; (c) delinquency, except where an institution demonstrates to the satisfaction of its competent authority that delinquency is not a material driver of risk for the exposure.

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Article 171 Assignment to grades or pools 1. An institution shall have specific definitions, processes and criteria for assigning exposures to grades or pools within a rating system that comply with the following requirements: (a) the grade or pool definitions and criteria shall be sufficiently detailed to allow those charged with assigning ratings to consistently assign obligors or facilities posing similar risk to the same grade or pool. This consistency shall exist across lines of business, departments and geographic locations; (b) the documentation of the rating process shall allow third parties to understand the assignments of exposures to grades or pools, to replicate grade and pool assignments and to evaluate the appropriateness of the assignments to a grade or a pool; (c) the criteria shall also be consistent with the institution's internal lending standards and its policies for handling troubled obligors and facilities. 2. An institution shall take all relevant information into account in assigning obligors and facilities to grades or pools. Information shall be current and shall enable the institution to forecast the future performance of the exposure. The less information an institution has, the more conservative shall be its assignments of exposures to obligor and facility grades or pools. If an institution uses an external rating as a primary factor determining an internal rating assignment, the institution shall ensure that it considers other relevant information.3. Institutions shall use a time horizon longer than one year in assigning ratings. An obligor rating shall represent the institution’s assessment of the obligor’s ability and willingness to contractually perform despite adverse economic conditions or the occurrence of unexpected events. Rating systems shall be designed in such a way that idiosyncratic changes and, where they are material drivers of risk for the type of exposure, industry-specific changes are a driver of migrations from one grade or pool to another. Business cycle effects may also be a driver of migrations.

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Article 172 Assignment of exposures 1. For exposures to corporates, institutions and central governments and central banks, exposures to regional governments, local authorities and for equity public sector entities, exposures where an institution uses to institutions and exposures to corporates, the PD/LGD approach set out in Article 155(3), assignment of exposures shall be carried out in accordance with the following criteria: (a) each obligor shall be assigned to an obligor grade as part of the credit approval process; (b) for those exposures for which an institution has received the permission of the competent authority to use own estimates of LGDs and conversion factors pursuant to Article 143, each exposure shall also be assigned to a facility grade as part of the credit approval process; (c) institutions using the methods set out in Article 153(5) for assigning risk weights for specialised lending exposures shall assign each of these exposures to a grade in accordance with Article 170(2); (d) each separate legal entity to which the institution is exposed shall be separately rated. An institution shall have appropriate policies regarding the treatment of individual obligor clients and groups of connected clients; rated; (e) separate exposures to the same obligor shall be assigned to the same obligor grade, irrespective of any differences in the nature of each specific transaction. However, where separate exposures are allowed to result in multiple grades for the same obligor, the following shall apply: (i) country transfer risk, this being dependent on whether the exposures are denominated in local or foreign currency; (ii) the treatment of associated guarantees to an exposure may be reflected in an adjusted assignment to an obligor grade; (iii) consumer protection, bank secrecy or other legislation prohibit the exchange of client data. For the purposes of the first subparagraph, point (d), an institution shall have appropriate policies for the treatment of individual obligor clients and groups of connected clients. Those policies shall contain a process for the identification of Specific Wrong-Way risk for each legal entity to which the institution is exposed. For the purposes of Chapter 6, transactions with counterparties where a Specific Wrong-Way risk has been identified shall be treated differently when calculating their exposure value. 2. For retail exposures, each exposure shall be assigned to a grade or a pool as part of the credit approval process. 3. For grade and pool assignments institutions shall document the situations in which human judgement may override the inputs or outputs of the assignment process and the personnel responsible for approving these overrides. Institutions shall document these overrides and note down the personnel responsible. Institutions shall analyse the performance of the exposures whose assignments have been overridden. This analysis shall include an assessment of the performance of exposures whose rating has been overridden by a particular person, accounting for all the responsible personnel.

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Article 173 Integrity of assignment process 1. For exposures to corporates, institutions and central governments and central banks, exposures to regional governments, local authorities and for equity public sector entities, exposures where an institution uses the PD/LGD approach set out in Article 155(3), to institutions and exposures to corporates, the assignment process shall meet the following requirements of integrity: requirements: (a) Assignments and periodic reviews of assignments shall be completed or approved by an independent party that does not directly benefit from decisions to extend the credit; (b) Institutions shall review assignments at least annually and adjust the assignment where the result of the review does not justify carrying forward the current assignment. High risk obligors and problem exposures shall be subject to more frequent review. Institutions shall undertake a new assignment if material information on the obligor or exposure becomes available; (c) An institution shall have an effective process to obtain and update relevant information on obligor characteristics that affect PDs, and on transaction characteristics that affect LGDs or conversion factors. 2. For retail exposures, an institution shall at least annually review obligor and facility assignments and adjust the assignment where the result of the review does not justify carrying forward the current assignment, or review the loss characteristics and delinquency status of each identified risk pool, whichever applicable. An institution shall also at least annually review in a representative sample the status of individual exposures within each pool as a means of ensuring that exposures continue to be assigned to the correct pool, and adjust the assignment where the result of the review does not justify carrying forward the current assignment. 3. EBA shall develop draft regulatory technical standards setting out the methodologies of the competent authorities to assess the integrity of the assignment process and the regular and independent assessment of risks. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 174 Use of models If an institution uses Institutions shall use statistical models and or other mechanical mathematical methods (models) to assign exposures to obligors obligor or facilities facility grades or pools, the pools. The following requirements shall be met: (a) the model shall have good predictive power and capital own funds requirements shall not be distorted as a result of its use. The input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases; use; (b) the institution shall have in place a process for vetting data inputs into the model, which includes an assessment of the accuracy, completeness and appropriateness of the data; (c) the data used to build the model shall be representative of the population of the institution's actual obligors or exposures; (d) the institution shall have a regular cycle of model validation that includes monitoring of model performance and stability; review of model specification; and testing of model outputs against outcomes; (e) the institution shall complement the statistical model by human judgement and human oversight to review model-based assignments and to ensure that the models are used appropriately. Review procedures shall aim at finding and limiting errors associated with model weaknesses. Human judgements shall take into account all relevant information not considered by the model. The institution shall document how human judgement and model results are to be combined.For the purposes of the first paragraph, point (a), the input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases. There shall be a functional link between the inputs and the outputs of the model, which may be determined through expert judgement, where appropriate.

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Article 176 Data maintenance 1. Institutions shall collect and store data on aspects of their internal ratings as required under Part Eight. 2. For exposures to corporates, institutions and central governments and central banks, exposures to regional governments, local authorities and for equity public sector entities, exposures where an institution uses the PD/LGD approach set out in Article 155(3), to institutions and exposures to corporates, institutions shall collect and store: (a) complete rating histories on obligors and recognised guarantors; (b) the dates the ratings were assigned; (c) the key data and methodology used to derive the rating; (d) the person responsible for the rating assignment; (e) the identity of obligors and exposures that defaulted; (f) the date and circumstances of such defaults; (g) data on the PDs and realised default rates associated with rating grades and ratings migration. 3. Institutions not using For exposures for which this Chapter allows the use of own estimates of LGDs and conversion factors LGD or the use of IRB-CCF but for which institutions do not use own estimates of LGD or IRB-CCF, institutions shall collect and store data on comparisons of between realised LGDs to and the values as set out in Article 161(1) 161(1), and between realised conversion factors to the values CCFs and SA-CCFs as set out in Article 166(8). 166(8a). 4. Institutions using own estimates of LGDs and conversion factors shall collect and store: (a) complete histories of data on the facility ratings and LGD and conversion factor estimates associated with each rating scale; (b) the dates on which the ratings were assigned and the estimates were made; (c) the key data and methodology used to derive the facility ratings and LGD and conversion factor estimates; (d) the person who assigned the facility rating and the person who provided LGD and conversion factor estimates; (e) data on the estimated and realised LGDs and conversion factors associated with each defaulted exposure; (f) data on the LGD of the exposure before and after evaluation of the effects of a guarantee/or credit derivative, for those institutions that reflect the credit risk mitigating effects of guarantees or credit derivatives through LGD; (g) data on the components of loss for each defaulted exposure. 5. For retail exposures, institutions shall collect and store: (a) data used in the process of allocating exposures to grades or pools; (b) data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures; (c) the identity of obligors and exposures that defaulted; (d) for defaulted exposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD and conversion factor; (e) data on loss rates for qualifying revolving retail exposures.

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Article 177 Stress tests used in assessment of capital adequacy 1. An institution shall have in place sound stress testing processes for use in the assessment of its capital adequacy. Stress testing shall involve identifying possible events or future changes in economic conditions that could have unfavourable effects on an institution's credit exposures and assessment of the institution's ability to withstand such changes. 2. An institution shall regularly perform a credit risk stress test to assess the effect of certain specific conditions on its total capital requirements for credit risk. The test shall be one chosen by the institution, subject to supervisory review. The test to be employed shall be meaningful and consider the effects of severe, but plausible, recession scenarios. An institution shall assess migration in its ratings under the stress test scenarios. Stressed portfolios shall contain the vast majority of an institution's total exposure. 2a. The scenarios used under paragraph 2 shall also include ESG risk drivers, in particular physical risk and transition risk drivers stemming from climate change. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on the application of paragraph 2 and 2a. 3. Institutions using the treatment set out in Article 153(3) shall consider as part of their stress testing framework the impact of a deterioration in the credit quality of protection providers, in particular the impact of protection providers falling outside the eligibility criteria.

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Article 178 Default of an obligor or credit facility 1. A default shall be considered to have occurred with regard to a particular obligor when either or both of the following have taken place: (a) the institution considers that the obligor is unlikely to pay its credit obligations to the institution, the parent undertaking or any of its subsidiaries in full, without recourse by the institution to actions such as realising security; (b) the obligor is more than 90 days past due on any material credit obligation to the institution, the parent undertaking or any of its subsidiaries. Competent authorities may replace the 90 days with 180 days for exposures secured by residential property or SME commercial immovable property in the retail exposure class, as well as exposures to public sector entities. The 180 days shall not apply for the purposes of point (m) Article 36(1) or Article 127. In the case of retail exposures, institutions may apply the definition of default laid down in points (a) and (b) of the first subparagraph at the level of an individual credit facility rather than in relation to the total obligations of a borrower. 2. The following shall apply for the purposes of point (b) of paragraph 1: (a) for overdrafts, days past due commence once an obligor has breached an advised limit, has been advised a limit smaller than current outstandings, or has drawn credit without authorisation and the underlying amount is material; (b) for the purposes of point (a), an advised limit comprises any credit limit determined by the institution and about which the obligor has been informed by the institution; (c) days past due for credit cards commence on the minimum payment due date; (d) materiality of a credit obligation past due shall be assessed against a threshold, defined by the competent authorities. This threshold shall reflect a level of risk that the competent authority considers to be reasonable; (e) institutions shall have documented policies in respect of the counting of days past due, in particular in respect of the re-ageing of the facilities and the granting of extensions, amendments or deferrals, renewals, and netting of existing accounts. These policies shall be applied consistently over time, and shall be in line with the internal risk management and decision processes of the institution. 3. For the purpose of point (a) of paragraph 1, elements to be taken as indications of unlikeliness to pay shall include the following: (a) the institution puts the credit obligation on non-accrued status; (b) the institution recognises a specific credit adjustment resulting from a significant perceived decline in credit quality subsequent to the institution taking on the exposure; (c) the institution sells the credit obligation at a material credit-related economic loss; (d) the institution consents to a distressed restructuring forbearance measure as referred to in Article 47b of the credit obligation where this that measure is likely to result in a diminished financial obligation caused by due to the material forgiveness, or postponement, of principal, interest or, where relevant fees. This includes, in the case of equity exposures assessed under a PD/LGD Approach, distressed restructuring of the equity itself; relevant, fees; (e) the institution has filed for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the institution, the parent undertaking or any of its subsidiaries; (f) the obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the institution, the parent undertaking or any of its subsidiaries. 4. Institutions that use external data that is not itself consistent with the definition of default laid down in paragraph 1, shall make appropriate adjustments to achieve broad equivalence with the definition of default. 5. If the institution considers that a previously defaulted exposure is such that no trigger of default continues to apply, the institution shall rate the obligor or facility as they would for a non-defaulted exposure. Where the definition of default is subsequently triggered, another default would be deemed to have occurred. 6. EBA shall develop draft regulatory technical standards to specify the conditions according to which a competent authority shall set the threshold referred to in paragraph 2(d). EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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. 7. EBA shall issue guidelines on the application of this Article. Those guidelines shall be adopted in accordance with Article 16 of Regulation (EU) No 1093/2010. By 10 July 2025, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to update the guidelines referred to in the first subparagraph of this paragraph. In particular, that update shall take due account of the necessity to encourage institutions to engage in proactive, preventive and meaningful debt restructuring to support obligors. In developing those guidelines, EBA shall duly consider the need for granting a sufficient flexibility to institutions when specifying what constitutes a diminished financial obligation for the purposes of paragraph 3, point (d).

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Article 179 Overall requirements for estimation 1. In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements: (a) an institution's own estimates of the risk parameters PD, LGD, conversion factor and EL shall incorporate all relevant data, information and methods. The estimates shall be derived using both historical experience and empirical evidence, and not based purely on judgemental considerations. The estimates shall be plausible and intuitive and shall be based on the material drivers of the respective risk parameters. The less data an institution has, the more conservative it shall be in its estimation; (b) an institution shall be able to provide a breakdown of its loss experience in terms of default frequency, LGD, conversion factor, or loss where EL estimates are used, by the factors it sees as the drivers of the respective risk parameters. The institution's estimates shall be representative of long run experience; (c) any changes in lending practice or the process for pursuing recoveries over the observation periods referred to in Article 180(1)(h) and (2)(e), Article 181(1)(j) and (2), and Article 182(2) and (3) shall be taken into account. An institution's estimates shall reflect the implications of technical advances and new data and other information, as it becomes available. Institutions shall review their estimates when new information comes to light but at least on an annual basis; (d) the population of exposures represented in the data used for estimation, the lending standards used when the data was generated and other relevant characteristics shall be comparable with those of the institution's exposures and standards. The economic or market conditions that underlie the data shall be relevant to current and foreseeable conditions. The number of exposures in the sample and the data period used for quantification shall be sufficient to provide the institution with confidence in the accuracy and robustness of its estimates; (e) for purchased receivables the estimates shall reflect all relevant information available to the purchasing institution regarding the quality of the underlying receivables, including data for similar pools provided by the seller, by the purchasing institution, or by external sources. The purchasing institution shall evaluate any data relied upon which is provided by the seller; (f) to overcome biases, an institution shall include appropriate adjustments in its estimates to the extent possible; after having included an appropriate adjustment, it shall add to its estimates a sufficient margin of conservatism that is related to the expected range of estimation errors. Where errors; where methods and data are considered to be less satisfactory, the expected range of errors is larger, and the margin of conservatism shall be larger. Where institutions use different estimates for the calculation of risk weights and for internal purposes, it shall be documented and be reasonable. If institutions can demonstrate to their competent authorities that for data that have been collected prior to 1 January 2007 appropriate adjustments have been made to achieve broad equivalence with the definition of default laid down in Article 178 or with loss, competent authorities may permit the institutions some flexibility in the application of the required standards for data. 2. Where an institution uses data that is pooled across institutions it shall meet the following requirements: (a) the rating systems and criteria of other institutions in the pool are similar to its own; (b) the pool is representative of the portfolio for which the pooled data is used; (c) the pooled data is used consistently over time by the institution for its estimates; (d) the institution shall remain responsible for the integrity of its rating systems; (e) the institution shall maintain sufficient in-house understanding of its rating systems, including the ability to effectively monitor and audit the rating process.

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Article 180 Requirements specific to PD estimation 1. In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements specific to PD estimation to exposures to corporates, institutions and central governments and central banks banks, exposures to regional governments, local authorities and for equity public sector entities, exposures where an institution uses the PD/LGD approach set out in Article 155(3): to institutions and exposures to corporates: (a) institutions shall estimate PDs by obligor grade from long run averages of one-year default rates. PD estimates for obligors that are highly leveraged or for obligors whose assets are predominantly traded assets shall reflect the performance of the underlying assets based on periods of stressed volatilities; (b) for purchased corporate receivables institutions may estimate the EL by obligor grade from long run averages of one-year realised default rates; (c) if an institution derives long run average estimates of PDs and LGDs for purchased corporate receivables from an estimate of EL, and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in Article 181(1)(a); (d) institutions shall use PD estimation techniques only with supporting analysis. Institutions shall recognise the importance of judgmental considerations in combining results of techniques and in making adjustments for limitations of techniques and information; (e) to the extent that an institution uses data on internal default experience for the estimation of PDs, the estimates shall be reflective of current underwriting standards and of any differences in the rating system that generated the data and the current rating system. Where system; where underwriting standards or rating systems have changed, after including an appropriate adjustment, the institution shall add a greater margin of conservatism in its estimate of PD; PD related to the expected range of estimation errors that is not already covered by the appropriate adjustment; (f) to the extent that an institution associates or maps its internal grades to the scale used by an ECAI or similar organisations and then attributes the default rate observed for the external organisation's grades to the institution's grades, mappings shall be based on a comparison of internal rating criteria to the criteria used by the external organisation and on a comparison of the internal and external ratings of any common obligors. Biases or inconsistencies in the mapping approach or underlying data shall be avoided. The criteria of the external organisation underlying the data used for quantification shall be oriented to default risk only and not reflect transaction characteristics. The analysis undertaken by the institution shall include a comparison of the default definitions used, subject to the requirements in Article 178. The institution shall document the basis for the mapping; (g) to the extent that an institution uses statistical default prediction models it is allowed to estimate PDs as the simple average of default-probability estimates for individual obligors in a given grade. The institution's use of default probability models for this purpose shall meet the standards specified in Article 174; (h) irrespective of whether an institution is using external, internal, or pooled data sources, or a combination of the three, for its PD estimation, the length of the underlying historical observation period used shall be at least five years for at least one source. If source; (i) irrespective of the method used to estimate PD, institutions shall estimate a PD for each rating grade based on the observed historical average one-year default rate that is an arithmetic average based on the number of obligors (count weighted); other approaches, including exposure-weighted averages, shall not be permitted. For the purposes of the first subparagraph, point (h), of this paragraph where the available observation period spans a longer period for any source, and this where those data is are relevant, this that longer period shall be used. This point also applies to The data shall include a representative mix of good and bad years of the PD/LGD Approach to equity. economic cycle relevant for the type of exposures. Subject to the permission of competent authorities, institutions which have not received the permission of the competent authority pursuant to Article 143 to use own estimates of LGDs LGD or conversion factors to use IRB-CCF, may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase be increased by one year each year until relevant data cover a period of at least five years. 2. For retail exposures, the following requirements shall apply: (a) institutions shall estimate PDs by obligor or facility grade or pool from long run averages of one-year default rates; rates, and default rates shall be calculated at facility level only where the definition of default is applied at individual credit facility level pursuant to Article 178(1), second subparagraph; (b) PD estimates may also be derived from an estimate of total losses and appropriate estimates of LGDs; (c) institutions shall regard internal data for assigning exposures to grades or pools as the primary source of information for estimating loss characteristics. Institutions may use external data (including pooled data) or statistical models for quantification provided that the following strong links both exist: (i) between the institution's process of assigning exposures to grades or pools and the process used by the external data source; and (ii) between the institution's internal risk profile and the composition of the external data; (d) if an institution derives long run average estimates of PD and LGD for retail exposures from an estimate of total losses and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in point (a) of Article 181(1); (e) irrespective of whether an institution is using external, internal or pooled data sources sources, or a combination of the three, for their estimation of loss characteristics, its PD estimation, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation spans a longer period for any source, and these data are relevant, this longer period shall be used. An institution need not give equal importance to historic data if more recent data is a better predictor of loss rates. Subject to the permission of the competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years; source; (f) institutions shall identify and analyse expected changes of risk parameters over the life of credit exposures (seasoning effects). For purchased retail receivables, institutions may use external and internal reference data. Institutions shall use all relevant data sources as points of comparison. For the purposes of the first subparagraph, point (a), the PD shall be based on the observed historical average one-year default rate. For the purposes of the first subparagraph, point (e), where the available observation spans a longer period for any source, and where those data are relevant, that longer period shall be used. The data shall include a representative mix of good and bad years of the economic cycle relevant for the type of exposures. Subject to the permission of the competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall be increased by one year each year until relevant data cover at least five years. 3. EBA shall develop draft regulatory technical standards to specify the methodologies in accordance with which competent authorities shall assess the methodology of an institution for estimating PD pursuant to Article 143. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 181 Requirements specific to own-LGD estimates 1. In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements specific to own-LGD estimates: (a) institutions shall estimate LGDs by facility grade or pool on the basis of the average realised LGDs by facility grade or pool using all observed defaults within the data sources (default weighted average); (b) institutions shall use LGD estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised LGDs at a constant level by grade or pool over time, institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn; (c) an institution shall consider the extent of any dependence between between, on the one hand, the risk of the obligor and and, on the other hand, that of the collateral funded credit protection, other than master netting agreements and on-balance-sheet netting of loans and deposits, or collateral provider. Cases where there is a significant degree of dependence shall be addressed in a conservative manner; its provider; (d) currency mismatches between the underlying obligation and the collateral funded credit protection other than master netting agreements and on-balance-sheet netting of loans and deposits shall be treated conservatively in the institution's institution’s assessment of LGD; (e) to the extent that LGD estimates take into account the existence of collateral, these funded credit protection other than master netting agreements and on-balance-sheet netting of loans and deposits, those estimates shall not solely be based on the collateral's estimated market value. LGD estimates shall take into account the effect value of the potential inability of institutions to expeditiously gain control of their collateral and liquidate it; funded credit protection; (f) to the extent that LGD estimates take into account the existence of collateral, funded credit protection other than master netting agreements and on-balance-sheet netting of loans and deposits, institutions shall establish internal requirements for collateral the management, legal certainty and risk management of that are funded credit protection, and those requirements shall be generally consistent with those set out in Chapter 4, Section 3; 3, Sub-section 1; (g) to the extent that an institution recognises collateral funded credit protection other than master netting agreements and on-balance-sheet netting of loans and deposits for determining the exposure value for counterparty credit risk in accordance with Chapter 6, Section 5 or 6, any amount expected to be recovered from the collateral that funded credit protection shall not be taken into account in the LGD estimates; (h) for the specific case of exposures already in default, the institution shall use the sum of its best estimate of expected loss for each exposure given current economic circumstances and exposure status and its estimate of the increase of loss rate caused by possible additional unexpected losses during the recovery period, i.e. between date of default and final liquidation of the exposure; (i) to the extent that unpaid fees for late fees payments, imposed on the obligor before the time of default, have been capitalised in the institution's institution’s income statement, they shall be added to the institution's measure of exposure and loss; (j) for exposures to corporates, institutions and institutions, central governments and central banks, and regional governments, local authorities and public sector entities, estimates of LGD shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If source, if the available observation period spans a longer period for any source, and the data is are relevant, this that longer period shall be used. For the purposes of the first subparagraph, point (a), of this paragraph institutions shall adequately take into account recoveries realised in the course of the relevant recovery processes from any type of funded credit protection as well as from unfunded credit protection not falling under the definition in Article 142(1), point (10). For the purposes of the first subparagraph, point (c), cases where there is a significant degree of dependence shall be addressed in a conservative manner. For the purposes of the first subparagraph, point (e), LGD estimates shall take into account the effect of the potential inability of institutions to expeditiously gain control of their collateral and liquidate it. 2. For retail exposures, institutions may do the following: (a) derive LGD estimates from realised losses and appropriate estimates of PDs; (b) reflect future drawings either in their conversion factors or in their LGD estimates; (c) For purchased retail receivables use external and internal reference data to estimate LGDs. For the purposes of the first subparagraph, point (b), where institutions include future additional drawings in their conversion factors, those should be taken into account in the LGD in both the numerator and the denominator. Where institutions do not include future additional drawings in their conversion factors, those should be taken into account in the LGD numerator only. For retail exposures, estimates of LGD shall be based on data over a minimum of five years. An institution need not give equal importance to historic data if more recent data is a better predictor of loss rates. Subject to the permission of the competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase be increased by one year each year until relevant data cover a period of at least five years. 3. EBA shall develop draft regulatory technical standards to specify the following: (a) the nature, severity and duration of an economic downturn referred to in paragraph 1; (b) the conditions according to which a competent authority may permit an institution pursuant to paragraph 2 to use relevant data covering a period of two years when the institution implements the IRB Approach. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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. 4. EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to clarify the treatment of any type of funded credit protection and unfunded credit protection for the purposes of paragraph 1, point (a), of this Article and for the purposes of the application of the LGD parameters. 5. For the purpose of calculating loss, EBA shall, by 31 December 2025, issue updated guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on the following: (a) with regard to cases that return to non-defaulted status, specifying how artificial cash flow is to be treated and whether it is more appropriate for institutions to discount the artificial cash flow over the actual period of default; (b) assessing whether the calibration and application of the discount rate is appropriate for the calculation of economic loss across all exposures.

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Article 182 Requirements specific to own-conversion factor estimates 1. In quantifying the risk parameters to be associated with rating grades or pools, institutions shall apply the following requirements specific to own-conversion factor estimates: (a) institutions shall estimate conversion factors by facility grade or pool on the basis of the average realised conversion factors by facility grade or pool using the default weighted average resulting from all observed defaults within the data sources; (b) institutions shall use conversion factor estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised conversion factors at a constant level by grade or pool over time, institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn; (c) institutions' estimates of conversion factors institutions’ IRB-CCF shall reflect the possibility of additional drawings by the obligor up to and after the time a default event is triggered. The conversion factor estimate shall incorporate a larger margin of conservatism where a stronger positive correlation can reasonably be expected between the default frequency and the magnitude of conversion factor; triggered; (d) in arriving at estimates of conversion factors institutions shall consider their specific policies and strategies adopted in respect of account monitoring and payment processing. Institutions shall also consider their ability and willingness to prevent further drawings in circumstances short of payment default, such as covenant violations or other technical default events; (e) institutions shall have adequate systems and procedures in place to monitor facility amounts, current outstandings against committed lines and changes in outstandings per obligor and per grade. The institution shall be able to monitor outstanding balances on a daily basis; (f) if institutions use different estimates of conversion factors for the calculation of risk-weighted exposure amounts and internal purposes it shall be documented and be reasonable. reasonable; (g) institutions’ IRB-CCF shall be estimated using a 12-month fixed-horizon approach; (h) institutions’ IRB-CCF shall be based on reference data that reflect the obligor, facility and bank management practice characteristics of the exposures to which the estimates are applied. For the purposes of the first subparagraph, point (a), where institutions observe a negative realised conversion factor on their default observations, the realised conversion factor on those observations shall be equal to zero for the purpose of quantification of their IRB-CCF. Institutions may use the information of the negative realised conversion factor in the process of model development for the purpose of risk differentiation. For the purposes of the first subparagraph, point (c), IRB-CCF shall incorporate a greater margin of conservatism where a stronger positive correlation can reasonably be expected between the default frequency and the magnitude of the conversion factor. For the purposes of the first subparagraph, point (g), each default shall be linked to relevant obligor and facility characteristics at the fixed reference date defined as 12 months prior to the date of default. 1a. For the purposes of paragraph 1, point (h), IRB-CCF applied to particular exposures shall not be based on data that comingle the effects of disparate characteristics or data from exposures that exhibit materially different risk characteristics. IRB-CCF shall be based on appropriately homogenous segments. For that purpose, the following practices shall only be allowed on the basis of a detailed scrutiny and justification by an institution: (a) SME/mid-market underlying data being applied to large corporate obligors; (b) data from commitments with a small unused limit availability being applied to facilities with a large unused limit availability; (c) data from delinquent obligors or blocked for further drawdowns at the reference date being applied to obligors with no known delinquency or relevant restrictions; (d) data that have been affected by changes in the obligors’ mix of borrowing and other credit-related products over the observation period unless those data have been effectively adjusted by removing the effects of the changes in the product mix. 1b. For the purposes of paragraph 1a, point (d), institutions shall demonstrate to the competent authorities that they have a detailed understanding of the impact of changes in customer product mix on the exposures reference data sets and associated IRB-CCF, and that the impact is immaterial or has been effectively mitigated within their estimation process. In that regard, the following shall not be deemed appropriate: (a) setting floors or caps to CCF or exposure value observations, with the exception of the realised conversion factor equal to zero, in accordance with paragraph 1, second subparagraph; (b) using obligor-level estimates that do not fully cover the relevant product transformation options or that inappropriately combine products with very different characteristics; (c) adjusting only material observations affected by product transformation; (d) excluding observations affected by product profile transformation. 1c. Institutions shall ensure that their IRB-CCF are effectively quarantined from the potential effects of region of instability caused by a facility being close to being fully drawn at the reference date. 1d. Reference data shall not be capped at the principal amount outstanding of a facility or the available facility limit. Accrued interest, other due payments and drawings in excess of facility limits shall be included in the reference data. 2. For exposures to corporates, institutions and institutions, central governments and central banks, and regional governments, local authorities and public sector entities, estimates of conversion factors shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If the available observation period spans a longer period for any source, and the data is are relevant, this that longer period shall be used. 3. For retail exposures, institutions may reflect future drawings either in their conversion factors or in their LGD estimates. For retail exposures, estimates of conversion factors shall be based on data over a minimum of five years. By way of derogation from point (a) of paragraph 1, an institution need not give equal importance to historic data if more recent data is a better predictor of draw downs. Subject to the permission of competent authorities, institutions may use, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase be increased by one year each year until relevant data cover a period of at least five years. 4. EBA shall develop draft regulatory technical standards to specify the following: (a) the nature, severity and duration of an economic downturn referred to in paragraph 1; (b) conditions according to which a competent authority may permit and institution to use relevant data covering a period of two years at the time an institution first implements the IRB Approach. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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. 5. By 31 December 2026, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, to specify the methodology that institutions are to apply in order to estimate IRB-CCF.

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Article 183 Requirements for assessing the effect of guarantees and unfunded credit derivatives protection for exposures to corporates, institutions and central governments and central banks banks, exposures to regional governments, local authorities and public sector entities, and exposures to corporates, where own estimates of LGD are used and for retail exposures 1. The following requirements shall apply in relation to eligible guarantors and guarantees: (a) institutions shall have clearly specified criteria for the types of guarantors they recognise for the calculation of risk-weighted exposure amounts; (b) for recognised guarantors the same rules as for obligors as set out in Articles 171, 172 and 173 shall apply; (c) the guarantee shall be evidenced in writing, non-cancellable and non-changeable on the part of the guarantor, in force until the obligation is satisfied in full (to full, to the extent of the amount and tenor of the guarantee) guarantee, and legally enforceable against the guarantor in a jurisdiction where the guarantor has assets to attach and enforce a judgement. Conditional guarantees prescribing conditions under judgement; (d) the guarantee shall be unconditional. For the purposes of the first subparagraph, point (d), an unconditional guarantee means a guarantee where the credit protection contract does not contain any clause the fulfilment of which is outside the direct control of the lending institution and that could prevent the guarantor may not be from being obliged to perform may be recognised pay out in a timely manner pursuant to the qualifying default of the obligor or to the non-payment by the original obligor. A clause in the credit protection contract providing that a flawed due diligence or fraud by the lending institution cancels or diminishes the extent of the guarantee offered by the guarantor shall not disqualify that guarantee from being considered unconditional. Guarantees where the payment by the guarantor is subject to permission the lending institution first having to pursue the obligor and that only cover losses remaining after the institution has completed the workout process shall be considered unconditional. 1a. Institutions may recognise unfunded credit protection by using either the PD/LGD modelling adjustment approach, in accordance with this Article and subject to the requirement set out in paragraph 4 of this Article, or the substitution of risk parameters approach under A-IRB in accordance with Article 236a and subject to the eligibility requirements of Chapter 4. Institutions shall have clear policies for assessing the effects of unfunded credit protection on risk parameters. The policies of the competent authorities. The assignment criteria institutions shall adequately address any potential reduction be consistent with their internal risk management practices and shall reflect the requirements of this Article. Those policies shall clearly specify which of the specific methods described in the risk mitigation effect. this paragraph are used for each rating system, and institutions shall apply those policies consistently over time. 2. An institution shall have clearly specified criteria for adjusting grades, pools or LGD estimates, and, in the case of retail and eligible purchased receivables, the process of allocating exposures to grades or pools, to reflect the impact of guarantees for the calculation of risk-weighted exposure amounts. These criteria shall comply with the requirements set out in Articles 171, 172 and 173. The criteria shall be plausible and intuitive. They shall address the guarantor's ability and willingness to perform under the guarantee, the likely timing of any payments from the guarantor, the degree to which the guarantor's ability to perform under the guarantee is correlated with the obligor's ability to repay, and the extent to which residual risk to the obligor remains. 3. The requirements for guarantees in this Article shall apply also for single-name credit derivatives. In relation to a mismatch between the underlying obligation and the reference obligation of the credit derivative or the obligation used for determining whether a credit event has occurred, the requirements set out under Article 216(2) shall apply. For retail exposures and eligible purchased receivables, this paragraph applies to the process of allocating exposures to grades or pools. The criteria shall address the payout structure of the credit derivative and conservatively assess the impact this has on the level and timing of recoveries. The institution shall consider the extent to which other forms of residual risk remain. 4. The requirements set out in paragraphs 1 to 3 First-to-default credit derivatives may be recognised as eligible unfunded credit protection. However, second-to-default and all other nth-to-default credit derivatives shall not apply for guarantees provided be recognised as eligible unfunded credit protection. 4. Where institutions recognise unfunded credit protection by institutions, central governments the PD/LGD modelling adjustment approach, the covered part of the underlying exposure shall not be assigned a risk weight which would be lower than the protection-provider-RW-floor. For that purpose, the protection-provider-RW-floor shall be calculated using the same PD, LGD and central banks, and corporate entities which meet risk weight function as the requirements laid down ones applicable to comparable direct exposure to the protection provider as referred to in Article 201(1)(g) if the institution has received permission to apply the Standardised Approach for exposures to such entities pursuant to Articles 148 and 150. In this case the requirements of Chapter 4 shall apply. 236a. 5. For retail guarantees, the requirements set out in paragraphs 1, 2 and 3 shall also apply to the assignment of exposures to grades or pools, and the estimation of PD. 6. EBA shall develop draft regulatory technical standards to specify the conditions according to which competent authorities may permit conditional guarantees to be recognised. EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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.

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Article 192 Definitions For the purposes of this Chapter, the following definitions shall apply: (1) lending institution means the institution which has the exposure in question; (2) secured lending transaction means any transaction giving rise to an exposure secured by collateral which does not include a provision conferring upon the institution the right to receive margin at least daily; (3) capital market-driven transaction means any transaction giving rise to an exposure secured by collateral which includes a provision conferring upon the institution the right to receive margin at least daily; (4) underlying CIU means a CIU in the shares or units of which another CIU has invested. invested; (5) substitution of risk parameters approach under A-IRB means the substitution, in accordance with Article 236a, of both the PD and LGD risk parameters of the underlying exposure with the corresponding PD and LGD that would be assigned under the IRB approach using own estimates of LGD to a comparable direct exposure to the protection provider.

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Article 193 Principles for recognising the effect of credit risk mitigation techniques 1. No exposure in respect of which an institution obtains credit risk mitigation shall produce a higher risk-weighted exposure amount or expected loss amount than an otherwise identical exposure in respect of which an institution has no credit risk mitigation. 2. Where the risk-weighted exposure amount already takes account of credit protection under Chapter 2 or Chapter 3, as applicable, institutions shall not take into account that credit protection in the calculations under this Chapter. 3. Where the provisions in Sections 2 and 3 are met, institutions may amend the calculation of risk-weighted exposure amounts under the Standardised Approach and the calculation of risk-weighted exposure amounts and expected loss amounts under the IRB Approach in accordance with the provisions of Sections 4, 5 and 6. 4. Institutions shall treat cash, securities or commodities purchased, borrowed or received under a repurchase transaction or securities or commodities lending or borrowing transaction as collateral. 5. Where an institution calculating risk-weighted exposure amounts under the Standardised Approach has more than one form of credit risk mitigation covering a single exposure it shall do both of the following: (a) subdivide the exposure into parts covered by each type of credit risk mitigation tool; (b) calculate the risk-weighted exposure amount for each part obtained in point (a) separately in accordance with the provisions of Chapter 2 and this Chapter. 6. When an institution calculating risk-weighted exposure amounts under the Standardised Approach covers a single exposure with credit protection provided by a single protection provider and that protection has differing maturities, it shall do both of the following: (a) subdivide the exposure into parts covered by each credit risk mitigation tool; (b) calculate the risk-weighted exposure amount for each part obtained in point (a) separately in accordance with the provisions of Chapter 2 and this Chapter.7. Collateral that satisfies all eligibility requirements set out in this Chapter can be recognised even for exposures associated with undrawn facilities, where drawing under the facility is conditional on the prior or simultaneous purchase or reception of collateral to the extent of the institution’s interest in the collateral once the facility is drawn, such that the institution does not have any interest in the collateral to the extent the facility is not drawn.

No text on either side: this unit was named by a signal that carries no text, and only the structural diff carries any.

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Article 197 Eligibility of collateral under all approaches and methods 1. Institutions may use the following items as eligible collateral under all approaches and methods: (a) cash on deposit with, or cash assimilated instruments held by, the lending institution; (b) debt securities securities, issued by central governments or central banks, which securities have a credit assessment by an ECAI or export credit agency recognised as eligible where: (i) the ECAI or export credit agency has been nominated by the institution for the purposes of Chapter 2 which 2; and (ii) the credit assessment has been determined by EBA to be associated with credit quality step 1, 2, 3 or 4 or above under the rules for the risk weighting of exposures to central governments and central banks under Chapter 2; (c) debt securities securities, issued by institutions or investment firms, institutions, which securities have a credit assessment by an ECAI which where: (i) the ECAI has been nominated by the institution for the purposes of Chapter 2; and (ii) the credit assessment has been determined by EBA to be associated with credit quality step 1, 2 or 3 or above under the rules for the risk weighting of exposures to institutions under Chapter 2; (d) debt securities securities, issued by other entities entities, which securities have a credit assessment by an ECAI which where: (i) the ECAI has been nominated by the institution for the purposes of Chapter 2; and (ii) the credit assessment has been determined by EBA to be associated with credit quality step 1, 2 or 3 or above under the rules for the risk weighting of exposures to corporates under Chapter 2; (e) debt securities with having a short-term credit assessment by an ECAI which where: (i) the ECAI has been nominated by the institution for the purposes of Chapter 2; and (ii) the credit assessment has been determined by EBA to be associated with credit quality step 1, 2 or 3 or above under the rules for the risk weighting of short term short-term exposures under Chapter 2; (f) equities or convertible bonds that are included in a main index; (g) gold; gold bullion; (h) securitisation positions that are not resecuritisation positions and which are subject to a 100 % risk weight or lower in accordance with Article 261 to Article 264. 2. For the purposes of point (b) of paragraph 1, debt securities issued … 390 unchanged words … first subparagraph shall apply equally to any such underlying CIU. The use by a CIU of derivative instruments to hedge permitted investments shall not prevent units or shares in that undertaking from being eligible as collateral. 6. For the purposes of paragraph 5, 5 of this Article, where a CIU (the original CIU) or any of its underlying CIUs are not limited to investing in instruments that are eligible under paragraphs 1 and 4, 4 of this Article, the following shall apply: (a) where the institutions apply the look-through approach referred to in Article 132a(1) or Article 152(2) for direct exposures to a CIU, they may use units or shares in that CIU as collateral up to an the amount equal to the value of the eligible assets instruments held by that CIU that are eligible under paragraphs 1 and 4 of this Article; (b) where institutions apply the mandate-based approach referred to in Article 132a(2) or 152(5) for direct exposures to a CIU, they may use units or shares in that CIU as collateral up to the amount equal to the value of the instruments held by that CIU that are eligible under paragraphs 1 and 4 of this Article under the assumption that that CIU or any of its underlying CIUs have invested in non-eligible assets instruments to the maximum extent allowed under their respective mandates. Where any underlying CIU has underlying CIUs of its own, institutions may use units or shares in the original CIU as eligible collateral provided that they apply the methodology laid down in the first subparagraph. Where non-eligible assets can have a negative value due to liabilities or contingent liabilities resulting from ownership, institutions shall do both of the following: (a) calculate the total value of the non-eligible assets; (b) where the amount obtained under point (a) is negative, subtract the absolute value of that amount from the total value of the eligible assets. 7. With regard to points (b) to (e) of paragraph 1, where a security has two credit assessments by ECAIs, institutions shall apply the less favourable assessment. Where a security has more than two credit assessments by ECAIs, institutions shall apply the two most favourable assessments. Where the two most favourable credit assessments are different, institutions shall apply the less favourable of the two. 8. ESMA shall develop draft implementing technical standards to specify the following: (a) the main indices referred to in point (f) of paragraph 1 of this Article, in point (a) of Article 198(1), in Article 224(1) and (4), and in point (e) of Article 299(2); (b) the recognised exchanges referred to in point (a) of paragraph 4 of this Article, in point (a) of Article 198(1), in Article 224(1) and (4), in point (e) of Article 299(2), in point (k) of Article 400(2), in point (e) of Article 416(3), in point (c) of Article 428(1), and in point 12 of Annex III in accordance with the conditions laid down in point (72) of Article 4(1). ESMA shall submit those draft implementing technical standards to the Commission by 31 December 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 1095/2010.

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Article 198 Additional eligibility of collateral under the Financial Collateral Comprehensive Method 1. In addition to the collateral established in Article 197, where an institution uses the Financial Collateral Comprehensive Method set out in Article 223, that institution may use the following items as eligible collateral: (a) equities or convertible bonds not included in a main index but traded on a recognised exchange; (b) units or shares in CIUs where both the following conditions are met: (i) the units or shares have a daily public price quote; (ii) the CIU is limited to investing in instruments that are eligible for recognition under Article 197(1) and (4) and the items mentioned in point (a) of this subparagraph. In the case a CIU invests in units or shares of another CIU, conditions (a) and (b) of this paragraph equally apply to any such underlying CIU. The use by a CIU of derivative instruments to hedge permitted investments shall not prevent units or shares in that undertaking from being eligible as collateral. 2. Where the CIU or any underlying CIU are not limited to investing in instruments that are eligible for recognition under Article 197(1) and (4) and in the items mentioned referred to in paragraph 1, point (a) of paragraph 1 (a), of this Article, the following shall apply: (a) where institutions apply the look-through approach referred to in Article 132a(1) or 152(2) for direct exposures to a CIU, they may use units or shares in that CIU as collateral up to an the amount equal to the value of the eligible assets instruments held by that CIU, that are eligible under Article 197(1) and (4), and the items referred to in paragraph 1, point (a), of this Article; (b) where institutions apply the mandate-based approach referred to in Article 132a(2) or 152(5) for direct exposures to a CIUs, they may use units or shares in that CIU as collateral up to the amount equal to the value of the instruments held by that CIU, that are eligible under Article 197(1) and (4), and the items referred to in paragraph 1, point (a), of this Article under the assumption that that CIU or any of its underlying CIUs have invested in non-eligible assets instruments to the maximum extent allowed under their respective mandates. Where non-eligible assets instruments can have a negative value due to liabilities or contingent liabilities resulting from ownership, institutions shall do both of the following: (a) calculate the total value of the non-eligible assets; instruments; (b) where the amount obtained under point (a) is negative, subtract the absolute value of that amount from the total value of the eligible assets. instruments.

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Article 199 Additional eligibility for collateral under the IRB Approach 1. In addition to the collateral referred to in Articles 197 and 198, institutions that calculate risk-weighted exposure amounts and expected loss amounts under the IRB Approach may also use the following forms of collateral: (a) immovable property collateral in accordance with paragraphs 2, 3 and 4; (b) receivables in accordance with paragraph 5; (c) other physical collateral in accordance with paragraphs 6 and 8; (d) leasing in accordance with paragraph 7. 2. Unless otherwise specified under Article 124(2), 124(9), institutions may use as eligible collateral residential property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial immovable property, including offices and other commercial premises, where both of the following conditions are met: (a) the property value of the property does not materially depend upon the credit quality of the obligor. Institutions may exclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower from their determination of the materiality of such dependence; obligor; (b) the risk of the borrower does not materially depend upon the performance of the underlying property or project, but on the underlying capacity of the borrower to repay the debt from other sources, and as a consequence the repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral. For the purposes of the first subparagraph, point (a), institutions may exclude situations where purely macro-economic factors affect both the property value and the performance of the borrower. 3. Institutions may derogate from point (b) of paragraph 2 for exposures secured by residential property situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established residential property market is present in that territory with loss rates that do not exceed any of the following limits: (a) losses stemming from loans collateralised the aggregated amount reported by residential property up to 80 % of the market value or 80 % of the mortgage lending value, unless otherwise provided institutions under Article 124(2), do 430a(1), point (a), divided by the aggregated amount reported by institutions under Article 430a(1), point (c), does not exceed 0,3 % of %; (b) the outstanding loans collateralised aggregated amount reported by residential property in any given year; (b) overall losses stemming from loans collateralised institutions under Article 430a(1), point (b), divided by residential property do the aggregated amount reported by institutions under Article 430a(1), point (c), does not exceed 0,5 % of the outstanding loans collateralised by residential property in any given year. %. Where either of the conditions in points (a) and (b) of the first subparagraph is not met in a given year, institutions shall not use the treatment set out in that subparagraph until both conditions are satisfied in a subsequent year. 4. Institutions may derogate from point (b) of paragraph 2 for commercial immovable property situated within the territory of a Member State, where the competent authority of that Member State has published evidence showing that a well-developed and long-established commercial immovable property market is present in that territory with loss rates that do not exceed any of the following limits: (a) losses stemming from loans collateralised the aggregated amount reported by commercial immovable property up to 50 % of institutions under Article 430a(1), point (d), divided by the market value or 60 % of the mortgage lending value do aggregated amount reported by institutions under Article 430a(1), point (f), does not exceed 0,3 % of %; (b) the outstanding loans collateralised aggregated amount reported by commercial immovable property in any given year; (b) overall losses stemming from loans collateralised institutions under Article 430a(1), point (e), divided by commercial immovable property do the aggregated amount reported by institutions under Article 430a(1), point (f), does not exceed 0,5 % of the outstanding loans collateralised by commercial immovable property in any given year. %. Where either of the conditions in points (a) and (b) of the first subparagraph is not met in a given year, institutions shall not use the treatment set out in that subparagraph until both conditions are satisfied in a subsequent year. 4a. Institutions may also apply the derogations referred to in paragraphs 3 and 4 of this Article in cases where the competent authority of a third country which applies supervisory and regulatory arrangements at least equivalent to those applied in the Union as determined in a decision of the Commission adopted in accordance with Article 107(4), publishes corresponding loss rates for exposures secured by residential property or commercial immovable property situated within the territory of that third country. 5. Institutions may use as eligible collateral amounts receivable linked to a commercial transaction or transactions with an original maturity of less than or equal to one year. Eligible receivables do not include those associated with securitisations, sub-participations or credit derivatives or amounts owed by affiliated parties. Where a public development credit institution as defined in Article 429a(2) of this Regulation issues a promotional loan as defined in Article 429a(3) of this Regulation to another institution, or to a financial institution that is authorised to carry out activities as referred to in Annex I, point 2 or 3, to Directive 2013/36/EU and that meets the conditions set out in Article 119(5) of this Regulation, and where that other institution or financial institution passes through directly or indirectly that promotional loan to an ultimate obligor and cedes the receivable from the promotional loan as collateral to the public development credit institution, the public development credit institution may use the ceded receivable as eligible collateral, regardless of the original maturity of the ceded receivable. 6. Competent authorities shall permit an institution to use as eligible collateral physical collateral of a type other than those indicated in paragraphs 2, 3 and 4 where all the following conditions are met: (a) there are liquid markets, evidenced by frequent transactions taking into account the asset type, for the disposal of the collateral in an expeditious and economically efficient manner. Institutions shall carry out the assessment of this condition periodically and where information indicates material changes in the market; (b) there are well-established, publicly available market prices for the collateral. Institutions may consider market prices as well-established where they come from reliable sources of information such as public indices and reflect the price of the transactions under normal conditions. Institutions may consider market prices as publicly available, where these prices are disclosed, easily accessible, and obtainable regularly and without any undue administrative or financial burden; (c) the institution analyses the market prices, time and costs required to realise the collateral and the realised proceeds from the collateral; (d) the institution demonstrates that in at least 90 % of all liquidations for a given type of collateral the realised proceeds from the collateral are not below 70 % of the collateral value in more than 10 % of all liquidations for a given type of collateral. Where value; where there is material volatility in the market prices, the institution demonstrates to the satisfaction of the competent authorities authority that its valuation of the collateral is sufficiently conservative. Institutions shall document the fulfilment of the conditions specified in points (a) to (d) of the first subparagraph and those specified in Article 210. 7. Subject to the provisions of Article 230(2), where the requirements set out in Article 211 are met, exposures arising from transactions whereby an institution leases property to a third party may be treated in the same manner as loans collateralised by the type of property leased. 8. EBA shall disclose a list of types of physical collateral for which institutions can assume that the conditions referred to in points (a) and (b) of paragraph 6 are met.

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before (02013R0575-20240709)

Article 201
Eligibility of protection providers under all approaches
1. Institutions may use the following parties as eligible providers of unfunded credit protection:
(a) central governments and central banks;
(b) regional governments or local authorities;
(c) multilateral development banks;
(d) international organisations exposures to which a 0 % risk weight under Article 117 is assigned;
(e) public sector entities, claims on which are treated in accordance with Article 116;
(f) institutions, and financial institutions for which exposures to the financial institution are treated as exposures to institutions in accordance with Article 119(5);
(g) other corporate entities, including parent undertakings, subsidiaries and affiliated corporate entities of the institution, where either of the following conditions is met:
(i) those other corporate entities have a credit assessment by an ECAI;
(ii) in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, those other corporate entities do not have a credit assessment by a recognised ECAI and are internally rated by the institution;
(h) qualifying central counterparties.
2. Where institutions calculate risk-weighted exposure amounts and expected loss amounts under the IRB Approach, to be eligible as a provider of unfunded credit protection a guarantor shall be internally rated by the institution in accordance with the provisions of Section 6 of Chapter 3.
Competent authorities shall publish and maintain the list of those financial institutions that are eligible providers of unfunded credit protection under point (f) of paragraph 1, or the guiding criteria for identifying such eligible providers of unfunded credit protection, together with a description of the applicable prudential requirements, and share their list with other competent authorities in accordance with Article 117 of Directive 2013/36/EU.

after (02013R0575-20250101)

Article 201
Eligibility of protection providers under all approaches
1. Institutions may use the following parties as eligible providers of unfunded credit protection:
(a) central governments and central banks;
(b) regional governments or local authorities;
(c) multilateral development banks;
(d) international organisations to which a 0 % risk weight is assigned in accordance with in Article 118;
(e) public sector entities, claims on which are treated in accordance with Article 116;
(f) institutions, and financial institutions for which exposures to the financial institution are treated as exposures to institutions in accordance with Article 119(5);
(fa) regulated financial sector entities;
(g) where the credit protection is not provided to a securitisation exposure, other undertakings, that have a credit assessment by a nominated ECAI, including parent undertakings, subsidiaries or affiliated entities of the obligor where a direct exposure to those parent undertakings, subsidiaries or affiliated entities has a lower risk weight than the exposure to the obligor;
(h) qualifying central counterparties.
For the purposes of the first subparagraph, point (fa), of this Article, regulated financial sector entity means a financial sector entity meeting the condition set out in Article 142(1), point (4)(b).
2. In addition to the protection providers listed in paragraph 1, corporate entities that are internally rated by the institution in accordance with Chapter 3, Section 6, shall be eligible providers of unfunded credit protection where the institution uses the IRB approach for exposures to those corporate entities.

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Article 204 Eligible types of credit derivatives 1. Institutions may use the following types of credit derivatives, and instruments that may be composed of such credit derivatives or that are economically effectively similar, as eligible credit protection: (a) credit default swaps; (b) total return swaps; (c) credit linked notes to the extent of their cash funding. Where an institution buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record the offsetting deterioration in the value of the asset that is protected either through reductions in fair value or by an addition to reserves, that credit protection does not qualify as eligible credit protection. 2. Where an institution conducts an internal hedge using a credit derivative, in order for the credit protection to qualify as eligible credit protection for the purposes of this Chapter, the credit risk transferred to the trading book shall be transferred out to a third party or parties. Where an internal hedge has been conducted in accordance with the first subparagraph and the requirements in this Chapter have been met, institutions shall apply the rules set out in Sections 4 to 6 for the calculation of risk-weighted exposure amounts and expected loss amounts where they acquire unfunded credit protection.3. First-to-default and all other nth-to-default credit derivatives shall not be eligible types of unfunded credit protection under this Chapter.

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Article 207 Requirements for financial collateral 1. Under all approaches and methods, financial collateral and gold shall qualify as eligible collateral where all the requirements laid down in paragraphs 2 to 4 are met. 2. The credit quality of the obligor and the value of the collateral shall not have a material positive correlation. Where the value of the collateral is reduced significantly, this shall not alone imply a significant deterioration of the credit quality of the obligor. Where the credit quality of the obligor becomes critical, this shall not alone imply a significant reduction in the value of the collateral. Securities issued by the obligor, or any related group entity, shall not qualify as eligible collateral. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Article 129 qualify as eligible collateral when they are posted as collateral for a repurchase transaction, provided that they comply with the condition set out in the first subparagraph. 3. Institutions shall fulfil any contractual and statutory requirements in respect of, and take all steps necessary to ensure, the enforceability of the collateral arrangements under the law applicable to their interest in the collateral. Institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions. They shall re-conduct such review as necessary to ensure continuing enforceability. 4. Institutions shall fulfil all the following operational requirements: (a) they shall properly document the collateral arrangements and have in place clear and robust procedures for the timely liquidation of collateral; (b) they shall use robust procedures and processes to control risks arising from the use of collateral, including risks of failed or reduced credit protection, valuation risks, risks associated with the termination of the credit protection, concentration risk arising from the use of collateral and the interaction with the institution's overall risk profile; (c) they shall have in place documented policies and practices concerning the types and amounts of collateral accepted; (d) they shall calculate the market value of the collateral, and revalue it accordingly, at least once every six months and whenever they have reason to believe that a significant decrease in the market value of the collateral has occurred; ESG-related considerations shall prompt an assessment of whether a significant decrease in the market value of the collateral has occurred; (e) where the collateral is held by a third party, they shall take reasonable steps to ensure that the third party segregates the collateral from its own assets; (f) they shall ensure that they devote sufficient resources to the orderly operation of margin agreements with OTC derivatives and securities-financing counterparties, as measured by the timeliness and accuracy of their outgoing margin calls and response time to incoming margin calls; (g) they shall have in place collateral management policies to control, monitor and report the following: (i) the risks to which margin agreements expose them; (ii) the concentration risk to particular types of collateral assets; (iii) the reuse of collateral including the potential liquidity shortfalls resulting from the reuse of collateral received from counterparties; (iv) the surrender of rights on collateral posted to counterparties. 5. In addition to meeting all the requirements set out in paragraphs 2 to 4, for financial collateral to qualify as eligible collateral under the Financial Collateral Simple Method the residual maturity of the protection shall be at least as long as the residual maturity of the exposure.

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Article 208 Requirements for immovable property collateral 1. Immovable property shall qualify as eligible collateral only where all the requirements laid down in paragraphs 2 to 5 are met. 2. The following requirements on legal certainly shall be met: (a) a mortgage or charge is enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement and shall be properly filed on a timely basis; (b) all legal requirements for establishing the pledge have been fulfilled; (c) the protection agreement and the legal process underpinning it enable the institution to realise the value of the protection within a reasonable timeframe. 3. The following requirements on monitoring of property values and on property valuation shall be met: (a) institutions monitor the value of the property on a frequent basis and at a minimum once every year for commercial immovable property and once every three years for residential property. Institutions carry out more frequent monitoring where the market is subject to significant changes in conditions; (b) the property valuation is reviewed when information available to institutions indicates that the property value of the property may have declined materially relative to general market prices and that review is carried out by a valuer who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process. For process; ESG-related considerations, including those related to limitations imposed by the relevant Union and Member States regulatory objectives and legal acts, as well as, where relevant for internationally active institutions, third-country legal and regulatory objectives, shall be considered to be an indication that the property value might have declined materially, relative to general market prices; for loans exceeding EUR 3 million or 5 % of the own funds of an institution, the property valuation shall be reviewed by such valuer at least every three years. Institutions may use statistical methods to monitor the value of the immovable property and to identify immovable property that needs revaluation. 3a. Institutions may monitor the value of the immovable property and identify the immovable property in need of revaluation, in accordance with paragraph 3, by means of advanced statistical or other mathematical methods (models), provided that those methods are developed independently from the credit decision process and all of the following conditions are met: (a) the institutions set out, in their policies and procedures, the criteria for using models to monitor the values of collateral and to identify the properties that should be revaluated; those policies and procedures shall account for such models’ proven track record, property-specific variables considered, the use of minimum available and accurate information, and the models’ uncertainty; (b) the institutions ensure that the models used are: (i) property- and location-specific at a sufficient level of granularity; (ii) valid and accurate, and subject to robust and regular back-testing against the actual observed transaction prices; (iii) based on a sufficiently large and representative sample, based on observed transaction prices; (iv) based on up-to-date data of high quality; (c) the institutions are ultimately responsible for the appropriateness and performance of the models; (d) the institutions ensure that the documentation of the models is up to date; (e) the institutions have in place adequate IT processes, systems and capabilities and have sufficient and accurate data for any model-based monitoring of the value of immovable property collateral and identification of property in need of revaluation; (f) the estimates of models are independently validated and the validation process is generally consistent with the principles set out in Article 185, where applicable. 4. Institutions shall clearly document the types of residential property and commercial immovable property they accept and their lending policies in this regard. 5. Institutions The immovable property taken as credit protection shall be adequately insured against the risk of damage and institutions shall have in place procedures to monitor that the adequacy of the insurance. By way of derogation from Article 92(5), point (a)(ii), and without prejudice to the derogation set out in Article 92(3), second subparagraph, for exposures secured by immovable property taken as credit protection is adequately insured against granted before 1 January 2025, institutions that apply the risk IRB Approach referred to in Chapter 3 of damage. this Title by using their own estimates of LGD shall not be required to apply the provisions set out in the first subparagraph of this paragraph.

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Article 210 Requirements for other physical collateral Physical collateral other than immovable property collateral shall qualify as eligible collateral under the IRB Approach where all the following conditions are met: (a) the collateral arrangement under which the physical collateral is provided to an institution shall be legally effective and enforceable in all relevant jurisdictions and shall enable that institution to realise the value of the collateral within a reasonable timeframe; (b) with the sole exception of permissible first priority claims referred to in Article 209(2)(b), only first liens on, or charges over, collateral shall qualify as eligible collateral and an institution shall have priority over all other lenders to the realised proceeds of the collateral; (c) institutions shall monitor the value of the collateral on a frequent basis and at least once every year. Institutions shall carry out more frequent monitoring where the market is subject to significant changes in conditions; (d) the loan agreement shall include detailed descriptions of the collateral as well as detailed specifications of the manner and frequency of revaluation; (e) institutions shall clearly document in internal credit policies and procedures available for examination the types of physical collateral they accept and the policies and practices they have in place in respect of the appropriate amount of each type of collateral relative to the exposure amount; (f) institutions' credit policies with regard to the transaction structure shall address the following: (i) appropriate collateral requirements relative to the exposure amount; (ii) the ability to liquidate the collateral readily; (iii) the ability to establish objectively a price or market value; (iv) the frequency with which the value can readily be obtained, including a professional appraisal or valuation; (v) the volatility or a proxy of the volatility of the value of the collateral. (g) when conducting valuation and revaluation, institutions shall take fully into account any deterioration or obsolescence of the collateral, paying particular attention to the effects of the passage of time on fashion- or date-sensitive collateral; for physical collateral, obsolescence of collateral shall also include ESG-related valuation considerations related to prohibitions or limitations imposed by the relevant Union and Member States regulatory objectives and legal acts, as well as, where relevant for internationally active institutions, third-country legal and regulatory objectives; (h) institutions shall have the right to physically inspect the collateral. They shall also have in place policies and procedures addressing their exercise of the right to physical inspection; (i) the collateral taken as protection shall be adequately insured against the risk of damage and institutions shall have in place procedures to monitor this.Where general security agreements, or other forms of floating charge, provide the lending institution with a registered claim over a company’s assets and where that claim contains both assets that are not eligible as collateral under the IRB Approach and assets that are eligible as collateral under the IRB Approach, the institution may recognise those latter assets as eligible funded credit protection. In that case, that recognition shall be conditional on those assets meeting the requirements for eligibility of collateral under the IRB Approach as set out in this Chapter.

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Article 213 Requirements common to guarantees and credit derivatives 1. Subject to Article 214(1), credit protection deriving from a guarantee or credit derivative shall qualify as eligible unfunded credit protection where all of the following conditions are met: (a) the credit protection is direct; (b) the extent of the credit protection is clearly defined set out and incontrovertible; (c) the credit protection contract does not contain any clause, the fulfilment of which is outside the direct control of the lender, lending institution, that: (i) would allow the protection provider to cancel or change the credit protection unilaterally; (ii) would increase the effective cost of the credit protection as a result of a deterioration in the credit quality of the protected exposure; (iii) could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due, or when where the leasing contract has expired for the purposes purpose of recognising guaranteed residual value under Articles 134(7) and 166(4); (iv) could allow the maturity of the credit protection to be reduced by the protection provider; (d) the credit protection contract is legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement. For the purposes of the first subparagraph, point (c), a clause in the credit protection contract providing that flawed due diligence or fraud by the lending institution cancels or diminishes the extent of the credit protection offered by the guarantor, shall not disqualify that credit protection from being eligible. For the purposes of the first subparagraph, point (c), the protection provider may make one lump sum payment of all monies due under the claim, or may assume the future payment obligations of the obligor covered by the credit protection contract. 2. An institution shall demonstrate to competent authorities that it has in place systems to manage potential concentration of risk arising from its use of guarantees and credit derivatives. An institution shall be able to demonstrate to the satisfaction of the competent authorities how its strategy in respect of its use of credit derivatives and guarantees interacts with its management of its overall risk profile. 3. An institution shall fulfil any contractual and statutory requirements in respect of, and take all steps necessary to ensure, the enforceability of its unfunded credit protection under the law applicable to its interest in the credit protection. An institution shall have conducted sufficient legal review confirming the enforceability of the unfunded credit protection in all relevant jurisdictions. It shall repeat such review as necessary to ensure continuing enforceability.

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Article 215 Additional requirements for guarantees 1. Guarantees shall qualify as eligible unfunded credit protection where all the conditions in Article 213 and all the following conditions are met: (a) on the qualifying default of or non-payment by the counterparty, obligor, the lending institution has the right to pursue, in a timely manner, the guarantor for any monies due under the claim in respect of which the protection is provided and the payment by the guarantor shall not be subject to the lending institution first having to pursue the obligor; In the case of unfunded credit protection covering residential mortgage loans, the requirements in Article 213(1)(c)(iii) and in the first subparagraph of this point have only to be satisfied within 24 months; provided; (b) the guarantee is an explicitly documented obligation assumed by the guarantor; (c) either of the following conditions is met: (i) the guarantee covers all types of payments the obligor is expected to make in respect of the claim; (ii) where certain types of payment are excluded from the guarantee, the lending institution has adjusted the value of the guarantee to reflect the limited coverage. The payment by the guarantor shall not be subject to the lending institution first having to pursue the obligor. In the case of unfunded credit protection covering residential mortgage loans, the requirements in Article 213(1), point (c)(iii), and in the first subparagraph, point (a), of this paragraph, shall only be required to be satisfied within 24 months. 2. In the case of guarantees provided in the context of mutual guarantee schemes or provided by or counter-guaranteed by entities as listed in Article 214(2), the requirements in paragraph 1, point (a) of paragraph 1 (a), of this Article and in Article 213(1), point (c)(iii), shall be considered to be satisfied where either of the following conditions is met: (a) pursuant to the qualifying default of or non-payment by the original obligor, the lending institution has the right to obtain in a timely manner a provisional payment by the guarantor that meets both the following conditions: (i) it the provisional payment represents a robust estimate of the amount of the loss, loss that the lending institution is likely to incur, including losses resulting from the non-payment of interest and other types of payment which the borrower is obliged to make, that make; (ii) the lending institution is likely to incur; (ii) it provisional payment is proportional to the coverage of the guarantee; (b) the lending institution can demonstrate to the satisfaction of the competent authorities authority that the effects of the guarantee, which shall also cover losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment. treatment; that justification shall be properly documented and subject to dedicated internal approval and audit procedures.

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Article 216 Additional requirements for credit derivatives 1. Credit derivatives shall qualify as eligible unfunded credit protection where all the conditions in Article 213 and all the following conditions are met: (a) the credit events specified in the credit derivative contract include: (i) the … 336 unchanged words … underlying obligation and the reference obligation or the obligation used for the purpose of determining whether a credit event has occurred, as the case may be, share the same obligor and legally enforceable cross-default or cross-acceleration clauses are in place.3. By way of derogation from paragraph 1, for a corporate exposure covered by a credit derivative, the credit event referred to in point (a)(iii) of that paragraph shall not be required to be specified in the derivative contract, provided that all of the following conditions are met: (a) a 100 % vote is needed to amend the maturity, principal, coupon, currency or seniority status of the underlying corporate exposure; (b) the legal domicile in which the corporate exposure is governed has a well-established bankruptcy code that allows for a company to reorganise and restructure, and provides for an orderly settlement of creditor claims. Where the conditions set out in points (a) and (b) of this paragraph are not met, the credit protection may nonetheless be eligible subject to a reduction in the value as specified in Article 233(2).

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Article 219 On-balance sheet On-balance-sheet netting Loans to and deposits with the lending institution subject to on-balance sheet on-balance-sheet netting are to shall be treated by that institution as cash collateral for the purpose of calculating the effect of funded credit protection for those loans and deposits of the lending institution subject to on-balance sheet netting which are denominated in the same currency. on-balance-sheet netting.

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Article 220 Using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach for master netting agreements 1. When institutions Institutions that calculate the 'fully fully adjusted exposure value' value (E*) for the exposures subject to an eligible master netting agreement covering repurchase transactions or securities or commodities lending or borrowing financing transactions or other capital market-driven transactions, they transactions shall calculate the volatility adjustments that they need to apply either by using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach ('Own Estimates Approach') as set out in Articles 223 to 226 227 for the Financial Collateral Comprehensive Method. The use of the Own Estimates Approach shall be subject to the same conditions and requirements as apply under the Financial Collateral Comprehensive Method. 2. For the purpose of calculating E*, institutions shall: (a) calculate the net position in each group of securities or in each type of commodity by subtracting the amount in point (ii) from the amount in point (i): (i) the total value of a group of securities or of commodities of the same type lent, sold or provided under the master netting agreement; (ii) the total value of a group of securities or of commodities of the same type borrowed, purchased or received under the master netting agreement; (b) calculate the net position in each currency, other than the settlement currency of the master netting agreement, by subtracting the amount in point (ii) from the amount in point (i): (i) the sum of the total value of securities denominated in that currency lent, sold or provided under the master netting agreement and the amount of cash in that currency lent or transferred under that agreement; (ii) the sum of the total value of securities denominated in that currency borrowed, purchased or received under the master netting agreement and the amount of cash in that currency borrowed or received under that agreement; (c) apply the value of the volatility adjustment, or, where relevant, the absolute value of the volatility adjustment appropriate to for a given group of securities or to for a cash position given type of commodities, to the absolute value of the positive or negative net position in the securities in that group; group of securities, or to the commodities from that type of commodities; (d) apply the foreign exchange risk (fx) volatility adjustment to the net positive or negative position in each currency other than the settlement currency of the master netting agreement. 3. Institutions shall calculate E* in accordance with the following formula:E *max0,iEi iCijEjsec HjseckEkfx Hkfx formula: where: i = the index that denotes all separate securities, commodities or cash positions under the agreement that are either lent, sold with an agreement to repurchase, or posted by the institution to the counterparty; j = the index that denotes all separate securities, commodities or cash positions under the agreement that are either borrowed, purchased with an agreement to resell, or held by the institution; k = the index that denotes all separate currencies in which any securities, commodities or cash positions under the agreement are denominated; Ei = the exposure value for each separate exposure i of a given security, commodity or cash position i, that is either lent, sold with an agreement to repurchase, or posted to the counterparty under the agreement that would apply in the absence of the credit protection, where institutions calculate risk-weighted exposure amounts under the Standardised Approach or where they calculate the risk-weighted exposure amounts and expected loss amounts under the IRB Approach; Ci in accordance with Chapter 2 or 3, as applicable; Cj = the value of securities in each group a given security, commodity or commodities of the same type cash position j that is either borrowed, purchased with an agreement to resell, or received or held by the cash borrowed or received in respect of each exposure i; Ejsec institution under the net position (positive or negative) in a given group of securities j; Ekfx agreement; = the net position (positive or negative) in a given currency k other than the settlement currency of the agreement as calculated under in accordance with paragraph 2, point (b) of paragraph 2; Hjsec the volatility adjustment appropriate to a particular group of securities j; Hkfx (b); = the foreign exchange volatility adjustment for currency k. k; Enet = the net exposure of the agreement, calculated as follows: where: l = the index that denotes all distinct groups of the same securities and all distinct types of the same commodities under the agreement; = the net position (positive or negative) in a given group of securities l, or a given type of commodities l, under the agreement, calculated in accordance with paragraph 2, point (a); = the volatility adjustment appropriate to a given group of securities l, or a given type of commodities l, determined in accordance with paragraph 2, point (c); the sign of shall be determined as follows: (a) it shall have a positive sign where the group of securities l is lent, sold with an agreement to repurchase, or transacted in a manner similar to either a securities lending or a repurchase agreement; (b) it shall have a negative sign where the group of securities l is borrowed, purchased with an agreement to resell, or transacted in a manner similar to either a securities borrowing or a reverse repurchase agreement; N = the total number of distinct groups of the same securities and distinct types of the same commodities under the agreement; for the purposes of this calculation, those groups and types for which is less than shall not be counted; Egross = the gross exposure of the agreement, calculated as follows: . 4. For the purpose of calculating risk-weighted exposure amounts and expected loss amounts for repurchase transactions or securities or commodities lending or borrowing transactions or other capital market-driven transactions covered by master netting agreements, institutions shall use E* as calculated under paragraph 3 as the exposure value of the exposure to the counterparty arising from the transactions subject to the master netting agreement for the purposes of Article 113 under the Standardised Approach or Chapter 3 under the IRB Approach. 5. For the purposes of paragraphs 2 and 3, group of securities means securities which are issued by the same entity, have the same issue date, the same maturity, are subject to the same terms and conditions, and are subject to the same liquidation periods as indicated in Articles 224 and 225, as applicable.

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Article 221 Using the internal models approach for master netting agreements 1. Subject to permission For the purpose of competent authorities, institutions may, as an alternative to using the Supervisory Volatility Adjustments Approach or the Own Estimates Approach in calculating the fully adjusted risk-weighted exposure value (E*) resulting from the application of an eligible master netting agreement covering repurchase transactions, amounts and expected loss amounts for securities or commodities lending or borrowing transactions, financing transactions or other capital market driven market-driven transactions other than derivative transactions, use transactions covered by an internal models approach which takes into account correlation effects between security positions subject to the master netting agreement as well as the liquidity of the instruments concerned. 2. Subject to the permission of the competent authorities, institutions may also use their internal models for margin lending transactions, where the transactions are covered under a bilateral eligible master netting agreement that meets the requirements set out in Chapter 6, Section 7. 7, an institution may calculate the fully adjusted exposure value (E*) of the agreement using the internal model approach, provided that the institution meets the conditions set out in paragraph 2. 2. An institution may use the internal model approach where all of the following conditions are met: (a) the institution uses that approach only for exposures for which the risk-weighted exposures amounts are calculated under the IRB Approach set out in Chapter 3; (b) the institution is granted the permission to use that approach by its competent authority. 3. An institution may choose to use that uses an internal models model approach independently of the choice it has made between the Standardised Approach and the IRB Approach for the calculation of risk-weighted exposure amounts. However, where an institution seeks to use an internal models approach, it shall do so for all counterparties and securities, excluding with the exception of immaterial portfolios where for which it may use the Supervisory Volatility Adjustments Approach or the Own Estimates Approach as laid down in Article 220. Institutions that have received permission for an internal risk-measurement model under Title IV, Chapter 5 may use the internal models approach. Where an institution has not received such permission, it may still apply for permission to the competent authorities to use an internal models approach for the purposes of this Article. 4. Competent authorities shall permit an institution to use an internal models approach only where they are satisfied that the institution's system for managing the risks arising from the transactions covered by the master netting agreement is conceptually sound and … 334 unchanged words … institution may use empirical correlations within risk categories and across risk categories where its system for measuring correlations is sound and implemented with integrity. 6. Institutions using the internal models approach shall calculate E* in accordance with the following formula:E *max0,i Ei i Ci potential EiiCipotential change in value where: Ei the exposure value for each separate exposure i under the agreement that would apply in the absence of the credit protection, where institutions calculate the risk-weighted exposure amounts under the Standardised Approach or where they calculate risk-weighted exposure … 356 unchanged words … draft regulatory technical standards to the Commission by 31 December 2015. 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 222 Financial Collateral Simple Method 1. Institutions may use the Financial Collateral Simple Method only where they calculate risk-weighted exposure amounts under the Standardised Approach. Institution shall not use both the Financial Collateral Simple Method and the Financial Collateral Comprehensive Method, except for the purposes of Articles 148(1) and 150(1). Institutions shall not use this exception selectively with the purpose of achieving reduced own funds requirements or with the purpose of conducting regulatory arbitrage. 2. Under the Financial Collateral Simple Method institutions shall assign to eligible financial collateral a value equal to its market value as determined in accordance with point (d) of Article 207(4). 3. Institutions shall assign to those portions of exposure values that are collateralised by the market value of eligible collateral the risk weight that they would assign under Chapter 2 where the lending institution had a direct exposure to the collateral instrument. For this that purpose, the exposure value of an off-balance sheet off-balance-sheet item listed in Annex I shall be equal to 100 % of the item's item’s value rather than the exposure value indicated in Article 111(1). The risk weight of the collateralised portion shall be at least 20 % except as specified in paragraphs 4 to 6. Institutions shall apply to the remainder of the exposure value the risk weight that they would assign to an unsecured exposure to the counterparty under Chapter 2. 111(2). 4. Institutions shall assign a risk weight of 0 % to the collateralised portion of the exposure arising from repurchase transaction and securities lending or borrowing transactions which fulfil the criteria in Article 227. Where the counterparty to the transaction is not a core market participant, institutions shall assign a risk weight of 10 %. 5. Institutions shall assign a risk weight of 0 %, to the extent of the collateralisation, to the exposure values determined under Chapter 6 for the derivative instruments listed in Annex II and subject to daily marking-to-market, collateralised by cash or cash assimilated instruments where there is no currency mismatch. Institutions shall assign a risk weight of 10 %, to the extent of the collateralisation, to the exposure values of such transactions collateralised by debt securities issued by central governments or central banks which are assigned a 0 % risk weight under Chapter 2. 6. For transactions other than those referred to in paragraphs 4 and 5, institutions may assign a 0 % risk weight where the exposure and the collateral are denominated in the same currency, and either of the following conditions is met: (a) the collateral is cash on deposit or a cash assimilated instrument; (b) the collateral is in the form of debt securities issued by central governments or central banks eligible for a 0 % risk weight under Article 114, and its market value has been discounted by 20 %. 7. For the purpose of paragraphs 5 and 6 debt securities issued by central governments or central banks shall include: (a) debt securities issued by regional governments or local authorities exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Article 115; (b) debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under or by virtue of Article 117(2); (c) debt securities issued by international organisations which are assigned a 0 % risk weight under Article 118; (d) debt securities issued by public sector entities which are treated as exposures to central governments in accordance with Article 116(4).

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Article 223 Financial Collateral Comprehensive Method 1. In order to take account of price volatility, institutions shall apply volatility adjustments to the market value of collateral, as set out in Articles 224 to 227, when valuing financial collateral for the purposes of the Financial Collateral Comprehensive Method. Where collateral is denominated in a currency that differs from the currency in which the underlying exposure is denominated, institutions shall add an adjustment reflecting currency volatility to the volatility adjustment appropriate to the collateral as set out in Articles 224 to 227. In the case of OTC derivatives transactions covered by netting agreements recognised by the competent authorities under Chapter 6, institutions shall apply a volatility adjustment reflecting currency volatility when there is a mismatch between the collateral currency and the settlement currency. Even where multiple currencies are involved in the transactions covered by the netting agreement, institutions shall apply a single volatility adjustment. 2. Institutions shall calculate the volatility-adjusted value of the collateral (CVA) they need to take into account as follows:CVA C follows:CVAC 1 HC Hfx HCHfx where: C the value of the collateral; HC the volatility adjustment appropriate to the collateral, as calculated under Articles 224 and 227; Hfx the volatility adjustment appropriate to currency mismatch, as calculated under Articles 224 and 227. Institutions shall use the formula in this paragraph when calculating the volatility-adjusted value of the collateral for all transactions except for those transactions subject to recognised master netting agreements to which the provisions set out in Articles 220 and 221 apply. 3. Institutions shall calculate the volatility-adjusted value of the exposure (EVA) they need to take into account as follows:EVAE 1 HE 1HE where: E the exposure value as would be determined under Chapter 2 or Chapter 3, as applicable, where the exposure was not collateralised; HE the volatility adjustment appropriate to the exposure, as calculated under Articles 224 and 227. In the case of OTC derivative transactions, institutions using the method laid down in Section 6 of Chapter 6 shall calculate EVA as follows: EVA = E. 4. For the purpose of calculating E in paragraph 3, the following shall apply: (a) for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the exposure value of an off-balance sheet off-balance-sheet item listed in Annex I shall be 100 % of that item's item’s value rather than the exposure value indicated in Article 111(1); 111(2); (b) for institutions calculating risk-weighted exposure amounts off-balance-sheet items other than derivatives treated under the IRB Approach, they institutions shall calculate the their exposure value of the items listed in Article 166(8) to (10) by values using a conversion factor CCF of 100 % rather than instead of the conversion factors SA-CCF or percentages indicated IRB-CCF provided for in those paragraphs. Article 166(8), (8a) and (8b). 5. Institutions shall calculate the fully adjusted value of the exposure (E*), taking into account both volatility and the risk-mitigating effects of collateral as follows:E *max 0, EVA CVAM EVACVAM where: EVA the volatility adjusted value of the exposure as calculated in paragraph 3; CVAM CVA further adjusted for any maturity mismatch in accordance with the provisions of Section 5; In the case of OTC derivative transactions, institutions using the methods laid down in Sections 3, 4 and 5 of Chapter 6 shall take into account the risk-mitigating effects of collateral in accordance with the provisions laid down in Sections 3, 4 and 5 of Chapter 6, as applicable. 6. Institutions may shall calculate volatility adjustments either by using the Supervisory Volatility Adjustments Approach referred to in Article Articles 224 or the Own Estimates Approach referred to in Article 225. An institution may choose to use the Supervisory Volatility Adjustments Approach or the Own Estimates Approach independently of the choice it has made between the Standardised Approach and the IRB Approach for the calculation of risk-weighted exposure amounts. However, where an institution uses the Own Estimates Approach, it shall do so for the full range of instrument types, excluding immaterial portfolios where it may use the Supervisory Volatility Adjustments Approach. 227. 7. Where the collateral consists of a number of eligible items, institutions shall calculate the volatility adjustment (H) as follows:HiaiHi where: ai the proportion of the value of an eligible item i in the total value of collateral; Hi the volatility adjustment applicable to eligible item i.

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Article 224 Supervisory volatility adjustment under the Financial Collateral Comprehensive Method 1. The volatility adjustments to be applied by institutions under the Supervisory Volatility Adjustments Approach, assuming daily revaluation, shall be those set out in Tables 1 to 4 of this paragraph.VOLATILITY ADJUSTMENTS Table 1 Credit quality step with which the credit assessment of the debt security is associated Residual Maturity maturity (m), expressed in years Volatility adjustments for debt securities issued by entities described as referred to in Article 197(1)(b) 197(1), point (b) Volatility adjustments for debt securities issued by entities described as referred to in Article 197(1) 197(1), points (c) and (d) Volatility adjustments for securitisation positions and meeting the criteria laid down in Article 197(1) 197(1), point (h) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 1 m ≤ 1 year 0,707 0,5 0,354 1,414 1 0,707 2,829 2,828 2 1,414 >1 1 < m ≤ 3 2,828 2 1,414 4,243 3 2,121 11,314 8 5,657 3 < m ≤ 5 years 2,828 2 1,414 5,657 4 2,828 11,314 8 5,657 > 5 years < m ≤ 10 5,657 4 2,828 8,485 6 4,243 22,627 16 11,314 8 m > 10 5,657 22,628 4 2,828 16,971 12 8,485 22,627 16 11,313 2-3 11,314 2 to 3 m ≤ 1 year 1,414 1 0,707 2,828 2 1,414 5,657 4 2,828 >1 1 < m ≤ 3 4,243 3 2,121 5,657 4 2,828 16,971 12 8,485 3 < m ≤ 5 years 4,243 3 2,121 8,485 6 4,243 16,971 12 8,485 > 5 years < m ≤ 10 8,485 6 4,243 16,971 12 8,485 33,942 33,941 24 16,970 16,971 m > 10 8,485 6 4,243 28,284 20 14,142 33,941 24 16,971 4 ≤ 1 year 21,213 15 10,607 N/A N/A N/A N/A N/A N/A >1 ≤ 5 years 21,213 15 10,607 N/A N/A N/A N/A N/A N/A > 5 years all 21,213 15 10,607 N/A N/A N/A N/A N/A N/A Table 2 Credit quality step with which the credit assessment of a short term debt security is associated Residual maturity (m), expressed in years Volatility adjustments for debt securities issued by entities described as referred to in Article 197(1)(b) 197(1), point (b), with short-term credit assessments Volatility adjustments for debt securities issued by entities described as referred to in Article 197(1) 197(1), points (c) and (d) (d), with short-term credit assessments Volatility adjustments for securitisation positions and meeting the criteria laid down in Article 197(1)(h) 197(1), point (h), with short-term credit assessments 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) 1 0,707 0,5 0,354 1,414 1 0,707 2,829 2,828 2 1,414 2-3 2 to 3 1,414 1 0,707 2,828 2 1,414 5,657 4 2,828 Table 3 Other collateral or exposure types 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period (%) Main Index Equities, Main Index Convertible Bonds 21,213 15 10,607 index equities, main index convertible bonds 28,284 20 14,142 Other Equities equities or Convertible Bonds convertible bonds listed on a recognised exchange 35,355 25 17,678 42,426 30 21,213 Cash 0 0 0 Gold 21,213 15 10,607 bullion 28,284 20 14,142 Table 4 Volatility adjustment for currency mismatch (Hfx) 20-day liquidation period (%) 10-day liquidation period (%) 5-day liquidation period %) (%) 11,314 8 5,657 2. The calculation of volatility adjustments in accordance with paragraph 1 shall be subject to the following conditions: (a) for secured lending transactions the liquidation period shall be 20 business days; (b) for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities, and securities lending or borrowing transactions the liquidation period shall be 5 business days; (c) for other capital market driven transactions, the liquidation period shall be 10 business days. Where an institution has a transaction or netting set which meets the criteria set out in Article 285(2), (3) and (4), the minimum holding period shall be brought in line with the margin period of risk that would apply under those paragraphs. 3. In Tables 1 to 4 of paragraph 1 and in paragraphs 4 to 6, the credit quality step with which a credit assessment of the debt security is associated is the credit quality step with which the credit assessment is determined by EBA to be associated under Chapter 2. For the purpose of determining the credit quality step with which a credit assessment of the debt security is associated referred to in the first subparagraph, Article 197(7) also applies. 4. For non-eligible securities or for commodities lent or sold under repurchase transactions or securities or commodities lending or borrowing transactions, the volatility adjustment is the same as for non-main index equities listed on a recognised exchange. 5. For eligible units in CIUs the volatility adjustment is the weighted average volatility adjustments that would apply, having regard to the liquidation period of the transaction as specified in paragraph 2, to the assets in which the fund has invested. Where the assets in which the fund has invested are not known to the institution, the volatility adjustment is the highest volatility adjustment that would apply to any of the assets in which the fund has the right to invest. 6. For unrated debt securities issued by institutions or investment firms and satisfying the eligibility criteria in Article 197(4), the volatility adjustments is the same as for securities issued by institutions or corporates with an external credit assessment associated with credit quality step 2 or 3.

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Article 226 Scaling up of volatility adjustment under the Financial Collateral Comprehensive Method The volatility adjustments set out in Article 224 are the volatility adjustments an institution shall apply where there is daily revaluation. Similarly, where an institution uses its own estimates of the volatility adjustments in accordance with Article 225, it shall calculate them in the first instance on the basis of daily revaluation. Where the frequency of revaluation is less than daily, institutions shall apply larger volatility adjustments. Institutions shall calculate them by scaling up the daily revaluation volatility adjustments, using the following square-root-of-time formula:HHM NRTM 1TM formula: where: H = the volatility adjustment to be applied; HM = the volatility voatility adjustment where there is daily revaluation; NR = the actual number of business days between revaluations; TM = the liquidation period for the type of transaction in question.

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Article 227 Conditions for applying a 0 % volatility adjustment under the Financial Collateral Comprehensive Method 1. In relation Institutions that use the Supervisory Volatility Adjustments Approach referred to in Article 224, may, for repurchase transactions and securities lending or borrowing transactions, where an institution uses the Supervisory Volatility Adjustments Approach under Article 224 or the Own Estimates Approach under Article 225 and where the conditions set out in points (a) to (h) of paragraph 2 are satisfied, institutions may, apply a 0 % volatility adjustment instead of applying the volatility adjustments calculated under Articles 224 and 226, provided that the conditions set out in paragraph 2, points (a) to 226, apply a 0 % volatility adjustment. (h), of this Article are satisfied. Institutions using that use the internal models model approach set out in Article 221 shall not use the treatment set out in this Article. 2. Institutions may apply a 0 % volatility adjustment where all the following conditions are met: (a) both the exposure and the collateral are cash or debt securities issued by central governments or central banks within the meaning of Article 197(1)(b) and eligible for a 0 % risk weight under Chapter 2; (b) both the exposure and the collateral are denominated in the same currency; (c) either the maturity of the transaction is no more than one day or both the exposure and the collateral are subject to daily marking-to-market or daily re-margining; (d) the time between the last marking-to-market before a failure to re-margin by the counterparty and the liquidation of the collateral is no more than four business days; (e) the transaction is settled in a settlement system proven for that type of transaction; (f) the documentation covering the agreement or transaction is standard market documentation for repurchase transactions or securities lending or borrowing transactions in the securities concerned; (g) the transaction is governed by documentation specifying that where the counterparty fails to satisfy an obligation to deliver cash or securities or to deliver margin or otherwise defaults, then the transaction is immediately terminable; (h) the counterparty is considered a core market participant by the competent authorities. 3. The core market participants referred to in point (h) of paragraph 2 shall include the following entities: (a) the entities mentioned in Article 197(1)(b) exposures to which are assigned a 0 % risk weight under Chapter 2; (b) institutions; (ba) investment firms; (c) other financial undertakings within the meaning of points (25)(b) and (d) of Article 13 of Directive 2009/138/EC exposures to which are assigned a 20 % risk weight under the Standardised Approach or which, in the case of institutions calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach, do not have a credit assessment by a recognised ECAI and are internally rated by the institution; (d) regulated CIUs that are subject to capital or leverage requirements; (e) regulated pension funds; (f) recognised clearing organisations.

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Article 228 Calculating risk-weighted exposure amounts and expected loss amounts under the Financial Collateral Comprehensive method 1. for exposures treated under the Standardised Approach Under the Standardised Approach, institutions shall use E* as calculated under Article 223(5) as the exposure value for the purposes of Article 113. In the case of off-balance sheet off-balance-sheet items listed in Annex I, institutions shall use E* as the value to which the percentages indicated in Article 111(1) 111(2) shall be applied to arrive at the exposure value. 2. Under the IRB Approach, institutions shall use the effective LGD (LGD*) as the LGD for the purposes of Chapter 3. Institutions shall calculate LGD* as follows:LGD*LGD E*E where: LGD the LGD that would apply to the exposure under Chapter 3 where the exposure was not collateralised; E the exposure value in accordance with Article 223(3); E* the fully adjusted exposure value in accordance with Article 223(5).

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Article 229
Valuation principles for other eligible collateral under the IRB Approach
1. For immovable property collateral, the collateral shall be valued by an independent valuer at or at less than the market value. An institution shall require the independent valuer to document the market value in a transparent and clear manner.
In those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the immovable property may instead be valued by an independent valuer at or at less than the mortgage lending value. Institutions shall require the independent valuer not to take into account speculative elements in the assessment of the mortgage lending value and to document that value in a transparent and clear manner.
The value of the collateral shall be the market value or mortgage lending value reduced as appropriate to reflect the results of the monitoring required under Article 208(3) and to take account of any prior claims on the immovable property.
2. For receivables, the value of receivables shall be the amount receivable.
3. Institutions shall value physical collateral other than immovable property at its market value. For the purposes of this Article, the market value is the estimated amount for which the property would exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction.
4. EBA shall develop draft regulatory technical standards to specify the criteria and factors to be considered for the assessment of the term comparable property, as referred to in paragraph 1, point (e).
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 229
Valuation principles for eligible collateral other than financial collateral
1. The valuation of immovable property shall meet all of the following requirements:
(a) the value is appraised independently from an institution’s mortgage acquisition, loan processing and loan decision process by an independent valuer who possesses the necessary qualifications, ability and experience to execute a valuation;
(b) the value is appraised using prudently conservative valuation criteria which meet all of the following requirements:
(i) the value excludes expectations on price increases;
(ii) the value is adjusted to take into account the potential for the current market value to be significantly above the value that would be sustainable over the life of the loan;
(c) the value is documented in a transparent and clear manner;
(d) the value is not higher than a market value for the immovable property where such market value can be determined;
(e) where the property is revalued, the property value does not exceed the average value measured for that property, or for a comparable property over the last six years for residential property or eight years for commercial immovable property or the value at origination, whichever is higher.
For the purpose of calculating the average value, institutions shall take the average across property values observed at equal intervals and the reference period shall include at least three data points.
For the purpose of calculating the average value, institutions may use the results of the monitoring of property values in accordance with Article 208(3). The property value may exceed that average value or the value at origination, as applicable, in the case of modifications made to the property that unequivocally increase its value, such as improvements of the energy performance or improvements to the resilience, protection and adaptation to physical risks of the building or housing unit. The property value shall not be revalued upward if institutions do not have sufficient data to calculate the average value except if the value increase is based on modifications that unequivocally increase its value.
The valuation of immovable property shall take account of any prior claims on the property, unless a prior claim is taken into account in the calculation of the gross exposure amount pursuant to Article 124(6), point (c), or as reducing the amount of 55 % of the property value pursuant to Article 125(1) or Article 126(1), and reflect, where applicable, the results of the monitoring required under Article 208(3).
2. For receivables, the value of receivables shall be the amount receivable.
3. Institutions shall value physical collateral other than immovable property at its market value. For the purposes of this Article, the market value is the estimated amount for which the property would exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction.
4. EBA shall develop draft regulatory technical standards to specify the criteria and factors to be considered for the assessment of the term comparable property, as referred to in paragraph 1, point (e).
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 230
Calculating risk-weighted exposure amounts and expected loss amounts for other eligible collateral under the IRB Approach
1. Institutions shall use LGD* calculated in accordance with this paragraph and paragraph 2 as the LGD for the purposes of Chapter 3.
Where the ratio of the value of the collateral (C) to the exposure value (E) is below the required minimum collateralisation level of the exposure (C*) as laid down in Table 5, LGD* shall be the LGD laid down in Chapter 3 for uncollateralised exposures to the counterparty. For this purpose, institutions shall calculate the exposure value of the items listed in Article 166(8) to (10) by using a conversion factor or percentage of 100 % rather than the conversion factors or percentages indicated in those paragraphs.
Where the ratio of the value of the collateral to the exposure value exceeds a second, higher threshold level of C** as laid down in Table 5, LGD* shall be that prescribed in Table 5.
Where the required level of collateralisation C** is not achieved in respect of the exposure as a whole, institutions shall consider the exposure to be two exposures — one corresponding to the part in respect of which the required level of collateralisation C** is achieved and one corresponding to the remainder.
2. The applicable LGD* and required collateralisation levels for the secured parts of exposures are set out in Table 5 of this paragraph.
Table 5
Minimum LGD for secured parts of exposures
LGD* for senior exposure LGD* for subordinated exposures Required minimum collateralisation level of the exposure (C*) Required minimum collateralisation level of the exposure (C**)
Receivables 35 % 65 % 0 % 125 %
Residential property/commercial immovable property 35 % 65 % 30 % 140 %
Other collateral 40 % 70 % 30 % 140 %
3. As an alternative to the treatment set out in paragraphs 1 and 2, and subject to Article 124(2), institutions may assign a 50 % risk weight to the part of the exposure that is, within the limits set out in Article 125(2)(d) and Article 126(2)(d) respectively, fully collateralised by residential property or commercial immovable property situated within the territory of a Member State where all the conditions in Article 199(3) or (4) are met.

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Article 230
Calculating risk-weighted exposure amounts and expected loss amounts for an exposure with an eligible funded credit protection under the IRB Approach
1. Under the IRB Approach, except for those exposures that fall under the scope of Article 220, institutions shall use the effective LGD (LGD*) as the LGD for the purposes of Chapter 3 to recognise funded credit protection eligible pursuant to this Chapter. Institutions shall calculate LGD* as follows:
where:
E
= the exposure value before taking into account the effect of the funded credit protection; for an exposure secured by financial collateral eligible in accordance with this Chapter, that amount shall be calculated in accordance with Article 223(3); in the case of securities lent or posted, that amount shall be equal to the cash lent or securities lent or posted; for securities that are lent or posted, the exposure value shall be increased by applying the volatility adjustment (HE) in accordance with Articles 223 to 227;
ES
= the current value of the funded credit protection received after the application of the volatility adjustment applicable to that type of funded credit protection (HC) and the application of the volatility adjustment for currency mismatches (Hfx) between the exposure and the funded credit protection, in accordance with paragraphs 2 and 3; ES shall be capped at the following value: E·(1+HE);
EU
= E·(1+HE) – ES;
LGDU
= the applicable LGD for an unsecured exposure as set out in Article 161(1);
LGDS
= the applicable LGD to exposures secured by the type of eligible FCP used in the transaction, as specified in paragraph 2, Table 1.
2. Table 1 specifies the values of LGDS and Hc applicable in the formula set out in paragraph 1.
Table 1
Type of FCP LGDS Volatility adjustment (Hc)
Financial collateral 0 % Volatility adjustment Hc as set out in Articles 224 to 227
Receivables 20 % 40 %
Residential property and commercial immovable property 20 % 40 %
Other physical collateral 25 % 40 %
Ineligible FCP Not applicable 100 %
3. Where an eligible funded credit protection is denominated in a different currency than that of the exposure, the volatility adjustment for currency mismatch (Hfx) shall be the same as the one that applies pursuant to Articles 224 to 227.
4. As an alternative to the treatment set out in paragraphs 1 and 2 of this Article, and subject to Article 124(9), institutions may assign a 50 % risk weight to the part of the exposure that is, within the limits set out in Article 125(1), first subparagraph, and Article 126(1), first subparagraph, respectively, fully collateralised by residential property or commercial immovable property situated within the territory of a Member State where all of the conditions set out in Article 199(3) or (4) are met.
5. To calculate risk-weighted exposure amounts and expected loss amounts for IRB exposures that fall within the scope of Article 220, institutions shall use E* in accordance with Article 220(4) and shall use LGD for unsecured exposures, as set out in Article 161(1), points (a), (aa) and (b).

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before (02013R0575-20240709)

Article 231
Calculating risk-weighted exposure amounts and expected loss amounts in the case of mixed pools of collateral
1. An institution shall calculate the value of LGD* that it shall use as the LGD for the purposes of Chapter 3 in accordance with paragraphs 2 and 3 where both the following conditions are met:
(a) the institution uses the IRB Approach to calculate risk-weighted exposure amounts and expected loss amounts;
(b) an exposure is collateralised by both financial collateral and other eligible collateral.
2. Institutions shall be required to subdivide the volatility-adjusted value of the exposure, obtained by applying the volatility adjustment as set out in Article 223(5) to the value of the exposure, into parts so as to obtain a part covered by eligible financial collateral, a part covered by receivables, a part covered by commercial immovable property collateral or residential property collateral, a part covered by other eligible collateral, and the unsecured part, as applicable.
3. Institutions shall calculate LGD* for each part of the exposure obtained in paragraph 2 separately in accordance with the relevant provisions of this Chapter.

after (02013R0575-20250101)

Article 231
Calculating risk-weighted exposure amounts and expected loss amounts in the case of pools of eligible funded credit protection for an exposure treated under the IRB Approach
Institutions that have obtained multiple types of funded credit protection may, for exposures treated under the IRB Approach, apply the formula set out in Article 230, sequentially for each individual type of collateral. For that purpose, those institutions shall, after each step of recognising one individual type of FCP, reduce the remaining value of the unsecured exposure (EU) by the adjusted value of the collateral (ES) recognised in that step. In accordance with Article 230(1), the total of ES across all funded credit protection types shall be capped at the value of E·(1+HE), resulting in the following formula:
where:
LGDS,i
= the LGD applicable to FCP i, as specified in Article 230(2);
ES,i
= the current value of FCP i received after the application of the volatility adjustment applicable for the type of FCP (Hc) pursuant to Article 230(2).

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Article 232 Other funded credit protection 1. Where the conditions set out in Article 212(1) are met, cash on deposit with, or cash assimilated instruments held by, a deposit with third-party institution in a third party institution non-custodial arrangement and pledged to the lending institution, may be treated as a guarantee provided by the third party third-party institution. 2. Where the conditions set out in Article 212(2) are met, institutions shall subject the portion of the exposure collateralised by the current surrender value of life insurance policies pledged to the lending institution to the following treatment: (a) where the exposure is subject to the Standardised Approach, it shall be risk-weighted by using the risk weights specified in paragraph 3; (b) where the exposure is subject to the IRB Approach but not subject to the institution's own estimates of LGD, it shall be assigned an LGD of 40 %. In the event of a currency mismatch, institutions shall reduce the current surrender value in accordance with Article 233(3), the value of the credit protection being the current surrender value of the life insurance policy. 3. For the purposes of point (a) of paragraph 2, institutions shall assign the following risk weights on the basis of the risk weight assigned to a senior unsecured exposure to the undertaking providing the life insurance: (a) a risk weight of 20 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 20 %; (b) a risk weight of 35 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 50 %; (ba) a risk weight of 52,5 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 75 %; (c) a risk weight of 70 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 100 %; (d) a risk weight of 150 %, where the senior unsecured exposure to the undertaking providing the life insurance is assigned a risk weight of 150 %. 4. Institutions may treat instruments repurchased on request that are eligible under Article 200(c) as a guarantee by the issuing institution. The value of the eligible credit protection shall be the following: (a) where the instrument will be repurchased at its face value, the value of the protection shall be that amount; (b) where the instrument will be repurchased at market price, the value of the protection shall be the value of the instrument valued in the same way as the debt securities that meet the conditions in Article 197(4).

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Article 233 Valuation 1. For the purpose of calculating the effects of unfunded credit protection in accordance with this Sub-section, the value of unfunded credit protection (G) shall be the amount that the protection provider has undertaken to pay in the event of the default or non-payment of the borrower or on the occurrence of other specified credit events. 2. In the case of credit derivatives which do not include as a credit event restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that result in a credit loss event the following shall apply: (a) where the amount that the protection provider has undertaken to pay is not higher than the exposure value, institutions shall reduce the value of the credit protection calculated under paragraph 1 by 40 %; (b) where the amount that the protection provider has undertaken to pay is higher than the exposure value, the value of the credit protection shall be no higher than 60 % of the exposure value. 3. Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated, institutions shall reduce the value of the credit protection by the application of a volatility adjustment as follows:G*G 1 Hfx where: G* the amount of credit protection adjusted for foreign exchange risk, G the nominal amount of the credit protection; Hfx the volatility adjustment for any currency mismatch between the credit protection and the underlying obligation determined in accordance with paragraph 4. Where there is no currency mismatch Hfx is equal to zero. 4. Institutions shall base the volatility adjustments for any currency mismatch on a 10 business day liquidation period, assuming daily revaluation, and may shall calculate them those adjustments based on the Supervisory Volatility Adjustments Approach or the Own Estimates Approach as set out in Articles 224 and 225 respectively. Article 224. Institutions shall scale up the volatility adjustments in accordance with Article 226.

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Article 235 Calculating risk-weighted exposure amounts under the substitution approach where the guaranteed exposure is treated under the Standardised Approach 1. For the purposes of Article 113(3) 113(3), institutions shall calculate the risk-weighted exposure amounts for exposures with unfunded credit protection to which those institutions apply the Standardised Approach, irrespective of the treatment of comparable direct exposure to the protection provider, in accordance with the following formula:max 0,E formula: max {0, E – GA} · r + GA rGA · g where: E = the exposure value calculated in accordance with Article 111; for this that purpose, the exposure value of an off-balance sheet off-balance-sheet item listed in Annex I shall be 100 % of its value rather than the exposure value indicated in Article 111(1); 111(2); GA = the amount of credit protection adjusted for foreign exchange risk protection (G*) as calculated under Article 233(3) (G*) further adjusted for any maturity mismatch as laid down in Section 5; 5 of this Chapter; r = the risk weight of exposures to the obligor as specified under in Chapter 2; g = the risk weight of exposures applicable to a direct exposure to the protection provider as specified under in Chapter 2. 2. Where the protected amount (GA) is less than the exposure (E), institutions may apply the formula specified in paragraph 1 only where the protected and unprotected parts of the exposure are of equal seniority. 3. Institutions may extend the preferential treatment set out in Article 114(4) and (7) (7), to exposures or parts of exposures guaranteed by the central government or the central bank as if those exposures were direct exposures to the central government or the central bank, where provided that the guarantee is denominated conditions set out in the domestic currency of the borrower and the exposure is funded in that currency. Article 114(4) or (7), as applicable, are met for such direct exposures.

inserted text (02013R0575-20250101)

Article 235a
Calculating risk-weighted exposure amounts and expected loss amounts under the substitution approach where the guaranteed exposure is treated under the IRB Approach and a comparable direct exposure to the protection provider is treated under the Standardised Approach
1. For exposures with unfunded credit protection to which an institution applies the IRB Approach set out in Chapter 3 and where comparable direct exposures to the protection provider are treated under the Standardised Approach, institutions shall calculate the risk-weighted exposure amounts in accordance with the following formula:
max {0, E – GA} · r + GA · g
where:
E
= the exposure value determined in accordance with Chapter 3, Section 5; for that purpose, institutions shall calculate the exposure value for off-balance-sheet items other than derivatives treated under the IRB Approach using a CCF of 100 % instead of the SA-CCFs or IRB-CCF provided for in Article 166(8), (8a) and (8b);
GA
= the amount of credit protection adjusted for foreign exchange risk (G*) as calculated in accordance with Article 233(3) further adjusted for any maturity mismatch as laid down in Section 5 of this Chapter;
r
= the risk weight of exposures to the obligor as specified in Chapter 3;
g
= the risk weight applicable to a direct exposure to the protection provider as specified in Chapter 2.
2. Where the amount of credit protection (GA) is less than the exposure value (E), institutions may apply the formula specified in paragraph 1 only where the protected and unprotected parts of the exposure are of equal seniority.
3. Institutions may extend the preferential treatment set out in Article 114(4) and (7), to exposures or parts of exposures guaranteed by the central government or the central bank as if those exposures were direct exposures to the central government or the central bank, provided that the conditions set out in Article 114(4) or (7), as applicable, are met for such direct exposures.
4. The expected loss amount for the covered part of the exposure value shall be zero.
5. For any uncovered part of the exposure value (E), institutions shall use the risk weight and the expected loss corresponding to the underlying exposure. For the calculation set out in Article 159, institutions shall assign any general or specific credit risk adjustments or additional value adjustments in accordance with Article 34 related to the non-trading book business of the institution or other own funds reductions related to the exposure other than the deductions made in accordance with Article 36(1), point (m), to the uncovered part of the exposure value.

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before (02013R0575-20240709)

Article 236
Calculating risk-weighted exposure amounts and expected loss amounts under the IRB Approach
1. For the covered portion of the exposure value (E), based on the adjusted value of the credit protection GA, the PD for the purposes of Section 4 of Chapter 3 may be the PD of the protection provider, or a PD between that of the borrower and that of the guarantor where a full substitution is deemed not to be warranted. In the case of subordinated exposures and non-subordinated unfunded protection, the LGD to be applied by institutions for the purposes of Section 4 of Chapter 3 may be that associated with senior claims.
2. For any uncovered portion of the exposure value (E) the PD shall be that of the borrower and the LGD shall be that of the underlying exposure.
3. For the purposes of this Article, GA is the value of G* as calculated under Article 233(3) further adjusted for any maturity mismatch as laid down in Section 5. E is the exposure value determined in accordance with Section 5 of Chapter 3. For this purpose, institutions shall calculate the exposure value of the items listed in Article 166(8) to (10) by using a conversion factor or percentage of 100 % rather than the conversion factors or percentages indicated in those paragraphs.

after (02013R0575-20250101)

Article 236
Calculating risk-weighted exposure amounts and expected loss amounts under the substitution approach where the guaranteed exposure is treated under the IRB Approach without the use of own estimates of LGD and a comparable direct exposure to the protection provider is treated under the IRB Approach
1. For an exposure with unfunded credit protection to which an institution applies the IRB Approach set out in Chapter 3, but without using its own estimates of LGD, and where comparable direct exposures to the protection provider are treated under the IRB Approach set out in Chapter 3, the institution shall determine the covered part of the exposure as the lower of the exposure value (E) and the adjusted value of the unfunded credit protection (GA).
1a. Institutions that apply the IRB Approach to comparable direct exposures to the protection provider using own estimates of PD shall calculate the risk-weighted exposure amount and the expected loss amount for the covered part of the exposure value by using the PD of the protection provider and the LGD applicable for a comparable direct exposure to the protection provider as referred to in Article 161(1), in accordance with paragraph 1b of this Article. For subordinated exposures and non-subordinated unfunded credit protection, the LGD to be applied by institutions to the covered part of the exposure value shall be the LGD associated with senior claims and the institutions may account for any funded credit protection securing the unfunded credit protection in accordance with this Chapter.
1b. Institutions shall calculate the risk weight and expected loss applicable to the covered part of the underlying exposure using the PD, the LGD specified in paragraph 1a of this Article, and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity (M) related to the underlying exposure, calculated in accordance with Article 162.
1c. Institutions that apply the IRB Approach to comparable direct exposures to the protection provider using the method provided for in Article 153(5) shall use the risk weight and expected loss applicable to the covered part of the exposure that correspond to the ones provided for in Articles 153(5) and 158(6).
1d. Notwithstanding paragraph 1c of this Article, institutions that apply the IRB Approach to guaranteed exposures using the method provided for in Article 153(5) shall calculate the risk weight and expected loss applicable to the covered part of the exposure using the PD, the LGD applicable for a comparable direct exposure to the protection provider as referred to in Article 161(1), in accordance with paragraph 1b of this Article, and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity (M) related to the underlying exposure, calculated in accordance with Article 162. For subordinated exposures and non-subordinated unfunded credit protection, the LGD to be applied by institutions to the covered part of the exposure value shall be the LGD associated with senior claims and the institutions may account for any funded credit protection securing the unfunded credit protection in accordance with this Chapter.
2. For any uncovered part of the exposure value (E), institutions shall use the risk weight and the expected loss corresponding to the underlying exposure. For the calculation set out in Article 159, institutions shall assign any general or specific credit risk adjustments or additional value adjustments in accordance with Article 34 related to the non-trading book business of the institution or other own funds reductions related to the exposure other than the deductions made in accordance with Article 36(1), point (m), to the uncovered part of the exposure value.
3. For the purposes of this Article, (GA) is the amount of credit protection adjusted for foreign exchange risk (G*) as calculated under Article 233(3) further adjusted for any maturity mismatch as laid down in Section 5 of this Chapter. The exposure value (E) is the exposure value determined in accordance with Chapter 3, Section 5. Institutions shall calculate the exposure value for off-balance-sheet items other than derivatives treated under the IRB Approach using a CCF of 100 % instead of the SA-CCFs or IRB-CCF provided for in Article 166(8), (8a) and (8b).

inserted text (02013R0575-20250101)

Article 236a
Calculating risk-weighted exposure amounts and expected loss amounts under the substitution approach where the guaranteed exposure is treated under the IRB Approach using own estimates of LGD and a comparable direct exposure to the protection provider is treated under the IRB Approach
1. For an exposure with unfunded credit protection to which an institution applies the IRB Approach set out in Chapter 3 using its own estimates of LGD and where comparable direct exposures to the protection provider are treated under the IRB Approach set out in Chapter 3, but without using its own estimates of LGD, the institution shall determine the covered part of the exposure as the lower of the exposure value (E) and the adjusted value of the unfunded credit protection (GA), calculated in accordance with Article 235a(1). The institution shall calculate the risk-weighted exposure amount and the expected loss amount for the covered part of the exposure value by using the PD, the LGD and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity (M) related to the underlying exposure, calculated in accordance with Article 162.
2. Institutions that apply the IRB Approach set out in Chapter 3, but without using their own estimates of LGD to comparable direct exposures to the protection provider, shall determine the LGD in accordance with Article 161(1). For subordinated exposures and non-subordinated unfunded credit protection, the LGD to be applied by institutions to the covered part of the exposure value shall be the LGD associated with senior claims and the institutions may account for any funded credit protection securing the unfunded credit protection in accordance with this Chapter.
3. Institutions that apply the IRB Approach set out in Chapter 3 using their own estimates of LGD to comparable direct exposures to the protection provider shall calculate the risk weight and the expected loss applicable to the covered part of the underlying exposure using the PD, the LGD and the same risk weight function as the ones used for a comparable direct exposure to the protection provider, and shall, where applicable, use the maturity (M) related to the underlying exposure, calculated in accordance with Article 162.
4. Institutions that apply the IRB Approach to comparable direct exposures to the protection provider using the method provided for in Article 153(5) shall use the risk weight and expected loss applicable to the covered part of the exposure that correspond to the ones provided in Articles 153(5) and 158(6).
5. For any uncovered part of the exposure value (E), institutions shall use the risk weight and the expected loss corresponding to the underlying exposure. For the calculation set out in Article 159, institutions shall assign any general or specific credit risk adjustments or additional value adjustments in accordance with Article 34 related to the non-trading book business of the institution or other own funds reductions related to the exposure other than the deductions made in accordance with Article 36(1), point (m), to the uncovered part of the exposure value.

02013R0575-20240709 → 02013R0575-20250101

Article 252 Treatment of maturity mismatches in synthetic securitisations For the purposes of calculating risk-weighted exposure amounts in accordance with Article 251, any maturity mismatch between the credit protection by which the transfer of risk is achieved and the underlying exposures shall be calculated as follows: (a) the maturity of the underlying exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of 5 years. The maturity of the credit protection shall be determined in accordance with Chapter 4; (b) an originator institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for securitisation positions subject to a risk weight of 1250 % in accordance with this Section. For all other positions, the maturity mismatch treatment set out in Chapter 4 shall be applied in accordance with the following formula: RW*RWSP · t t*T t* RWAss t*RWAss · T tT t* where: RW* risk-weighted exposure amounts for the purposes of Article 92(4), point (a) of Article 92(3); (a); RWAss risk-weighted exposure amounts for the underlying exposures as if they had not been securitised, calculated on a pro-rata basis; RWSP risk-weighted exposure amounts calculated under Article 251 as if there was no maturity mismatch; T maturity of the underlying exposures, expressed in years; t maturity of credit protection, expressed in years; t* 0,25

02013R0575-20240709 → 02013R0575-20250101

Article 273 Methods for calculating the exposure value 1. Institutions shall calculate the exposure value for the contracts listed in Annex II and for credit derivatives, with the exception of the credit derivatives referred to in paragraphs 3 and 5 of this Article, on the basis of one of the methods set out in Sections 3 to 6 in accordance with this Article. An institution which does not meet the conditions set out in Article 273a(1) shall not use the method set out in Section 4. An institution which does not meet the conditions set out in Article 273a(2) shall not use the method set out in Section 5. Institutions may use in combination the methods set out in Sections 3 to 6 on a permanent basis within a group. A single institution shall not use in combination the methods set out in Sections 3 to 6 on a permanent basis. 2. Where permitted by the competent authorities in accordance with Article 283(1) and (2), an institution may determine the exposure value for the following items using the Internal Model Method set out in Section 6: (a) the contracts listed in Annex II; (b) repurchase transactions; (c) securities or commodities lending or borrowing transactions; (d) margin lending transactions; (e) long settlement transactions. 3. When an institution purchases protection through a credit derivative against a non-trading book exposure or against a counterparty risk exposure, it may calculate its own funds requirement for the hedged exposure in accordance with either of the following: (a) Articles 233 to 236; (b) in accordance with Article 153(3), or Article 183, where permission has been granted in accordance with Article 143. The exposure value for CCR for those credit derivatives shall be zero, unless an institution applies the approach in point (h)(ii) of Article 299(2). 4. Notwithstanding paragraph 3, an institution … 487 unchanged words … irrespective of the materiality of those positions. 9. For the methods set out in Sections 3 to 6 of this Chapter, institutions shall treat transactions where Specific Wrong-Way risk has been identified in accordance with Article 291(2), (4), (5), and (6).

02013R0575-20240709 → 02013R0575-20250101

Article 273a Conditions for using simplified methods for calculating the exposure value 1. An institution may calculate the exposure value of its derivative positions in accordance with the method set out in Section 4, provided that the size of its on- and off-balance-sheet derivative business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month: (a) 10 % of the institution's total assets; (b) EUR 300 million. 2. An institution may calculate the exposure value of its derivative positions in accordance with the method set out in Section 5, provided that the size of its on- and off-balance-sheet derivative business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month: (a) 5 % of the institution's total assets; (b) EUR 100 million. 3. For the purposes of paragraphs 1 and 2, institutions shall calculate the size of their on- and off-balance-sheet derivative business on the basis of data as of the last day of each month in accordance with the following requirements: (a) derivative positions shall be valued at their market values on that given date; 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 market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position; (b) the absolute value of the aggregated long derivative positions position shall be summed with the absolute value of the aggregated short derivative positions; position; (c) all derivative positions shall be included, except credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures. For the purposes of the first subparagraph, the meaning of long and short positions is the same as that set out in Article 94(3). For the purposes of the first subparagraph, the value of the aggregated long (short) position shall be equal to the sum of the values of the individual long (short) positions included in the calculation in accordance with point (c). 4. By way of derogation from paragraph 1 or 2, as applicable, where the derivative business on a consolidated basis does not exceed the thresholds set out in paragraph 1 or 2, as applicable, an institution which is included in the consolidation and which would have to apply the method set out in Section 3 or 4 because it exceeds those thresholds on an individual basis, may, subject to the approval of competent authorities, instead choose to apply the method that would apply on a consolidated basis. 5. Institutions shall notify the competent authorities of the methods set out in Section 4 or 5 that they use, or cease to use, as applicable, to calculate the exposure value of their derivative positions. 6. Institutions shall not enter into a derivative transaction or buy or sell a derivative instrument for the sole purpose of complying with any of the conditions set out in paragraphs 1 and 2 during the monthly assessment.

02013R0575-20240709 → 02013R0575-20250101

Article 273b Non-compliance with the conditions for using simplified methods for calculating the exposure value of derivatives and the simplified approach for calculating the own funds requirements for CVA risk 1. An institution that no longer meets one or more of the conditions set out in Article 273a(1) or (2) shall immediately notify the competent authority thereof. 2. An institution Institutions shall cease to calculate the exposure values of its their derivative positions in accordance with Section 4 or 5, 5 and to calculate the own funds requirements for CVA risk in accordance with Article 385, as applicable, within three months of the occurrence of one of the following occurring: following: (a) the institution does not meet the conditions set out in point (a) of Article 273a(1) or (2), as applicable, or the conditions set out in point (b) of Article 273a(1) or (2), as applicable, for three consecutive months; (b) the institution does not meet the conditions set out in point (a) of Article 273a(1) or (2), as applicable, or the conditions set out in point (b) of Article 273a(1) or (2), as applicable, for more than six of the preceding 12 months. 3. Where an institution has Institutions that have ceased to calculate the exposure values of its their derivative positions in accordance with Section 4 or 5, 5 and to calculate the own funds requirements for CVA risk in accordance with Article 385, as applicable, it shall only be permitted to resume calculating the exposure value of its their derivative positions as set out in Section 4 or 5 and the own funds requirements for CVA risk in accordance with Article 385 where it demonstrates they demonstrate to the competent authority that all of the conditions set out in Article 273a(1) or (2) (2), have been met for an uninterrupted period of one year.

02013R0575-20240709 → 02013R0575-20250101

Article 274 Exposure value 1. An institution may calculate a single exposure value at netting set level for all the transactions covered by a contractual netting agreement where all the following conditions are met: (a) the netting agreement belongs to one of the types of contractual netting agreements referred to in Article 295; (b) the netting agreement has been recognised by competent authorities in accordance with Article 296; (c) the institution has fulfilled the obligations laid down in Article 297 in respect of the netting agreement. Where any of the conditions set out in the first subparagraph are not met, the institution shall treat each transaction as if it was its own netting set. 2. Institutions shall calculate the exposure value of a netting set under the standardised approach for counterparty credit risk as follows: Exposure value = α · (RC + PFE) where: RC the replacement cost calculated in accordance with Article 275; and PFE the potential future exposure calculated in accordance with Article 278; α 1,4. 3. The exposure value of a netting set that is subject to a contractual margin agreement shall be capped at the exposure value of the same netting set not subject to any form of margin agreement. 4. Where multiple margin agreements apply to the same netting set, institutions shall allocate each or the same netting set includes both transactions subject to a margin agreement and transactions not subject to a margin agreement, an institution shall calculate its exposure value as follows: (a) the group institution shall establish the hypothetical sub-netting sets concerned, composed of transactions included in the netting set set, as follows: (i) all transactions subject to which that a margin agreement contractually applies and to the same margin period of risk as determined in accordance with Article 285(2) to (5), shall be allocated to the same sub-netting set; (ii) all transactions not subject to a margin agreement shall be allocated to the same sub-netting set, distinct from the sub-netting sets established in accordance with point (i) of this paragraph; (b) the institution shall calculate the replacement cost of the netting set in accordance with Article 275(2), taking into account all transactions within the netting set, whether or not subject to a margin agreement, and apply all of the following: (i) CMV shall be calculated for all transactions within a netting set gross of any collateral held or posted where positive and negative market values are netted in computing the CMV; (ii) NICA, VM, TH, and MTA, where applicable, shall be calculated separately as the sum across the same inputs applicable to each individual margin agreement of the netting set; (c) the institution shall calculate an the potential future exposure value of the netting set referred to in Article 278 by applying all of the following: (i) the multiplier referred to in Article 278(1) shall be based on the inputs CMV, NICA and VM, as applicable, in accordance with point (b) of this paragraph; (ii) shall be calculated in accordance with Article 278, separately for each hypothetical sub-netting set referred to in point (a) of those grouped transactions. this paragraph. 5. Institutions may set to zero the exposure value of a netting set that satisfies all the following conditions: (a) the netting set is solely composed of sold options; (b) the current market value of the netting set is at all times negative; (c) the premium of all the options included in the netting set has been received upfront by the institution to guarantee the performance of the contracts; (d) the netting set is not subject to any margin agreement. 6. In a netting set, institutions shall replace a transaction which is a finite linear combination of bought or sold call or put options with all the single options that form that linear combination, taken as an individual transaction, for the purpose of calculating the exposure value of the netting set in accordance with this Section. Each such combination of options shall be treated as an individual transaction in the netting set in which the combination is included for the purpose of calculating the exposure value. By way of derogation from the first subparagraph, institutions shall replace a vanilla digital option the strike of which equals K with the relevant collar combination of two sold and bought vanilla call or put options that meet the following requirements: (a) the two options of the collar combination have: (i) the same expiry date and the same spot or forward price of the underlying instrument as the vanilla digital option; (ii) strikes equal to 0,95·K and 1,05·K respectively; (b) the collar combination replicates exactly the vanilla digital option payoff outside the range between the two strikes referred to in point (a). The risk position of the two options of the collar combination referred to in the second subparagraph shall be calculated separately in accordance with Article 279. 7. The exposure value of a credit derivative transaction representing a long position in the underlying may be capped to the amount of outstanding unpaid premium provided it is treated as its own netting set that is not subject to a margin agreement.

02013R0575-20240709 → 02013R0575-20250101

Article 276 Recognition and treatment of collateral 1. For the purposes of this Section, institutions shall calculate the collateral amounts of VM, VMMA, NICA and NICAMA, by applying all the following requirements: (a) where all the transactions included in a netting set belong to the trading book, only collateral that is eligible under Articles 197 and 299 shall be recognised; (b) where a netting set contains at least one transaction that belongs to the non-trading book, only collateral that is eligible under Article 197 shall be recognised; (c) collateral received from a counterparty shall be recognised with a positive sign and collateral posted to a counterparty shall be recognised with a negative sign; (d) the volatility-adjusted value of any type of collateral received or posted shall be calculated in accordance with Article 223; for the purposes of that calculation, institutions shall not use the method set out in Article 225; (e) the same collateral item shall not be included in both VM and NICA at the same time; (f) the same collateral item shall not be included in both VMMA and NICAMA at the same time; (g) any collateral posted to the counterparty that is segregated from the assets of that counterparty and, as a result of that segregation, is bankruptcy remote in the event of the default or insolvency of that counterparty shall not be recognised in the calculation of NICA and NICAMA. 2. For the calculation of the volatility-adjusted value of collateral posted referred to in point (d) of paragraph 1 of this Article, institutions shall replace the formula set out in Article 223(2) with the following formula: CVA = C · (1 + HC + Hfx) where: CVA = the volatility-adjusted value of collateral posted; and C = the collateral; Hc and Hfx are defined in accordance with Article 223(2). 3. For the purposes of point (d) of paragraph 1, institutions shall set the liquidation period relevant for the calculation of the volatility-adjusted value of any collateral received or posted in accordance with one of the following time horizons: (a) one year for the netting sets referred to in Article 275(1); (b) the margin period of risk determined in accordance with point (b) of Article 279c(1) for the netting sets referred to in Article 275(2) and (3).

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Article 277a Hedging sets 1. Institutions shall establish the relevant hedging sets for each risk category of a netting set and assign each transaction to those hedging sets as follows: (a) transactions mapped to the interest rate risk category shall be assigned to … 576 unchanged words … to in point (b) of the first subparagraph to one of the hedging sets established in accordance with paragraph 1, on the basis of only one of the two risk drivers referred to in point (b) of the first subparagraph. For the purposes of the first subparagraph, point (a), of this paragraph, institutions shall assign transactions to a separate hedging set of the relevant risk category following the same hedging set construction set out in paragraph 1. 3. Institutions shall make available upon request by the competent authorities the number of hedging sets established in accordance with paragraph 2 of this Article for each risk category, with the primary risk driver, or the most material risk driver in the given risk category for transactions referred to in Article 277(3), or the pair of risk drivers of each of those hedging sets and with the number of transactions in each of those hedging sets.

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Article 279a Supervisory delta 1. Institutions shall calculate the supervisory delta as follows: (a) for call and put options that entitle the option buyer to purchase or sell an underlying instrument at a positive price on a single or multiple dates in the future, except where those options are mapped to the interest rate risk or commodity risk category, institutions shall use the following formula: δsignN typelnPK0,5σ2TσT where: δ the supervisory delta; sign – 1 where the transaction is a sold call option or a bought put option; sign + 1 where the transaction is a bought call option or sold put option; type – 1 where … 498 unchanged words … for transactions referred to in Article 277(3) means that the market value of the transaction decreases when the value of that risk driver increases. 3. EBA shall develop draft regulatory technical standards to specify: (a) in accordance with international regulatory developments, the formula formulae that institutions shall use to calculate the supervisory delta of call and put options mapped to the interest rate risk or commodity risk category compatible with market conditions in which interest rates or commodity prices may be negative as well as and the supervisory volatility that is suitable for that formula; those formulae; (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 10 July 2025. 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 285 Exposure value for netting sets subject to a margin agreement 1. If the netting set is subject to a margin agreement and daily mark-to-market valuation, the institution shall calculate Effective EPE as set out in this paragraph. If the model … 685 unchanged words … jointly with the exposure in its exposure value calculations for OTC derivatives and securities-financing transactions. 7. If an institution is not able to model collateral jointly with the exposure, it shall not recognise in its exposure value calculations for OTC derivatives and securities-financing transactions the effect of collateral other than cash of the same currency as the exposure itself, unless it the institution uses either the volatility adjustments that meet the standards of the financial collateral comprehensive Method with own volatility adjustments estimates or under the standard Supervisory Volatility Adjustments Approach in accordance with Chapter 4. 7a. If an institution is not able to model collateral jointly with the exposure, it shall not recognise in its exposure value calculations for securities financing transactions the effect of collateral other than cash of the same currency as the exposure itself. 8. An institution using the IMM shall ignore in its models the effect of a reduction of the exposure value due to any clause in a collateral agreement that requires receipt of collateral when counterparty credit quality deteriorates.

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Article 291 Wrong-Way Risk 1. For the purposes of this Article: (a) General Wrong-Way risk arises when the likelihood of default by counterparties is positively correlated with general market risk factors; (b) Specific Wrong-Way risk arises when future exposure to a specific counterparty is … 389 unchanged words … is legally connected with the counterparty. For transactions referencing a basket of names or index, the jump-to-default of the respective underlying obligations where the issuer is legally connected with the counterparty, shall be applied, if material; (f) to the extent that this the calculation uses existing market risk calculations for own funds requirements for incremental default and migration risk as set out in Title IV, Chapter 5, 1a, Section 4 or 5, or for default risk using an internal default risk model as set out in Title IV, Chapter 1b, Section 3, that already contain an LGD assumption, the LGD in the formula used shall be 100 %. 6. Institutions shall provide senior management and the appropriate committee of the management body with regular reports on both Specific and General Wrong-Way risks and the steps being taken to manage those risks.

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Article 311a
Definitions
For the purposes of this Title, the following definitions apply:
(1) operational risk event means any event linked to an operational risk which generates a loss or multiple losses, within one or multiple financial years;
(2) aggregated gross loss means the sum of all gross losses linked to the same operational risk event over one or multiple financial years;
(3) aggregated net loss means the sum of all net losses linked to the same operational risk event over one or multiple financial years;
(4) grouped losses means all operational losses caused by a common underlying trigger or root cause that could be grouped into one operational risk event.

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Article 312
Permission and notification
1. To qualify for use of the Standardised Approach, institutions shall meet the criteria set out in Article 320, in addition to meeting the general risk management standards set out in Articles 74 and 85 of Directive 2013/36/EU. Institutions shall notify the competent authorities prior to using the Standardised Approach.
Competent authorities shall permit institutions to use an alternative relevant indicator for the business lines of retail banking and commercial banking where the conditions set out in Articles 319(2) and 320 are met.
2. Competent authorities shall permit institutions to use Advanced Measurement Approaches based on their own operational risk measurement systems, where all the qualitative and quantitative standards set out in Articles 321 and 322 respectively are met and where institutions meet the general risk management standards set out in Articles 74 and 85 of Directive 2013/36/EU and Section II, Chapter 3, Title VII of that Directive.
Institutions shall also apply for permission from their competent authorities where they want to implement material extensions and changes to those Advanced Measurement Approaches. Competent authorities shall grant the permission only where institutions would continue to meet the standards specified in the first subparagraph following those material extensions and changes.
3. Institutions shall notify the competent authorities of all changes to their Advanced Measurement Approaches models.
4. EBA shall develop draft regulatory technical standards to specify the following:
(a) the assessment methodology under which the competent authorities permit institutions to use Advanced Measurement Approaches;
(b) the conditions for assessing the materiality of extensions and changes to the Advanced Measurement Approaches;
(c) the modalities of the notification required in paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 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.

after (02013R0575-20250101)

Article 312
Own funds requirement for operational risk
The own funds requirement for operational risk shall be the business indicator component calculated in accordance with Article 313.

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Article 313
Reverting to the use of less sophisticated approaches
1. Institutions that use the Standardised Approach shall not revert to the use of the Basic Indicator Approach unless the conditions in paragraph 3 are met.
2. Institutions that use the Advanced Measurement Approaches shall not revert to the use of the Standardised Approach or the Basic Indicator Approach unless the conditions in paragraph 3 are met.
3. An institution may only revert to the use of a less sophisticated approach for operational risk where both the following conditions are met:
(a) the institution has demonstrated to the satisfaction of the competent authority that the use of a less sophisticated approach is not proposed in order to reduce the operational risk related own funds requirements of the institution, is necessary on the basis of nature and complexity of the institution and would not have a material adverse impact on the solvency of the institution or its ability to manage operational risk effectively;
(b) the institution has received the prior permission of the competent authority.

after (02013R0575-20250101)

Article 313
Business indicator component
Institutions shall calculate their business indicator component in accordance with the following formula:
where:
BIC
= the business indicator component;
BI
= the business indicator, expressed in billions of euro, calculated in accordance with Article 314.

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Article 314
Combined use of different approaches
1. Institutions may use a combination of approaches provided that they obtain permission from the competent authorities. Competent authorities shall grant such permission where the requirements set out in paragraphs 2 to 4, as applicable, are met.
2. An institution may use an Advanced Measurement Approach in combination with either the Basic Indicator Approach or the Standardised Approach, where both of the following conditions are met:
(a) the combination of Approaches used by the institution captures all its operational risks and competent authorities are satisfied with the methodology used by the institution to cover different activities, geographical locations, legal structures or other relevant divisions determined on an internal basis;
(b) the criteria set out in Article 320 and the standards set out in Articles 321 and 322 are fulfilled for the part of activities covered by the Standardised Approach and the Advanced Measurement Approaches respectively.
3. For institutions that want to use an Advanced Measurement Approach in combination with either the Basic Indicator Approach or the Standardised Approach competent authorities shall impose the following additional conditions for granting permission:
(a) on the date of implementation of an Advanced Measurement Approach, a significant part of the institution's operational risks are captured by that Approach;
(b) the institution takes a commitment to apply the Advanced Measurement Approach across a material part of its operations within a time schedule that was submitted to and approved by its competent authorities.
4. An institution may request permission from a competent authority to use a combination of the Basic Indicator Approach and the Standardised Approach only in exceptional circumstances such as the recent acquisition of new business which may require a transitional period for the application of the Standardised Approach.
A competent authority shall grant such permission only where the institution has committed to apply the Standardised Approach within a time schedule that was submitted to and approved by the competent authority.
5. EBA shall develop draft regulatory technical standards to specify the following:
(a) the conditions that competent authorities shall use when assessing the methodology referred to in point (a) of paragraph 2;
(b) the conditions that the competent authorities shall use when deciding whether to impose the additional conditions referred to in paragraph 3.
EBA shall submit those draft regulatory technical standards to the Commission by 31 December 2016.
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. EBA shall develop draft regulatory technical standards to specify the following:
(a) the components of the business indicator, and their use, by developing lists of typical sub-items, taking into account international regulatory standards and, where appropriate, the prudential boundary defined in Part Three, Title I, Chapter 3;
(b) the elements listed in paragraph 7 of this Article.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
10. EBA shall develop draft implementing technical standards to specify the items of the business indicator by mapping those items with the corresponding reporting cells set out in Commission Implementing Regulation (EU) 2021/451Commission Implementing Regulation (EU) 2021/451 of 17 December 2020 laying down implementing technical standards for the application of Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to supervisory reporting of institutions and repealing Implementing Regulation (EU) No 680/2014 (OJ L 97, 19.3.2021, p. 1).;, where appropriate.
EBA shall submit those draft implementing technical standards to the Commission by 10 January 2026.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 314
Business indicator
1. Institutions shall calculate their business indicator in accordance with the following formula:
BI = ILDC + SC + FC
where:
BI
= the business indicator, expressed in billions of euro;
ILDC
= the interest, leases and dividend component, expressed in billions of euro and calculated in accordance with paragraph 2;
SC
= the services component, expressed in billions of euro and calculated in accordance with paragraph 5;
FC
= the financial component, expressed in billions of euro and calculated in accordance with paragraph 6.
2. For the purposes of paragraph 1, the interest, leases and dividend component shall be calculated in accordance with the following formula:
where:
ILDC
= the interest, leases and dividend component;
IC
= the interest component, which is the institution’s interest income from all financial assets and other interest income, including finance income from financial leases and income from operating leases and profits from leased assets, minus the institution’s interest expenses from all financial liabilities and other interest expenses, including interest expense from financial and operating leases, depreciation and impairment of, and losses from, operating leased assets, calculated as the annual average of the absolute values of the differences over the last three financial years;
AC
= the asset component, which is the sum of the institution’s total gross outstanding loans, advances, interest bearing securities, including government bonds, and lease assets, calculated as the annual average over the last three financial years on the basis of the amounts at the end of each of the respective financial years;
DC
= the dividend component, which is the institution’s dividend income from investments in stocks and funds not consolidated in the financial statements of the institution, including dividend income from non-consolidated subsidiaries, associates and joint ventures, calculated as the annual average over the last three financial years.
3. By way of derogation from paragraph 2, an EU parent institution may, until 31 December 2027, request permission from its consolidating supervisor to calculate a separate interest, leases and dividend component for any of its specific subsidiary institutions and to add the outcome of that calculation to the interest, leases and dividend component calculated, on a consolidated basis, for the other entities of the group where all of the following conditions are met:
(a) the subsidiaries’ retail or commercial banking activities account for the majority of their activity;
(b) a significant proportion of the subsidiaries’ retail or commercial banking activities comprise loans associated with a high PD;
(c) the use of the derogation provides an appropriate basis for calculating the EU parent institution’s own funds requirement for operational risk.
Once granted, the permission, and its conditions, shall be reassessed by the consolidating supervisor every two years.
The consolidating supervisor shall notify EBA as soon as such permission is granted, confirmed or withdrawn.
By 31 December 2031, EBA shall report to the Commission on the use and appropriateness of the derogation referred to in the first subparagraph having regard, in particular, to the specific business models concerned and to the adequacy of the related own funds requirement for operational risk. On the basis of that report, and taking due account of the related internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2032.
4. Until 31 December 2027 or until the consolidating supervisor grants permission in accordance with paragraph 3, whichever is earlier, an EU parent institution that has been granted permission to apply the alternative standardised approach to its business lines of retail banking and commercial banking to calculate its own funds requirement for operational risk may, after having informed its consolidating supervisor, continue to use the alternative standardised approach as set out in the version of this Regulation applicable on 8 July 2024 for the purpose of calculating the own funds requirement for operational risk relating to those two business lines and according to the scope of the existing permission.
5. For the purposes of paragraph 1, the services component shall be calculated in accordance with the following formula:
SC = max(OI,OE) + max(FI,FE)
where:
SC
= the services component;
OI
= the other operating income, which is the annual average over the last three financial years of the institution’s income from ordinary banking operations not included in other items of the business indicator but of similar nature;
OE
= the other operating expenses, which is the annual average over the last three financial years of the institution’s expenses and losses from ordinary banking operations not included in other items of the business indicator but of similar nature, and from operational risk events;
FI
= the fee and commission income component, which is the annual average over the last three financial years of the institution’s income received from providing advice and services, including income received by the institution as an outsourcer of financial services;
FE
= the fee and commission expenses component, which is the annual average over the last three financial years of the institution’s expenses paid for receiving advice and services, including outsourcing fees paid by the institution for the supply of financial services, but excluding outsourcing fees paid for the supply of non-financial services.
Subject to the prior permission of the competent authority, and to the extent that the institutional protection scheme has at its disposal suitable and uniformly stipulated systems for the monitoring and classification of operational risks, institutions that are members of an institutional protection scheme meeting the requirements of Article 113(7) may calculate the services component net of any income received from, or expenses paid to, institutions that are members of the same institutional protection scheme. Any losses resulting from the related operational risks are subject to mutualisation across institutional protection scheme members.
6. For the purposes of paragraph 1, the financial component shall be calculated in accordance with the following formula:
FC = TC + BC
where:
FC
= the financial component;
TC
= the trading book component, which is the annual average of the absolute values over the last three financial years of the net profit or loss, as applicable, on the institution’s trading book, determined as appropriate either in accordance with accounting standards or in accordance with Part Three, Title I, Chapter 3, including from trading assets and trading liabilities, from hedge accounting and from exchange differences;
BC
= the banking book component, which is the annual average of the absolute values over the last three financial years of the net profit or loss, as applicable, on the institution’s non-trading book, including from financial assets and liabilities measured at fair value through profit and loss, from hedge accounting, from exchange differences and from realised gains and losses on financial assets and liabilities not measured at fair value through profit and loss.
7. Institutions shall not use any of the following elements in the calculation of their business indicator:
(a) income and expenses from insurance or reinsurance business;
(b) premiums paid and payments received from insurance or reinsurance policies purchased;
(c) administrative expenses, including staff expenses, outsourcing fees paid for the supply of non-financial services, and other administrative expenses;
(d) recovery of administrative expenses including recovery of payments on behalf of customers;
(e) expenses of premises and fixed assets, except where those expenses result from operational risk events;
(f) depreciation of tangible assets and amortisation of intangible assets, except the depreciation related to operating lease assets, which shall be included in financial and operating lease expenses;
(g) provisions and reversal of provisions, except where those provisions relate to operational risk events;
(h) expenses due to share capital repayable on demand;
(i) impairment and reversal of impairment;
(j) changes in goodwill recognised in profit or loss;
(k) corporate income tax.
8. Where an institution has been in operation for less than three years, it shall use forward-looking business estimates in calculating the relevant components of its business indicator, subject to the satisfaction of its competent authority. The institution shall start using historical data as soon as that data are available.
9. EBA shall develop draft regulatory technical standards to specify the following:
(a) the components of the business indicator, and their use, by developing lists of typical sub-items, taking into account international regulatory standards and, where appropriate, the prudential boundary defined in Part Three, Title I, Chapter 3;
(b) the elements listed in paragraph 7 of this Article.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
10. EBA shall develop draft implementing technical standards to specify the items of the business indicator by mapping those items with the corresponding reporting cells set out in Commission Implementing Regulation (EU) 2021/451Commission Implementing Regulation (EU) 2021/451 of 17 December 2020 laying down implementing technical standards for the application of Regulation (EU) No 575/2013 of the European Parliament and of the Council with regard to supervisory reporting of institutions and repealing Implementing Regulation (EU) No 680/2014 (OJ L 97, 19.3.2021, p. 1)., where appropriate.
EBA shall submit those draft implementing technical standards to the Commission by 10 January 2026.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

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Article 315 Own funds requirement Adjustments to the business indicator 1. Under Institutions shall include business indicator items of merged or acquired entities or activities in their business indicator calculation from the Basic Indicator Approach, the own funds requirement for operational risk is equal to 15 % time of the average over three years of the relevant indicator merger or acquisition, as set out in Article 316. Institutions applicable, and shall calculate the average over three years of the relevant indicator on the basis of cover the last three twelve-monthly observations at financial years. 2. Institutions may request permission from the end of competent authority to exclude from the financial year. When audited figures are not available, institutions may use business estimates. 2. Where an institution has been in operation for less than three years it may use forward-looking business estimates in calculating the relevant indicator, provided that it starts using historical data as soon as it is available. indicator amounts related to disposed entities or activities. 3. EBA shall develop draft regulatory technical standards to specify the following: (a) how institutions are to determine the adjustments to the business indicator referred to in paragraphs 1 and 2; (b) the conditions under which competent authorities are able to grant the permission referred to in paragraph 2; (c) the timing for the adjustments referred to in paragraph 2. EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 4. Where for any given observation, the relevant indicator is negative or equal to zero, institutions shall not take into account this figure in the calculation of the average over three years. Institutions shall calculate the average over three years as the sum of positive figures divided by the number of positive figures.

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Article 316
Relevant indicator
1. For institutions applying accounting standards established by Directive 86/635/EEC, based on the accounting categories for the profit and loss account of institutions under Article 27 of that Directive, the relevant indicator is the sum of the elements listed in Table 1 of this paragraph. Institutions shall include each element in the sum with its positive or negative sign.
Table 1
1 Interest receivable and similar income
2 Interest payable and similar charges
3 Income from shares and other variable/fixed-yield securities
4 Commissions/fees receivable
5 Commissions/fees payable
6 Net profit or net loss on financial operations
7 Other operating income
Institutions shall adjust these elements to reflect the following qualifications:
(a) institutions shall calculate the relevant indicator before the deduction of any provisions and operating expenses. Institutions shall include in operating expenses fees paid for outsourcing services rendered by third parties which are not a parent or subsidiary of the institution or a subsidiary of a parent which is also the parent of the institution. Institutions may use expenditure on the outsourcing of services rendered by third parties to reduce the relevant indicator where the expenditure is incurred from an undertaking subject to rules under, or equivalent to, this Regulation;
(b) institutions shall not use the following elements in the calculation of the relevant indicator:
(i) realised profits/losses from the sale of non-trading book items;
(ii) income from extraordinary or irregular items;
(iii) income derived from insurance.
(c) when revaluation of trading items is part of the profit and loss statement, institutions may include revaluation. When institutions apply Article 36(2) of Directive 86/635/EEC, they shall include revaluation booked in the profit and loss account.
By way of derogation from the first subparagraph of this paragraph, institutions may choose not to apply the accounting categories for the profit and loss account under Article 27 of Directive 86/635/EEC to financial and operating leases for the purpose of calculating the relevant indicator, and may instead:
(a) include interest income from financial and operating leases and profits from leased assets in the category referred to in point 1 of Table 1;
(b) include interest expense from financial and operating leases, losses, depreciation and impairment of operating leased assets in the category referred to in point 2 of Table 1.
2. When institutions apply accounting standards different from those established by Directive 86/635/EEC, they shall calculate the relevant indicator on the basis of data that best reflect the definition set out in this Article.
3. EBA shall develop draft regulatory technical standards to specify the condition of unduly burdensome for the purposes of paragraph 1.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 316
Calculation of the annual operational risk loss
1. Institutions with a business indicator equal to or exceeding EUR 750 million shall calculate their annual operational risk loss as the sum of all net losses over a given financial year, calculated in accordance with Article 318(1), that are equal to or exceed the loss data thresholds set out in Article 319(1) or (2).
By way of derogation from the first subparagraph, competent authorities may grant a waiver from the requirement to calculate an annual operational risk loss to institutions with a business indicator that does not exceed EUR 1 billion, provided that the institution has demonstrated to the satisfaction of the competent authority that it would be unduly burdensome for the institution to apply the first subparagraph.
2. For the purposes of paragraph 1, the relevant business indicator shall be the highest value of the business indicator that the institution has reported at the last eight reporting reference dates. An institution that has not yet reported its business indicator shall use its most recent business indicator.
3. EBA shall develop draft regulatory technical standards to specify the condition of unduly burdensome for the purposes of paragraph 1.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 317
Own funds requirement
1. Under the Standardised Approach, institutions shall divide their activities into the business lines set out in Table 2 of paragraph 4 and in accordance with the principles set out in Article 318.
2. Institutions shall calculate the own funds requirement for operational risk as the average over three years of the sum of the annual own funds requirements across all business lines referred to in Table 2 of paragraph 4. The annual own funds requirement of each business line is equal to the product of the corresponding beta factor referred to in that Table and the part of the relevant indicator mapped to the respective business line.
3. In any given year, institutions may offset negative own funds requirements resulting from a negative part of the relevant indicator in any business line with positive own funds requirements in other business lines without limit. However, where the aggregate own funds requirement across all business lines within a given year is negative, institutions shall use the value zero as the input to the numerator for that year.
4. Institutions shall calculate the average over three years of the sum referred to in paragraph 2 on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, institutions may use business estimates.
Where an institution can prove to its competent authority that, due to a merger, an acquisition or a disposal of entities or activities, using a three year average to calculate the relevant indicator would lead to a biased estimation for the own funds requirement for operational risk, the competent authority may permit institutions to amend the calculation in a way that would take into account such events and shall duly inform EBA thereof. In such circumstances, the competent authority may, on its own initiative, also require an institution to amend the calculation.
Where an institution has been in operation for less than three years it may use forward-looking business estimates in calculating the relevant indicator, provided that it starts using historical data as soon as it is available.
Table 2
Business line List of activities Percentage (beta factor)
Corporate finance Underwriting of financial instruments or placing of financial instruments on a firm commitment basis
Services related to underwriting
Investment advice
Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to the mergers and the purchase of undertakings
Investment research and financial analysis and other forms of general recommendation relating to transactions in financial instruments 18 %
Trading and sales Dealing on own account
Money broking
Reception and transmission of orders in relation to one or more financial instruments
Execution of orders on behalf of clients
Placing of financial instruments without a firm commitment basis
Operation of Multilateral Trading Facilities 18 %
Retail brokerage
(Activities with natural persons or with SMEs meeting the criteria set out in Article 123 for the retail exposure class) Reception and transmission of orders in relation to one or more financial instruments
Execution of orders on behalf of clients
Placing of financial instruments without a firm commitment basis 12 %
Commercial banking Acceptance of deposits and other repayable funds
Lending
Financial leasing
Guarantees and commitments 15 %
Retail banking
(Activities with natural persons or with SMEs meeting the criteria set out in Article 123 for the retail exposure class) Acceptance of deposits and other repayable funds
Lending
Financial leasing
Guarantees and commitments 12 %
Payment and settlement Money transmission services,
Issuing and administering means of payment 18 %
Agency services Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management 15 %
Asset management Portfolio management
Managing of UCITS
Other forms of asset management 12 %
9. For the purposes of paragraph 7, EBA shall develop draft regulatory technical standards establishing a risk taxonomy on operational risk that complies with international standards and a methodology to classify the loss events included in the loss data set based on that risk taxonomy on operational risk.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
10. For the purposes of paragraph 8, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, explaining the technical elements necessary to ensure the soundness, robustness and performance of governance arrangements to maintain the loss data set, with a particular focus on IT systems and infrastructures.

after (02013R0575-20250101)

Article 317
Loss data set
1. Institutions that calculate an annual operational risk loss in accordance with Article 316(1) shall have in place arrangements, processes and mechanisms to establish and maintain updated on an ongoing basis a loss data set compiling for each recorded operational risk event the gross loss amounts, non-insurance recoveries, insurance recoveries, reference dates and grouped losses, including those from misconduct events.
2. The institution’s loss data set shall capture all operational risk events stemming from all entities that are part of the scope of consolidation pursuant to Part One, Title II, Chapter 2.
3. For the purpose of paragraph 1, institutions shall:
(a) include in the loss data set each operational risk event recorded during one or multiple financial years;
(b) use the date of accounting for including losses related to operational risk events in the loss data set;
(c) allocate losses and recoveries related to a common operational risk event or related operational risk events over time and posted to the accounts over several years, to the corresponding financial years of the loss data set, in line with their accounting treatment.
4. Institutions shall also collect:
(a) information about the reference dates of operational risk events, including:
(i) the date when the operational risk event happened or first began (date of occurrence), where available;
(ii) the date on which the institution became aware of the operational risk event (date of discovery);
(iii) the date or dates on which an operational risk event results in a loss, or the reserve or provision against a loss, recognised in the institution’s profit and loss accounts (date of accounting);
(b) information on any recoveries of gross loss amounts as well as descriptive information about the drivers or causes of the loss events.
The level of detail of any descriptive information shall be commensurate with the size of the gross loss amount.
5. An institution shall not include in the loss data set operational risk events related to credit risk that are accounted for in the risk-weighted exposure amount for credit risk. Operational risk events that relate to credit risk but are not accounted for in the risk-weighted exposure amount for credit risk shall be included in the loss data set.
6. Operational risk events related to market risk shall be treated as operational risk and shall be included in the loss data set.
7. An institution shall, upon request from the competent authority, be able to map its historical internal loss data to the event type.
8. For the purposes of this Article, institutions shall ensure the soundness, robustness and performance of their IT systems and infrastructure necessary to maintain and update the loss data set, in particular by ensuring all of the following:
(a) their IT systems and infrastructure are sound and resilient and that that soundness and resilience can be maintained on a continuous basis;
(b) their IT systems and infrastructure are subject to configuration management, change management and release management processes;
(c) where an institution outsources parts of the maintenance of its IT systems and infrastructure, the soundness, robustness and performance of the IT systems and infrastructure is ensured by confirming at least the following:
(i) its IT systems and infrastructure are sound and resilient and that soundness and resilience can be maintained on a continuous basis;
(ii) the process for planning, creating, testing and deploying the IT systems and infrastructure is sound and proper with reference to project management, risk management, governance, engineering, quality assurance and test planning, systems’ modelling and development, quality assurance in all activities, including code reviews and, where appropriate, code verification, and testing, including user acceptance;
(iii) its IT systems and infrastructure are subject to configuration management, change management and release management processes;
(iv) the process for planning, creating, testing and deploying the IT systems and infrastructure and contingency plans is approved by the management body or senior management and the management body and senior management are periodically informed about the IT systems and infrastructure performance.
9. For the purposes of paragraph 7, EBA shall develop draft regulatory technical standards establishing a risk taxonomy on operational risk that complies with international standards and a methodology to classify the loss events included in the loss data set based on that risk taxonomy on operational risk.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2026.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
10. For the purposes of paragraph 8, EBA shall issue guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, explaining the technical elements necessary to ensure the soundness, robustness and performance of governance arrangements to maintain the loss data set, with a particular focus on IT systems and infrastructures.

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before (02013R0575-20240709)

Article 318
Principles for business line mapping
1. Institutions shall develop and document specific policies and criteria for mapping the relevant indicator for current business lines and activities into the standardised framework set out in Article 317. They shall review and adjust those policies and criteria as appropriate for new or changing business activities and risks.
2. Institutions shall apply the following principles for business line mapping:
(a) institutions shall map all activities into the business lines in a mutually exclusive and jointly exhaustive manner;
(b) institutions shall allocate any activity which cannot be readily mapped into the business line framework, but which represents an ancillary activity to an activity included in the framework, to the business line it supports. Where more than one business line is supported through the ancillary activity, institutions shall use an objective-mapping criterion;
(c) where an activity cannot be mapped into a particular business line then institutions shall use the business line yielding the highest percentage. The same business line equally applies to any ancillary activity associated with that activity;
(d) institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain;
(e) the mapping of activities into business lines for operational risk capital purposes shall be consistent with the categories institutions use for credit and market risks;
(f) senior management shall be responsible for the mapping policy under the control of the management body of the institution;
(g) institutions shall subject the mapping process to business lines to independent review.
3. EBA shall develop draft implementing technical standards to determine the conditions of application of the principles for business line mapping provided in this Article.
EBA shall submit those draft implementing technical standards to the Commission by 31 December 2017.
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 (02013R0575-20250101)

Article 318
Calculation of net loss and gross loss
1. For the purposes of Article 316(1), institutions shall calculate for each operational risk event a net loss as follows:
net loss = gross loss – recovery
where:
gross loss
= a loss linked to an operational risk event before recoveries of any type;
recovery
= one or multiple independent occurrences, related to the original operational risk event, separated in time, in which funds or inflows of economic benefits are received from a third party.
Institutions shall maintain on an ongoing basis an updated calculation of the net loss for each specific operational risk event. To that end, institutions shall update the net loss calculation based on the observed or estimated variations of the gross loss and the recovery for each of the last 10 financial years. Where losses, linked to the same operational risk event, are observed during multiple financial years within that 10-year time window, the institution shall calculate and maintain updated:
(a) the net loss, gross loss and recovery for each of the financial years of the 10-year time window where that net loss, gross loss and recovery were recorded;
(b) the aggregated net loss, aggregated gross loss and aggregated recovery of all relevant financial years of the 10-year time window.
2. For the purposes of paragraph 1, the following items shall be included in the gross loss computation:
(a) direct charges, such as impairments, settlements, amounts paid to make good the damage, penalties and interest in arrears and legal fees, to the institution’s profit and loss accounts and write-downs due to the operational risk event, including:
(i) where the operational risk event relates to market risk, the costs to unwind market positions in the recorded loss amount of the operational risk items;
(ii) where payments relate to failures or inadequate processes of the institution, penalties, interest charges, late-payment charges, legal fees and, with the exclusion of the tax amount originally due, tax, unless that amount is already included under point (e);
(b) costs incurred as a consequence of the operational risk event, including external expenses with a direct link to the operational risk event and costs of repair or replacement, incurred to restore the position that was prevailing before the operational risk event occurred;
(c) provisions or reserves accounted for in the profit and loss accounts against the potential operational loss impact, including those from misconduct events;
(d) losses stemming from operational risk events with a definitive financial impact which are temporarily booked in transitory or suspense accounts and are not yet reflected in the profit and loss accounts (pending losses);
(e) negative economic impacts booked in a financial year and which are due to operational risk events impacting the cash flows or financial statements of previous financial years (timing losses).
For the purposes of the first subparagraph, point (d), material pending losses shall be included in the loss data set within a time period commensurate with the size and age of the pending item.
For the purposes of the first subparagraph, point (e), the institution shall include in the loss data set material timing losses where those losses are due to operational risk events that span more than one financial year. Institutions shall include in the recorded loss amount of the operational risk item of a financial year losses that are due to the correction of booking errors that occurred in any previous financial year, even where those losses do not directly affect third parties. Where there are material timing losses and the operational risk event affects directly third parties, including customers, providers and employees of the institution, the institution shall also include the official restatement of previously issued financial reports.
3. For the purposes of paragraph 1, the following items shall be excluded from the gross loss computation:
(a) costs of general maintenance of contracts on property, plant or equipment;
(b) internal or external expenditure to enhance the business after the operational risk losses, including upgrades, improvements, risk assessment initiatives and enhancements;
(c) insurance premiums.
4. For the purposes of paragraph 1, recoveries shall be used to reduce gross losses only where the institution has received payment. Receivables shall not be considered as recoveries.
Upon request from the competent authority, the institution shall provide all documentation needed to verify the payments received and factored in the calculation of the net loss of an operational risk event.

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before (02013R0575-20240709)

Article 319
Alternative Standardised Approach
1. Under the Alternative Standardised Approach, for the business lines retail banking and commercial banking, institutions shall apply the following:
(a) the relevant indicator is a normalised income indicator equal to the nominal amount of loans and advances multiplied by 0,035;
(b) the loans and advances consist of the total drawn amounts in the corresponding credit portfolios. For the commercial banking business line, institutions shall also include securities held in the non trading book in the nominal amount of loans and advances.
2. To be permitted to use the Alternative Standardised Approach, an institution shall meet all the following conditions:
(a) its retail or commercial banking activities shall account for at least 90 % of its income;
(b) a significant proportion of its retail or commercial banking activities shall comprise loans associated with a high PD;
(c) the Alternative Standardised Approach provides an appropriate basis for calculating its own funds requirement for operational risk.

after (02013R0575-20250101)

Article 319
Loss data thresholds
1. To calculate the annual operational risk loss referred to in Article 316(1), institutions shall take into account from the loss data set operational risk events with a net loss, calculated in accordance with Article 318, that are equal to or exceed EUR 20000.
2. Without prejudice to paragraph 1 of this Article, and for the purposes of Article 446, institutions shall also calculate the annual operational risk loss referred to in Article 316(1), taking into account from the loss data set operational risk events with a net loss, calculated in accordance with Article 318, that are equal to or exceed EUR 100000.
3. In the case of an operational risk event that leads to losses during more than one financial year, as referred to in Article 318(1), second subparagraph, the net loss to be taken into account for the thresholds referred to in paragraphs 1 and 2 of this Article shall be the aggregated net loss.

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before (02013R0575-20240709)

Article 320
Criteria for the Standardised Approach
1. The criteria referred to in the first subparagraph of Article 312(1) are the following:
(a) an institution shall have in place a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. It shall identify its exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review carried out by an internal or external party possessing the necessary knowledge to carry out such review;
(b) an institution's operational risk assessment system shall be closely integrated into the risk management processes of the institution. Its output shall be an integral part of the process of monitoring and controlling the institution's operational risk profile;
(c) an institution shall implement a system of reporting to senior management that provides operational risk reports to relevant functions within the institution. An institution shall have in place procedures for taking appropriate action according to the information within the reports to management.
3. EBA shall develop draft regulatory technical standards to specify the conditions that the competent authority has to assess pursuant to paragraph 1, including how the average annual operational risk loss is to be computed and the specifications on the information to be collected pursuant to paragraph 2 or any further information deemed necessary to carry out the assessment.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 320
Exclusion of losses
1. An institution may request permission from the competent authority to exclude from the calculation of its annual operational risk loss exceptional operational risk events that are no longer relevant to the institution’s risk profile, where all of the following conditions are met:
(a) the institution can demonstrate to the satisfaction of the competent authority that the cause of the operational risk event at the origin of those operational risk losses will not occur again;
(b) the aggregated net loss of the corresponding operational risk event is either of the following:
(i) equal to or exceed 10 % of the institution’s average annual operational risk loss, calculated over the last 10 financial years and based on the threshold referred to in Article 319(1), where the operational risk loss event refers to activities that are still part of the business indicator;
(ii) related to an operational risk event that refers to activities divested from the business indicator in accordance with Article 315(2);
(c) the operational risk loss was in the loss database for a minimum period of one year, unless the operational risk loss is related to activities divested from the business indicator in accordance with Article 315(2).
For the purposes of the first subparagraph, point (c), of this paragraph the minimum period of one year shall start from the date on which the operational risk event, included in the loss data set, first became greater than the materiality threshold provided for in Article 319(1).
2. An institution requesting the permission referred to in paragraph 1 shall provide the competent authority with documented justifications for the exclusion of an exceptional operational risk event, including:
(a) a description of the operational risk event;
(b) proof that the loss from the operational risk event is above the materiality threshold for loss exclusion referred to in paragraph 1, point (b)(i), including the date on which that operational risk event became greater than the materiality threshold;
(c) the date on which the operational risk event concerned would be excluded, considering the minimum retention period set out in paragraph 1, point (c);
(d) the reason why the operational risk event is no longer deemed relevant to the institution’s risk profile;
(e) a demonstration that there are no similar or residual legal exposures and that the operational risk event to be excluded has no relevance to other activities or products;
(f) reports of the institution’s independent review or validation, confirming that the operational risk event is no longer relevant and that there are no similar or residual legal exposures;
(g) proof that competent bodies of the institution, through the institution’s approval processes, have approved the request for exclusion of the operational risk event and the date of such approval;
(h) the impact of the exclusion of the operational risk event on the annual operational risk loss.
3. EBA shall develop draft regulatory technical standards to specify the conditions that the competent authority has to assess pursuant to paragraph 1, including how the average annual operational risk loss is to be computed and the specifications on the information to be collected pursuant to paragraph 2 or any further information deemed necessary to carry out the assessment.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

02013R0575-20240709 → 02013R0575-20250101

Article 321 Inclusion of losses from merged or acquired entities or activities 1. The qualitative standards referred to in Article 312(2) are the following: (a) an institution's internal operational risk measurement system Losses stemming from merged or acquired entities or activities shall be closely integrated into its day-to-day risk management processes; (b) an institution included in the loss data set as soon as the business indicator items related to those entities or activities are included in the institution’s business indicator calculation in accordance with Article 315(1). To that end, institutions shall have an independent risk management function for operational risk; (c) an institution shall have in place regular reporting of operational risk exposures and loss experience and shall have in place procedures for taking appropriate corrective action; (d) an institution's risk management system shall be well documented. An institution shall have in place routines for ensuring compliance and policies for include losses observed during a 10-year period prior to the treatment of non-compliance; (e) an institution shall subject its operational risk management processes and measurement systems to regular reviews performed by internal acquisition or external auditors; (f) an institution's internal validation processes shall operate in a sound and effective manner; (g) data flows and processes associated with an institution's risk measurement system shall be transparent and accessible. merger. 2. EBA shall develop draft regulatory technical standards to specify how institutions are to determine the adjustments to their loss data set following the inclusion of losses from merged or acquired entities or activities as referred to in paragraph 1. EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2027. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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before (02013R0575-20240709)

Article 322
Quantitative Standards
1. The quantitative standards referred to in Article 312(2) include the standards relating to process, to internal data, to external data, to scenario analysis, to business environment and to internal control factors laid down in paragraphs 2 to 6 respectively.
2. The standards relating to process are the following:
(a) an institution shall calculate its own funds requirement as comprising both expected loss and unexpected loss, unless expected loss is adequately captured in its internal business practices. The operational risk measure shall capture potentially severe tail events, achieving a soundness standard comparable to a 99,9 % confidence interval over a one year period;
(b) an institution's operational risk measurement system shall include the use of internal data, external data, scenario analysis and factors reflecting the business environment and internal control systems as set out in paragraphs 3 to 6. An institution shall have in place a well documented approach for weighting the use of these four elements in its overall operational risk measurement system;
(c) an institution's risk measurement system shall capture the major drivers of risk affecting the shape of the tail of the estimated distribution of losses;
(d) an institution may recognise correlations in operational risk losses across individual operational risk estimates only where its systems for measuring correlations are sound, implemented with integrity, and take into account the uncertainty surrounding any such correlation estimates, particularly in periods of stress. An institution shall validate its correlation assumptions using appropriate quantitative and qualitative techniques;
(e) an institution's risk measurement system shall be internally consistent and shall avoid the multiple counting of qualitative assessments or risk mitigation techniques recognised in other areas of this Regulation.
3. The standards relating to internal data are the following:
(a) an institution shall base its internally generated operational risk measures on a minimum historical observation period of five years. When an institution first moves to an Advanced Measurement Approach, it may use a three-year historical observation period;
(b) an institution shall be able to map their historical internal loss data into the business lines defined in Article 317 and into the event types defined in Article 324, and to provide these data to competent authorities upon request. In exceptional circumstances, an institution may allocate loss events which affect the entire institution to an additional business line corporate items. An institution shall have in place documented, objective criteria for allocating losses to the specified business lines and event types. An institution shall record the operational risk losses that are related to credit risk and that the institution has historically included in the internal credit risk databases in the operational risk databases and shall identify them separately. Such losses shall not be subject to the operational risk charge, provided that the institution is required to continue to treat them as credit risk for the purposes of calculating own funds requirements. An institution shall include operational risk losses that are related to market risks in the scope of the own funds requirement for operational risk;
(c) an institution's internal loss data shall be comprehensive in that it captures all material activities and exposures from all appropriate sub-systems and geographic locations. An institution shall be able to justify that any excluded activities or exposures, both individually and in combination, would not have a material impact on the overall risk estimates. An institution shall define appropriate minimum loss thresholds for internal loss data collection;
(d) aside from information on gross loss amounts, an institution shall collect information about the date of the loss event, any recoveries of gross loss amounts, as well as descriptive information about the drivers or causes of the loss event;
(e) an institution shall have in place specific criteria for assigning loss data arising from a loss event in a centralised function or an activity that spans more than one business line, as well as from related loss events over time;
(f) an institution shall have in place documented procedures for assessing the on-going relevance of historical loss data, including those situations in which judgement overrides, scaling, or other adjustments may be used, to what extent they may be used and who is authorised to make such decisions.
4. The qualifying standards relating to external data are the following:
(a) an institution's operational risk measurement system shall use relevant external data, especially when there is reason to believe that the institution is exposed to infrequent, yet potentially severe, losses. An institution shall have a systematic process for determining the situations for which external data shall be used and the methodologies used to incorporate the data in its measurement system;
(b) an institution shall regularly review the conditions and practices for external data and shall document them and subject them to periodic independent review.
5. An institution shall use scenario analysis of expert opinion in conjunction with external data to evaluate its exposure to high severity events. Over time, the institution shall validate and reassess such assessments through comparison to actual loss experience to ensure their reasonableness.
6. The qualifying standards relating to business environment and internal control factors are the following:
(a) an institution's firm-wide risk assessment methodology shall capture key business environment and internal control factors that can change the institutions operational risk profile;
(b) an institution shall justify the choice of each factor as a meaningful driver of risk, based on experience and involving the expert judgment of the affected business areas;
(c) an institution shall be able to justify to competent authorities the sensitivity of risk estimates to changes in the factors and the relative weighting of the various factors. In addition to capturing changes in risk due to improvements in risk controls, an institution's risk measurement framework shall also capture potential increases in risk due to greater complexity of activities or increased business volume;
(d) an institution shall document its risk measurement framework and shall subject it to independent review within the institution and by competent authorities. Over time, an institution shall validate and reassess the process and the outcomes through comparison to actual internal loss experience and relevant external data.

after (02013R0575-20250101)

Article 322
Comprehensiveness, accuracy and quality of the loss data
1. Institutions shall have in place the organisation and processes to ensure the comprehensiveness, accuracy and quality of the loss data and to subject that data to independent review.
2. Competent authorities shall periodically, and at least every five years, review the quality of the loss data of an institution that calculates an annual operational risk loss in accordance with Article 316(1). Competent authorities shall carry out such review at least every three years for an institution with a business indicator that exceeds EUR 1 billion.

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before (02013R0575-20240709)

Article 323
Operational risk management framework
1. The competent authorities shall permit institutions to recognise the impact of insurance subject to the conditions set out in paragraphs 2 to 5 and other risk transfer mechanisms where the institution can demonstrate that a noticeable risk mitigating effect is achieved.
2. EBA shall develop draft regulatory technical standards to specify the obligations under paragraph 1, points (a) to (h), taking into consideration the size and complexity of the institution.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
3. The insurance and the institutions' insurance framework shall meet all the following conditions:
(a) the insurance policy has an initial term of no less than one year. For policies with a residual term of less than one year, an institution shall make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100 % haircut for policies with a residual term of 90 days or less;
(b) the insurance policy has a minimum notice period for cancellation of the contract of 90 days;
(c) the insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed institution, that preclude the institution's receiver or liquidator from recovering the damages suffered or expenses incurred by the institution, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the institution. However, the insurance policy may exclude any fine, penalty, or punitive damages resulting from actions by the competent authorities;
(d) the risk mitigation calculations shall reflect the insurance coverage in a manner that is transparent in its relationship to, and consistent with, the actual likelihood and impact of loss used in the overall determination of operational risk capital;
(e) the insurance is provided by a third party entity. In the case of insurance through captives and affiliates, the exposure has to be laid off to an independent third party entity that meets the eligibility criteria set out in paragraph 2;
(f) the framework for recognising insurance is well reasoned and documented.
4. The methodology for recognising insurance shall capture all the following elements through discounts or haircuts in the amount of insurance recognition:
(a) the residual term of the insurance policy, where less than one year;
(b) the policy's cancellation terms, where less than one year;
(c) the uncertainty of payment as well as mismatches in coverage of insurance policies.
5. The reduction in own funds requirements from the recognition of insurances and other risk transfer mechanisms shall not exceed 20 % of the own funds requirement for operational risk before the recognition of risk mitigation techniques.

after (02013R0575-20250101)

Article 323
Operational risk management framework
1. Institutions shall have in place:
(a) a well-documented assessment and management system for operational risk which is closely integrated into day-to-day risk management processes, forms an integral part of the process of monitoring and controlling the institution’s operational risk profile, and for which clear responsibilities have been assigned; the assessment and management system for operational risk shall identify the institution’s exposures to operational risk and track relevant operational risk data, including material loss data;
(b) an operational risk management function that is independent from the institution’s business and operational units;
(c) a system of reporting to senior management that provides operational risk reports to relevant functions within the institution;
(d) a system of regular monitoring and reporting of operational risk exposures and loss experience, and procedures for taking appropriate corrective actions;
(e) routines for ensuring compliance, and policies for the treatment of non-compliance;
(f) regular reviews of the institution’s operational risk assessment and management processes and systems, carried out by internal or external auditors that possess the necessary knowledge;
(g) internal validation processes that operate in a sound and effective manner;
(h) transparent and accessible data flows and processes associated with the institution’s operational risk assessment system.
2. EBA shall develop draft regulatory technical standards to specify the obligations under paragraph 1, points (a) to (h), taking into consideration the size and complexity of the institution.
EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

deleted text (02013R0575-20240709)

Article 324
Loss event type classification
The loss events types referred to in point (b) of Article 322(3) are the following:
Table 3
Event-Type Category Definition
Internal fraud Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/discrimination events, which involves at least one internal party
External fraud Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party
Employment Practices and Workplace Safety Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity/discrimination events
Clients, Products & Business Practices Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product
Damage to Physical Assets Losses arising from loss or damage to physical assets from natural disaster or other events
Business disruption and system failures Losses arising from disruption of business or system failures
Execution, Delivery & Process Management Losses from failed transaction processing or process management, from relations with trade counterparties and vendors

02013R0575-20240709 → 02013R0575-20250101

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 for all its 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 its 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. 1b for those positions assigned to trading desks for which the institution has been granted permission by its competent authority to use that alternative approach as set out in Article 325az(1); (c) the simplified standardised approach referred to in paragraph 2 of this Article, provided that the institution meets the conditions set out in Article 325a(1). By way of derogation from the first subparagraph, an institution shall not calculate own funds requirements for foreign exchange risk for trading book positions and non-trading book positions that are subject to foreign exchange risk where those positions are deducted from the institution’s own funds. The institution shall document its use of the derogation set out in this subparagraph, including its impact and materiality, and make the information available, upon request, to its competent authority. 2. The own funds requirements for market risk calculated in accordance with the simplified standardised approach shall be the sum of the following own funds requirements, as applicable: (a) the own funds requirements for position risk referred to in Chapter 2, multiplied by: (i) 1,3, for the general and specific risks of positions in debt instruments, excluding securitisation instruments as referred to in Article 337; (ii) 3,5, for the general and specific risks of positions in equity instruments; (b) the own funds requirements for foreign exchange risk referred to in Chapter 3, multiplied by 1,2; (c) the own funds requirements for commodity risk referred to in Chapter 4, multiplied by 1,9; (d) the own funds requirements for securitisation instruments as referred to in Article 337. 3. An institution using the alternative internal model approach referred to in paragraph 1, point (b), of this Article to calculate the own funds requirements for market risk of trading book positions and non-trading book positions that are subject to foreign exchange risk or commodity risk shall report to its competent authority the monthly calculation of the own funds requirements for market risk using the alternative standardised approach referred to in paragraph 1, point (a), of this Article for each trading desk to which those positions have been assigned in accordance with Article 104b. 4. An institution may use a combination of the alternative standardised approach referred to in combination paragraph 1, point (a), of this Article and the approaches set out alternative internal model approach referred to in points (a) and (b) of paragraph 1 1, point (b), of this Article on a permanent basis within basis, provided that the total own funds requirements for market risk calculated using the alternative internal model approach represent at least 10 % of the total own funds requirements for market risk. On an individual basis, an institution shall not use either of those approaches in combination with the simplified standardised approach referred to in paragraph 1, point (c), of this Article. At consolidated level, an institution may use a group combination of those three approaches to calculate the own funds requirements for market risk in accordance with Article 363. 325b(4), point (b), as long as the simplified standardised approach is not used in combination with the other two approaches within a single legal entity. 5. Institutions An institution shall not use the alternative internal model approach set out referred to in paragraph 1, point (b) of paragraph 3 (b), for instruments in their its 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 paragraph 1, points (a) and (b), of this Article, taking into account the requirements set out in Article 104b(5) and (6), where applicable. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 325a Exemptions from specific reporting Conditions for using the simplified standardised approach 1. An institution may calculate the own funds requirements for market risk 1. An institution shall be exempted from by using the reporting requirement set out simplified standardised approach referred to in Article 430b, 325(1), point (c), provided that the size of the institution's 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; included, except those positions that are excluded from the calculation of the own funds requirements for foreign exchange risk in accordance with Article 104c or that are deducted from the institutions’ own funds; (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 trading book position is not available on a given date, institutions shall take a fair value for the trading book position on that date; where the fair value and market value of a trading book 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 the aggregated long positions position shall be added to summed with the absolute value of the aggregated short positions. position. For the purposes of the first subparagraph, the meaning of long and short positions is the same as the meaning set out in Article 94(3). For the purposes of the first subparagraph, the value of the aggregated long (short) position shall be equal to the sum of the values of the individual long (short) positions included in the calculation in accordance with points (a) and (b) of that subparagraph. 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 Institutions shall cease to apply calculate the own funds requirements for market risk in accordance with the approach referred to in Article 325(1), point (c), 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 An institution that has become subject ceased to calculate the reporting own funds requirements laid down for market risk using the approach referred to in Article 430b in accordance with paragraph 5 of this Article, the institution 325(1), point (c), shall only be exempted from those reporting permitted to start calculating the own funds requirements for market risk using that approach where it demonstrates to the competent authority that all of the conditions set out in paragraph 1 of this Article have been met for an uninterrupted full-year period. period of one year. 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.4. Where a competent authority has not granted an institution the permission referred to in paragraph 2 for at least one institution or undertaking of the group, the following requirements shall apply for the calculation of the own funds requirements for market risk on a consolidated basis in accordance with this Title: (a) the institution shall calculate net positions and own funds requirements in accordance with this Title for all positions in institutions or undertakings of the group for which the institution has been granted the permission referred to in paragraph 2, using the treatment set out in paragraph 1; (b) the institution shall calculate net positions and own funds requirements in accordance with this Title individually for all positions in each institution or undertaking of the group for which the institution has not been granted the permission referred to in paragraph 2; (c) the institution shall calculate the total own funds requirements in accordance with this Title on a consolidated basis by adding the amounts calculated in points (a) and (b) of this paragraph. For the purposes of the calculation referred to in the first subparagraph, points (a) and (b), institutions and undertakings referred to therein shall use the same reporting currency as the reporting currency used to calculate the own funds requirements for market risk in accordance with this Title on a consolidated basis for the group.

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before (02013R0575-20240709)

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.
8. EBA shall develop draft regulatory technical standards to specify the assessment methodology under which competent authorities conduct the verification referred to in paragraph 7;
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2028.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 325c
Scope, structure and qualitative requirements of the alternative standardised approach
1. Institutions shall have in place, and make available to the competent authorities, a documented set of internal policies, procedures and controls for monitoring and ensuring compliance with the requirements of this Chapter. Any changes to those policies, procedures and controls shall be notified to the competent authorities in due course.
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.
3. By way of derogation from paragraph 2, an institution shall calculate the own funds requirements for market risk in accordance with the alternative standardised approach for the institution’s holdings of its own debt instruments as the sum of the two components referred to in paragraph 2, points (a) and (c). When calculating the own funds requirements for market risk for own debt instruments under the sensitivities-based method referred to in paragraph 2, point (a), the institution shall exclude from that calculation the risks from the institution’s own credit spread.
4. Institutions shall have a risk control unit that is independent from business trading units and that reports directly to senior management. That risk control unit shall be responsible for designing and implementing the alternative standardised approach. It shall produce and analyse monthly reports on the output of the alternative standardised approach, as well as the appropriateness of the institution’s trading limits.
5. Institutions shall independently review the alternative standardised approach they use for the purposes of this Chapter to the satisfaction of the competent authorities, either as part of their regular internal auditing process, or by mandating a third-party undertaking to conduct that review. The outcome of such a review shall be reported to the appropriate management bodies.
For the purposes of the first subparagraph, third-party undertaking means an undertaking that provides auditing or consulting services to institutions and that has staff with sufficient skills in the area of market risk.
6. The review of the alternative standardised approach referred to in paragraph 5 shall cover the activities of both the business trading units and of the independent risk control unit and shall assess at least the following:
(a) the internal policies, procedures and controls for monitoring and ensuring compliance with the requirements referred to in paragraph 1 of this Article;
(b) the adequacy of the documentation of the risk management system and processes and the organisation of the risk control unit referred to in paragraph 4 of this Article;
(c) the accuracy of sensitivity computations and of the process used to derive those computations from the institution’s pricing models that serve as a basis for reporting profit and loss to senior management, as referred to in Article 325t;
(d) the verification process that the institution employs to evaluate the consistency, timeliness and reliability of the data sources used in the calculation of the own funds requirements for market risk using the alternative standardised approach, including the independence of those data sources.
An institution shall conduct the review referred to in the first subparagraph at least once a year, or on a less frequent basis of up to every two years where the institution can demonstrate to the satisfaction of the competent authority that the size, systemic importance, nature, scale and complexity of its trading book business justifies a less frequent review.
7. Competent authorities shall verify that the calculation referred to in paragraph 2 of this Article, including the implementation by an institution of the requirements set out in this Chapter and in Article 325a, is performed with integrity.
8. EBA shall develop draft regulatory technical standards to specify the assessment methodology under which competent authorities conduct the verification referred to in paragraph 7;
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2028.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 325j Treatment of collective investment undertakings 1. An institution shall calculate the own funds requirements for market risk of a position in a CIU using one of the following approaches: (a) where an institution is able to obtain sufficient information about that meets the individual underlying exposures of the CIU, the institution condition set out in Article 104(8), point (a), shall calculate the own funds requirements for market risk of that CIU position by looking through to the underlying positions of the CIU CIU, on a monthly basis, as if those positions were directly held by the institution; (b) where an institution that meets the institution is not able to obtain sufficient information about the individual underlying exposures of the CIU, but the institution has knowledge of the content the mandate of the CIU and daily price quotes for the CIU can be obtained, the institution condition set out in Article 104(8), point (b), shall calculate the own funds requirements for market risk of that CIU position by using one either of the following approaches: (i) the institution may it shall consider the position in the CIU as a single equity position allocated to the bucket other sector in Article 325ap(1), Table 8 of Article 325ap(1); 8; (ii) upon permission from its competent authority, an institution may calculate the own funds requirements for market risk of the CIU in accordance with it shall consider the limits set in the CIU’s mandate and in the relevant law; (c) where law. For the purposes of the calculation referred to in the first subparagraph, point (b)(ii), of this paragraph the institution meets neither the conditions in point (a) nor (b), the institution shall allocate the CIU to the non-trading book. An institution that uses one of the approaches set out in point (b) shall apply the own funds requirement for the default risk set out in Section 5 of this Chapter and the residual risk add-on set out in Section 4 of this Chapter where the mandate of the CIU implies that some exposures in the CIU shall be subject to those own funds requirements. An institution that uses the approach set out in point (ii) of point (b) may calculate the own funds requirements for counterparty credit risk and own funds requirements for credit valuation adjustment risk of derivative positions of the CIU, CIU using the simplified approach set out in Article 132a(3). 1a. For the purposes of the approaches referred to in paragraph 3 1, point (b), of this Article 132a. the institution shall: (a) apply the own funds requirements for default risk set out in Section 5 and the residual risk add-on set out in Section 4 to a position in a CIU, where the mandate of that CIU allows it to invest in exposures that shall be subject to those own funds requirements; when using the approach referred to in paragraph 1, point (b)(i), of this Article the institution shall consider the position in the CIU as a single unrated equity position allocated to the bucket unrated in Article 325y(1), Table 2; and (b) for all positions in the same CIU, use the same approach among the approaches set out in paragraph 1, point (b), of this Article to calculate the own funds requirements on a stand-alone basis as a separate portfolio. 2. By way of derogation from paragraph 1, where an institution has a position in a CIU that tracks an index benchmark so that the annualised return difference between the CIU and the tracked index benchmark over the last 12 months is below 1 % in absolute terms, ignoring fees and commissions, the institution may treat that position as a position in the tracked index benchmark. An institution shall verify compliance with that condition when the institution enters into the position and, after that, at least annually. However, where data for the last 12 months are not fully available, an institution may, subject to permission from the institution’s competent authority, use an annualised return difference from a period shorter than 12 months. 3. An institution may use a combination of the approaches referred to in paragraph 1, points (a), (b) (a) and (c) of paragraph 1 (b), for its positions in CIUs. However, an institution shall use only one of those approaches for all the positions in the same CIU. 4. For the purposes of point (b) of paragraph 1, point (b)(ii), of this Article an institution shall carry out the calculations under the following provisions: (a) for the purposes of calculating calculate the own funds requirement under requirements for market risk by determining the sensitivities-based method set out in Section 2 hypothetical portfolio of this Chapter, the CIU shall first take position to the maximum extent allowed under its mandate or relevant law in the exposures attracting that would attract the highest own funds requirements set out under that Section and shall then continue in accordance with Article 325c(2), point (a), based on the CIU’s mandate or relevant law, taking positions in descending order until into account the leverage to the maximum total loss limit is reached; (b) for extent, where applicable. The institution shall use the purposes of same hypothetical portfolio as the one referred to in the first subparagraph to calculate, where applicable, the own fund funds requirements for the default risk set out in Section 5 of this Chapter, and the CIU shall first take position to the maximum extent allowed under its mandate or relevant law in the exposures attracting the highest own funds requirements residual risk add-on set out under that in Section and shall then continue taking positions 4 to a position in descending order until a CIU. The methodology developed by the maximum total loss limit is reached; (c) institution to determine the CIU shall apply leverage to the maximum extent allowed under its mandate or relevant law, where applicable. The own funds requirements for hypothetical portfolios of all positions in the same CIU CIUs for which the calculations referred to in the first subparagraph are used shall be calculated on a stand-alone basis as a separate portfolio using the approach set out in this Chapter. approved by its competent authority. 5. An institution may use the approaches referred to in point (a) or (b) of paragraph 1 only where the CIU meets all of the conditions set out in Article 132(3) 132(3). Where the CIU does not meet all of the conditions set out in Article 132(3), the institution shall assign its positions in that CIU to the non-trading book. 6. To calculate the own funds requirements for market risk of a CIU position in accordance with the approach set out in paragraph 1, point (a), institutions may rely on a third party to perform such calculation, provided that all of the following conditions are met: (a) the third party is one of the following: (i) the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all securities at that depository institution or depository financial institution; (ii) for CIUs not covered by point (a) (i) of this point, the CIU management company, provided that the CIU management company meets the criteria set out in Article 132(4). 132(3), point (a); (iii) a third-party vendor on condition that the data, information or risk metrics are provided or calculated by the third parties referred to in point (i) or (ii) of this point or by another such third-party vendor; (b) the third party provides the institution with the data, information or risk metrics to calculate the own funds requirement for market risk of the CIU position in accordance with the approach referred to in paragraph 1, point (a), of this Article; (c) an external auditor of the institution has confirmed the adequacy of the third-party’s data, information or risk metrics referred to in point (b) of this paragraph and the institution’s competent authority has unrestricted access to those data, information or risk metrics upon request. 7. EBA shall develop draft regulatory technical standards to further specify the technical elements of the methodology to determine hypothetical portfolios for the purposes of the approach set out in paragraph 4, including the manner in which institutions are to take into account in the methodology, where applicable, leverage to the maximum extent. EBA shall submit those draft regulatory technical standards to the Commission by 10 January 2027. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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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 or the institution’s base currency where the institution is using a base currency in accordance with paragraph 7. 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. pairs. 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, years and 10 years. 3. The foreign exchange curvature risk factors to be applied by institutions to instruments with underlyings that are sensitive to foreign exchange shall be the foreign exchange delta risk factors referred to in paragraph 1. 4. Institutions shall not be … 345 unchanged words … use a base currency as set out in the first subparagraph shall convert the resulting own funds requirements for foreign exchange risk into the reporting currency using the prevailing spot exchange rate between the base currency and the reporting currency.

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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, subparagraph of this paragraph, 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 purposes of the calculation and the reporting of the own funds requirements for market risk set out in accordance with Article 430b(3). 325(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 or 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 or 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 formulae set out in this Subsection, and that the linear transformation referred to in the first subparagraph reflects a vega risk sensitivity. sensitivity, and that the resulting sensitivities do not materially differ from the ones applying those formulae.

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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. 4a. By way of derogation from paragraph 1, until 31 December 2032, an institution shall not apply the own funds requirement for residual risks to instruments that aim solely to hedge the market risk of positions in the trading book that generate an own funds requirement for residual risks and are subject to the same type of residual risks as the positions they hedge. The competent authority shall grant permission to apply the treatment referred to in the first subparagraph if the institution can demonstrate on an ongoing basis to the satisfaction of the competent authority that the instruments comply with the criteria to be treated as hedging positions. The institution shall report to the competent authority the result of the calculation of the own funds requirements for the residual risks for all instruments for which the derogation referred to in the first subparagraph is applied. 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. 6. EBA shall develop draft regulatory technical standards to specify the criteria that the institutions are to use to identify the positions qualifying for the derogation referred to in paragraph 4a. Those criteria shall include, at least, the nature of the instruments referred to in that paragraph, the net profit and loss of the combined positions, the sensitivities of the combined positions and the risks remaining unhedged in the combined positions, taking into account in particular the possibility that the original position can be hedged by a partial amount. EBA shall submit those draft regulatory technical standards to the Commission by 30 June 2024. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 7. By 31 December 2029, EBA shall submit a report to the Commission on the impact of the application of the treatment referred to in paragraph 4a. On the basis of the findings of that report, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal to prolong the treatment referred to in that paragraph.

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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.3. 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 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.5. Where the contractual or legal terms of a derivative position having a debt or equity cash instrument as an underlying, and hedged with that debt or equity cash instrument, allow an institution to close out both legs of that position at the time of the expiry of the first-to-mature of the two legs with no exposure to default risk of the underlying, the net jump-to-default amount of the combined position shall be set equal to zero.

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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.6. For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the standardised approach for credit risk set out in Title II, Chapter 2.

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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 non-tranched products, the default risk weights corresponding to their credit quality as specified in Article 325y(1) and (2); (b) for non-tranched 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: 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) Article 325bd(7), the risk weights of the sensitivities to the risk-free rate risk factors shall be the following: Table 3 Bucket Maturity Risk Weight 1 0,25 years 1,7 % 2 0,5 years 1,7 % 3 1 year 1,6 % 4 2 years 1,3 % 5 3 years 1,2 % 6 5 years 1,1 % 7 10 years 1,1 % 8 15 years 1,1 % 9 20 years 1,1 % 10 30 years 1,1 % 2. Institutions shall apply a risk weight of 1,6 % to all sensitivities of inflation and to cross currency basis risk factors. 3. For The risk weights of risk factors based on the currencies included in the most liquid currency sub-category as referred to in Article 325bd(7), point (b) of 325bd(7) (b), and the domestic currency of the institution, institution shall be the risk weights of the following: (a) for risk-free rate risk factors shall be factors, the risk weights referred to in paragraph 1, Table 3 3, of this Article divided by √2. ; (b) for inflation risk factor and cross currency basis risk factors, the risk weights referred to in paragraph 2 of this Article divided by .

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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 1 All Central government, including central banks, of Member States 0,5 % 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 established in Member States 1,0 % 10 Credit quality step 1 Covered bonds issued by credit institutions in third countries 1,5 % Credit quality steps 2 to 3 2,5 % 11 Credit quality step 4 to 6 and unrated Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 2 % 12 Regional or local authority and public sector entities 4,0 % 13 Financial sector entities entities, including credit institutions incorporated or established by a central government, a regional government or a local authority and authority, promotional lenders and covered bonds 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 % 19 Listed credit indices with a majority of its individual constituents being investment grade 1,5 % 20 Listed credit indices with a majority of its individual constituents being non-investment grade or unrated 5 % For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the standardised approach for credit risk set out in Title II, Chapter 2. 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 4.3. By way of derogation from paragraph 2, institutions may assign a risk exposure of an unrated covered bond to bucket 4 where the institution that issued the covered bond has credit quality step 1 to 3.

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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, identical; it shall be equal to 35 % where the two names of sensitivities k and l are in buckets 1 to 18 in Article 325ah(1), Table 4, otherwise it shall be equal to 35 80 %; 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: (a) 1, where buckets b and c are buckets 1 to 1 where the two 17 and both buckets have the same credit quality category (either credit quality step 1 to 3 or credit quality step 4 to 6), 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; (b) 1, where either bucket b or c is bucket 18; (c) 1, where bucket b or c is bucket 19 and the other bucket has credit quality step 1 to 3; otherwise it shall be equal to 50 %; (d) 1, where bucket b or c is bucket 20 and the other bucket has credit quality step 4 to 6; otherwise it shall be equal to 50 %; 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 and 10 18 19 20 1, 2 and 11 75 % 10 % 20 % 25 % 20 % 15 % 10 % 0 % 45 % 45 % 3 and 12 5 % 15 % 20 % 15 % 10 % 10 % 0 % 45 % 45 % 4 and 13 5 % 15 % 20 % 5 % 20 % 0 % 45 % 45 % 5 and 14 20 % 25 % 5 % 5 % 0 % 45 % 45 % 6 and 15 25 % 5 % 15 % 0 % 45 % 45 % 7 and 16 5 % 20 % 0 % 45 % 45 % 8 and 17 5 % 0 % 45 % 45 % 9 and 10 0 % 45 % 45 % 18 0 % 0 % 19 75 % 20

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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 Risk weight 1 All Central government, including central banks, of Member States 4,0 % 2 Credit quality step 1 to 3 10 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 4,0 % 3 Regional or local authority and public sector entities 4,0 % 4 Financial sector entities including credit institutions incorporated or established by a central government, a regional government or a local authority and promotional lenders 8,0 % 5 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 5,0 % 6 Consumer goods and services, transportation and storage, administrative and support service activities 4,0 % 7 Technology, telecommunications 3,0 % 8 Health care, utilities, professional and technical activities 2,0 % 9 Covered bonds issued by credit institutions established in Member States 3,0 % 10 Covered bonds issued by credit institutions in third countries 6,0 % 11 Credit quality step 4 11 to 6 and unrated 17 Central government, including central banks, of a third country, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 13,0 % 12 Regional or local authority and public sector entities 13,0 % 13 Financial sector entities entities, including credit institutions incorporated or established by a central government, a regional government or a local authority and authority, promotional lenders and covered bonds 16,0 % 14 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 10,0 % 15 Consumer goods and services, transportation and storage, administrative and support service activities 12,0 % 16 Technology, telecommunications 12,0 % 17 Health care, utilities, professional and technical activities 12,0 % 18 Other sector 13,0 %For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the standardised approach for credit risk set out in Title II, Chapter 2. By way of derogation from the second paragraph, institutions may assign a risk exposure of an unrated covered bond to bucket 4 where the institution that issues the covered bond has a credit quality step 1 to 3.

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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 Risk weight 1 Senior and Credit credit quality step 1 to 3 10 RMBS — Prime 0,9 % 2 RMBS — Mid-Prime 1,5 % 3 RMBS — Sub-Prime 2,0 % 4 CMBS 2,0 % 5 Asset backed securities (ABS) — Student loans 0,8 % 6 ABS — Credit cards 1,2 % 7 ABS — Auto 1,2 % 8 Collateralised loan obligations (CLO) non-ACTP 1,4 % 9 Non-senior and credit quality step 1 to 3 10 RMBS — Prime 1,125 % 10 RMBS — Mid-Prime 1,875 % 11 RMBS — Sub-Prime 2,5 % 12 CMBS 2,5 % 13 ABS — Student loans 1 % 14 ABS — Credit cards 1,5 % 15 ABS — Auto 1,5 % 16 CLO non-ACTP 1,75 % 17 Credit quality step 4 11 to 6 17 and unrated RMBS — Prime 1,575 % 18 RMBS — Mid-Prime 2,625 % 19 RMBS — Sub-Prime 3,5 % 20 CMBS 3,5 % 21 ABS — Student loans 1,4 % 22 ABS — Credit cards 2,1 % 23 ABS — Auto 2,1 % 24 CLO non-ACTP 2,45 % 25 Other sector 3,5 % 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 25.3. For the purposes of this Article, an exposure shall be assigned the credit quality category corresponding to the credit quality category that it would be assigned under the External Rating Based Approach set out in Title II, Chapter 5.

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Article 325as Risk weights for commodity risk Risk weights for sensitivities to commodity risk factors shall be the following: Table 9 Bucket number Bucket name Risk weight 1 Energy — solid combustibles 30 % 2 Energy — liquid combustibles 35 % 3 Energy — electricity and 60 % 3a Energy — EU ETS carbon trading 40 % 3b Energy — non-EU ETS carbon trading 60 % 4 Freight 80 % 5 Metals — non-precious 40 % 6 Gaseous combustibles 45 % 7 Precious metals (including gold) 20 % 8 Grains and oilseed 35 % 9 Livestock and dairy 25 % 10 Softs and other agricultural commodities 35 % 11 Other commodities 50 %

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Article 325ax Vega and curvature risk weights 1. Vega Buckets for vega risk factors shall use be similar to the buckets established for delta buckets referred to risk factors in accordance with Section 3, Subsection 1. 2. The risk weight Risk weights for a given sensitivities to vega risk factor k factors shall be determined as a share assigned in accordance with the risk class of the current value of that risk factor k which represents the implied volatility of an underlying, factors, as described in Section 3. follows: Table 1 Risk class Risk weights GIRR 100 % CSR non-securitisations 100 % CSR securitisations (ACTP) 100 % CSR securitisations (non-ACTP) 100 % Equity (large cap and indices) 77,78 % Equity (small cap and other sector) 100 % Commodity 100 % Foreign exchange 100 % 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 Risk weights GIRR 60 100 % CSR non-securitisations 120 100 % CSR securitisations (ACTP) 120 100 % CSR securitisations (non-ACTP) 120 100 % Equity (large cap and indices) 20 77,78 % Equity (small cap and other sector) 60 100 % Commodity 120 100 % Foreign exchange 40 100 % 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. bucket.

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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 may be used only by an institution to calculate its own funds requirements for market risk, provided that the purposes institution meets all of the reporting requirement requirements laid down in Article 430b(3). this Chapter. 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; 325bf(3); (d) the institution has reported to its competent authorities the results of trading desks have met the profit and loss attribution (P&L attribution) requirement for the trading desks set out requirements referred to 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; (g) no positions in CIUs that meet the condition set out in Article 104(8), point (b), 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 been granted permission to use the alternative internal model approach shall report to also meet the competent authorities reporting requirement set out in accordance with Article 430b(3). 325(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 institution’s compliance with the requirements set out in Articles 325bh, 325bi, 325bn, 325bo and 325bp. this Chapter. 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 issue an opinion as to whether extraordinary circumstances as referred to in paragraph 5 of this Article and in Article 325bf(6), second subparagraph, have occurred. For the purpose of providing that opinion, EBA shall monitor the market conditions to assess whether extraordinary circumstances have occurred and, where that is the case, shall notify the Commission immediately. 10. EBA shall develop draft regulatory technical standards to specify the conditions and indicators that EBA is to use to determine whether extraordinary circumstances have occurred. EBA shall submit those draft regulatory technical standards to the Commission by 30 June 2024. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph 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). Where calculating the own funds requirements for market risk using an internal model in accordance with the first subparagraph, an institution shall not include its own credit spreads in the calculation of the measures referred to in points (a) and (b) for positions in the institution’s own debt instruments. 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.By way of derogation from the first subparagraph, an institution shall not be subject to the additional own funds requirement for the holdings of its own debt instruments. 3. An institution using an alternative internal model shall calculate the total own funds requirements for market risk for all trading book positions and all non-trading book positions generating foreign exchange risk or commodity risk in accordance with the following formula: where: AIMA = the sum of the own funds requirements referred to in paragraphs 1 and 2; PLAaddon = the additional own funds requirement referred to in Article 325bg(2); ASAnon–aima = the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of trading book positions and non-trading book positions generating foreign exchange risk or commodity risk for which the institution uses the alternative standardised approach to calculate the own funds requirements for market risk; ASAall portofolio = the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of all trading book positions and all non-trading book positions generating foreign exchange risk or commodity risk; ASAaima = the own funds requirements for market risk as calculated under the alternative standardised approach referred to in Article 325(1), point (a), for the portfolio of trading book positions and non-trading book positions generating foreign exchange risk or commodity risk for which the institution uses the approach referred to in Article 325(1), point (b), to calculate the own funds requirements for market risk.

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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 … 332 unchanged words … 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. 5a. Currencies of Member States participating in ERM II shall be included in the most liquid currencies and domestic currency sub-category within the broad category of interest rate 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. For the purposes of the assessment referred to in first subparagraph, competent authorities may allow institutions to use market data provided by third-party vendors. 1a. Competent authorities may require an institution to consider not modellable a risk factor that has been assessed as modellable by the institution in accordance with paragraph 1 of this Article, where the data inputs used to determine the scenarios of future shocks applied to the risk factor do not meet, to the satisfaction of the competent authorities, the requirements referred to in Article 325bc(6). 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. 2a. In extraordinary circumstances, occurring during periods of significant reduction in certain trading activities across financial markets, competent authorities may allow institutions using the approach set out in this Chapter to consider as modellable risk factors that have been assessed as not modellable by those institutions in accordance with paragraph 1, provided that the following conditions are met: (a) the risk factors subject to the treatment correspond to the trading activities which are significantly reduced across financial markets; (b) the treatment is applied temporarily, and for not more than six months within one financial year; (c) the treatment does not significantly reduce the total own funds requirements for market risk of the institutions applying it; (d) competent authorities immediately notify EBA of any decision to allow institutions to apply the approach set out in this Chapter to consider as modellable risk factors that have been assessed as non-modellable, as well as of the trading activities concerned, and substantiate that decision. 3. EBA shall develop draft regulatory technical standards to specify the criteria to assess the modellability of risk factors in accordance with paragraph 1, including where market data provided by third-party vendors are used, and the frequency of that assessment. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph 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 … 461 unchanged words … 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 equal to at least the sum of the value of 1,5 and an add-on between 0 and 0,5 determined 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 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 permit an institution to do one or both of the following: (a) limit the calculation of the add-on to that resulting from overshootings under the back-testing of hypothetical changes where the number of overshootings under the back-testing of actual changes does not result from deficiencies in the institution’s alternative internal model; (b) exclude the overshootings evidenced by the back-testing of hypothetical or actual changes from the calculation of the add-on where those overshootings do not result from deficiencies in the institution’s alternative internal model. For the purposes of the first subparagraph, competent authorities may increase the value of mc above the sum referred to in that subparagraph, where an institution’s alternative internal model shows deficiencies preventing the appropriate measurement of the own funds requirements for market risk. 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, 6, 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 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. 10. EBA shall develop draft regulatory technical standards to specify the conditions and the criteria according to which an institution may be permitted not to count an overshooting where the 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. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph 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 institution’s trading desk meets the P&L attribution requirements where the theoretical changes in the value of that trading desk complies with desk’s portfolio, based on the requirements set out institution’s risk-measurement model, are either close or sufficiently close to the hypothetical changes in the value of that trading desk’s portfolio, based on the institution’s pricing model. 2. Notwithstanding paragraph 1 of this Article. 2. The P&L attribution requirement shall ensure that Article, where the theoretical changes in the value of a trading desk's desk’s portfolio, based on the institution's institution’s risk-measurement model, are sufficiently close to the hypothetical changes in the value of the that trading desk's desk’s portfolio, based on the institution's institution’s pricing model. 3. For each position of a given model, the institution shall calculate, for all positions assigned to that trading desk, an institution's compliance with additional own funds requirement to the own funds requirements referred to in Article 325ba(1) and (2). 3. On the basis of the results of the P&L attribution requirement referred to in paragraph 1 of this Article, an institution shall lead to the identification of determine and document a precise list of risk factors included in the institution’s risk-measurement model that are deemed appropriate for verifying the institution's institution’s compliance with the back-testing requirement set out in Article 325bf. The institution shall track any change to the list of those risk factors. 4. EBA shall develop draft regulatory technical standards to specify: (a) the criteria necessary to ensure that specifying whether the theoretical changes in the value of a trading desk's desk’s portfolio is are either close or sufficiently close to the hypothetical changes in the value of a trading desk's desk’s portfolio for the purposes of paragraph 2, 1, taking into account international regulatory developments; (b) the consequences for an institution where the theoretical changes additional own funds requirement referred to 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 10 July 2025. 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 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. maturities; (i) for positions in CIUs, institutions shall look through the underlying positions of the CIUs at least on a weekly basis to calculate their own funds requirements in accordance with this Chapter; where the look-through approach is carried out weekly, institutions shall be able to monitor the risks resulting from significant changes in the composition of the CIU; institutions that do not have adequate data inputs or information to calculate the own funds requirements for market risk of a CIU position in accordance with the look-through approach may rely on a third party to obtain those data inputs or information, provided that all of the following conditions are met: (i) the third party is one of the following: (1) the depository institution or the depository financial institution of the CIU, provided that the CIU exclusively invests in securities and deposits all securities at that depository institution or depository financial institution; (2) the CIU management company, provided that it meets the criteria set out in Article 132(3), point (a); (3) a third-party vendor on the condition that the data, information or risk metrics are provided or calculated by the third parties referred to in point (1) or (2) of this point or another such third-party vendor; (ii) the third party provides the institution with the data, information or risk metrics to calculate the own funds requirements for market risk of the CIU position in accordance with the look-through approach referred to in the first subparagraph; (iii) an external auditor of the institution has confirmed the adequacy of the third party data, information or risk metrics referred to in point (ii) and the competent authority has unrestricted access to those data, information or risk metrics upon request. 2. Institutions An institution may use empirical correlations within broad categories of risk factors and, for the purpose of calculating the unconstrained expected shortfall measure UESt as referred to in Article 325bb(1), 325bb(1) across broad categories of risk factors only where the institution's institution’s approach for measuring those correlations is sound, consistent with either the applicable liquidity horizons, horizons or, to the satisfaction of the competent authority, with the base time horizon of 10 days set out in Article 325bc(1), 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 shall: (i) be responsible for designing and implementing any internal risk-measurement model; that unit shall conduct model used in the initial and on-going validation of any alternative internal model used approach for the purposes of this Chapter and shall Chapter; (ii) be responsible for the overall risk management system; that unit shall (iii) produce and analyse daily reports on the output of any internal model used to calculate capital own funds requirements for market risk, as well as reports and 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. A validation unit, which is separate from the risk control unit referred to in the first subparagraph, point (b), shall conduct the initial and ongoing validation of any internal risk-measurement model used in the alternative internal model approach for the purposes of this Chapter. 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 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 ensure that maturity mismatches between a hedging instrument and the hedged instrument that could occur during the one-year time horizon, where those mismatches are not captured in their internal default risk model, do not lead to a material underestimation of risk. 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 0,01 % for exposures to which a 0 % risk weight is applied in accordance with Articles 114 to 118 and at 0,01 % for covered bonds to which a 10 % risk weight is applied in accordance with Article 129; otherwise, 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 Title II, Chapter 3, Section 1 of Chapter 3 of Title II for the exposure class and the rating system corresponding to a given issuer shall use the methodology set out therein to calculate the default probabilities; probabilities of that issuer, provided that the data to make such an estimate are available; (e) an institution that has not been granted permission to estimate default probabilities referred to in accordance with Section 1 of Chapter 3 of Title II point (d) shall develop an internal methodology or use external sources to estimate these default probabilities; in both situations, probabilities consistently with the requirements applicable to estimates of default probability under this Article. For the purposes of the first subparagraph, point (d), the data to estimate the default probabilities shall be consistent of a given issuer of a trading book position are available where, at the calculation date, the institution has a non-trading book position on the same obligor for which it estimates default probabilities in accordance with the Title II, Chapter 3, Section 1 to calculate its own funds requirements set out in this Article. that Chapter. 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 LGD in accordance with Title II, Chapter 3, Section 1 of Chapter 3 of Title II 1, for the exposure class and the rating system corresponding to a given exposure shall use the methodology set out therein to calculate loss given default estimates; LGD estimates of that issuer, provided that the data to make such an estimate are available; (d) an institution that has not been granted permission to estimate loss given default LGD referred to in accordance with Section 1 of Chapter 3 of Title II point (c) shall develop an internal methodology or use external sources to estimate loss given default; in both situations, LGD consistently with the requirements applying to estimates of loss LGD under this Article. For the purposes of the first subparagraph, point (c), the data to estimate the LGD of a given default shall be consistent issuer of a trading book position are available where, at the calculation date, the institution has a non-trading book position on the same exposure for which it estimates LGD in accordance with the Title II, Chapter 3, Section 1 to calculate its own funds requirements set out in this Article. that Chapter. 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 332 Credit Derivatives 1. When calculating the own funds requirement for general and specific risk of the party who assumes the credit risk (the protection seller), unless specified differently, the notional amount of the credit derivative contract shall be used. Notwithstanding … 652 unchanged words … from the protection seller's perspective carrying a negative sign. If at a given moment there is a call option in combination with a step-up, such moment is treated as the maturity of the protection. 3. Credit derivatives in accordance with Article 338(1) 325(6) or (3) (8) shall be included only in the determination of the specific risk own funds requirement in accordance with Article 338(4). 338(2).

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Article 337 Own funds requirement for securitisation instruments 1. For instruments in the trading book that are securitisation positions, the institution shall weight the net positions as calculated in accordance with Article 327(1) with 8 % of the risk weight the institution would apply to the position in its non-trading book according to Section 3 of Chapter 5 of Title II. 2. When determining risk weights for the purposes of paragraph 1, estimates of PD and LGD may be determined based on estimates that are derived from an internal incremental default and migration risk model (IRC model) of an institution that has been granted permission to institutions shall use an internal model for specific risk of debt instruments. The latter alternative may be used only subject to permission by exclusively the competent authorities, which shall be granted if those estimates meet the quantitative requirements for the IRB Approach approach set out in Title II, Chapter 3 of Title II. In accordance with Article 16 of Regulation (EU) No 1093/2010, the EBA shall issue guidelines on the use of estimates of PD and LGD as inputs when those estimates are based on an IRC model. 5, Section 3. 3. For securitisation positions that are subject to an additional risk weight in accordance with Article 247(6), 8 % of the total risk weight shall be applied. 4. The institution shall sum its weighted positions resulting from the application of paragraphs 1, 2 and 3 of this Article regardless of whether they are long or short, in order to calculate its own funds requirement against specific risk, except for securitisation positions subject to Article 338(4). 338(2). 5. Where an originator institution of a traditional securitisation does not meet the conditions for significant risk transfer set out in Article 244, the originator institution shall include the exposures underlying the securitisation in its calculation of own funds requirement as if those exposures had not been securitised. Where an originator institution of a synthetic securitisation does not meet the conditions for significant risk transfer set out in Article 245, the originator institution shall include the exposures underlying the securitisation in its calculation of own funds requirements as if those exposures had not been securitised and shall ignore the effect of the synthetic securitisation for credit protection purposes.

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before (02013R0575-20240709)

Article 338
Own funds requirement for the correlation trading portfolio
1. The correlation trading portfolio shall consist of securitisation positions and n-th-to-default credit derivatives that meet all of the following criteria:
(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 reference instruments are either of the following:
(i) single-name instruments, including single-name credit derivatives, for which a liquid two-way market exists;
(ii) commonly-traded indices based on those reference entities.
A two-way market is deemed to exist where there are independent bona fide offers to buy and sell so that a price 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 such price within a relatively short time conforming to trade custom.
2. Positions which reference any of the following shall not be part of the correlation trading portfolio:
(a) an underlying that is capable of being assigned to the exposure class retail exposures or to the exposure class exposures secured by mortgages on immovable property under the Standardised Approach for credit risk in an institution's non-trading book;
(b) a claim on a special purpose entity, collateralised, directly or indirectly, by a position that would itself not be eligible for inclusion in the correlation trading portfolio in accordance with paragraph 1 and this paragraph.
3. An institution may include in the correlation trading portfolio positions which are neither securitisation positions nor n-th-to-default credit derivatives but which hedge other positions of that portfolio, provided that a liquid two-way market as described in the last subparagraph of paragraph 1 exists for the instrument or its underlyings.
4. An institution shall determine the larger of the following amounts as the specific risk own funds requirement for the correlation trading portfolio:
(a) the total specific risk own funds requirement that would apply just to the net long positions of the correlation trading portfolio;
(b) the total specific risk own funds requirement that would apply just to the net short positions of the correlation trading portfolio.

after (02013R0575-20250101)

Article 338
Own funds requirement for the correlation trading portfolio
1. For the purposes of this Article, an institution shall determine its correlation trading portfolio in accordance with Article 325(6), (7) and (8).
2. An institution shall determine the larger of the following amounts as the specific risk own funds requirement for the correlation trading portfolio:
(a) the total specific risk own funds requirement that would apply just to the net long positions of the correlation trading portfolio;
(b) the total specific risk own funds requirement that would apply just to the net short positions of the correlation trading portfolio.

02013R0575-20240709 → 02013R0575-20250101

Article 348 Own funds requirements for CIUs 1. Without prejudice to other provisions in this Section, positions in CIUs shall be subject to an own funds requirement for position risk, comprising general and specific and general risk, of 32 %. Without prejudice to Article 353 taken together with the amended gold treatment set out in Article 352(4) and Article 367(2)(b) positions in CIUs shall be subject to an own funds requirement for position risk, comprising general and specific and general risk, and foreign-exchange foreign exchange risk of 40 %. 2. Unless noted otherwise in Article 350, no netting is permitted between the underlying investments of a CIU and other positions held by the institution.

02013R0575-20240709 → 02013R0575-20250101

Article 351 De minimis and weighting for foreign exchange risk If the sum of an institution's institution’s overall net foreign-exchange foreign exchange position and its net gold position, calculated in accordance with the procedure set out in Article 352, including for any foreign exchange and gold positions for which own funds requirements are calculated using an internal model, exceeds 2 % of its total own funds, the institution shall calculate an own funds requirement for foreign exchange risk. The own funds requirement for foreign exchange risk shall be the sum of its overall net foreign-exchange foreign exchange position and its net gold position in the reporting currency, multiplied by 8 %.

No text on either side: this unit was named by a signal that carries no text, and only the structural diff carries any.

02013R0575-20240709 → 02013R0575-20250101

Article 361 Extended maturity ladder approach Institutions may use the minimum spread, carry and outright rates set out in the following Table 2 instead of those indicated in Article 359 provided that the institutions: (a) undertake significant commodities business; (b) have an appropriately diversified commodities portfolio; portfolio. (c) are not yet in a position to use internal models for the purpose of calculating the own funds requirement for commodities risk. Table 2 Precious metals (except gold) Base metals Agricultural products (softs) Other, including energy products Spread rate (%) 1,0 1,2 1,5 1,5 Carry rate (%) 0,3 0,5 0,6 0,6 Outright rate (%) 8 10 12 15 Institutions shall notify the use they make of this Article to their competent authorities together with evidence of their efforts to implement an internal model for the purpose of calculating the own funds requirement for commodities risk. authorities.

02013R0575-20240709 → 02013R0575-20250101

Article 381 Meaning of credit valuation adjustment For the purposes of this Title and Chapter 6 of Title II, credit valuation adjustment or CVA means an adjustment to the mid-market valuation of the portfolio of transactions with a counterparty. That adjustment reflects the current market value of the credit risk of the counterparty to the institution, but does not reflect the current market value of the credit risk of the institution to the counterparty.For the purposes of this Title, CVA risk means the risk of losses arising from changes in the value of CVA, calculated for the portfolio of transactions with a counterparty as set out in the first paragraph, due to movements in counterparty credit spread risk factors and in other risk factors embedded in the portfolio of transactions.

02013R0575-20240709 → 02013R0575-20250101

Article 382 Scope 1. An institution shall calculate the own funds requirements for CVA risk in accordance with this Title for all OTC derivative instruments in respect of all of its business activities, other than credit derivatives recognised to reduce risk-weighted exposure amounts for credit risk. 2. An institution shall include securities financing transactions in the calculation of own funds required by paragraph 1 if securities financing transactions that are fair-valued under the competent authority determines that accounting framework applicable to the institution's institution where the institution’s CVA risk exposures arising from those transactions are material. 3. Transactions with a qualifying central counterparty and a client's transactions with a clearing member, when the clearing member is acting as an intermediary between the client and a qualifying central counterparty and the transactions give rise to a trade exposure of the clearing member to the qualifying central counterparty, are excluded from the own funds requirements for CVA risk. 4. The following transactions shall be excluded from the own funds requirements for CVA risk: (a) transactions with non-financial counterparties as defined in point (9) of Article 2 of Regulation (EU) No 648/2012, or with non-financial counterparties established in a third country, where those transactions do not exceed the clearing threshold as specified in Article 10(3) and (4) of that Regulation; (aa) intragroup transactions entered into with non-financial counterparties as defined in Article 2, point (9), of Regulation (EU) No 648/2012 which are part of the same group provided that all the following conditions are met: (i) the institution and the non-financial counterparties are included in the same consolidation on a full basis and are subject to supervision on a consolidated basis in accordance with Part One, Title II, Chapter 2; (ii) they are subject to appropriate centralised risk evaluation, measurement and control procedures; and (iii) the non-financial counterparties are established in the Union or, if they are established in a third country, the Commission has adopted an implementing act in accordance with paragraph 4c in respect of that third country; (b) intragroup transactions entered into with financial counterparties, as provided for defined in Article 3 2, point (8), of Regulation (EU) No 648/2012, financial institutions or ancillary services undertakings that are established in the Union or that are established in a third country that applies prudential and supervisory requirements to those financial counterparties, financial institutions or ancillary services undertakings that are at least equivalent to those applied in the Union, unless Member States adopt national law requiring the structural separation within a banking group, in which case the competent authorities may require those intragroup transactions between the structurally separated entities to be included in the own funds requirements; (c) transactions with counterparties referred to in point (10) of Article 2 of Regulation (EU) No 648/2012 and subject to the transitional provisions set out in Article 89(1) of that Regulation until those transitional provisions cease to apply; (d) transactions with counterparties referred to in Article 1(4) and (5) of Regulation (EU) No 648/2012 and transactions with counterparties for which Article 114(4) and Article 115(2) of this Regulation specifies a risk weight of 0 % for exposures to those counterparties. The exemption from the CVA risk charge for those transactions referred to in point (c) of this paragraph) which are entered into during the transitional period laid down in Article 89(1) of Regulation (EU) No 648/2012 shall apply for the length of the contract of that transaction. In regard to point (a), where an institution ceases to be exempt through crossing the exemption threshold or due to a change in the exemption threshold, outstanding contracts shall remain exempt until the date of their maturity. 4a. By way of derogation from paragraph 4 of this Article, an institution may choose to calculate the own funds requirements for CVA risk, using any of the approaches referred to in Article 382a(1), for the transactions that are excluded pursuant to paragraph 4 of this Article, where the institution uses eligible hedges determined in accordance with Article 386 to mitigate the CVA risk of those transactions. Institutions shall establish policies to specify the application and calculation of the own funds requirements for CVA risk for such transactions. 4b. Institutions shall report to their competent authorities the results of the calculations of the own funds requirements for CVA risk for all transactions referred to in paragraph 4 of this Article. For the purposes of that reporting requirement, institutions shall calculate the own funds requirements for CVA risk using the relevant approaches set out in Article 382a(1) that they would have used to satisfy an own funds requirement for CVA risk if those transactions were not excluded from the scope pursuant to paragraph 4 of this Article. 4c. For the purposes of paragraph 4, points (aa) and (b), the Commission may adopt, by way of implementing acts, and subject to the examination procedure referred to in Article 464(2), a decision as to whether a third country applies prudential supervisory and regulatory requirements at least equivalent to those applied in the Union. 5. EBA shall conduct a review by 1 January 2015 and every two years thereafter, in the light of international regulatory developments and including on potential methodologies on the calibration and thresholds for application of CVA risk charges to non-financial counterparties established in a third country. EBA in cooperation with ESMA shall develop draft regulatory technical standards to specify the procedures for excluding transactions with non-financial counterparties established in a third country from the own funds requirement for CVA risk charge. EBA shall submit those draft regulatory technical standards within six months of the date of the review referred to in the first subparagraph, Power is delegated to the Commission to adopt the regulatory technical standards referred to in the second subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010. 6. EBA shall develop draft regulatory technical standards to specify the conditions and the criteria that institutions are to use to assess whether the CVA risk exposures arising from fair-valued securities financing transactions are material, as well as the frequency of that assessment. EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2026. Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

inserted text (02013R0575-20250101)

Article 382a
Approaches for calculating the own funds requirements for CVA risk
1. An institution shall calculate the own funds requirements for CVA risk for all transactions referred to in Article 382 in accordance with the following approaches:
(a) the standardised approach set out in Article 383, where the institution has been granted permission by the competent authority to use that approach;
(b) the basic approach set out in Article 384;
(c) the simplified approach set out in Article 385, provided that the institution meets the conditions set out in paragraph 1 of that Article.
2. An institution shall not use the approach referred to in paragraph 1, point (c), in combination with the approach referred to in point (a) or (b) of that paragraph.
3. An institution may use a combination of the approaches referred to in paragraph 1, points (a) and (b), to calculate the own funds requirements for CVA risk on a permanent basis for:
(a) different counterparties;
(b) different eligible netting sets with the same counterparty;
(c) different transactions of the same eligible netting set, provided that any of the conditions referred to in paragraph 5 are satisfied.
4. For the purposes of paragraph 3, point (c), institutions shall split the eligible netting set into a hypothetical netting set containing the transactions subject to the approach referred to in paragraph 1, point (a), and a hypothetical netting set containing the transactions subject to the approach referred to in paragraph 1, point (b).
5. For the purposes of paragraph 3, point (c), the conditions referred to therein shall comprise the following:
(a) the split is consistent with the treatment of the legal netting set when calculating the CVA for accounting purposes;
(b) the permission granted by competent authorities to use the approach referred to in paragraph 1, point (a), is limited to the corresponding hypothetical netting set and does not cover all transactions within the eligible netting set.
Institutions shall document how they use a combination of the approaches referred to in paragraph 1, points (a) and (b), and as set out in this paragraph, to calculate the own funds requirements for CVA risk on a permanent basis.

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before (02013R0575-20240709)

Article 383
Advanced method
1. An institution which has permission to use an internal model for the specific risk of debt instruments in accordance with point (d) of Article 363 (1) shall, for all transactions for which it has permission to use the IMM for determining the exposure value for the associated counterparty credit risk exposure in accordance with Article 283, determine the own funds requirements for CVA risk by modelling the impact of changes in the counterparties' credit spreads on the CVAs of all counterparties of those transactions, taking into account CVA hedges that are eligible in accordance with Article 386.
An institution shall use its internal model for determining the own funds requirements for the specific risk associated with traded debt positions and shall apply a 99 % confidence interval and a 10-day equivalent holding period. The internal model shall be used in such way that it simulates changes in the credit spreads of counterparties, but does not model the sensitivity of CVA to changes in other market factors, including changes in the value of the reference asset, commodity, currency or interest rate of a derivative.
The own funds requirements for CVA risk for each counterparty shall be calculated in accordance with the following formula:CVALGDMKT  Ti1 max 0,exp  si  1  ti  1LGDMKT exp  si  tiLGDMKT  EEi  1  Di  1 EEi  Di2
where:
ti
the time of the i-th revaluation, starting from t0=0;
tT
the longest contractual maturity across the netting sets with the counterparty;
si
is the credit spread of the counterparty at tenor ti, used to calculate the CVA of the counterparty. Where the credit default swap spread of the counterparty is available, an institution shall use that spread. Where such a credit default swap spread is not available, an institution shall use a proxy spread that is appropriate having regard to the rating, industry and region of the counterparty;
LGDMKT
the LGD of the counterparty that shall be based on the spread of a market instrument of the counterparty if a counterparty instrument is available. Where a counterparty instrument is not available, it shall be based on the proxy spread that is appropriate having regard to the rating, industry and region of the counterparty.
The first factor within the sum represents an approximation of the market implied marginal probability of a default occurring between times ti-1 and ti;
EEi
the expected exposure to the counterparty at revaluation time ti, where exposures of different netting sets for such counterparty are added, and where the longest maturity of each netting set is given by the longest contractual maturity inside the netting set; An institution shall apply the treatment set out in paragraph 3 in the case of margined trading, if the institution uses the EPE measure referred to in point (a) or (b) of Article 285(1) for margined trades;
Di
the default risk-free discount factor at time ti, where D0 =1.
2. When calculating the own funds requirements for CVA risk for a counterparty, an institution shall base all inputs into its internal model for specific risk of debt instruments on the following formulae (whichever is appropriate):
(a) where the model is based on full repricing, the formula in paragraph 1 shall be used directly;
(b) where the model is based on credit spread sensitivities for specific tenors, an institution shall base each credit spread sensitivity ('Regulatory CS01') on the following formula:
Regulatory CS01i0.0001  ti  exp  si  tiLGDMKT  EEi  1  Di  1  EEi  1  Di  12
For the final time bucket i=T, the corresponding formula is
Regulatory CS01T0.0001  tT  expsT  tTLGDMKT  EET  1  DT  1 EET  DT2
(c) where the model uses credit spread sensitivities to parallel shifts in credit spreads, an institution shall use the following formula:
Regulatory CS01 0.0001  Ti1ti  expsi  tiLGDMKT  ti  1  expsi  1  ti  1LGDMKT  EEi  1  Di  1EEi  Di2
(d) where the model uses second-order sensitivities to shifts in credit spreads (spread gamma), the gammas shall be calculated based on the formula in paragraph 1.
3. An institution using the EPE measure for collateralised OTC derivatives referred to in point (a) or (b) of Article 285(1) shall, when determining the own funds requirements for CVA risk in accordance with paragraph 1, do both of the following:
(a) assume a constant EE profile;
(b) set EE equal to the effective expected exposure as calculated under Article 285(1)(b) for a maturity equal to the greater of the following:
(i) half of the longest maturity occurring in the netting set;
(ii) the notional weighted average maturity of all transactions inside the netting set.
4. An institution which is permitted by the competent authority in accordance with Article 283 to use IMM to calculate exposure values in relation to the majority of its business, but which uses the methods set out in Section 3, Section 4 or Section 5 of Title II, Chapter 6 for smaller portfolios, and which has permission to use the market risk internal model for the specific risk of debt instruments in accordance with point (d) of Article 363(1) may, subject to permission from the competent authorities, calculate the own funds requirements for CVA risk in accordance with paragraph 1 for the non-IMM netting sets. Competent authorities shall grant this permission only if the institution uses the methods set out in Section 3, Section 4 or Section 5 of Title II, Chapter 6 for a limited number of smaller portfolios.
For the purposes of a calculation under the preceding subparagraph and where the IMM model does not produce an expected exposure profile, an institution shall do both of the following:
(a) assume a constant EE profile;
(b) set EE equal to the exposure value as computed under the methods set out in Section 3, Section 4 or Section 5 of Title II, Chapter 6, or IMM for a maturity equal to the greater of:
(i) half of the longest maturity occurring in the netting set;
(ii) the notional weighted average maturity of all transactions inside the netting set.
5. An institution shall determine the own funds requirements for CVA risk in accordance with Article 364(1) and Articles 365 and 367 as the sum of non-stressed and stressed value-at-risk, which shall be calculated as follows:
(a) for the non-stressed value-at-risk, current parameter calibrations for expected exposure as set out in the first subparagraph of Article 292(2), shall be used;
(b) for the stressed value-at-risk, future counterparty EE profiles using a stressed calibration as set out in the second subparagraph of Article 292(2) shall be used. The period of stress for the credit spread parameters shall be the most severe one-year stress period contained within the three-year stress period used for the exposure parameters;
(c) the three-times multiplication factor used in the calculation of own funds requirements based on a value-at-risk and a stressed value-at-risk in accordance with 364(1) will apply to these calculations. EBA shall monitor for consistency any supervisory discretion used to apply a higher multiplication factor than that three-times multiplication factor to the value-at-risk and stressed value-at-risk inputs to the CVA risk charge. Competent authorities applying a multiplication factor higher than three shall provide a written justification to EBA;
(d) the calculation shall be carried out on at least a monthly basis and the EE that is used shall be calculated on the same frequency. If lower than a daily frequency is used, for the purpose of the calculation specified in points (a)(ii) and (b)(ii) of Article 364(1) institutions shall take the average over three months.
6. For exposures to a counterparty, for which the institution's approved internal model for the specific risk of debt instruments does not produce a proxy spread that is appropriate with respect to the criteria of rating, industry and region of the counterparty, the institution shall use the method set out in Article 384 to calculate the own funds requirement for CVA risk.
7. EBA shall develop draft regulatory technical standards to specify in greater detail:
(a) how a proxy spread is to be determined by the institution's approved internal model for the specific risk of debt instruments for the purposes of identifying si and LGDMKT referred to in paragraph 1;
(b) the number and size of portfolios that fulfil the criterion of a limited number of smaller portfolios referred to in paragraph 4.
EBA shall submit those 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.

after (02013R0575-20250101)

Article 383
Standardised approach
1. The competent authority shall grant an institution permission to calculate its own funds requirements for CVA risk for a portfolio of transactions with one or more counterparties by using the standardised approach in accordance with paragraph 3 of this Article, after having assessed whether the institution complies with the following requirements:
(a) the institution has established a distinct unit which is responsible for the institution’s overall risk management and hedging of CVA risk;
(b) for each counterparty concerned, the institution has developed a regulatory CVA model to calculate the CVA of that counterparty in accordance with Article 383a;
(c) for each counterparty concerned, the institution is able to calculate, at least on a monthly basis, the sensitivities of its CVA to the risk factors concerned as determined in accordance with Article 383b;
(d) for all positions in eligible hedges recognised in accordance with Article 386 for the purpose of calculating the own funds requirements for CVA risk using the standardised approach, the institution is able to calculate, and at least on a monthly basis, the sensitivities of those positions to the relevant risk factors determined in accordance with Article 383b;
(e) the institution has established a risk control unit that is independent from business trading units and the unit referred to in point (a) and that reports directly to the management body; that risk control unit shall be responsible for designing and implementing the standardised approach and shall produce and analyse monthly reports on the output of that approach and, moreover, the risk control unit shall assess the appropriateness of the institution’s trading limits and include the results of that assessment in its monthly reports; the risk control unit shall have a sufficient number of staff with a level of skills that is appropriate to fulfil its purpose.
For the purposes of the first subparagraph, point (c), of this paragraph the sensitivity of a counterparty’s CVA to a risk factor means the relative change in the value of that CVA, as a result of a change in the value of one of the relevant risk factors of that CVA, calculated using the institution’s regulatory CVA model in accordance with Articles 383i and 383j.
For the purposes of the first subparagraph, point (d), of this paragraph the sensitivity of a position in an eligible hedge to a risk factor means the relative change in the value of that position, as a result of a change in the value of one of the relevant risk factors of that position, calculated using the institution’s pricing model in accordance with Articles 383i and 383j.
2. For the purpose of calculating the own funds requirements for CVA risk, the following definitions apply:
(1) risk class means any of the following categories:
(a) interest rate risk;
(b) counterparty credit spread risk;
(c) reference credit spread risk;
(d) equity risk;
(e) commodity risk;
(f) foreign exchange risk;
(2) CVA portfolio means the portfolio composed of the aggregate CVA and the eligible hedges referred to in paragraph 1, point (d);
(3) aggregate CVA means the sum of the CVAs calculated using the regulatory CVA model for the counterparties referred to in paragraph 1, first subparagraph.
3. Institutions shall determine the own funds requirements for CVA risk using the standardised approach as the sum of the following own funds requirements calculated in accordance with Article 383b:
(a) the own funds requirements for delta risk which capture the risk of changes in the institution’s CVA portfolio due to movements in the relevant non-volatility related risk factors;
(b) the own funds requirements for vega risk which capture the risk of changes in the institution’s CVA portfolio due to movements in the relevant volatility related risk factors.

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before (02013R0575-20240709)

Article 383a
Regulatory CVA model
4. EBA shall develop draft regulatory technical standards to specify:
(a) how proxy spreads referred to in paragraph 2, point (b), are to be determined by the institution for the purposes of calculating default probabilities;
(b) further technical elements that institutions are to take into account when calculating the counterparty’s expected loss given default, the counterparty’s probabilities of default and the simulated discounted future exposure of the portfolio of transactions with that counterparty and CVA, as referred to in paragraph 1;
(c) which other instruments referred to in paragraph 2, point (a), are appropriate to estimate the counterparty’s probabilities of default and how institutions are to make that estimate.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
5. EBA shall develop draft regulatory technical standards to specify:
(a) the conditions for assessing the materiality of extensions and changes to the use of the standardised approach as referred to in Article 383(3);
(b) the assessment methodology under which competent authorities are to verify an institution’s compliance with the requirements set out in Articles 383 and 383a.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2028.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

after (02013R0575-20250101)

Article 383a
Regulatory CVA model
1. A regulatory CVA model used for calculating the own funds requirements for CVA risk in accordance with Article 383 shall be conceptually sound, implemented with integrity, and comply with all of the following requirements:
(a) the regulatory CVA model is capable of modelling the CVA of a given counterparty, recognising netting and margin agreements at netting set level, where relevant, in accordance with this Article;
(b) the institution estimates the counterparty’s probabilities of default from the counterparty credit spreads and market-consensus expected loss given default for that counterparty;
(c) the expected loss given default referred to in point (a) shall be the same as the market-consensus expected loss given default referred to in point (b), unless the institution can demonstrate that the seniority of the portfolio of transactions with that counterparty differs from the seniority of senior unsecured bonds issued by that counterparty;
(d) at each future time point, the simulated discounted future exposure of the portfolio of transactions with a counterparty is calculated with an exposure model by repricing all transactions in that portfolio, based on the simulated joint changes of the market risk factors that are material to those transactions using an appropriate number of scenarios, and discounting the prices to the date of calculation using risk-free interest rates;
(e) the regulatory CVA model is capable of modelling significant dependency between the simulated discounted future exposure of the portfolio of transactions and the counterparty credit spreads;
(f) where the transactions of the portfolio are included in a netting set subject to a margin agreement and daily mark-to-market valuation, the collateral posted and received as part of that agreement is recognised as a risk mitigant in the simulated discounted future exposure, where all of the following conditions are met:
(i) the institution determines the margin period of risk relevant for that netting set in accordance with the requirements set out in Article 285(2) and (5), and reflects that margin period in the calculation of the simulated discounted future exposure;
(ii) all applicable features of the margin agreement, including the frequency of margin calls, the type of contractually eligible collateral, the threshold amounts, the minimum transfer amounts, the independent amounts and the initial margins for both the institution and the counterparty are appropriately reflected in the calculation of the simulated discounted future exposure;
(iii) the institution has established a collateral management unit that complies with Article 287 for all collateral recognised for calculating the own funds requirements for CVA risk using the standardised approach.
For the purposes of the first subparagraph, point (a), CVA shall have a positive sign and shall be calculated as a function of the counterparty’s expected loss given default, an appropriate set of the counterparty’s probabilities of default at future time points and an appropriate set of simulated discounted future exposures of the portfolio of transactions with that counterparty at future time points until the maturity of the longest transaction in that portfolio.
For the purposes of the demonstration referred to in the first subparagraph, point (c), collateral received from the counterparty shall not change the seniority of the exposure.
For the purposes of the first subparagraph, point (f)(iii), of this paragraph where the institution has already established a collateral management unit for using the internal model method referred to in Article 283, the institution shall not be required to establish an additional collateral management unit where that institution demonstrates to its competent authority that such a unit complies with the requirements set out in Article 287 for the collateral recognised for calculating the own funds requirements for CVA risk using the standardised approach.
2. For the purposes of paragraph 1, point (b), where the credit default swap spreads of the counterparty are observable in the market, an institution shall use those spreads. Where such credit default swap spreads are not available, an institution shall use one of the following:
(a) credit spreads from other instruments issued by the counterparty reflecting current market conditions;
(b) proxy spreads that are appropriate considering the rating, industry and region of the counterparty.
3. An institution using a regulatory CVA model shall comply with all of the following qualitative requirements:
(a) the exposure model referred to in paragraph 1 is part of the institution’s internal CVA risk management system that includes the identification, measurement, management, approval and internal reporting of CVA and CVA risk for accounting purposes;
(b) the institution has in place a process for ensuring compliance with a documented set of internal policies, controls, assessment of model performance and procedures concerning the exposure model referred to in paragraph 1;
(c) the institution shall have an independent validation unit that is responsible for the effective initial and ongoing validation of the exposure model referred to in paragraph 1 of this Article; that unit shall be independent from business credit and trading units, including the unit referred to in Article 383(1), point (a), and report directly to senior management; it shall have a sufficient number of staff with a level of skills that is appropriate to fulfil that purpose;
(d) the senior management shall be actively involved in the risk control process and shall regard CVA risk control as an essential aspect of the business, to which appropriate resources need to be devoted;
(e) the institution shall document the process for initial and ongoing validation of the exposure model referred to in paragraph 1 to a level of detail that would enable a third party to understand how the models operate, their limitations, and their key assumptions, and recreate the analysis; that documentation shall set out the minimum frequency with which ongoing validation will be conducted, as well as other circumstances, such as a sudden change in market behaviour, under which additional validation shall be conducted; it shall describe how the validation is conducted with respect to data flows and portfolios, what analyses are used and how representative counterparty portfolios are constructed;
(f) the pricing models used in the exposure model referred to in paragraph 1 for a given scenario of simulated market risk factors shall be tested against appropriate independent benchmarks for a wide range of market states as part of the initial and ongoing model validation process; pricing models for options shall account for the non-linearity of option value with respect to market risk factors;
(g) an independent review of the institution’s internal CVA risk management system referred to in point (a) of this paragraph shall be carried out by the institution’s internal auditing process on a regular basis; that review shall include the activities both of the unit referred to in Article 383(1), point (a), and of the independent validation unit referred to in point (c) of this paragraph;
(h) the regulatory CVA model used by the institution for calculating the simulated discounted future exposure referred to in paragraph 1, shall reflect transaction terms and specifications and margin agreements in a timely, complete, and conservative manner; the terms and specifications shall reside in a secure database subject to formal and periodic audit; the transmission of transaction terms and specifications data and margin agreements to the exposure model shall also be subject to internal audit, and formal reconciliation processes shall be in place between the internal model and source data systems to verify on an ongoing basis that transaction terms, specifications and margin agreements are being reflected in the exposure system correctly or, at least, conservatively;
(i) the current and historical market data inputs used in the model by the institution for calculating the simulated discounted future exposure referred to in paragraph 1 shall be acquired independently of the business lines and fed into that model in a timely and complete manner and maintained in a secure database subject to formal and periodic audit; an institution shall have a well-developed data integrity process to handle inappropriate data observations; where the model relies on proxy market data, an institution shall design internal policies to identify suitable proxies and shall demonstrate empirically on an ongoing basis that the proxies provide a conservative representation of the underlying risk;
(j) the exposure model referred to in paragraph 1 shall capture the transaction specific and contractual information necessary in order to aggregate exposures at the level of the netting set; an institution shall verify that transactions are assigned to the appropriate netting set within the model.
For the purpose of calculating the own funds requirements for CVA risk, the exposure model referred to in paragraph 1 of this Article may have different specifications and assumptions in order to meet all requirements laid down in Article 383a, except that its market data inputs and netting recognition shall remain the same as the ones used for accounting purposes.
4. EBA shall develop draft regulatory technical standards to specify:
(a) how proxy spreads referred to in paragraph 2, point (b), are to be determined by the institution for the purposes of calculating default probabilities;
(b) further technical elements that institutions are to take into account when calculating the counterparty’s expected loss given default, the counterparty’s probabilities of default and the simulated discounted future exposure of the portfolio of transactions with that counterparty and CVA, as referred to in paragraph 1;
(c) which other instruments referred to in paragraph 2, point (a), are appropriate to estimate the counterparty’s probabilities of default and how institutions are to make that estimate.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.
5. EBA shall develop draft regulatory technical standards to specify:
(a) the conditions for assessing the materiality of extensions and changes to the use of the standardised approach as referred to in Article 383(3);
(b) the assessment methodology under which competent authorities are to verify an institution’s compliance with the requirements set out in Articles 383 and 383a.
EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2028.
Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

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Article 383b
Own funds requirements for delta and vega risks
1. Institutions shall apply the delta and vega risk factors described in Articles 383c to 383h, and the process set out in paragraphs 2 to 8 of this Article, to calculate the own funds requirements for delta and vega risks.
2. For each risk class referred to in Article 383(2), the sensitivity of the aggregate CVAs and the sensitivity of all positions in eligible hedges falling within the scope of the own funds requirements for delta or vega risk to each of the applicable delta or vega risk factors included in that risk class shall be calculated by using the corresponding formulae set out in Articles 383i and 383j. Where the value of an instrument depends on several risk factors, the sensitivity shall be determined separately for each risk factor.
For the calculation of the vega risk sensitivities of the aggregate CVAs, sensitivities both to volatilities used in the exposure model to simulate risk factors and to volatilities used to reprice option transactions in the portfolio with the counterparty shall be included.
By way of derogation from paragraph 1 of this Article, subject to the permission of the competent authority, an institution may use alternative definitions of delta and vega risk sensitivities in the calculation of the own funds requirements of a trading book position under this Chapter, provided that the institution meets all of the following conditions:
(a) those alternative definitions are used for internal risk management purposes or 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 of the position than the formulae set out in Articles 383i and 383j, and that the resulting delta and vega risk sensitivities do not materially differ from the ones obtained applying the formulae set out in Articles 383i and 383j, respectively.
3. Where an eligible hedge is an index instrument, institutions shall calculate the sensitivities of that eligible hedge to all relevant risk factors by applying the shift of one of the relevant risk factors to each of the index constituents.
4. An institution may introduce additional risk factors that correspond to qualified index instruments for the following risk classes:
(a) counterparty credit spread risk;
(b) reference credit spread risk; and
(c) equity risk.
For the purposes of delta risks, an index instrument shall be considered qualified where it meets the conditions set out in Article 325i. For vega risks, all index instruments shall be considered qualified.
An institution shall calculate sensitivities of CVA and eligible hedges to qualified index risk factors in addition to sensitivities to the non-index risk factors.
An institution shall calculate delta and vega risk sensitivities to a qualified index risk factor as a single sensitivity to the underlying qualified index. Where 75 % of the constituents of a qualified index are mapped to the same sector as set out in Articles 383p, 383s and 383v, the institution shall map the qualified index to that same sector. Otherwise, the institution shall map the sensitivity to the applicable qualified index bucket.
5. The weighted sensitivities of the aggregate CVA and of the market value of all eligible hedges to each risk factor shall be calculated by multiplying the respective net sensitivities by the corresponding risk weight, in accordance with the following formulae:
where:
k
= the index that denotes the risk factor k;
= the weighted sensitivity of the aggregate CVA to risk factor k;
RWk
= the risk weight applicable to the risk factor k;
= the net sensitivity of the aggregate CVA to risk factor k;
= the weighted sensitivity of the market value of all eligible hedges in the CVA portfolio to risk factor k;
= the net sensitivity of the market value of all eligible hedges in the CVA portfolio to risk factor k.
6. Institutions shall calculate the net-weighted sensitivity WSk of the CVA portfolio to risk factor k in accordance with the following formula:
7. The net-weighted sensitivities within the same bucket shall be aggregated in accordance with the following formula, using the corresponding correlations ρkl to weighted sensitivities within the same bucket set out in Articles 383l, 383t and 383q giving rise to the bucket-specific sensitivity Kb:
where:
Kb
= the bucket-specific sensitivity of bucket b;
WSk
= the net-weighted sensitivities;
ρkl
= the corresponding intra-bucket correlation parameters;
R
= the hedging disallowance parameter equal to 0,01.
8. The bucket-specific sensitivity shall be calculated in accordance with paragraphs 5, 6 and 7 of this Article for each bucket within a risk class. 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 following formula, using the corresponding correlations γbc for weighted sensitivities in different buckets set out in Articles 383l, 383o, 383r, 383u, 383w and 383z giving rise to the risk-class specific own funds requirements for delta or vega risk:
where:
mCVA
= a multiplier factor which is equal to 1; the competent authority may increase the value of mCVA where the institution’s regulatory CVA model shows deficiencies preventing the appropriate measurement of the own funds requirements for CVA risk;
Kb
= the bucket-specific sensitivity of bucket b;
γbc
= the correlation parameter between buckets b and c;
for all risk factors in bucket b;
for all risk factors in bucket c.

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Article 383c
Interest rate risk factors
1. For the interest rate delta risk factors, including inflation rate risk, there shall be one bucket per currency, with each bucket containing different types of risk factors.
The interest rate delta risk factors that are applicable to interest-rate sensitive instruments in the CVA portfolio shall be the risk-free rates per currency concerned and per each of the following maturities: 1 year, 2 years, 5 years, 10 years and 30 years.
The interest rate delta risk factors applicable to inflation-rate sensitive instruments in the CVA portfolio shall be the inflation rates per currency concerned and per each of the following maturities: 1 year, 2 years, 5 years, 10 years and 30 years.
2. The currencies for which an institution shall apply the interest rate delta risk factors in accordance with paragraph 1 shall be euro, Swedish krona, Australian dollar, Canadian dollar, British pound sterling, Japanese yen and US dollar, the institution’s reporting currency and the currency of a Member State participating in ERM II.
3. For currencies not specified in paragraph 2, the interest rate delta risk factors shall be the absolute change of the inflation rate and the parallel shift of the entire risk-free curve for a given currency.
4. Institutions shall obtain the risk-free rates per currency from money market instruments held in their trading book that have the lowest credit risk, including overnight index swaps.
5. Where institutions cannot apply the approach referred to in paragraph 4, the risk-free rates shall be based on one or more market-implied swap curves used by the institutions to mark positions to market, such as the interbank offered rate swap curves.
Where the data on market-implied swap curves described in the first subparagraph are insufficient, the risk-free rates may be derived from the most appropriate sovereign bond curve for a given currency.
6. The interest rate vega risk factor applicable to instruments in the CVA portfolio sensitive to interest rate volatility shall be all the volatilities of the interest rate of all tenors for a given currency. The inflation rate vega risk factor applicable to instruments in the CVA portfolio sensitive to inflation rate volatility shall be all the volatilities of the inflation rate of all tenors for a given currency. There shall be one net interest rate sensitivity and one net inflation rate sensitivity computed for each currency.

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Article 383d
Foreign exchange risk factors
1. The foreign exchange delta risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to foreign exchange spot rates shall be the spot foreign exchange rates between the currency in which an instrument is denominated and the institution’s reporting currency or the institution’s base currency where the institution is using a base currency in accordance with Article 325q(7). 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 instruments in the CVA portfolio sensitive to foreign exchange volatility shall be the implied volatilities of foreign exchange rates between the currency pairs referred to in paragraph 1. There shall be one bucket for all currencies and maturities, containing all foreign exchange vega risk factors and a single net sensitivity.
3. Institutions shall not be required to distinguish between onshore and offshore variants of a currency for foreign exchange delta and vega risk factors.

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Article 383e
Counterparty credit spread risk factors
1. The counterparty credit spread delta risk factors applicable to counterparty credit spread sensitive instruments in the CVA portfolio shall be the credit spreads of individual counterparties and reference names and qualified indices for the following maturities: 0,5 years, 1 year, 3 years, 5 years and 10 years.
2. The counterparty credit spread risk class shall not be subject to vega risk own funds requirements.

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Article 383f
Reference credit spread risk factors
1. The reference credit spread delta risk factors applicable to reference credit spread sensitive instruments in the CVA portfolio shall be the credit spreads of all maturities for all reference names within a bucket. There shall be one net sensitivity computed for each bucket.
2. The reference credit spread vega risk factors applicable to instruments in the CVA portfolio sensitive to reference credit spread volatility shall be the volatilities of the credit spreads of all tenors for all reference names within a bucket. There shall be one net sensitivity computed for each bucket.

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Article 383g
Equity risk factors
1. The buckets for all equity risk factors shall be the buckets referred to in Article 383t.
2. The equity delta risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to equity spot prices shall be the spot prices of all equities mapped to the same bucket referred to in paragraph 1. There shall be one net sensitivity computed for each bucket.
3. The equity vega risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to equity volatility shall be the implied volatilities of all equities mapped to the same bucket referred to in paragraph 1. There shall be one net sensitivity computed for each bucket.

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Article 383h
Commodity risk factors
1. The buckets for all commodity risk factors shall be the sector buckets referred to in Article 383x.
2. The commodity delta risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to commodity spot prices shall be the spot prices of all commodities mapped to the same sector bucket referred to in paragraph 1. There shall be one net sensitivity computed for each sector bucket.
3. The commodity vega risk factors to be applied by institutions to instruments in the CVA portfolio sensitive to commodity price volatility shall be the implied volatilities of all commodities mapped to the same sector bucket referred to in paragraph 1. There shall be one net sensitivity computed for each sector bucket.

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Article 383i
Delta risk sensitivities
1. Institutions shall calculate delta sensitivities consisting of interest rate risk factors as follows:
(a) the delta sensitivities of the aggregate CVA to risk factors consisting of risk-free rates, as well as of an eligible hedge to those risk factors, shall be calculated as follows:
where:
= the sensitivities of the aggregate CVA to a risk-free rate risk factor;
rkt
= the value of the risk-free rate risk factor k with maturity t;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than rkt in VCVA;
= the sensitivities of the eligible hedge i to a risk-free rate risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than rkt in the pricing function Vi;
(b) the delta sensitivities to risk factors consisting of inflation rates as well as of an eligible hedge to those risk factors, shall be calculated as follows:
where:
= the sensitivities of the aggregate CVA to an inflation rate risk factor;
inflkt
= the value of an inflation rate risk factor k with maturity t;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than inflkt in VCVA;
= the sensitivities of the eligible hedge i to an inflation rate risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than inflkt in the pricing function Vi.
2. Institutions shall calculate the delta sensitivities of the aggregate CVA to risk factors consisting of foreign exchange spot rates, as well as of an eligible hedge instrument to those risk factors, as follows:
where:
= the sensitivities of the aggregate CVA to a foreign exchange spot rate risk factor;
FXk
= the value of the foreign exchange spot rate risk factor k;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than FXk in VCVA;
= the sensitivities of the eligible hedge i to a foreign exchange spot rate risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than FXk in the pricing function Vi.
3. Institutions shall calculate the delta sensitivities of the aggregate CVA to risk factors consisting of counterparty credit spread rates, as well as of an eligible hedge instrument to those risk factors, as follows:
where:
= the sensitivities of the aggregate CVA to a counterparty credit spread rate risk factor;
ccskt
= the value of the counterparty credit spread rate risk factor k at maturity t;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than ccskt in VCVA;
= the sensitivities of the eligible hedge i to a counterparty credit spread rate risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than ccskt in the pricing function Vi.
4. Institutions shall calculate the delta sensitivities of the aggregate CVA to risk factors consisting of reference credit spread rates, as well as of an eligible hedge instrument to those risk factors, as follows:
where:
= the sensitivities of the aggregate CVA to a reference credit spread rate risk factor;
rcskt
= the value of the reference credit spread rate risk factor k at maturity t;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than ccskt in VCVA ;
= the sensitivities of the eligible hedge i to a reference credit spread rate risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than ccskt in the pricing function Vi.
5. Institutions shall calculate the delta sensitivities of the aggregate CVA to risk factors consisting of equity spot prices, as well as of an eligible hedge instrument to those risk factors, as follows:
where:
= the sensitivities of the aggregate CVA to an equity spot price risk factor;
EQ
= the value of the equity spot price;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than EQ in VCVA;
= the sensitivities of the eligible hedge i to an equity spot price risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than EQ in the pricing function Vi.
6. Institutions shall calculate the delta sensitivities of the aggregate CVA to risk factors consisting of commodity spot prices, as well as of an eligible hedge instrument to those risk factors, as follows:
where:
= the sensitivities of the aggregate CVA to a commodity spot price risk factor;
CTY
= the value of the commodity spot price;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than CTY in VCVA;
= the sensitivities of the eligible hedge i to a commodity spot price risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than CTY in the pricing function Vi.

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Article 383j
Vega risk sensitivities
Institutions shall calculate the vega risk sensitivities of the aggregate CVA to risk factors consisting of implied volatility, as well as of an eligible hedge instrument to those risk factors, as follows:
where:
= the sensitivities of the aggregate CVA to an implied volatility risk factor;
volk
= the value of the implied volatility risk factor;
VCVA
= the aggregate CVA calculated by the regulatory CVA model;
x,y
= risk factors other than volk in the pricing function VCVA;
= the sensitivities of the eligible hedge instrument i to an implied volatility risk factor;
Vi
= the pricing function of the eligible hedge i;
w,z
= risk factors other than volk in the pricing function Vi.

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Article 383k
Risk weights for interest rate risk
1. For the currencies referred to in Article 383c(2), the risk weights of risk-free rate delta sensitivities for each bucket in Table 1 shall be the following:
Table 1
Bucket Maturity Risk weight
1 1 year 1,11 %
2 2 years 0,93 %
3 5 years 0,74 %
4 10 years 0,74 %
5 30 years 0,74 %
2. For currencies other than the currencies referred to in Article 383c(2), the risk weight of risk-free rate delta sensitivities shall be 1,58 %.
3. For inflation rate risk denominated in one of the currencies referred to in Article 383c(2), the risk weight of the delta sensitivity to the inflation rate risk shall be 1,11 %.
4. For inflation rate risk denominated in a currency other than the currencies referred to in Article 383c(2), the risk weight of the delta sensitivity to the inflation rate risk shall be 1,58 %.
5. The risk weights to be applied to sensitivities to interest rate vega risk factors and to inflation rate vega risk factors for all currencies shall be 100 %.

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Article 383l
Intra-bucket correlations for interest rate risk
1. For the currencies referred to in Article 383c(2), the correlation parameters that institutions shall apply to the aggregation of the risk-free rate delta sensitivities between the different buckets set out in Article 383k, Table 1, shall be the following:
Table 1
Bucket 1 2 3 4 5
1 100 % 91 % 72 % 55 % 31 %
2 100 % 87 % 72 % 45 %
3 100 % 91 % 68 %
4 100 % 83 %
5 100 %
2. Institutions shall apply a correlation parameter of 40 % for the aggregation of inflation rate delta risk sensitivity and risk-free rate delta sensitivity denominated in the same currency.
3. Institutions shall apply a correlation parameter of 40 % for the aggregation of inflation rate vega risk factor sensitivity and interest rate vega risk factor sensitivity denominated in the same currency.

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Article 383m
Correlation across buckets for interest rate risk
The cross-bucket correlation parameter for interest rate delta and vega risks shall be set at 0,5 for all currency pairs.

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Article 383n
Risk weights for foreign exchange risk
1. The risk weights for all delta sensitivities to foreign exchange risk factor between an institution’s reporting currency and another currency shall be 11 %.
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 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 ECB, 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 that paragraph which participate in 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 weights for all vega sensitivities to foreign exchange risk factor shall be 100 %.

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Article 383o
Correlations for foreign exchange risk
1. A uniform correlation parameter equal to 60 % shall apply to the aggregation of sensitivities to delta foreign exchange risk factor across buckets.
2. A uniform correlation parameter equal to 60 % shall apply to the aggregation of sensitivities to vega foreign exchange risk factor across buckets.

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Article 383p
Risk weights for counterparty credit spread risk
1. The risk weights for the delta sensitivities to counterparty credit spread risk factors shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) within each bucket in Table 1 and shall be the following:
Table 1
Bucket number Credit quality Sector Risk weight
1 All Central government, including central banks, of Member States 0,5 %
2 Credit quality step 1 to 3 Central government, including central banks, of third countries, multilateral development banks and international organisations referred to in Article 117(2) and Article 118 0,5 %
3 Regional government 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 established in Member States 1,0 %
10 Credit quality step 1 Covered bonds issued by credit institutions in third countries 1,5 %
Credit quality steps 2 to 3 2,5 %
11 Credit quality steps 1 to 3 Other sector 5,0 %
12 Qualified indices 1,5 %
13 Credit quality step 4 to 6 and unrated Central government, including central banks, of third countries, multilateral development banks and international organisations referred to in Article 117(2) and Article 118 2,0 %
14 Regional government or local authority and public sector entities 4,0 %
15 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 %
16 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 7,0 %
17 Consumer goods and services, transportation and storage, administrative and support service activities 8,5 %
18 Technology, telecommunications 5,5 %
19 Health care, utilities, professional and technical activities 5,0 %
20 Other sector 12,0 %
21 Qualified indices 5,0 %
Where there are no external ratings for a specific counterparty, institutions may, subject to approval by the competent authorities, map the internal rating to a corresponding external rating and assign a risk weight corresponding to either credit quality step 1 to 3 or credit quality step 4 to 6. Otherwise, the risk weights for unrated exposures shall be applied.
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 set out in Table 1. Risk exposures from any issuer that an institution cannot assign to a sector in such a manner shall be assigned to either bucket 11 or bucket 20 in Table 1, depending on the credit quality of the issuer.
3. Institutions shall assign to buckets 12 and 21 in Table 1 only exposures that reference qualified indices as referred to in Article 383b(4).
4. Institutions shall use a look-through approach to determine the sensitivities of an exposure referencing a non-qualified index.

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Article 383q
Intra-bucket correlations for counterparty credit spread risk
1. Between two sensitivities WSk and WSl, resulting from risk exposures assigned to sector buckets 1 to 11 and 13 to 20, as set out in Article 383p(1), Table 1, the correlation parameter ρkl shall be set as follows:
where:
shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 90 %;
shall be equal to 1 where the two names of sensitivities k and l are identical, 90 % if the two names are distinct but legally related, otherwise it shall be equal to 50 %;
shall be equal to 1 where the two names are both in buckets 1 to 11 or are both in buckets 13 to 20, otherwise it shall be equal to 80 %.
2. Between two sensitivities WSk and WSl resulting from risk exposures assigned to sector buckets 12 and 21, the correlation parameter ρkl shall be set as follows:
where:
shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 90 %;
shall be equal to 1 where the two names of sensitivities k and l are identical and the two indices are of the same series, 90 % if the two indices are the same but of distinct series, otherwise it shall be equal to 80 %;
shall be equal to 1 where the two names are both in bucket 12 or both in bucket 21, otherwise it shall be equal to 80 %.

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Article 383r
Correlations across buckets for counterparty credit spread risk
The cross-bucket correlations for counterparty credit spread delta risk shall be the following:
Table 1
Bucket 1, 2, 3, 13 and 14 4 and 15 5 and 16 6 and 17 7 and 18 8 and 19 9 and 10 11 and 20 12 and 21
1, 2, 3, 13 and 14 100 % 10 % 20 % 25 % 20 % 15 % 10 % 0 % 45 %
4 and 15 100 % 5 % 15 % 20 % 5 % 20 % 0 % 45 %
5 and 16 100 % 20 % 25 % 5 % 5 % 0 % 45 %
6 and 17 100 % 25 % 5 % 15 % 0 % 45 %
7 and 18 100 % 5 % 20 % 0 % 45 %
8 and 19 100 % 5 % 0 % 45 %
9 and 10 100 % 0 % 45 %
11 and 20 100 % 0 %
12 and 21 100 %

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Article 383s
Risk weights for reference credit spread risk
1. The risk weights for the delta sensitivities to reference credit spread risk factors shall be the same for all maturities (0,5 years, 1 year, 3 years, 5 years, 10 years) and all reference credit spread exposures within each bucket in Table 1 and shall be the following:
Table 1
Bucket number Credit quality Sector Risk weight
1 All Central government, including central banks, of Member States 0,5 %
2 Credit quality step 1 to 3 Central government, including central banks, of third countries, multilateral development banks and international organisations referred to in Article 117(2) and Article 118 0,5 %
3 Regional government 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 established in Member States 1,0 %
10 Credit quality step 1 Covered bonds issued by credit institutions in third countries 1,5 %
Credit quality steps 2 to 3 2,5 %
11 Credit Quality Step 1 to 3 Qualified indices 1,5 %
12 Credit quality step 4 to 6 and unrated Central government, including central banks, of third countries, multilateral development banks and international organisations referred to in Article 117(2) and Article 118 2,0 %
13 Regional government or local authority and public sector entities 4,0 %
14 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 %
15 Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 7,0 %
16 Consumer goods and services, transportation and storage, administrative and support service activities 8,5 %
17 Technology, telecommunications 5,5 %
18 Health care, utilities, professional and technical activities 5,0 %
19 Qualified indices 5,0 %
20 Other sector 12,0 %
Where there are no external ratings for a specific counterparty, institutions may, subject to approval by the competent authorities, map the internal rating to a corresponding external rating and assign a risk weight corresponding to either credit quality step 1 to 3 or credit quality step 4 to 6. Otherwise, the risk weights for unrated exposures shall be applied.
2. Risk weights for reference credit spread volatilities shall be set at 100 %.
3. 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 1. Risk exposures from any issuer that an institution cannot assign to a sector in such a manner shall be assigned to bucket 20 in Table 1.
4. Institutions shall assign to buckets 11 and 19 only exposures that reference qualified indices as referred to in Article 383b(4).
5. Institutions shall use a look-through approach to determine the sensitivities of an exposure referencing a non-qualified index.

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Article 383t
Intra-bucket correlations for reference credit spread risk
1. Between two sensitivities WSk and WSl, resulting from risk exposures assigned to sector buckets 1 to 10, 12 to 18 and 20 of Article 383s(1), Table 1, the correlation parameter ρkl shall be set as follows:
where:
shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 90 %;
shall be equal to 1 where the two names of sensitivities k and l are identical, 90 % if the two names are distinct but legally related, otherwise it shall be equal to 50 %;
shall be equal to 1 where the two names are both in buckets 1 to 10, are both in buckets 12 to 18, or are both in bucket 20, otherwise it shall be equal to 80 %.
2. Between two sensitivities WSk and WSl, resulting from risk exposures assigned to sector buckets 11 and 19, the correlation parameter ρkl shall be set as follows:
where:
shall be equal to 1 where the two vertices of the sensitivities k and l are identical, otherwise it shall be equal to 90 %;
shall be equal to 1 where the two names of sensitivities k and l are identical and the two indices are of the same series, 90 % if the two indices are the same but of distinct series, otherwise it shall be equal to 80 %;
shall be equal to 1 where the two names are both in bucket 11 or both in bucket 19, otherwise it shall be equal to 80 %.

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Article 383u
Correlations across buckets for reference credit spread risk
1. The cross-bucket correlations for reference credit spread delta risk and reference credit spread vega risk shall be the following:
Table 1
Bucket 1, 2 and 12 3 and 14 4 and 15 5 and 16 6 and 17 7 and 18 8 and 19 9 and 10 20 11 19
1, 2, and 12 100 % 75 % 10 % 20 % 25 % 20 % 15 % 10 % 0 % 45 % 45 %
3 and 14 100 % 5 % 15 % 20 % 15 % 10 % 10 % 0 % 45 % 45 %
4 and 15 100 % 5 % 15 % 20 % 5 % 20 % 0 % 45 % 45 %
5 and 16 100 % 20 % 25 % 5 % 5 % 0 % 45 % 45 %
6 and 17 100 % 25 % 5 % 15 % 0 % 45 % 45 %
7 and 18 100 % 5 % 20 % 0 % 45 % 45 %
8 and 19 100 % 5 % 0 % 45 % 45 %
9 and 10 100 % 0 % 45 % 45 %
20 100 % 0 % 0 %
11 100 % 75 %
19 100 %
2. By way of derogation from paragraph 1, the cross-bucket correlation values calculated in that paragraph shall be divided by 2 for correlations between a bucket from the group of buckets 1 to 10 and a bucket from the group of buckets 12 to 18.

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Article 383v
Risk weight buckets for equity risk
1. The risk weights for the delta sensitivities to equity spot price risk factors shall be the same for all equity risk exposures within each bucket in Table 1 and shall be the following:
Table 1
Bucket number Market capitalisation Economy Sector Risk weight for equity spot price
1 Large Emerging market economy Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities 55 %
2 Telecommunications, industrials 60 %
3 Basic materials, energy, agriculture, manufacturing, mining and quarrying 45 %
4 Financials, including government-backed financials, immovable property activities, technology 55 %
5 Advanced economy Consumer goods and services, transportation and storage, administrative and support service activities, healthcare, utilities 30 %
6 Telecommunications, industrials 35 %
7 Basic materials, energy, agriculture, manufacturing, mining and quarrying 40 %
8 Financials, including government-backed financials, immovable property activities, technology 50 %
9 Small Emerging market economy All sectors described under bucket numbers 1, 2, 3 and 4 70 %
10 Advanced economy All sectors described under bucket numbers 5, 6, 7 and 8 50 %
11 Other sector 70 %
12 Large Advanced economy Qualified indices 15 %
13 Other Qualified indices 25 %
2. For the purposes of paragraph 1 of this Article, what constitutes a small and a large capitalisation shall be specified in the regulatory technical standards referred to in Article 325bd(7).
3. For the purposes of paragraph 1 of this Article, what constitutes an emerging market and an advanced economy shall be specified in the regulatory technical standards referred to in Article 325ap(3).
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 industry sector. Institutions shall assign each issuer to one of the sector buckets in paragraph 1, Table 1, 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 that manner shall be assigned to bucket 11. Multinational or multi-sector equity issuers shall be allocated to a particular bucket on the basis of the most material region and sector in which the equity issuer operates.
5. The risk weights for equity vega risk shall be set at 78 % for buckets 1 to 8 and bucket 12, and at 100 % for all other buckets.

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Article 383w
Correlations across buckets for equity risk
The cross-bucket correlation parameter for equity delta and vega risk shall be set at:
(a) 15 %, where the two buckets fall within buckets 1 to 10 in Article 383v(1), Table 1;
(b) 75 %, where the two buckets are buckets 12 and 13 in Article 383v(1), Table 1;
(c) 45 %, where one of the buckets is bucket 12 or 13 in Article 383v(1), Table 1, and the other bucket falls within buckets 1 to 10 in Article 383v(1), Table 1;
(d) 0 %, where one of the two buckets is bucket 11 in Article 383v(1), Table 1.

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Article 383x
Risk weight buckets for commodity risk
1. The risk weights for the delta sensitivities to commodity spot price risk factors shall be the same for all commodity risk exposures within each bucket in Table 1 and shall be the following:
Table 1
Bucket number Bucket name Risk weight for commodity spot price
1 Energy — solid combustibles 30 %
2 Energy — liquid combustibles 35 %
3 Energy — electricity 60 %
4 Energy — EU ETS carbon trading 40 %
5 Energy — non-EU ETS carbon trading 60 %
6 Freight 80 %
7 Metals — non-precious 40 %
8 Gaseous combustibles 45 %
9 Precious metals, including gold 20 %
10 Grains and oilseed 35 %
11 Livestock and dairy 25 %
12 Softs and other agricultural commodities 35 %
13 Other commodity 50 %
2. The risk weights for commodity vega risk shall be set at 100 %.

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Article 383z
Correlations across buckets for commodity risk
1. The cross-bucket correlation parameter for commodity delta risk shall be set at:
(a) 20 %, where the two buckets fall within buckets 1 to 12 in Article 383x(1), Table 1;
(b) 0 %, where one of the two buckets is bucket 13 in Article 383x(1), Table 1.
2. The cross-bucket correlation parameter for commodity vega risk shall be set at:
(a) 20 %, where the two buckets fall within buckets 1 to 12 in Article 383x(1), Table 1;
(b) 0 %, where one of the two buckets is bucket 13 in Article 383x(1), Table 1.

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before (02013R0575-20240709)

Article 384
Standardised method
1. An institution which does not calculate the own funds requirements for CVA risk for its counterparties in accordance with Article 383 shall calculate a portfolio own funds requirements for CVA risk for each counterparty in accordance with the following formula, taking into account CVA hedges that are eligible in accordance with Article 386:K2.33  h  i 0.5  wi  Mi  EADitotal  MihedgeBi  ind wind  Mind Bind2 i 0.75  wi2  Mi  EADitotal  MihedgeBi2
where:
h
the one-year risk horizon (in units of a year); h = 1;
wi
the weight applicable to counterparty i.
Counterparty i shall be mapped to one of the six weights wi based on an external credit assessment by a nominated ECAI, as set out in Table 1. For a counterparty for which a credit assessment by a nominated ECAI is not available:
(a) an institution using the approach in Title II, Chapter 3 shall map the internal rating of the counterparty to one of the external credit assessment;
(b) an institution using the approach in Title II, Chapter 2 shall assign wi=1,0 % to this counterparty. However, if an institution uses Article 128 to risk weight counterparty credit risk exposures to this counterparty, wi=3,0 % shall be assigned;
EADtotali
the total counterparty credit risk exposure value of counterparty i (summed across its netting sets) including the effect of collateral in accordance with the methods set out in Sections 3 to 6 of Chapter 6 of Title II as applicable to the calculation of the own funds requirements for counterparty credit risk for that counterparty.
For an institution not using the method set out in Section 6 of Title II, Chapter 6, the exposure shall be discounted by applying the following factor:1  e0.05  Mi0.05  Mi
Bi
the notional of purchased single name credit default swap hedges (summed if more than one position) referencing counterparty i and used to hedge CVA risk.
That notional amount shall be discounted by applying the following factor:1  e0.05  Mihedge0.05  Mihedge
Bind
is the full notional of one or more index credit default swap of purchased protection used to hedge CVA risk.
That notional amount shall be discounted by applying the following factor:1  e0.05  Mind0.05  Mind
wind
is the weight applicable to index hedges.
An institution shall determine wind by calculating a weighted average of wi that are applicable to the individual constituents of the index;
Mi
the effective maturity of the transactions with counterparty i.
For an institution using the method set out in Section 6 of Title II, Chapter 6, Mi shall be calculated in accordance with Article 162(2)(g). However, for that purpose, Mi shall not be capped at five years but at the longest contractual remaining maturity in the netting set.
For an institution not using the method set out in Section 6 of Title II, Chapter 6, Mi is the average notional weighted maturity as referred to in point (b) of Article 162(2). However, for that purpose, Mi shall not be capped at five years but at the longest contractual remaining maturity in the netting set.
Mihedge
the maturity of the hedge instrument with notional Bi (the quantities MihedgeBi are to be summed if these are several positions);
Mind
the maturity of the index hedge.
In the case of more than one index hedge position, Mind is the notional-weighted maturity.
2. Where a counterparty is included in an index on which a credit default swap used for hedging counterparty credit risk is based, the institution may subtract the notional amount attributable to that counterparty in accordance with its reference entity weight from the index CDS notional amount and treat it as a single name hedge (Bi) of the individual counterparty with maturity based on the maturity of the index.
Table 1
Credit quality step Weight wi
1 0,7 %
2 0,8 %
3 1,0 %
4 2,0 %
5 3,0 %
6 10,0 %

after (02013R0575-20250101)

Article 384
Basic approach
1. An institution shall calculate the own funds requirements for CVA risk in accordance with paragraph 2 or 3 of this Article, as applicable, for a portfolio of transactions with one or more counterparties by using one of the following formulae, as appropriate:
(a) the formula set out in paragraph 2 of this Article, where the institution includes in the calculation one or more eligible hedges recognised in accordance with Article 386;
(b) the formula set out in paragraph 3 of this Article, where the institution does not include in the calculation any eligible hedges recognised in accordance with Article 386.
The approaches set out in the first subparagraph, points (a) and (b), shall not be used in combination.
2. An institution that meets the condition referred to in paragraph 1, point (a), shall calculate the own funds requirements for CVA risk as follows:
BACVAtotal = β · BACVAcsr–unhedged + DSCVA · (1 – β) · BACVAcsr–hedged
where:
BACVAtotal
= the own funds requirements for CVA risk under the basic approach;
BACVAcsr–unhedged
= the own funds requirements for CVA risk under the basic approach as calculated in accordance with paragraph 3 for an institution that meets the condition set out in paragraph 1, point (b);
DSCVA
= 0,65;
β
= 0,25;
where:
α
= 1,4;
ρ
= 0,5;
c
= the index that denotes all counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;
NS
= the index that denotes all netting sets with a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;
h
= the index that denotes all single-name instruments recognised as eligible hedges in accordance with Article 386 for a given counterparty for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;
I
= the index that denotes all index instruments recognised as eligible hedges in accordance with Article 386 for all counterparties for which the institution calculates the own funds requirements for CVA risk using the approach laid down in this Article;
RWc
= the risk weight applicable to counterparty c; counterparty c shall be mapped to one of the risk weights based on a combination of sector and credit quality and determined in accordance with Table 1.
Where there are no external ratings for a specific counterparty, institutions may, subject to approval by the competent authorities, map the internal rating to a corresponding external rating and assign a risk weight corresponding to either credit quality step 1 to 3 or credit quality step 4 to 6; otherwise, the risk weights for unrated exposures shall be applied.
= the effective maturity for the netting set NS with counterparty c;
shall be calculated in accordance with Article 162; however, for that calculation,  shall not be capped at five years, but at the longest contractual remaining maturity in the netting set;
= the counterparty credit risk exposure value of the netting set NS with counterparty c, including the effect of collateral in accordance with the methods set out in Title II, Chapter 6, Sections 3 to 6, as applicable to the calculation of the own funds requirements for counterparty credit risk referred to in Article 92(4), points (a) and (g);
= the supervisory discount factor for the netting set NS with counterparty c.
For an institution, using the methods set out in Title II, Chapter 6, Section 6, the supervisory discount factor shall be set at 1; in all other cases, the supervisory discount factor shall be calculated as follows:
rhc
= the supervisory correlation factor between the credit spread risk of counterparty c and the credit spread risk of a single-name instrument recognised as an eligible hedge h for counterparty c, determined in accordance with Table 2;
= the residual maturity of a single-name instrument recognised as an eligible hedge;
= the notional of a single name instrument recognised as an eligible hedge;
= the supervisory discount factor for a single name instrument recognised as an eligible hedge, calculated as follows:
= the supervisory risk weight of a single-name instrument recognised as an eligible hedge; those risk weights shall be based on a combination of sector and credit quality of the reference credit spread of the hedging instrument and determined in accordance with Table 1;
= the residual maturity of one or more positions in the same index instrument recognised as an eligible hedge; in the case of more than one position in the same index instrument,  shall be the notional-weighted maturity of all those positions;
= the full notional of one or more positions in the same index instrument recognised as an eligible hedge;
= the supervisory discount factor for one or more positions in the same index instrument recognised as an eligible hedge, calculated as follows:
= the supervisory risk weight of an index instrument recognised as an eligible hedge;  shall be based on a combination of sector and credit quality of all index constituents, calculated as follows:
(a) where all index constituents belong to the same sector and have the same credit quality, as determined in accordance with Table 1,  shall be calculated as the relevant risk weight of Table 1 for that sector and credit quality multiplied by 0,7;
(b) where all index constituents do not belong to the same sector or do not have the same credit quality,  shall be calculated as a weighted average of the risk weights of all index constituents, as determined in accordance with Table 1, multiplied by 0,7;
Table 1
Sector of counterparty Credit quality
Credit quality
step 1 to 3 Credit quality step 4 to 6 and not rated
Central government, including central banks, multilateral development banks and international organisations referred to in Article 117(2) or Article 118 0,5 % 2,0 %
Regional government or local authority and public sector entities 1,0 % 4,0 %
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 % 12,0 %
Basic materials, energy, industrials, agriculture, manufacturing, mining and quarrying 3,0 % 7,0 %
Consumer goods and services, transportation and storage, administrative and support service activities 3,0 % 8,5 %
Technology, telecommunications 2,0 % 5,5 %
Health care, utilities, professional and technical activities 1,5 % 5,0 %
Other sector 5,0 % 12,0 %
Table 2
Correlations between credit spread of counterparty and single-name hedge
Single-name hedge h of counterparty i Value of rhc
Counterparties referred to in Article 386(3), point (a)(i) 100 %
Counterparties referred to in Article 386(3), point (a)(ii) 80 %
Counterparties referred to in Article 386(3), point (a)(iii) 50 %
3. An institution that meets the condition referred to in paragraph 1, point (b), shall calculate the own funds requirements for CVA risk as follows:
where all of the terms are the ones set out in paragraph 2.

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before (02013R0575-20240709)

Article 385
Alternative to using CVA methods for calculating own funds requirements
As an alternative to Article 384, for instruments referred to in Article 382 and subject to the prior consent of the competent authority, institutions using the Original Exposure Method as laid down in Article 282 may apply a multiplication factor of 10 to the resulting risk-weighted exposure amounts for counterparty credit risk for those exposures instead of calculating the own funds requirements for CVA risk.

after (02013R0575-20250101)

Article 385
Simplified approach
1. An institution that meets all of the conditions set out in Article 273a(2) or has been permitted by its competent authority in accordance with Article 273a(4) to apply the approach set out in Article 282, may calculate the own funds requirements for CVA risk as the risk-weighted exposure amounts for counterparty risk for non-trading book and trading book positions, respectively, referred to in Article 92(4), points (a) and (g), divided by 12,5.
2. For the purposes of the calculation referred to in paragraph 1, the following requirements shall apply:
(a) only transactions subject to the own funds requirements for CVA risk laid down in Article 382 are subject to that calculation;
(b) credit derivatives that are recognised as internal hedges against counterparty risk exposures are not included in that calculation.
3. An institution that no longer meets one or more of the conditions set out in Article 273a(2) or (4), as applicable, shall comply with the requirements set out in Article 273b.

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before (02013R0575-20240709)

Article 386
Eligible hedges
1. Hedges shall be eligible hedges for the purposes of the calculation of own funds requirements for CVA risk in accordance with Articles 383 and 384 only where they are used for the purpose of mitigating CVA risk and managed as such, and are one of the following:
(a) single-name credit default swaps or other equivalent hedging instruments referencing the counterparty directly;
(b) index credit default swaps, provided that the basis between any individual counterparty spread and the spreads of index credit default swap hedges is reflected, to the satisfaction of the competent authority, in the value-at-risk and the stressed value-at-risk.
The requirement in point (b) that the basis between any individual counterparty spread and the spreads of index credit default swap hedges is reflected in the value-at-risk and the stressed value-at-risk shall also apply to cases where a proxy is used for the spread of a counterparty.
For all counterparties for which a proxy is used, an institution shall use reasonable basis time series out of a representative group of similar names for which a spread is available.
If the basis between any individual counterparty spread and the spreads of index credit default swap hedges is not reflected to the satisfaction of the competent authority, then an institution shall reflect only 50 % of the notional amount of index hedges in the value-at-risk and the stressed value-at-risk.
Over-hedging of the exposures with single name credit default swaps under the method laid out in Article 383 is not allowed.
2. An institution shall not reflect other types of counterparty risk hedges in the calculation of the own funds requirements for CVA risk. In particular, tranched or nth-to-default credit default swaps and credit linked notes are not eligible hedges for the purposes the calculation of the own funds requirements for CVA risk.
3. Eligible hedges that are included in the calculation of the own funds requirements for CVA risk shall not be included in the calculation of the own funds requirements for specific risk as set out in Title IV or treated as credit risk mitigation other than for the counterparty credit risk of the same portfolio of transaction.

after (02013R0575-20250101)

Article 386
Eligible hedges
1. Positions in hedging instruments shall be recognised as eligible hedges for the calculation of the own funds requirements for CVA risk in accordance with Articles 383 and 384 where those positions meet all of the following requirements:
(a) they are used for the purpose of mitigating CVA risk and are managed as such;
(b) they can be entered into with third parties or with the institution’s trading book as an internal hedge, in which case they are to comply with Article 106(7);
(c) only positions in hedging instruments as referred to in paragraphs 2 and 3 of this Article can be recognised as eligible hedges for the calculation of the own funds requirements for CVA risk in accordance with Articles 383 and 384, respectively.
For the purpose of calculating the own funds requirements for CVA risk in accordance with Article 383, positions in hedging instruments shall be recognised as eligible hedges where, in addition to the conditions set out in points (a) to (c) of this paragraph, such hedging instruments form a single position in an eligible hedge and are not split into more than one position in more than one eligible hedge.
2. For the calculation of the own funds requirements for CVA risk in accordance with Article 383, only positions in the following hedging instruments shall be recognised as eligible hedges:
(a) instruments that hedge variability of the counterparty credit spread, with the exception of instruments referred to in Article 325(5);
(b) instruments that hedge variability of the exposure component of CVA risk, with the exception of the instruments referred to in Article 325(5).
3. For the calculation of the own funds requirements for CVA risk in accordance with Article 384, only positions in the following hedging instruments shall be recognised as eligible hedges:
(a) single-name credit default swaps and single-name contingent-credit default swaps, referencing:
(i) the counterparty directly;
(ii) an entity legally related to the counterparty, where legally related refers to cases where the reference name and the counterparty are either a parent undertaking and its subsidiary or two subsidiaries of a common parent;
(iii) an entity that belongs to the same sector and region as the counterparty;
(b) index credit default swaps.
4. Positions in hedging instruments entered into with third parties that are recognised as eligible hedges in accordance with paragraphs 1, 2 and 3 and included in the calculation of the own funds requirements for CVA risk shall not be subject to the own funds requirements for market risk set out in Title IV.
5. Positions in hedging instruments that are not recognised as eligible hedges in accordance with this Article shall be subject to the own funds requirements for market risk set out in Title IV.

02013R0575-20240709 → 02013R0575-20250101

Article 394 Reporting requirements 1. Institutions shall report the following information to their competent authorities for each large exposure that they hold, including large exposures exempted from the application of Article 395(1): (a) the identity of the client or the group of connected clients to which the institution has a large exposure; (b) the exposure value before taking into account the effect of the credit risk mitigation, where 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 purposes of Article 395(1), where applicable. Institutions that are subject to Chapter 3 of Title II of Part Three shall report their 20 largest exposures to their competent authorities on a consolidated basis, excluding the exposures exempted from the application of Article 395(1). Institutions shall also report exposures of a value greater than or equal to EUR 300 million but less than 10 % of the institution's Tier 1 capital to their competent authorities on a consolidated basis. 2. In addition to the information referred to in paragraph 1 of this Article, institutions shall report the following information to their competent authorities in relation to their 10 largest exposures to institutions on a consolidated basis, as well as their 10 largest exposures to shadow banking entities which carry out banking activities outside the regulated framework on a consolidated basis, including large exposures exempted from the application of Article 395(1): (a) the identity 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, where 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 purposes of Article 395(1), where applicable. In addition to the information referred to in the first subparagraph, institutions shall report to their competent authorities their aggregate exposure to shadow banking entities. 3. Institutions shall report the information referred to in paragraphs 1 and 2 to their competent authorities on at least a semi-annual basis. 4. EBA shall develop draft regulatory technical standards to specify the criteria for the identification of shadow banking entities referred to in paragraph 2. In developing those draft regulatory technical standards, EBA shall 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 institution's solvency or liquidity position; (b) entities that are subject to solvency or liquidity requirements similar to those imposed by this Regulation and Directive 2013/36/EU should be entirely or partially excluded from the obligation to be reported referred to in paragraph 2 on shadow banking entities. 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.

02013R0575-20240709 → 02013R0575-20250101

Article 400 Exemptions 1. The following exposures shall be exempted from the application of Article 395(1): (a) asset items constituting claims on central governments, central banks or public sector entities which, unsecured, would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2; (b) asset items constituting claims on international organisations or multilateral development banks which, unsecured, would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2; (c) asset items constituting claims carrying the explicit guarantees of central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity providing the guarantee would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2; (d) other exposures attributable to, or guaranteed by, central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity to which the exposure is attributable or by which it is guaranteed would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2; (e) asset items constituting claims on regional governments or local authorities of Member States where those claims would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those regional governments or local authorities, claims on which would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2; (f) exposures to counterparties referred to in Article 113(6) or (7) if they would be assigned a 0 % risk weight under Part Three, Title II, Chapter 2. Exposures that do not meet those criteria, whether or not exempted from Article 395(1) shall be treated as exposures to a third party; (g) asset items and other exposures secured by collateral in the form of cash deposits placed with the lending institution or with an institution which is the parent undertaking or a subsidiary of the lending institution; (h) asset items and other exposures secured by collateral in the form of certificates of deposit issued by the lending institution or by an institution which is the parent undertaking or a subsidiary of the lending institution and lodged with either of them; (i) exposures arising from undrawn credit facilities that are classified as low-risk off-balance sheet bucket 5 off-balance-sheet items in Annex I or contractual arrangements that meet the conditions for not being treated as commitments and provided that an agreement has been concluded with the client or group of connected clients under which the facility may be drawn only if it has been ascertained that it will not cause the limit applicable under Article 395(1) to be exceeded; (j) clearing members' trade exposures and default fund contributions to qualified central counterparties; (k) exposures to deposit guarantee schemes under Directive 94/19/EC arising from the funding of those schemes, if the member institutions of the scheme have a legal or contractual obligation to fund the scheme; (l) clients' trade exposures referred to in Article 305(2) or (3); (m) holdings by resolution entities, or by their subsidiaries which are not themselves resolution entities, of own funds instruments and eligible liabilities referred to in Article 45f(2) of Directive 2014/59/EU that have been issued by any of the following entities: (i) in respect of resolution entities, other entities belonging to the same resolution group; (ii) in respect of subsidiaries of a resolution entity that are not themselves resolution entities, the relevant subsidiary's subsidiaries belonging to the same resolution group; (n) exposures arising from a minimum value commitment that meets all the conditions set out in Article 132c(3). Cash received under a credit linked note issued by the institution and loans and deposits of a counterparty to or with the institution which are subject to an on-balance sheet netting agreement recognised under Part Three, Title II, Chapter 4 shall be deemed to fall under point (g). 2. Competent authorities may fully or partially exempt the following exposures: (a) covered bonds falling within the terms of as referred to in Article 129(1), (3) and (6); 129; (b) asset items constituting claims on regional governments or local authorities of Member States where those claims would be assigned a 20 % risk weight under Part Three, Title II, Chapter 2 and other exposures to or guaranteed by those … 708 unchanged words … and (b) of this paragraph and provide EBA with the reasons substantiating the use of those exemptions. 4. The simultaneous application of more than one exemption set out in paragraphs 1 and 2 to the same exposure shall not be permitted.

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Article 402 Exposures arising from mortgage lending 1. For the calculation of exposure values for the purposes of Article 395, institutions may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is fully secured by residential property in accordance with Article 125(1) by the pledged amount of the market value or mortgage lending value of the property concerned, value, but by not more than 50 55 % of the market value or 60 % of the mortgage lending value in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, property value, provided that all of the following conditions are met: (a) the competent authorities of the Member States have not set a risk weight higher than 35 20 % for exposures or parts of exposures secured by residential property in accordance with Article 124(2); 124(9); (b) the exposure or part of the exposure is fully secured by any of the following: (i) one or more mortgages on residential property; or (ii) a residential property in a leasing transaction under which the lessor retains full ownership of the residential property and the lessee has not yet exercised his or her option to purchase; (c) the requirements laid down in Article 208 and Article 229(1) are met. 2. For the calculation of exposure values for the purposes of Article 395, an institution institutions may, except where prohibited by applicable national law, reduce the value of an exposure or any part of an exposure that is fully secured by commercial immovable property in accordance with Article 126(1) by the pledged amount of the market value or mortgage lending value property value, but by not more than 55 % of the property concerned, but not by more than 50 % of the market value or 60 % of the mortgage lending value in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, value, provided that all of the following conditions are met: (a) the competent authorities of the Member States have not set a risk weight higher than 50 60 % for exposures or parts of exposures secured by commercial immovable property in accordance with Article 124(2); 124(9); (b) the exposure is fully secured by any of the following: (i) one or more mortgages on offices or other commercial premises; or (ii) one or more offices or other commercial premises and the exposures related to property leasing transactions; (c) the requirements in Article 124(3), point (a) of Article 126(2) (c), and in Article 208 and Article 229(1) are met; (d) the commercial immovable property is fully constructed. 3. An institution may treat an exposure to a counterparty that results from a reverse repurchase agreement under which the institution has purchased from the counterparty non-accessory independent mortgage liens on immovable property of third parties as a number of individual exposures to each of those third parties, provided that all of the following conditions are met: (a) the counterparty is an institution or an investment firm; (b) the exposure is fully secured by liens on the immovable property of those third parties that have been purchased by the institution and the institution is able to exercise those liens; (c) the institution has ensured that the requirements in Article 208 and Article 229(1) are met; (d) the institution becomes beneficiary of the claims that the counterparty has against the third parties in the event of default, insolvency or liquidation of the counterparty; (e) the institution reports to the competent authorities in accordance with Article 394 the total amount of exposures to each other institution or investment firm that are treated in accordance with this paragraph. For these purposes, the institution shall assume that it has an exposure to each of those third parties for the amount of the claim that the counterparty has on the third party instead of the corresponding amount of the exposure to the counterparty. The remainder of the exposure to the counter party, if any, shall continue to be treated as an exposure to the counter party.

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Article 425 Inflows 1. Institutions shall report their liquidity inflows. Liquidity inflows shall be capped at 75 % of liquidity outflows. Institutions may exempt liquidity inflows from deposits placed with other institutions that qualify for the treatment set out in Article 113(6) … 639 unchanged words … combined market and idiosyncratic stress of the provider; (b) the counterparty is a parent or subsidiary institution of the institution or another subsidiary of the same parent institution or linked to the institution by a relationship within the meaning of Article 12(1) 22(7) of Directive 83/349/EEC 2013/34/EU or a member of the same institutional protection scheme referred to in Article 113(7) of this Regulation or the central institution or a member of a network that is subject to the waiver referred to in Article 10 of this Regulation; (c) a corresponding symmetric or more conservative outflow is applied by the counterparty by way of derogation from Articles 422, 423 and 424; (d) the institution and the counterparty are established in the same Member State. 5. Competent authorities may waive the condition set out in point (d) of paragraph 4 where Article 20(1)(b) is applied. In that case additional objective criteria as set out in the delegated act referred to in Article 460 have to be met. Where such higher inflow is permitted to be applied, the competent authorities shall inform EBA about the result of the process referred to in Article 20(1)(b). Fulfilment of the conditions for such higher inflows shall be regularly reviewed by the competent authorities. 6. EBA shall develop draft regulatory technical standards to further specify the additional objective criteria referred to in paragraph 5. EBA shall submit those draft regulatory technical standards to the Commission by 1 January 2015. 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. 7. Institutions shall not report inflows from any of the liquid assets reported in accordance with Article 416 other than payments due on the assets that are not reflected in the market value of the asset. 8. Institutions shall not report inflows from any new obligations entered into. 9. Institutions shall take liquidity inflows which are to be received in third countries where there are transfer restrictions or which are denominated in non-convertible currencies into account only to the extent that they correspond to outflows respectively in the third country or currency in question.

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Article 428 Items requiring stable funding 1. Unless deducted from own funds, the following items shall be reported to competent authorities separately in order to allow an assessment of the needs for stable funding: (a) the assets that would qualify as liquid assets in accordance with Article 416, broken down by asset type; (b) the following securities and money market instruments not included in point (a): (i) assets qualifying for credit step 1 under Article 122; (ii) assets qualifying for credit step 2 under Article 122; (iii) other assets; (c) equity securities of non-financial entities listed on a major index in a recognised exchange; (d) other equity securities; (e) gold; (f) other precious metals; (g) non-renewable loans and receivables, and separately those non-renewable loans and receivables for which borrowers are: (i) natural persons other than commercial sole proprietors and partnerships; (ii) SMEs that qualify for the retail exposure class under the Standardised or IRB approaches for credit risk or to a company which is eligible for the treatment set out in Article 153(4) and where the aggregate deposit placed by that client or group of connected clients is less than EUR 1 million; (iii) sovereigns, central banks and public sector entities; (iv) clients not referred to in points (i) and (ii) other than financial customers; (v) clients not referred to in points (i), (ii) and (iii) that are financial customers, and thereof separately those that are credit institutions and other financial customers; (h) non-renewable loans and receivables referred to in point (g), and thereof separately those that are: (i) collateralised by commercial immovable property (CRE); (ii) collateralised by residential property (RRE); (iii) match funded (pass‐through) via bonds eligible for the treatment set out in Article 129(4) or (5) of this Regulation or via covered bonds as defined in point (1) of Article 3 of Directive (EU) 2019/2162; (i) derivatives receivables; (j) any other assets; (k) undrawn committed credit facilities that qualify as medium risk bucket 4, bucket 3 or medium/low risk bucket 2 items under Annex I. 2. Where applicable, all items shall be presented in the five buckets described in Article 427(2).

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Article 429 Calculation of the leverage ratio 1. Institutions shall calculate their leverage ratio in accordance with the methodology set out in paragraphs 2, 3 and 4. 2. The leverage ratio shall be calculated as an institution's capital measure divided by that institution's … 358 unchanged words … receipt or provision of cash variation margin. The treatment set out in point (b) of the first subparagraph shall also apply to an institution acting as a higher-level client that guarantees the performance of its client's trade exposures. For the purposes of point (b) of the first subparagraph subparagraph, point (b), and of the second subparagraph of this paragraph, institutions may consider an affiliated entity as a client only where that entity is outside the regulatory scope of consolidation at the level at which the requirement set out in Article 92(4), point (d) of Article 92(3) (e), is applied. 6. For the purposes of paragraph 4, point (e) of paragraph 4 (e), of this Article and Article 429g, regular-way purchase or sale means a purchase or a sale of a security financial asset under contracts for which the terms require delivery of the security financial asset within the period established generally by law or convention in the marketplace concerned. 7. Unless otherwise expressly provided for in this Part, institutions shall calculate the total exposure measure in accordance with the following principles: (a) physical or financial collateral, guarantees or credit risk mitigation purchased shall not be used to reduce the total exposure measure; (b) assets shall not be netted with liabilities. 8. By way of derogation from point (b) of paragraph 7, institutions may reduce the exposure value of a pre-financing loan or an intermediate loan by the positive balance on the savings account of the debtor to which the loan was granted and only include the resulting amount in the total exposure measure, provided that all the following conditions are met: (a) the granting of the loan is conditional upon the opening of the savings account at the institution granting the loan and both the loan and the savings account are regulated by the same sectoral law; (b) the balance on the savings account cannot be withdrawn, in part or in full, by the debtor for the entire duration of the loan; (c) the institution can unconditionally and irrevocably use the balance on the savings account to settle any claim originating under the loan agreement in cases regulated by the sectoral law referred to in point (a), including the case of non-payment by or the insolvency of the debtor. Pre-financing loan or intermediate loan means a loan that is granted to the borrower for a limited period of time in order to bridge the borrower's financing gaps until the final loan is granted in accordance with the criteria laid down in the sectoral law regulating such transactions.

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Article 429a Exposures excluded from the total exposure measure 1. By way of derogation from Article 429(4), an institution may exclude any of the following exposures from its total exposure measure: (a) the amounts deducted from Common Equity Tier 1 items in accordance with point (d) of Article 36(1); (b) the assets deducted in the calculation of the capital measure referred to in Article 429(3); (c) exposures that are assigned a risk weight of 0 % in accordance with Article 113(6) or (7); (ca) where the institution is a member of the network referred to in Article 113(7), the exposures that are assigned a risk weight of 0 % in accordance with Article 114 and arising from assets being an equivalent of deposits in the same currency of other members of that network stemming from legal or statutory minimum deposit in accordance with Article 422(3), point (b); in such a case exposures of other members of that network being legal or statutory minimum deposit are not subject to point (c) of this paragraph; (d) where the institution is a public development credit institution, the exposures arising from assets that constitute claims on central governments, regional governments, local authorities or public sector entities in relation to public sector investments, and promotional loans; (da) the institution’s exposures to its shareholders, provided that such exposures are collateralised to the level of at least 125 % by assets referred to in Article 129(1), points (d) and (e), and those assets are accounted for in the shareholders’ leverage ratio requirement, where the institution is not a public development credit institution but it meets the following conditions: (i) its shareholders are credit institutions and do not exercise control over the institution; (ii) it complies with paragraph 2, points (a), (b), (c) and (e), of this Article; (iii) its exposures are located in the same Member State; (iv) it is subject to some form of oversight by a Member State’s central government on an ongoing basis; (v) its business model is limited to the pass-through of the amount corresponding to the proceeds raised through the issuance of covered bonds to its shareholders, in the form of debt instruments; (e) where the institution is not a public development credit institution, the parts of exposures arising from passing-through promotional loans to other credit institutions; (f) the guaranteed parts of exposures arising from export credits that meet both of the following conditions: (i) … 1,314 unchanged words … its central bank, calculated over the full reserve maintenance period of the central bank immediately preceding the date referred to in point (c) of paragraph 5, that are eligible to be excluded in accordance with point (n) of paragraph 1.

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Article 429c Calculation of the exposure value of derivatives 1. Institutions shall calculate the exposure value of derivative contracts listed in Annex II and of credit derivatives, including those that are off-balance-sheet, in accordance with the method set out in Section 3 of Chapter 6 of Title II of Part Three. When calculating the exposure value, institutions may take into account the effects of contracts for novation and other netting agreements in accordance with Article 295. Institutions shall not take into account cross-product netting, but may net within the product category as referred to in point (25)(c) of Article 272 and credit derivatives where they are subject to a contractual cross-product netting agreement as referred to in point (c) of Article 295. Institutions shall include in the total exposure measure sold options even where their exposure value can be set to zero in accordance with the treatment laid down in Article 274(5). 2. Where the provision of collateral related to derivative contracts reduces the amount of assets under the applicable accounting framework, institutions shall reverse that reduction. 3. For the purposes of paragraph 1 of this Article, institutions calculating the replacement cost of derivative contracts in accordance with Article 275 may recognise only collateral received in cash from their counterparties as the variation margin referred to in Article 275, where the applicable accounting framework has not already recognised the variation margin as a reduction of the exposure value and where all the following conditions are met: (a) for trades not cleared through a QCCP, the cash received by the recipient counterparty is not segregated; segregated from the assets of the institution; (b) the variation margin is calculated and exchanged at least daily based on a mark-to-market valuation of derivatives positions; (c) the variation margin received is in a currency specified in the derivative contract, governing master netting agreement, credit support annex to the qualifying master netting agreement or as defined by any netting agreement with a QCCP; (d) the variation margin received is the full amount that would be necessary to extinguish the mark-to-market exposure of the derivative contract subject to the threshold and minimum transfer amounts that are applicable to the counterparty; (e) the derivative contract and the variation margin between the institution and the counterparty to that contract are covered by a single netting agreement that the institution may treat as risk-reducing in accordance with Article 295. Where an institution provides cash collateral to a counterparty and that collateral meets the conditions set out in points (a) to (e) of the first subparagraph, the institution shall consider that collateral as the variation margin posted with the counterparty and shall include it in the calculation of the replacement cost. For the purposes of point (b) of the first subparagraph, an institution shall be considered to have met the condition set out therein where the variation margin is exchanged on the morning of the trading day following the trading day on which the derivative contract was stipulated, provided that the exchange is based on the value of the contract at the end of the trading day on which the contract was stipulated. For the purposes of point (d) of the first subparagraph, where a margin dispute arises, institutions may recognise the amount of non-disputed collateral that has been exchanged. 4. For the purposes of paragraph 1 of this Article, institutions shall not include collateral received in the calculation of NICA as defined in point (12a) of Article 272, except point (12a). 4a. By way of derogation from paragraphs 3 and 4, an institution may recognise any collateral received in accordance with Part Three, Title II, Chapter 6, Section 3 where all of the following conditions are met: (a) the collateral is received from a client for a derivative contract cleared by the institution on behalf of that client; (b) the contract referred to in point (a) is cleared through a QCCP; (c) where the collateral has been received in the case form of derivative contracts with clients where those contracts are cleared by a QCCP. initial margin, that collateral is segregated from the assets of the institution. 5. For the purposes of paragraph 1 of this Article, institutions shall set the value of the multiplier used in the calculation of the potential future exposure in accordance with Article 278(1) to one, except in the case of derivative contracts with clients where those contracts are cleared by a QCCP. 6. By way of derogation from paragraph 1 of this Article, institutions may use the method set out in Part Three, Title II, Chapter 6, Section 4 or 5 of Chapter 6 of Title II of Part Three to determine the exposure value of the following: (a) derivative contracts listed in points 1 Annex II and 2 of Annex II, but only credit derivatives, where they also use that method for determining the exposure value of those contracts for the purpose purposes of meeting the own funds requirements set out in Article 92. 92(1), points (a), (b) and (c); (b) credit derivatives to which they apply the treatment set out in Article 273(3) or (5), where the conditions to use that method are met. Where institutions apply one of the methods referred to in the first subparagraph, they shall not reduce the total exposure measure by the amount of margin they have received.

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Article 429f Calculation of the exposure value of off-balance-sheet items 1. Institutions shall calculate, in accordance with Article 111(1), 111(2), the exposure value of off-balance-sheet items, excluding the derivative contracts listed in Annex II, credit derivatives, securities financing transactions and the positions referred to in Article 429d. Where a commitment refers to the extension of another commitment, off-balance-sheet item, Article 166(9) 111(3) shall apply. 2. By way of derogation from paragraph 1, institutions may reduce the credit exposure equivalent amount of an off-balance-sheet item by the corresponding amount of specific credit risk adjustments. The calculation shall be subject to a floor of zero. 3. By way of derogation from paragraph 1 of this Article, Article 495d, institutions shall apply a conversion factor of 10 % to low-risk off-balance-sheet items referred to in point (d) the form of Article 111(1). unconditionally cancellable commitments.

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Article 429g Calculation of the exposure value of regular-way purchases and sales awaiting settlement 1. Institutions shall treat cash related to regular-way sales purchases and securities financial assets related to regular-way purchases sales which remain on the balance sheet until the settlement date as assets in accordance with Article 429(4), point (a) of Article 429(4). (a). 2. Institutions that, in accordance with the applicable accounting framework, apply trade date accounting to regular-way purchases and sales which are awaiting settlement shall reverse out any offsetting between cash receivables for regular-way sales awaiting settlement and cash payables for regular-way purchase awaiting settlement allowed under that framework. After institutions have reversed out the accounting offsetting, they may offset between those cash receivables and cash payables where both the related regular-way sales and purchases are settled on a delivery-versus-payment basis. 3. Institutions that, in accordance with the applicable accounting framework, apply settlement date accounting to regular-way purchases and sales which are awaiting settlement shall include in the total exposure measure the full nominal value of commitments to pay related to regular-way purchases. Institutions may offset the full nominal value of the commitments to pay related to regular-way purchases by the full nominal value of cash receivables related to regular-way sales awaiting settlement only where both of the following conditions are met: (a) both the regular-way purchases and sales are settled on a delivery-versus-payment basis; (b) the financial assets bought and sold that are associated with cash payables and receivables are fair valued through profit and loss and included in the institution's trading book.

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Article 430 Reporting on prudential requirements and financial information 1. Institutions shall report to their competent authorities on: (a) own funds requirements, including the leverage ratio, as set out in Article 92 and Part Seven; (b) the requirements laid down in Articles 92a and 92b, for institutions that are subject to those requirements; (c) large exposures as set out in Article 394; (d) liquidity requirements as set out in Article 415; (e) the aggregate data for each national immovable property market as set out in Article 430a(1); (f) the requirements and guidance set out in Directive 2013/36/EU qualified for standardised reporting, except for any additional reporting requirement under point (j) of Article 104(1) of that Directive; (g) the level of asset encumbrance, including a breakdown by the type of asset encumbrance, such as repurchase agreements, securities lending, securitised exposures or loans; (h) their exposures to ESG risks, including: (i) their existing and new exposures to fossil fuel sector entities; (ii) their exposures to physical risks and transition risks; (i) their crypto-asset exposures; Institutions exempted in accordance with Article 6(5) shall not be subject to the reporting requirement on the leverage ratio set out in point (a) of the first subparagraph of this paragraph on an individual basis. 1a. For the purposes of point (a) of paragraph 1 of this Article, when institutions report on own funds requirements on securitisations, the information they report shall include information on NPE securitisations benefitting from the treatment set out in Article 269a, on STS on-balance sheet securitisations that they originate, and on the breakdown of the assets underlying those STS on-balance sheet securitisations by asset class. 2. In addition to the reporting on the leverage ratio referred to in point (a) of the first subparagraph of paragraph 1 and in order to enable the competent authorities to monitor leverage ratio volatility, in particular around reporting reference dates, large institutions shall report specific components of the leverage ratio to their competent authorities based on averages over the reporting period and the data used to calculate those averages. 2a. When reporting their own funds requirements for market risk referred to in paragraph 1, point (a), of this Article, institutions shall report separately the calculations set out in Article 325c(2), points (a), (b) and (c), for the portfolio of all trading book positions or non-trading book positions that are subject to foreign exchange risk and commodity risk. 2b. When reporting their own funds requirements for market risk referred to in paragraph 1, point (a), of this Article, institutions shall report separately the calculations set out in Article 325ba(1), points (a)(i) and (ii) and (b)(i) and (ii), and for the portfolio of all trading book positions or non-trading book positions that are subject to foreign exchange risk and commodity risk assigned to the 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). 3. In addition to the reporting on prudential requirements referred to in paragraph 1 of this Article, institutions shall report financial information to their competent authorities where they are one of the following: (a) an institution that is subject to Article … 1,154 unchanged words … authorities shall make use of data exchange wherever possible to reduce reporting requirements. The provisions on the exchange of information and professional secrecy as laid down in Section II of Chapter I of Title VII of Directive 2013/36/EU shall apply.

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Article 430a Specific reporting obligations 1. Institutions shall report to their competent authorities on an annual basis the following aggregate data for each national immovable property market to which they are exposed: (a) losses stemming from exposures for which an institution has recognised residential property as collateral, in each case up to the lower of the pledged amount and 80 55 % of the market property value or 80 % of the mortgage lending value, residential property, unless otherwise decided under Article 124(2); 124(9), where applicable; (b) overall losses stemming from exposures for which an institution has recognised residential property as collateral, in each case up to the part lower of the exposure treated as fully secured by pledged amount and 100 % of the property value of the residential property in accordance with Article 124(1); property; (c) the exposure value of all outstanding exposures for which an institution has recognised residential property as collateral limited collateral, in each case up to the part treated as fully secured by lower of the pledged amount and 100 % of the property value of the residential property in accordance with Article 124(1); property; (d) losses stemming from exposures for which an institution has recognised commercial immovable commercial property as collateral, in each case up to the lower of the pledged amount and 50 55 % of the market property value or 60 % of the mortgage lending value, commercial immovable property, unless otherwise decided under Article 124(2); 124(9), where applicable; (e) overall losses stemming from exposures for which an institution has recognised commercial immovable commercial property as collateral, collateral in each case up to the part lower of the exposure treated as fully secured by pledged amount and 100 % of the property value of the commercial immovable commercial property in accordance with Article 124(1); property; (f) the exposure value of all outstanding exposures for which an institution has recognised commercial immovable commercial property as collateral limited collateral, in each case up to the part treated as fully secured by lower of the pledged amount and 100 % of the property value of the commercial immovable commercial property in accordance with Article 124(1). property. 2. The data referred to in paragraph 1 shall be reported to the competent authority of the home Member State of the relevant institution. Where an institution has a branch in another Member State, the data relating to that branch shall also be reported to the competent authorities of the host Member State. The data shall be reported separately for each immovable property market within the Union to which the relevant institution is exposed. 3. The competent authorities shall publish annually on an aggregated basis the data specified in paragraph 1, points (a) to (f) of paragraph 1, (f), together with historical data, where available. available, for each national immovable property market for which such data have been collected. A competent authority shall, upon the request of another competent authority in a Member State or EBA EBA, provide to that competent authority or EBA more detailed information on the condition of the residential property or commercial immovable property markets in that Member State.

No text on either side: this unit was named by a signal that carries no text, and only the structural diff carries any.

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Article 433 Frequency and scope of disclosures Institutions shall publish disclose the disclosures information required under Titles II and III in the manner set out in this Article, Articles 433a, 433b 433b, 433c and 433c. Annual 434. EBA shall publish annual disclosures shall be published on its website on the same date day as the date on which institutions publish their financial statements or as soon as possible thereafter. Semi-annual EBA shall publish semi-annual and quarterly disclosures shall be published on its website on the same date day as the date on which the institutions publish their financial reports for the corresponding period period, where applicable applicable, or as soon as possible thereafter. Any delay between the date of publication of the disclosures required under this Part and the relevant financial statements shall be reasonable and, in any event, shall not exceed the timeframe set by competent authorities pursuant to Article 106 of Directive 2013/36/EU.

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Article 433a Disclosures by large institutions 1. Large institutions shall disclose the information outlined below with the following frequency: (a) all the information required under this Part on an annual basis; (b) on a semi-annual basis the information referred to in: (i) point (a) of Article 437; (ii) point (e) of Article 438; (iii) points (e) to (l) of Article 439; (iv) Article 440; (v) points (c), (e), (f) and (g) of Article 442; (vi) point (e) of Article 444; (vii) Article 445; (viii) point (a) and (b) of Article 448(1); (ix) point (j) to (l) of Article 449; (x) points (a) and (b) of Article 451(1); (xi) Article 451a(3); (xii) point (g) of Article 452; (xiii) points (f) to (j) of Article 453; (xiv) Article 455(2), points (d), (e) (a), (b) and (g) of (c); (xv) Article 455; 449a; (xvi) Article 449b; (c) on a quarterly basis the information referred to in: (i) Article 438, points (d) (d), (da) and (h) of Article 438; (h); (ii) the key metrics referred to in Article 447; (iii) Article 451a(2). 2. By way of derogation from paragraph 1, large institutions other than G-SIIs that are non-listed institutions shall disclose the information outlined below with the following frequency: (a) all the information required under this Part on an annual basis; (b) the key metrics referred to in Article 447 on a semi-annual basis. 3. Large institutions that are subject to Article 92a or 92b shall disclose the information required under Article 437a on a semi-annual basis, except for the key metrics referred to in point (h) of Article 447, which are to be disclosed on a quarterly basis.

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Article 433b Disclosures by small and non-complex institutions 1. Small and non-complex institutions shall disclose the information outlined below with referred to in the following frequency: (a) provisions on an annual basis the information referred to in: (i) basis: (a) Article 435(1), points (a), (e) and (f) of (f); (b) Article 435(1); (ii) point 438, points (c), (d) of and (da); (c) Article 438; (iii) 442, points (a) to (d), (h), (i), (j) of Article 450(1); (b) on a semi-annual basis (c) and (d); (d) the key metrics referred to in Article 447. 447; (e) Article 449a; (f) Article 449b; (g) Article 450(1), points (a) to (d), (h), (i) and (j). 2. By way of derogation from paragraph 1 of this Article, small and non-complex institutions that are non-listed institutions shall disclose the key metrics referred to in Article 447 and ESG risks referred to in Article 449a on an annual basis.

02013R0575-20240709 → 02013R0575-20250101

Article 433c Disclosures by other institutions 1. Institutions that are not subject to Article 433a or 433b shall disclose the information outlined below with the following frequency: (a) all the information required under this Part on an annual basis; (b) the key metrics referred to in Article 447 on a semi-annual basis. 2. By way of derogation from paragraph 1 of this Article, other institutions that are non-listed institutions shall disclose the following information on an annual basis: (a) points (a), (e) and (f) of Article 435(1); (b) points (a, (b) and (c) of Article 435(2); (c) point (a) of Article 437; (d) Article 438, points (c), (d) and (da): (da) Article 442, points (c) and (d) of Article 438; (d); (e) the key metrics referred to in Article 447; (ea) the information referred to in Article 449a; (eb) the information referred to in Article 449b; (f) points (a) to (d), (h) to (k) of Article 450(1).

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before (02013R0575-20240709)

Article 434
Means of disclosures
1. Institutions shall disclose all the information required under Titles II and III in electronic format and in a single medium or location. The single medium or location shall be a standalone document that provides a readily accessible source of prudential information for users of that information or a distinctive section included in or appended to the institutions' financial statements or financial reports containing the required disclosures and being easily identifiable to those users.
2. Institutions shall make available on their website or, in the absence of a website, in any other appropriate location an archive of the information required to be disclosed in accordance with this Part. That archive shall be kept accessible for a period of time that shall be no less than the storage period set by national law for information included in the institutions' financial reports.

after (02013R0575-20250101)

Article 434
Means of disclosures
1. Institutions other than small and non-complex institutions shall submit all information required under Titles II and III in electronic format to EBA no later than the date on which they publish their financial statements or financial reports for the corresponding period, where applicable, or as soon as possible thereafter. EBA shall publish that information, together with its submission date, on its website.
EBA shall ensure that disclosures made on its website contain information identical to that which institutions submitted to EBA. Institutions shall have the right to resubmit to EBA the information in accordance with the technical standards referred to in Article 434a. EBA shall make available on its website the date when the resubmission took place.
EBA shall prepare and keep up-to-date a tool that specifies the mapping of the templates and tables for disclosures with those on supervisory reporting. The mapping tool shall be accessible to the public on the EBA website.
Institutions may continue to publish a standalone document that provides a readily accessible source of prudential information for users of that information or a distinctive section included in or appended to the institutions’ financial statements or financial reports containing the required disclosures and being easily identifiable to those users. Institutions may include in their website a link to the EBA website where the prudential information is published in a centralised manner.
2. Institutions other than small and non-complex institutions shall submit the disclosures required under Articles 433a and 433c in electronic format to EBA no later than the date on which they publish their financial statements or financial reports for the corresponding period or as soon as possible thereafter. If the financial reports are published before the submission of information in accordance with Article 430 for the same period, disclosures can be submitted on the same date as supervisory reporting or as soon as possible thereafter. If disclosure is required to be made for a period when an institution does not prepare any financial report, the institution shall submit to EBA the information on disclosures as soon as possible following the end of that period.
3. By way of derogation from paragraphs 1 and 2 of this Article, institutions may submit to EBA the information required under Article 450 separately from the other information required under Titles II and III no later than two months after the date on which institutions publish their financial statements for the corresponding year.
4. EBA shall publish on its website the disclosures of small and non-complex institutions on the basis of the information reported by those institutions to competent authorities in accordance with Article 430.
5. Ownership of the data and the responsibility for their accuracy shall remain with the institutions that produce them. EBA shall provide for a single access point for institutions’ disclosures and shall make available on its website an archive of the information required to be disclosed in accordance with this Part. That archive shall be kept accessible for a period that shall be no less than the storage period set by national law for information included in the institutions’ financial reports.
6. EBA shall monitor the number of visits to its single access point for institutions’ disclosures and include the related statistics in its annual reports.

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Article 438 Disclosure of own funds requirements and risk-weighted exposure amounts Institutions shall disclose the following information regarding their compliance with Article 92 of this Regulation and with the requirements laid down in Article 73 and in point (a) of Article 104(1) of Directive 2013/36/EU: (a) a summary of their approach to assessing the adequacy of their internal capital to support current and future activities; (b) the amount of the additional own funds requirements based on the supervisory review process as referred to in Article 104(1), point (a) of Article 104(1) (a), of Directive 2013/36/EU to address risks other than the risk of excessive leverage and its composition in terms of Common Equity Tier 1, additional Tier 1 and Tier 2 instruments; composition; (c) upon demand from the relevant competent authority, the result of the institution's internal capital adequacy assessment process; (d) the total risk-weighted risk exposure amount as calculated in accordance with Article 92(3) and the corresponding total own funds requirement requirements as determined in accordance with Article 92, 92(2), to be broken down by the different risk categories or risk exposure classes, as applicable, set out in Part Three and, where applicable, an explanation of the effect on the calculation of the own funds and risk-weighted exposure amounts that results from applying capital floors and not deducting items from own funds; (da) where required to calculate the un-floored total risk exposure amount as calculated in accordance with Article 92(4), and the standardised total risk exposure amount as calculated in accordance with Article 92(5), to be broken down by the different risk categories or risk exposure classes, as applicable, set out in Part Three and, where applicable, an explanation of the effect on the calculation of own funds and risk-weighted exposure amounts that results from applying capital floors and not deducting items from own funds; (e) the on- and off-balance-sheet exposures, the risk-weighted exposure amounts and associated expected losses for each category of specialised lending referred to in Article 153(5), Table 1 of Article 153(5) 1, and the on- and off-balance-sheet exposures and risk-weighted exposure amounts for the categories of equity exposures set out in Article 155(2); 133(3) to (6), and Article 495a(3); (f) the exposure value and the risk-weighted exposure amount of own funds instruments held in any insurance undertaking, reinsurance undertaking or insurance holding company that the institutions do not deduct from their own funds in accordance with Article 49 when calculating their capital requirements on an individual, sub-consolidated and consolidated basis; (g) the supplementary own funds requirement and the capital adequacy ratio of the financial conglomerate calculated in accordance with Article 6 of Directive 2002/87/EC and Annex I to that Directive where method 1 or 2 set out in that Annex is applied; (h) the variations in the risk-weighted exposure amounts of the current disclosure period compared to the immediately preceding disclosure period that result from the use of internal models, including an outline of the key drivers explaining those variations.

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before (02013R0575-20240709)

Article 445
Disclosure of exposure to market risk
Institutions calculating their own funds requirements in accordance with points (b) and (c) of Article 92(3) shall disclose those requirements separately for each risk referred to in those points. In addition, own funds requirements for the specific interest rate risk of securitisation positions shall be disclosed separately.

after (02013R0575-20250101)

Article 445
Disclosure of exposures to market risk under the standardised approach
1. Institutions that have not been granted permission by competent authorities to use the alternative internal model approach as set out in Article 325az, and that use the simplified standardised approach in accordance with Article 325a or the alternative standardised approach in accordance with Part Three, Title IV, Chapter 1a, shall disclose an overview of their trading book positions.
2. Institutions calculating their own funds requirements in accordance with Part Three, Title IV, Chapter 1a, shall disclose their total own funds requirements, own funds requirements for the sensitivities-based method, default risk charge and own funds requirements for residual risks. The disclosure of own funds requirements for the measures of the sensitivities-based method and for default risk shall be broken down into the following instruments:
(a) financial instruments other than securitisation instruments held in the trading book, with a breakdown by risk class, and a separate identification of the own funds requirements for default risk;
(b) securitisation instruments not held in the ACTP, with a separate identification of the own funds requirements for credit spread risk and of the own funds requirements for default risk;
(c) securitisation instruments held in the ACTP, with a separate identification of the own funds requirements for credit spread risk and of the own funds requirements for default risk.

inserted text (02013R0575-20250101)

Article 445a
Disclosure of CVA risk
1. Institutions subject to the own funds requirements for CVA risk shall disclose the following information:
(a) an overview of their processes to identify, measure, hedge and monitor their CVA risk;
(b) whether institutions meet all of the conditions set out in Article 273a(2); where those conditions are met, whether institutions have chosen to calculate the own funds requirements for CVA risk using the simplified approach set out in Article 385; where institutions have chosen to calculate the own funds requirements for CVA risk using the simplified approach, the own funds requirements for CVA risk in accordance with that approach;
(c) the total number of counterparties for which the standardised approach is used, with a breakdown by counterparty types.
2. Institutions using the standardised approach set out in Article 383 for calculating the own funds requirements for CVA risk shall disclose, in addition to the information referred to in paragraph 1 of this Article, the following information:
(a) the structure and the organisation of their internal CVA risk management function and governance;
(b) their total own funds requirements for CVA risk under the standardised approach with a breakdown by risk class;
(c) an overview of the eligible hedges used in that calculation, with a breakdown by type of instruments set out in Article 386(2).
3. Institutions using the basic approach set out in Article 384 for calculating the own funds requirements for CVA risk shall disclose, in addition to the information referred to in paragraph 1 of this Article, the following information:
(a) their total own funds requirements for CVA risk under the basic approach, and the components BACVAtotal and BACVAcsr-hedged;
(b) an overview of the eligible hedges used in that calculation, with a breakdown by type of instruments set out in Article 386(3).

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before (02013R0575-20240709)

Article 446
Disclosure of operational risk management
Institutions shall disclose the following information about their operational risk management:
(a) the approaches for the assessment of own funds requirements for operation risk that the institution qualifies for;
(b) where the institution makes use of it, a description of the methodology set out in Article 312(2), which shall include a discussion of the relevant internal and external factors being considered in the institution's advanced measurement approach;
(c) in the case of partial use, the scope and coverage of the different methodologies used.

after (02013R0575-20250101)

Article 446
Disclosure of operational risk
1. Institutions shall disclose the following information:
(a) the main characteristics and elements of their operational risk management framework;
(b) their own funds requirement for operational risk equal to the business indicator component calculated in accordance with Article 313;
(c) the business indicator, calculated in accordance with Article 314(1), and the amounts of each of the business indicator components and their sub-components for each of the three years relevant for the calculation of the business indicator;
(d) the amount of the reduction of the business indicator for each exclusion from the business indicator in accordance with Article 315(2), as well as the corresponding justifications for such exclusions.
2. Institutions that calculate their annual operational risk losses in accordance with Article 316(1) shall disclose the following information in addition to the information referred to in paragraph 1 of this Article:
(a) their annual operational risk losses for each of the last 10 financial years, calculated in accordance with Article 316(1);
(b) the number of exceptional operational risk events and the amounts of the corresponding aggregated net operational risk losses that were excluded from the calculation of the annual operational risk loss in accordance with Article 320(1), for each of the last 10 financial years, and the corresponding justifications for those exclusions.

02013R0575-20240709 → 02013R0575-20250101

Article 447 Disclosure of key metrics Institutions shall disclose the following key metrics in a tabular format: (a) the composition of their own funds and their own funds requirements risk-based capital ratios as calculated in accordance with Article 92; 92(2); (aa) where applicable, the risk-based capital ratios as calculated in accordance with Article 92(2), by using the un-floored total risk exposure amount instead of the total risk exposure amount; (b) the total risk exposure amount as calculated in accordance with Article 92(3); 92(3) and, where applicable, the un-floored total risk exposure amount as calculated in accordance with Article 92(4); (c) where applicable, the amount and composition of additional own funds which the institutions are required to hold in accordance with point (a) of Article 104(1) of Directive 2013/36/EU; (d) their the combined buffer requirement which the institutions are required to hold in accordance with Chapter 4 of Title VII of Directive 2013/36/EU; (e) their leverage ratio and the total exposure measure as calculated in accordance with Article 429; (f) the following information in relation to their liquidity coverage ratio as calculated in accordance with the delegated act referred to in Article 460(1): (i) the average or averages, as applicable, of their liquidity coverage ratio based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period; (ii) the average or averages, as applicable, of total liquid assets, after applying the relevant haircuts, included in the liquidity buffer pursuant to the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period; (iii) the averages of their liquidity outflows, inflows and net liquidity outflows as calculated pursuant to the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period; (g) the following information in relation to their net stable funding requirement as calculated in accordance with Title IV of Part Six: (i) the net stable funding ratio at the end of each quarter of the relevant disclosure period; (ii) the available stable funding at the end of each quarter of the relevant disclosure period; (iii) the required stable funding at the end of each quarter of the relevant disclosure period; (h) their own funds and eligible liabilities ratios and their components, numerator and denominator, as calculated in accordance with Articles 92a and 92b and broken down at the level of each resolution group, where applicable.