8439/13 SO/psc 1

EN
DQPG
COUNCIL OF
THE EUROPEAN UNION
Brussels, 26 April 2013
Interinstitutionl File!
2011"0202 #CO$%
&'3("13
CO$EC &23
EF )3
ECOFIN 261
PE 16(
INFOR*ATION NOTE
from: General Secretariat
to: Permanent Representatives Committee/Council
Su!ect: Proposal for a Re"ulation of t#e $uropean Parliament an% of t#e Council on
pru%ential re&uirements for cre%it institutions an% investment firms
' Outcome of t#e $uropean Parliament(s first rea%in"
)S tra so u r"* 1+ to 18 ,pr il -.1 3 /
I+ INTRO$UCTION
0n accor%ance 1it# t#e provisions of ,rticle -94 of t#e 23$4 an% t#e !oint %eclaration on practical
arran"ements for t#e co%ecision proce%ure
1
* a numer of informal contacts #ave ta5en place
et1een t#e Council* t#e $uropean Parliament an% t#e Commission 1it# a vie1 to reac#in" an
a"reement on t#is %ossier at first rea%in"* t#ere6 avoi%in" t#e nee% for secon% rea%in" an%
conciliation7
0n t#is conte8t* t#e rapporteur* 9r Ot#mar :,R,S )$PP;,2/ presente% one compromise
amen%ment )amen%ment -/ to t#e proposal for Re"ulation* on e#alf of t#e Committee on
$conomic an% 9onetar6 ,ffairs7 2#is amen%ment #a% een a"ree% %urin" t#e informal contacts
referre% to aove7
1
O< C 14+* 3.7=7-..>* p7+
II+ ,OTE
?#en it vote% on 1= ,pril -.13* t#e plenar6 a%opte% t#e compromise amen%ment )amen%ment -/ to
t#e proposal for a Re"ulation7 2#e Commission(s proposal as t#us amen%e% an% t#e le"islative
resolution constitute t#e $uropean Parliament(s position at first rea%in"* it reflects 1#at #a% een
previousl6 a"ree% et1een t#e institutions7 2#e Council s#oul% t#erefore e in a position to approve
t#e position of t#e $uropean Parliament7 2#e le"islative act 1oul% t#en e a%opte% in t#e 1or%in"
1#ic# correspon%s to t#is position7
2#e te8t of t#e amen%ment a%opte% an% t#e $uropean Parliament(s le"islative resolution are set out
in t#e ,nne8 #ereto7 2#e amen%ment is presente% in t#e form of a consoli%ate% te8t* 1#ere c#an"es
to t#e Commission(s proposal are #i"#li"#te% in ol% an% italics7 2#e s6mol @ A@ in%icates %elete%
te8t7
AN N E-
#16+'+2013%
Pru.entil re/uire0ents 1or 2re.it institutions n. in3est0ent 1ir0s 444I
Europen Prli0ent le5islti3e resolution o1 16 April 2013 on t6e proposl 1or re5ultion
o1 t6e Europen Prli0ent n. o1 t6e Coun2il on pru.entil re/uire0ents 1or 2re.it
institutions n. in3est0ent 1ir0s #CO*#2011%0'72 8 C)90'1)"2011 8 2011"0202#CO$%%
#Or.inr: le5islti3e pro2e.ure! 1irst re.in5%
The European Parliament*
' #avin" re"ar% to t#e Commission proposal to Parliament an% t#e Council )CO9)-.11/.4+-/*
' #avin" re"ar% to ,rticle -94)-/ an% ,rticle 114 of t#e 2reat6 on t#e 3unctionin" of t#e
$uropean 4nion* pursuant to 1#ic# t#e Commission sumitte% t#e proposal to Parliament
)C>;.41>/-.11/*
' #avin" re"ar% to ,rticle -94)3/ of t#e 2reat6 on t#e 3unctionin" of t#e $uropean 4nion*
' #avin" re"ar% to t#e reasone% opinion sumitte%* 1it#in t#e frame1or5 of Protocol Bo - on t#e
application of t#e principles of susi%iarit6 an% proportionalit6* 6 t#e 3renc# Senate* t#e
S1e%is# Parliament an% t#e 4nite% :in"%om Couse of Commons* assertin" t#at t#e %raft
le"islative act %oes not compl6 1it# t#e principle of susi%iarit6*
' #avin" re"ar% to t#e opinion of t#e $uropean Central Dan5 of -+ <anuar6 -.1-
1
*
' #avin" re"ar% to t#e opinion of t#e $uropean $conomic an% Social Committee of 18 <anuar6
-.1-
-
*
' #avin" re"ar% to t#e un%erta5in" "iven 6 t#e Council representative 6 letter of -> 9arc# -.13
to approve Parliament(s position* in accor%ance 1it# ,rticle -94)4/ of t#e 2reat6 on t#e
3unctionin" of t#e $uropean 4nion*
' #avin" re"ar% to Rule ++ of its Rules of Proce%ure*
' #avin" re"ar% to t#e report of t#e Committee on $conomic an% 9onetar6 ,ffairs ),>;
1
O< C 1.+* 11747-.1-* p7 17
-
O< C =8* =737-.1-* p7 397
.1>1/-.1-/*
17 ,%opts its position at first rea%in" #ereinafter set outE
-7 Calls on t#e Commission to refer t#e matter to Parliament a"ain if it inten%s to amen% its
proposal sustantiall6 or replace it 1it# anot#er te8tE
37 0nstructs its Presi%ent to for1ar% its position to t#e Council* t#e Commission an% t#e national
parliaments7
P);TC19CO$#2011%0202
Position o1 t6e Europen Prli0ent .opte. t 1irst re.in5 on 16 April 2013 <it6 3ie< to
t6e .option o1 Re5ultion #EU% No +++"2013 o1 t6e Europen Prli0ent n. o1 t6e Coun2il on
pru.entil re/uire0ents 1or 2re.it institutions n. in3est0ent 1ir0s

#Te=t <it6 EEA rele3n2e%

2C$ $4ROP$,B P,RF0,9$B2 ,BD 2C$ CO4BC0F O3 2C$ $4ROP$,B 4B0OB*
Cavin" re"ar% to t#e 2reat6 on t#e 3unctionin" of t#e $uropean 4nion* an% in particular ,rticle 114
t#ereof*
Cavin" re"ar% to t#e proposal from t#e $uropean Commission*
,fter transmission of t#e %raft le"islative act to t#e national Parliaments*
Having regard to the opinion of the European Central Bank,
Cavin" re"ar% to t#e opinion of t#e $uropean $conomic an% Social Committee*
,ctin" in accor%ance 1it# t#e or%inar6 le"islative proce%ure
1
*

2$G2 C,S BO2 H$2 4BD$RGOB$ F$G,F;F0BG40S20C 30B,F0S,20OB7
1
Position of t#e $uropean Parliament of 1= ,pril -.137
?#ereas:
)1/ 2#e G-. Declaration of - ,pril -..9
A
on Stren"t#enin" of t#e 3inancial S6stem calle% for
internationall6 consistent efforts t#at are aime% at stren"t#enin" transparenc6*
accountailit6 an% re"ulation 6* improvin" t#e &uantit6 an% &ualit6 of capital in t#e
an5in" s6stem once t#e economic recover6 is assure%7 2#e %eclaration also calle% for
intro%ucin" a supplementar6 non;ris5 ase% measure to contain t#e uil%;up of levera"e in
t#e an5in" s6stem* an% %evelopin" a frame1or5 for stron"er li&ui%it6 uffers7 0n response
to t#e man%ate "iven 6 t#e G-.* in Septemer -..9 t#e Group of Central Dan5 Governors
an% Cea%s of Supervision )GCOS/* a"ree% on a numer of measures to stren"t#en t#e
re"ulation of t#e an5in" sector7 2#ese measures 1ere en%orse% 6 t#e G-. lea%ers at t#eir
Pittsur"# Summit of -4;-+ Septemer -..9 an% 1ere set out in %etail in Decemer -..97
0n <ul6 an% Septemer -.1.* GCOS issue% t1o furt#er announcements on %esi"n an%
caliration of t#ese ne1 measures* an% in Decemer -.1.* t#e Dasel Committee on
Dan5in" Supervision )DCDS/ pulis#e% t#e final measures* t#at are referre% to as Dasel 0007
)-/ 2#e Ci"# Fevel Group on 3inancial Supervision in t#e $4 c#aire% 6 <ac&ues %e FarosiIre
invite% t#e $uropean 4nion to %evelop a more #armonise% set of financial re"ulation7 0n
t#e conte8t of t#e future $uropean supervisor6 arc#itecture* t#e $uropean Council of 18
an% 19 <une -..9 also stresse% t#e nee% to estalis# a ($uropean Sin"le Rule Doo5(
applicale to all cre%it institutions an% investment firms in t#e Sin"le 9ar5et7
(2a) As stated in the de Larosire report, "a Me!er "tate should !e a!le to adopt ore
stringent national regulator# easures $onsidered to !e doesti$all# appropriate for
safeguarding finan$ial sta!ilit# as long as the prin$iples of the internal arket and
agreed iniu $ore standards are respe$ted%
)3/ Directive -..=/48/$C of t#e $uropean Parliament an% of t#e Council of 14 <une -..=
1
relatin" to t#e ta5in" up an% pursuit of t#e usiness of cre%it institutions an%
Directive -..=/49/$C of t#e $uropean Parliament an% of t#e Council of 14 <une -..=
-
on
t#e capital a%e&uac6 of investment firms an% cre%it institutions )@institutions@/ #ave een
si"nificantl6 amen%e% on several occasions7 9an6 provisions of Directives -..=/48/$C
an% -..=/49/$C are applicale to ot# cre%it institutions an% investment firms7 &n order to
ensure a co#erent application of t#ose provisions* it is appropriate to mer"e t#ese
provisions into ne1 legal a$ts' a (ire$tive and this )egulation7 3or the sa5e of clarit6* t#e
provisions of t#e ,nne8es to t#ose Directives s#oul% e inte"rate% into t#e enactin" terms
of these ne1 legal a$ts7
)4/ A2o"et#er* ot# ne* le"al a$ts s#oul% form t#e le"al frame1or5 "overnin" t#e access to
t#e activit6* t#e supervisor6 frame1or5 an% t#e pru%ential rules for cre%it institutions an%
investment firms7 +herefore this Re"ulation s#oul% A e rea% to"et#er 1it# ADirective
,inserted !# -./7
1
O< F 1>>* 3.7=7-..=* p7 17
-
O< F 1>>* 3.7=7-..=* p7 -.17
)+/ +he Directive Jinserte% 6 OPK* ase% on ,rticle +3 )1/ 23$4* s#oul%, inter alia, contain
t#e provisions concernin" t#e access to t#e activit6 of cre%it institutions an% investment
firms* t#e mo%alities for t#eir "overnance* an% t#eir supervisor6 frame1or5* suc# as
provisions "overnin" t#e aut#orisation of t#e usiness* t#e ac&uisition of &ualif6in"
#ol%in"s* t#e e8ercise of t#e free%om of estalis#ment an% of t#e free%om to provi%e
services* t#e po1ers of supervisor6 aut#orities of #ome an% #ost 9emer States in t#is
re"ar% an% t#e provisions "overnin" t#e initial capital an% t#e supervisor6 revie1 of cre%it
institutions an% investment firms7
)=/ 2#is Re"ulation s#oul%, inter alia, contain t#e pru%ential re&uirements for cre%it
institutions an% investment firms t#at relate strictl6 to t#e functionin" of an5in" an%
financial services mar5ets an% are meant to ensure t#e financial stailit6 of t#e operators on
t#ese mar5ets as 1ell as a #i"# level of protection of investors an% %epositors7 2#is
)egulation aims at contriutin" in a %eterminin" manner to t#e smoot# functionin" of t#e
internal mar5et an% s#oul%* conse&uentl6* e ase% on t#e provisions of ,rticle 114 23$4*
as interprete% in accor%ance 1it# t#e consistent case;la1 of t#e Court of <ustice of t#e
$uropean 4nion 7
)>/ Directives -..=/48/$C an% -..=/49/$C* alt#ou"# #avin" #armonise% t#e rules of 9emer
States in t#e area of pru%ential supervision to a certain %e"ree* inclu%e a si"nificant numer
of options an% possi!ilities for 9emer States Ato impose stricter rules t#an t#ose lai%
%o1n 6 t#ose Directives7 2#is results in %iver"ences et1een national rules, *hi$h ight
#amper t#e cross;or%er provision of services an% t#e freedo of esta!lishent and so
$reate ostacles to t#e smoot# functionin" of internal mar5et7
(0!) 1or reasons of legal $ertaint# and !e$ause of the need for a level pla#ing field *ithin the
2nion, a single set of regulations for all arket parti$ipants is a ke# eleent for the
fun$tioning of the internal arket3 &n order to avoid arket distortions and regulator#
ar!itrage, .illar 4 easures should therefore ensure a5iu haronisation3 As a
$onse6uen$e, the transitional periods provided for in this )egulation are essential for
the sooth ipleentation of this )egulation and to avoid un$ertaint# for the arkets3
(0d) Having regard to *ork of the Basel Coittee of Banking "upervisors7 "tandards
&pleentation 8roup in onitoring and revie*ing e!er $ountries7 ipleentation
of the Basel regulator# $apital frae*ork, the Coission should provide update
reports on an ongoing !asis, and at least follo*ing the pu!li$ation of ea$h .rogress
)eport on Basel &&& ipleentation !# the Basel Coittee on Banking "upervisors, on
the ipleentation and doesti$ adoption of Basel &&& in other a9or 9urisdi$tions,
in$luding an assessent of the $onsisten$# of other $ountries7 legislation or regulations
*ith the international iniu standard to identif# differen$es that $ould raise level
pla#ing field $on$erns3
)8/ 0n or%er to remove Aostacles to tra%e an% A%istortions of competition resultin" from
%iver"ences et1een national la1s an% to prevent A furt#er li5el6 ostacles to tra%e an%
si"nificant %istortions of competition from arisin"* it is t#erefore necessar6 to a%opt a
Re"ulation estalis#in" uniform rules applicale in all 9emer States7
)9/ S#apin" pru%ential re&uirements in t#e form of a Re"ulation 1oul% ensure t#at t#ose
re&uirements 1ill e %irectl6 applicale to t#em7 2#is 1oul% ensure uniform con%itions 6
preventin" %iver"in" national re&uirements as a result of t#e transposition of a Directive7
2#is Re"ulation 1oul% entail t#at all $redit institutions and investent firs *hi$h it
defines as su$h follo1 t#e same rules in all t#e 4nion* 1#ic# 1oul% also oost confi%ence
in t#e stailit6 of cre%it institutions an% investment firms* especiall6 in times of stress7 ,
Re"ulation 1oul% also re%uce re"ulator6 comple8it6 an% firms( compliance costs*
especiall6 for cre%it institutions an% investment firms operatin" on a cross;or%er asis*
an% contriute to eliminatin" competitive %istortions7 ?it# re"ar% to t#e peculiarit6 of
immovale propert6 mar5ets 1#ic# are c#aracterise% 6 economic %evelopments an%
!uris%ictional %ifferences t#at are specific to 9emer States* re"ions or local areas*
competent aut#orities s#oul% e allo1e% to set #i"#er ris5s 1ei"#ts or to appl6 stricter
criteria ase% on %efault e8perience an% e8pecte% mar5et %evelopments to e8posures
secure% 6 mort"a"es on immovale propert6 in specific areas7
A
(4:) &n areas not $overed in this )egulation, in$luding for an e5aple d#nai$ provisioning,
provisions on national $overed !onds s$hees not related to the treatent of $overed
!onds under the rules esta!lished !# this )egulation, a$6uisition and holding of
parti$ipations in !oth the finan$ial and non finan$ial se$tor for purposes not related to
prudential re6uireents spe$ified in this )egulation, $opetent authorities or Me!er
"tates should !e a!le to ipose national rules, provided that the# are not in$onsistent
*ith this )egulation3
(4:a) +he ost iportant re$oendations advo$ated in de Larosire report and later
ipleented in the 2nion *ere the esta!lishent of a "ingle )ule Book and a
European frae*ork for a$roprudential supervision *here !oth eleents *ere aied
in $o!ination at ensuring finan$ial sta!ilit#3 +he "ingle )ule!ook ensures a ro!ust
and unifor regulator# frae*ork fa$ilitating the "ingle Market and prevents
regulator# ar!itrage opportunities3 ;ithin the single arket in finan$ial servi$es
a$roprudential risks a# ho*ever differ in a nu!er of *a#s *ith a range of national
spe$ifi$ities eaning that varian$es for e5aple $an !e o!served as to the stru$ture and
si<e of the !anking se$tor $opared to the *ider e$ono# and the $redit $#$le3
(4:!) A nu!er of tools to prevent and itigate a$ro=prudential and s#stei$ risks have
!een !uilt into the (ire$tive and )egulation ensuring fle5i!ilit# *hile at the sae tie
ensuring that the use of these tools are su!9e$t to appropriate $ontrol in order not to
har the fun$tion of the internal arket *hile also ensuring that the use of su$h tools
are transparent and $onsistent3
Be#ond the s#stei$ risk !uffer tool as in$luded in the (ire$tive, *here a$ro=
prudential or s#stei$ risks $on$ern a Me!er "tate, the $opetent or designated
authorities of the relevant Me!er "tate should have the possi!ilit# to address those
risks !# $ertain spe$ifi$ national a$ro=prudential easures, *hen this is $onsidered
ore effe$tive to ta$kle those risks3 +he E")B, EBA should have the opportunit# to
provide their opinions on *hether the $onditions for su$h national a$ro=prudential
easures are et and there should !e a 2nion e$hanis to prevent national easures
fro pro$eeding, *here there is ver# strong eviden$e that the relevant $onditions are not
satisfied3 ;hilst this )egulation esta!lishes unifor i$ro=prudential rules for
institutions, Me!er "tates retain a leading role in a$ro=prudential oversight !e$ause
of their e5pertise and their e5isting responsi!ilities in relation to finan$ial sta!ilit#3 &n
this spe$ifi$ $ase, sin$e the de$ision to adopt an# national a$ro=prudential easures
in$ludes $ertain assessents in relation to risks *hi$h a# ultiatel# affe$t the
a$roe$onoi$, fis$al and !udgetar# situation of the relevant Me!er "tate, it is
ne$essar# that the po*er to re9e$t the national proposed a$ro=prudential easures is
$onferred on the Coun$il in a$$ordan$e *ith Arti$le 2>4 +1E2, a$ting on proposal !#
the Coission3
;here the Coission has su!itted to the Coun$il a proposal to re9e$t these national
easures, the Coun$il should e5aine *ithout dela# that proposal and de$ide *hether
or not to re9e$t the national easures% a vote $ould !e taken in a$$ordan$e *ith the
Coun$il )ules of .ro$edure at the re6uest of a Me!er "tate or of the Coission3 &n
a$$ordan$e *ith Arti$le 2>? +1E2, the Coun$il should state the reasons for its de$ision
in relation *ith the respe$t to the $onditions laid in this )egulation for its intervention3
Considering the iportan$e of the a$ro prudential and s#stei$ risk for the finan$ial
arket of the Me!er "tate $on$erned and therefore the need for rapid rea$tion, it is
iportant that the tie liit for the Coun$il de$ision is set to one onth3
&f the Coun$il, after having e5ained in depth the proposal !# the Coission to re9e$t
the proposed national easure, $oes to the $on$lusion that the $onditions laid do*n in
this )egulation for the re9e$tion of the national easures *ere not fulfilled, it should
al*a#s provide its reasons in a $lear and una!iguous anner3
(4:d) 2ntil the haronisation of li6uidit# re6uireents in 2:4@ and the haronisation of a
Leverage )atio in 2:4A Me!er "tates a# appl# these easures as the Me!er "tates
find appropriate, in$luding itigation of a$ro=prudential or s#stei$ risk in the
eaning of a risk of disruption in the finan$ial s#ste *ith the potential to have serious
negative $onse6uen$es to the finan$ial s#ste and the real e$ono# in a spe$ifi$
Me!er "tate3
(4:da) "#stei$ risk !uffers or individual easures taken !# Me!er "tates to address s#stei$
risks $on$erning these Me!er "tates, $an !e applied to the !anking se$tor in general or
to one or ore su!sets of the se$tor, in the eaning of institutions that e5hi!it siilar
risk profiles in their !usiness a$tivities, or to the e5posures to one or several doesti$
e$onoi$ or geographi$ se$tors a$ross the !anking se$tor3
(4:e) &f t*o or ore Me!er "tates designated authorities identif# the sae $hanges in the
intensit# of s#stei$ or a$ro=prudential risk posing a risk to finan$ial sta!ilit# at the
national level in ea$h Me!er "tate *hi$h the designated authorities $onsiders *ould
!etter !e addressed !# eans of national easures, the Me!er "tates a# su!it a
9oint notifi$ation to the Coission, the Coun$il, the E")B and EBA3 ;hen notif#ing
the Coission, the Coun$il, +he E")B and EBA the# shall su!it relevant eviden$e,
in$luding a 9ustifi$ation of the 9oint notifi$ation3
(4:f) +he Coission shall furtherore !e epo*ered to adopt a teporar# in$rease in the
level of o*n funds, risk *eights, re6uireents for large e5posures and pu!li$ dis$losure3
"u$h provisions should !e appli$a!le for a period of one #ear, unless the European
.arliaent or the Coun$il has o!9e$ted to the delegated a$t *ithin a period of 2 onth3
+he Coission shall state the reasons for the use of this pro$edure3 +he Coission is
onl# epo*ered to ipose stri$ter prudential re6uireents for e5posures *hi$h arise
fro arket developents in the 2nion or outside the 2nion affe$ting all Me!er
"tates3
(4:g) A revie* of the a$ro=prudential regulation is finall# 9ustified in order for the
Coission to assess, aong other things, *hether the $urrent a$ro=prudential tools
in this )egulation or the (ire$tive ,inserted !# -./ are effe$tive, effi$ient and
transparent, *hether ne* instruents shall !e proposed, *hether the $overage and the
possi!le degrees of overlap of the a$ro=prudential tools for targeting siilar risks in
this )egulation or the (ire$tive ,inserted !# -./ are ade6uate and ho* internationall#
agreed standards for s#stei$ institutions intera$ts *ith the provisions in this )egulation
or the (ire$tive ,inserted !# -./
)11/ ?#ere 9emer States a%opt "ui%elines of "eneral scope* in particular in areas 1#ere t#e
a%option 6 t#e Commission of %raft tec#nical stan%ar%s is pen%in"* t#ose "ui%elines s#all
neit#er contra%ict 4nion la1 nor un%ermine its application7
)1-/ 2#is Re"ulation %oes not prevent 9emer States from imposin", *here appropriate,
e&uivalent re&uirements on un%erta5in"s t#at %o not fall 1it#in its scope7
)13/ 2#e "eneral pru%ential re&uirements set out in t#is Re"ulation are supplemente% 6
in%ivi%ual arran"ements t#at are %eci%e% 6 t#e competent aut#orities as a result of t#eir
on"oin" supervisor6 revie1 of Ain%ivi%ual cre%it institution an% investment firm7 2#e
ran"e of suc# supervisor6 arran"ements s#oul%, inter alia, e set out in a Directive since
t#e competent aut#orities s#oul% e ale to e8ert t#eir !u%"ment as to 1#ic# arran"ements
s#oul% e impose%7
)14/ 2#is Re"ulation s#oul% not affect t#e ailit6 of competent aut#orities to impose specific
re&uirements un%er t#e supervisor6 revie1 an% evaluation process set out in Directive
Jinserte% 6 OPK t#at s#oul% e tailore% to t#e specific ris5 profile of cre%it institutions an%
investment firms7
)1+/ Re"ulation )$4/ Bo 1.93/-.1. of t#e $uropean Parliament an% of t#e Council of
-4 Bovemer -.1. estalis#in" a $uropean Supervisor6 ,ut#orit6
A
* estalis#e% t#e
$uropean Dan5in" ,ut#orit6 )$D,/7 2#at Re"ulation aims at up"ra%in" t#e &ualit6 an%
consistenc6 of national supervision an% stren"t#enin" oversi"#t of cross;or%er "roups7
(4@!) 8iven the inevita!le e5tension of po*ers and tasks for EBA foreseen !# this )egulation,
the European .arliaent, the Coun$il and the Coission should see to it that
ade6uate huan and finan$ial resour$es are ade availa!le *ithout dela#3
)1=/ Re"ulation )$4/ Bo 1.93/-.1. re&uires $D, to act 1it#in t#e scope of
Directives -..=/48/$C an% -..=/49/$C7 $D, is also re&uire% to act in t#e fiel% of
activities of cre%it institutions an% investment firms in relation to issues not %irectl6
covere% in t#ose Directives* provi%e% t#at suc# actions are necessar6 to ensure t#e effective
an% consistent application of t#ose acts7 2#is Re"ulation s#oul% ta5e into account t#e role
an% function of $D, an% facilitate t#e e8ercise of $D,(s po1ers set out in t#at Re"ulation7
After the o!servation period and the full ipleentation of a li6uidit# re6uireent in
a$$ordan$e *ith Arti$le BBB, it should !e assessed *hether granting EBA a po*er of
self=initiative to intervene *ith !inding ediation in relation to the rea$hing of 9oint
de$isions !# the $opetent authorities under Arti$les 4A and 4> of this )egulation *ould
fa$ilitate the pra$ti$al foration and operation of single li6uidit# su!=groups as *ell as
the deterination of *hether $riteria for a spe$ifi$ intra=group treatent for $ross=
!order institutions are et3 +herefore, at that tie, as part of one of the regular reports
on the operation of EBA under Arti$le A4 of )egulation 4:>CD2:4:, the Coission
should spe$ifi$all# e5aine the need to grant EBA su$h po*ers and in$lude the results
of this e5aination in its report a$$opanied !# an# appropriate proposals3
(4?a) +he report fro the High Level 8roup on 1inan$ial "upervision in the European
2nion, $haired !# Ea$6ues de Larosire, stated that i$ro=prudential supervision $annot
effe$tivel# safeguard finan$ial sta!ilit# *ithout ade6uatel# taking a$$ount of a$ro=level
developents, *hile a$ro=prudential oversight is not eaningful unless it $an
soeho* ipa$t on supervision at the i$ro level3
Close $ooperation !et*een EBA and the E")B is essential to give full effe$tiveness to
the fun$tioning of the E")B and the follo*=up to its *arnings and re$oendations3 &n
parti$ular, EBA should !e a!le to transit to the E")B all relevant inforation
gathered !# $opetent authorities in a$$ordan$e *ith the reporting o!ligations set out in
this )egulation3
(4?!) Considering the devastating effe$ts of the latest finan$ial $risis the overall o!9e$tives of
this regulation are to en$ourage e$onoi$all# useful !anking a$tivities that shall serve
the general interest and to dis$ourage unsustaina!le finan$ial spe$ulation *ithout a real
added value3 +his iplies a $oprehensive refor of the *a#s savings are $hannelled
into produ$tive investents3 &n order to safeguard a sustaina!le and diverse !anking
environent in Europe, $opetent authorities should !e epo*ered to ipose higher
$apital re6uireents for s#stei$all# iportant institutions that are a!le, due to their
!usiness a$tivities, to pose a threat to the glo!al e$ono#3
)1>/ $&uivalent financial re&uirements for cre%it institutions an% investment firms holding
one# or se$urities !elonging to their $lients are necessar6 to ensure similar safe"uar%s
for savers an% fair con%itions of competition et1een comparale "roups of cre%it
institutions an% investment firms3
)18/ Since cre%it institutions an% investment firms in t#e internal mar5et are en"a"e% in %irect
competition* monitorin" re&uirements s#oul% e e&uivalent t#rou"#out t#e 4nion taking
into a$$ount the different risk profiles of the institutions7
)19/ ?#enever in t#e course of supervision it is necessar6 to %etermine t#e amount of t#e
consoli%ate% o1n fun%s of a "roup of cre%it institutions an% investment firms* t#e
calculation s#oul% e effecte% in accor%ance 1it# t#is Re"ulation7
)-./ ,ccor%in" to t#is Re"ulation o1n fun%s re&uirements appl6 on an in%ivi%ual an%
consoli%ate% asis* unless competent aut#orities do not appl# supervision on an in%ivi%ual
asis 1#ere t#e6 %eem t#is appropriate7 0n%ivi%ual* consoli%ate% an% cross;or%er
consoli%ate% supervision are useful tools in overseein" cre%it institutions an% investment
firms7
)-1/ 0n or%er to ensure a%e&uate solvenc6 of cre%it institutions an% investment firms 1it#in a
"roup it is essential t#at t#e capital re&uirements appl6 on t#e asis of t#e consoli%ate%
situation of t#ese institutions in t#e "roup7 0n or%er to ensure t#at o1n fun%s are
appropriatel6 %istriute% 1it#in t#e "roup an% availale to protect savin"s 1#ere nee%e%*
t#e capital re&uirements s#oul% appl6 to in%ivi%ual cre%it institutions an% investment firms
1it#in a "roup* unless t#is o!ective can e effectivel6 ot#er1ise ac#ieve%7
(24a) +he inorit# interests arising fro interediate finan$ial holding $opanies that are
su!9e$t to the re6uireents of this regulation on a su!$onsolidated !asis a# also !e
eligi!le (*ithin the relevant liits) to the CE+4 of the group on a $onsolidated !asis, as
the $oon e6uit# +ier 4 $apital of an interediate finan$ial holding $opan#
attri!uta!le to inorit# interests and the part of that sae $apital attri!uta!le to the
parent $opan# support !oth pari passu the losses of their su!sidiaries *hen the# o$$ur3
)--/ 2#e precise accountin" tec#ni&ue to e use% for t#e calculation of o1n fun%s* t#eir
a%e&uac6 for t#e ris5 to 1#ic# a cre%it institution or investment firm is e8pose%* an% for
t#e assessment of t#e concentration of e8posures s#oul% ta5e account of t#e provisions of
Council Directive 8=/=3+/$$C of 8 Decemer 198= on t#e annual accounts an%
consoli%ate% accounts of an5s an% ot#er financial institutions
A
* 1#ic# incorporates certain
a%aptations of t#e provisions of Sevent# Council Directive 83/349/$$C of 13 <une 1983 on
consoli%ate% accounts
A
or of Re"ulation )$C/ Bo 1=.=/-..- of t#e $uropean Parliament
an% of t#e Council of 19 <ul6 -..- on t#e application of international accountin"
stan%ar%s
A
* 1#ic#ever "overns t#e accountin" of t#e cre%it institutions an% investment
firms un%er national la17
)-3/ 3or t#e purposes of ensurin" a%e&uate solvenc6 it is important to la6 %o1n capital
re&uirements 1#ic# 1ei"#t assets an% off;alance;s#eet items accor%in" to t#e %e"ree of
ris57
)-4/ On -= <une -..4 t#e DCDS a%opte% a frame1or5 a"reement on t#e international
conver"ence of capital measurement an% capital re&uirements )(Dasel 00 frame1or5(/7 2#e
provisions in Directive -..=/48/$C an% -..=/49/$C t#at t#is Re"ulation #as ta5en over
form an e&uivalent to t#e provisions of t#e Dasel 00 frame1or5 a"reement7 Conse&uentl6*
6 incorporatin" t#e supplementar6 elements of t#e Dasel 000 t#is Re"ulation forms an
e&uivalent to t#e provisions of t#e Dasel 00 an% 000 a"reements7
)-+/ 0t is essential to ta5e account of t#e %iversit6 of cre%it institutions an% investment firms in
t#e 4nion 6 provi%in" alternative approac#es to t#e calculation of capital re&uirements for
cre%it ris5 incorporatin" %ifferent levels of ris5;sensitivit6 an% re&uirin" %ifferent %e"rees
of sop#istication7 4se of e8ternal ratin"s an% cre%it institutions an% investment firms( o1n
estimates of in%ivi%ual cre%it ris5 parameters represents a si"nificant en#ancement in t#e
ris5;sensitivit6 an% pru%ential soun%ness of t#e cre%it ris5 rules7 Credit institutions an%
investment firms should !e en$ouraged to move to1ar%s t#e more ris5;sensitive
approac#es7 0n pro%ucin" t#e estimates nee%e% to appl6 t#e approac#es to cre%it ris5 of t#is
Re"ulation* cre%it institutions an% investment firms s#oul% en#ance their cre%it ris5
measurement an% mana"ement processes A to ma5e availa!le met#o%s for %eterminin"
Are"ulator6 o1n fun%s re&uirements At#at *ould reflect t#e nature, s$ale, and $ople5it#
of in%ivi%ual cre%it institutions an% investment firms( processes7 0n t#is re"ar%* t#e
processin" of %ata in connection 1it# t#e incurrin" an% mana"ement of e8posures to
customers s#oul% e consi%ere% to inclu%e t#e %evelopment an% vali%ation of cre%it ris5
mana"ement an% measurement s6stems7
2#at serves not onl6 to fulfil t#e le"itimate interest of cre%it institutions an% investment
firms ut also t#e purpose of t#is Re"ulation* to use etter met#o%s for ris5 measurement
an% mana"ement an% also use t#em for re"ulator6 o1n fun%s purposes7 +his
not*ithstanding, the ore risk=sensitive approa$hes re6uire $onsidera!le e5pertise and
resour$es as *ell as data of high 6ualit# and suffi$ient volue3 Credit institutions and
investent firs should therefore $opl# *ith high standards !efore appl#ing these
approa$hes for regulator# o*n funds purposes3 8iven the ongoing *ork on ensuring
appropriate !a$kstops to internal odels, the Coission should prepare a report on
the possi!ilit# of e5tending the Basel & floor and a$$opan# that report, if appropriate,
!# a separate legislative proposal3
)-=/ 2#e capital re&uirements s#oul% e proportionate to t#e ris5s a%%resse%7 0n particular t#e
re%uction in ris5 levels %erivin" from #avin" a lar"e numer of relativel6 small e8posures
s#oul% e reflecte% in t#e re&uirements7
)2?a) "all and ediu si<ed enterprises ("MEs) are one of the pillars of the European
e$ono# given their fundaental role in $reating e$onoi$ gro*th and providing
eplo#ent3 +he re$over# and future gro*th of European E$ono# depend largel# on
the availa!ilit# of $apital and funding to E2 sall and ediu enterprises to $arr# out
the ne$essar# investents to adopt ne* te$hnologies and e6uipent to in$rease their
$opetitiveness3 +he liited aount of alternative sour$es of funding has ade E2
"MEs even ore sensitive to the ipa$t of the !anking $risis3 &t is therefore iportant to
fill the e5isting funding gap for "MEs and ensure an appropriate flo* of !ank $redit to
"MEs in the $urrent $onte5t3 Capital $harges for e5posures to "MEs should !e redu$ed
through the appli$ation of a supporting fa$tor e6ual to :30?4> to allo* $redit institutions
in$rease lending to "MEs3 +o a$hieve this o!9e$tive, $redit institutions should effe$tivel#
use the $apital relief produ$ed through the appli$ation of the supporting fa$tor for the
e5$lusive purpose of providing an ade6uate flo* of $redit to E2 "MEs3 "upervisor#
Authorities should onitor periodi$all# the total aount of e5posures to "MEs of $redit
institutions and the total aount of $apital dedu$tion3
)->/ 0n line 1it# t#e %ecision of t#e DCDS* as en%orse% 6 t#e GCOS on 1. <anuar6 -.11* all
a%%itional 2ier 1 an% 2ier - instruments of an institution s#oul% e $apa!le of !eing full6
an% permanentl6 1ritten %o1n or converte% full6 into Common $&uit6 2ier 1 capital at t#e
point of non;viailit6 of t#e institution3 Fe$essar# legislation to ensure that o*n funds
instruents are su!9e$t to the additional loss a!sorption e$hanis should !e
in$orporated into 2nion legislation as part of the re6uireents in relation to the
re$over# and resolution of $redit institutions and investent firs3 &f !# C4st (e$e!er
2:4@, 2nion legislation governing the re6uireent that $apital instruents should !e
full# and peranentl# *ritten do*n to <ero or $onverted into Coon E6uit# +ier 4
instruents in the event that an institution is no longer $onsidered via!le has not !een
adopted, then the Coission should revie* and report on *hether su$h a provision
should !e in$luded in this )egulation and, in light of that revie*, $oe for*ard *ith
appropriate legislative proposals3
(20!) +he inorit# interests arising fro interediate finan$ial holding $opanies that are
su!9e$t to the re6uireents of this )egulation on a su!$onsolidated !asis a# also !e
eligi!le (*ithin the relevant liits) to the Coon E6uit# +ier 4 of the group on a
$onsolidated !asis, as the Coon E6uit# +ier 4 $apital of an interediate finan$ial
holding $opan# attri!uta!le to inorit# interests and the part of that sae $apital
attri!uta!le to the parent $opan# support !oth pari passu the losses of their
su!sidiaries *hen the# o$$ur7
)-8/ 2#e provisions of t#is Re"ulation respect t#e principle of proportionalit6* #avin" re"ar% in
particular to t#e %iversit6 in siLe an% scale of operations an% to t#e ran"e of activities of
cre%it institutions an% investment firms7 Respect of t#e principle of proportionalit6 also
means t#at t#e simplest possile ratin" proce%ures* even in t#e 0nternal Ratin"s Dase%
,pproac# )M0RD ,pproac#N/* are reco"nise% for retail e8posures7
Me!er "tates should ensure that the re6uireents laid do*n in this )egulation appl#
in a anner proportional to the nature, s$ale and $ople5it# of the risks asso$iated
*ith an institutionGs !usiness odel and a$tivities3
+he Coission should ensure that delegated and ipleenting a$ts, regulator#
te$hni$al standards and ipleenting te$hni$al standards are $onsistent *ith the
prin$iple of proportionalit#, so as to guarantee that this )egulation is applied in a
proportional anner3 EBA should therefore ensure that all regulator# and
ipleenting te$hni$al standards are drafted in su$h a *a# that the# are $onsistent *ith
and uphold the prin$iple of proportionalit#3
Copetent authorities should pa# appropriate attention to $ases *here the# suspe$t that
the inforation *as regarded as proprietar# or $onfidential for the purpose of avoiding
dis$losure of that inforation3 Although an institution a# opt not to dis$lose
inforation as the inforation is regarded as proprietar# or $onfidential, the fa$t of
inforation !eing regarded as proprietar# or $onfidential does not dis$harge lia!ilit#
arising fro non=dis$losure of that inforation *hi$h is found to have aterial effe$t3
)-9/ 2#e Mevolutionar6N nature of t#is Re"ulation enales cre%it institutions an% investment
firms to c#oose amon"st t#ree approac#es of var6in" comple8it67 0n or%er to allo1
especiall6 small cre%it institutions an% investment firms to opt for t#e more ris5;sensitive
0RD ,pproac#* t#e relevant provisions s#oul% e rea% as suc# t#at e8posure classes inclu%e
all e8posures t#at are* %irectl6 or in%irectl6* put on a par 1it# t#em t#rou"#out t#is
Re"ulation7 ,s a "eneral rule* t#e competent aut#orities s#oul% not %iscriminate et1een
t#e t#ree approac#es 1it# re"ar% to t#e Supervisor6 Revie1 Process* i7e7 cre%it institutions
an% investment firms operatin" accor%in" to t#e provisions of t#e Stan%ar%ise% ,pproac#
s#oul% not for t#at reason alone e supervise% on a stricter asis7
)3./ 0ncrease% reco"nition s#oul% e "iven to tec#ni&ues of cre%it ris5 miti"ation 1it#in a
frame1or5 of rules %esi"ne% to ensure t#at solvenc6 is not un%ermine% 6 un%ue
reco"nition7 2#e relevant 9emer States( current customar6 an5in" collateral for
miti"atin" cre%it ris5s s#oul% 1#erever possile e reco"nise% in t#e Stan%ar%ise%
,pproac#* ut also in t#e ot#er approac#es7
)31/ 0n or%er to ensure t#at t#e ris5s an% ris5 re%uctions arisin" from cre%it institutions an%
investment firms( securitisation activities an% investments are appropriatel6 reflecte% in t#e
capital re&uirements of cre%it institutions an% investment firms it is necessar6 to inclu%e
rules provi%in" for a ris5;sensitive an% pru%entiall6 soun% treatment of suc# activities an%
investments7 +o this end, a $lear and en$opassing definition of se$uritisation is needed
that $aptures an# transa$tion or s$hee *here!# the $redit risk asso$iated *ith an
e5posure or pool of e5posures is tran$hed3 An e5posure that $reates a dire$t pa#ent
o!ligation for a transa$tion or s$hee used to finan$e or operate ph#si$al assets should
not !e $onsidered an e5posure to a se$uritisation, even if the transa$tion or s$hee has
pa#ent o!ligations of different seniorit#3
(C4a) Alongside surveillan$e aied at ensuring finan$ial sta!ilit#, there is a need for
enhan$ing e$haniss designed to develop an effe$tive surveillan$e and prevention of
potential !u!!les in order to ensure optiu allo$ation of $apital in the light of the
a$roe$onoi$ $hallenges and o!9e$tives, in parti$ular *ith respe$t to long ter
investent in the real e$ono#3
)3-/ Operational ris5 is a si"nificant ris5 face% 6 cre%it institutions an% investment firms
re&uirin" covera"e 6 o1n fun%s7 0t is essential to ta5e account of t#e %iversit6 of cre%it
institutions an% investment firms in t#e 4nion 6 provi%in" alternative approac#es to t#e
calculation of operational ris5 re&uirements incorporatin" %ifferent levels of ris5;
sensitivit6 an% re&uirin" %ifferent %e"rees of sop#istication7 2#ere s#oul% e appropriate
incentives for cre%it institutions an% investment firms to move to1ar%s t#e more ris5;
sensitive approac#es7 0n vie1 of t#e emer"in" state of t#e art for t#e measurement an%
mana"ement of operational ris5 t#e rules s#oul% e 5ept un%er revie1 an% up%ate% as
appropriate inclu%in" in relation to t#e c#ar"es for %ifferent usiness lines an% t#e
reco"nition of ris5 miti"ation tec#ni&ues7 Particular attention s#oul% e pai% in t#is re"ar%
to ta5in" insurance into account in t#e simple approac#es to calculatin" capital
re&uirements for operational ris57
)33/ 2#e monitorin" an% control of a cre%it institution(s e8posures s#oul% e an inte"ral part of
its supervision7 2#erefore* e8cessive concentration of e8posures to a sin"le client or "roup
of connecte% clients ma6 result in an unacceptale ris5 of loss7 Suc# a situation can e
consi%ere% pre!u%icial to t#e solvenc6 of a cre%it institution7
)34/ 0n %eterminin" t#e e8istence of a "roup of connecte% clients an% t#us e8posures
constitutin" a sin"le ris5* it is also important to ta5e into account ris5s arisin" from a
common source of si"nificant fun%in" provi%e% 6 t#e cre%it institution or investment firm
itself* its financial "roup or its connecte% parties7
)3+/ ?#ile it is %esirale to ase t#e calculation of t#e e8posure value on t#at provi%e% for t#e
purposes of o1n fun%s re&uirements* it is appropriate to a%opt rules for t#e monitorin" of
lar"e e8posures 1it#out appl6in" ris5 1ei"#tin"s or %e"rees of ris57 9oreover* t#e cre%it
ris5 miti"ation tec#ni&ues applie% in t#e solvenc6 re"ime 1ere %esi"ne% 1it# t#e
assumption of a 1ell;%iversifie% cre%it ris57 0n t#e case of lar"e e8posures %ealin" 1it#
sin"le name concentration ris5* cre%it ris5 is not 1ell;%iversifie%7 2#e effects of t#ose
tec#ni&ues s#oul% t#erefore e su!ect to pru%ential safe"uar%s7 0n t#is conte8t* it is
necessar6 to provi%e for an effective recover6 of cre%it protection for t#e purposes of lar"e
e8posures7
)3=/ Since a loss arisin" from an e8posure to a cre%it institution or an investment firm can e as
severe as a loss from an6 ot#er e8posure* suc# e8posures s#oul% e treate% an% reporte% in
t#e same manner as an6 ot#er e8posures7 An alternative &uantitative limit #as een
intro%uce% to alleviate t#e %isproportionate impact of suc# an approac# on smaller
institutions7 0n a%%ition* ver6 s#ort;term e8posures relate% to mone6 transmission inclu%in"
t#e e8ecution of pa6ment services* clearin"* settlement an% custo%6 services to clients are
e8empt to facilitate t#e smoot# functionin" of financial mar5ets an% of t#e relate%
infrastructure7 2#ose services cover* for e8ample* t#e e8ecution of cas# clearin" an%
settlement an% similar activities to facilitate settlement7 2#e relate% e8posures inclu%e
e8posures 1#ic# mi"#t not e foreseeale an% are t#erefore not un%er t#e full control of a
cre%it institution* inter alia* alances on inter;an5 accounts resultin" from client
pa6ments* inclu%in" cre%ite% or %eite% fees an% interest* an% ot#er pa6ments for client
services* as 1ell as collateral "iven or receive%7
)3>/ 0t is important t#at t#e interests of un%erta5in"s t#at Mre;pac5a"eN loans into tra%ale
securities an% ot#er financial instruments )ori"inators or sponsors/ an% un%erta5in"s t#at
invest in t#ese securities or instruments )investors/ are ali"ne%7 2o ac#ieve t#is* t#e
ori"inator or sponsor s#oul% retain a si"nificant interest in t#e un%erl6in" assets7 0t is
t#erefore important for t#e ori"inators or t#e sponsors to retain e8posure to t#e ris5 of t#e
loans in &uestion7 9ore "enerall6* securitisation transactions s#oul% not e structure% in
suc# a 1a6 as to avoi% t#e application of t#e retention re&uirement* in particular t#rou"#
an6 fee or premium structure or ot#7 Suc# retention s#oul% e applicale in all situations
1#ere t#e economic sustance of a securitisation is applicale* 1#atever le"al structures or
instruments are use% to otain t#is economic sustance7 0n particular 1#ere cre%it ris5 is
transferre% 6 securitisation* investors s#oul% ma5e t#eir %ecisions onl6 after con%uctin"
t#orou"# %ue %ili"ence* for 1#ic# t#e6 nee% a%e&uate information aout t#e
securitisations7
)38/ +he $urrent frae*ork also foresees that there s#oul% e no multiple applications of t#e
retention re&uirement7 3or an6 "iven securitisation it suffices t#at onl6 one of t#e
ori"inator* t#e sponsor or t#e ori"inal len%er is su!ect to t#e re&uirement7 Similarl6* 1#ere
securitisation transactions contain ot#er securitisations as an un%erl6in"* t#e retention
re&uirement s#oul% e applie% onl6 to t#e securitisation 1#ic# is su!ect to t#e investment7
Purc#ase% receivales s#oul% not e su!ect to t#e retention re&uirement if t#e6 arise from
corporate activit6 1#ere t#e6 are transferre% or sol% at a %iscount to finance suc# activit67
Competent aut#orities s#oul% appl6 t#e ris5 1ei"#t in relation to non;compliance 1it# %ue
%ili"ence an% ris5 mana"ement oli"ations in relation to securitisation for non;trivial
reac#es of policies an% proce%ures 1#ic# are relevant to t#e anal6sis of t#e un%erl6in"
ris5s7 +he Coission should also revie* *hether avoidan$e of ultiple appli$ations of
the retention re6uireents $ould !e $ondu$ive to pra$ti$es $ir$uventing the retention
re6uireent and *hether the rules on se$uritisations are enfor$ed effe$tivel# !# the
supervisor# authorities3
)39/ Due %ili"ence s#oul% e use% in or%er to properl6 A assess t#e ris5s arisin" from
securitisation e8posures for ot# t#e tra%in" oo5 an% t#e non;tra%in" oo57 0n a%%ition*
%ue %ili"ence oli"ations nee% to e proportionate7 Due %ili"ence proce%ures s#oul%
contriute to uil%in" "reater confi%ence et1een ori"inators* sponsors an% investors7 0t is
t#erefore %esirale t#at relevant information concernin" t#e %ue %ili"ence proce%ures is
properl6 %isclose%7
)4./ ?#en an institution A incurs an e8posure to its o1n parent un%erta5in" or to ot#er
susi%iaries of its parent un%erta5in"* particular pru%ence is necessar67 2#e mana"ement of
su$h e8posures incurre% 6 A institutions As#oul% e carrie% out in a full6 autonomous
manner* in accor%ance 1it# t#e principles of soun% mana"ement* 1it#out re"ar% to an6
ot#er consi%erations7 +his is espe$iall# iportant in $ase of large e5posures and in $ases
not sipl# related to intra=group adinistration or usual intra=group transa$tions3
"upervisor# authorities should pa# parti$ular attention to su$h intra=group e5posures7
Suc# stan%ar%s nee% not* #o1ever e applie% 1#ere t#e parent un%erta5in" is a financial
#ol%in" compan6 or a cre%it institution or 1#ere t#e ot#er susi%iaries are eit#er cre%it or
financial institutions or un%erta5in"s offerin" ancillar6 services* provi%e% t#at all suc#
un%erta5in"s are covere% 6 t#e supervision of t#e cre%it institution on a consoli%ate%
asis7
)41/ 0n vie1 of t#e ris5;sensitivit6 of t#e rules relatin" to capital re&uirements* it is %esirale to
5eep un%er revie1 1#et#er t#ese #ave si"nificant effects on t#e economic c6cle7 2#e
Commission* ta5in" into account t#e contriution of t#e $uropean Central Dan5 s#oul%
report on t#ese aspects to t#e $uropean Parliament an% to t#e Council7
)4-/ 2#e capital re&uirements for commo%it6 %ealers* inclu%in" t#ose %ealers currentl6 e8empt
from t#e re&uirements of Directive -..4/39/$C* s#oul% e revie1e%7
)43/ 2#e "oal of lieralisation of "as an% electricit6 mar5ets is ot# economicall6 an%
politicall6 important for t#e 2nion7 ?it# t#is in min%* t#e capital re&uirements an% ot#er
pru%ential rules to e applie% to firms active in t#ose mar5ets s#oul% e proportionate an%
s#oul% not un%ul6 interfere 1it# ac#ievement of t#e "oal of lieralisation7 2#is "oal
s#oul%* in particular* e 5ept in min% 1#en revie1s of t#is Re"ulation are carrie% out7
)44/ Cre%it institutions an% investment firms investin" in re;securitisations s#oul% e8ercise %ue
%ili"ence also 1it# re"ar% to t#e un%erl6in" securitisations an% t#e non;securitisation
e8posures ultimatel6 un%erl6in" t#e former7 Cre%it institutions an% investment firms
s#oul% assess 1#et#er e8posures in t#e conte8t of asset;ac5e% commercial paper
pro"rammes constitute re;securitisation e8posures* inclu%in" t#ose in t#e conte8t of
pro"rammes 1#ic# ac&uire senior tranc#es of separate pools of 1#ole loans 1#ere none of
t#ose loans is a securitisation or re;securitisation e8posure* an% 1#ere t#e first;loss
protection for eac# investment is provi%e% 6 t#e seller of t#e loans7 0n t#e latter situation*
a pool; specific li&ui%it6 facilit6 s#oul% "enerall6 not e consi%ere% a re;securitisation
e8posure ecause it represents a tranc#e of a sin"le asset pool )t#at is* t#e applicale pool
of 1#ole loans/ 1#ic# contains no securitisation e8posures7 D6 contrast* a pro"ramme;
1i%e cre%it en#ancement coverin" onl6 some of t#e losses aove t#e seller;provi%e%
protection across t#e various pools "enerall6 1oul% constitute a tranc#in" of t#e ris5 of a
pool of multiple assets containin" at least one securitisation e8posure* an% 1oul% t#erefore
e a re;securitisation e8posure7 Bevert#eless* if suc# a pro"ramme fun%s itself entirel6
1it# a sin"le class of commercial paper* an% if eit#er t#e pro"ramme;1i%e cre%it
en#ancement is not a re;securitisation or t#e commercial paper is full6 supporte% 6 t#e
sponsorin" cre%it institution or investment firm* leavin" t#e commercial paper investor
effectivel6 e8pose% to t#e %efault ris5 of t#e sponsor instea% of t#e un%erl6in" pools or
assets* t#en t#at commercial paper "enerall6 s#oul% not e consi%ere% a re;securitisation
e8posure7
)4+/ 2#e provisions on pru%ent valuation for t#e tra%in" oo5 s#oul% appl6 to all instruments
measure% at fair value* 1#et#er in t#e tra%in" oo5 or non; tra%in" oo5 of cre%it
institutions an% investment firms7 0t s#oul% e clarifie% t#at* 1#ere t#e application of
pru%ent valuation 1oul% lea% to a lo1er carr6in" value t#an actuall6 reco"nise% in t#e
accountin"* t#e asolute value of t#e %ifference s#oul% e %e%ucte% from o1n fun%s7
)4=/ Cre%it institutions an% investment firms s#oul% #ave a c#oice 1#et#er to appl6 a capital
re&uirement to or %e%uct from Common $&uit6 2ier 1 items t#ose securitisation positions
t#at receive a 1 -+. O ris5 1ei"#t un%er t#is Re"ulation* irrespective of 1#et#er t#e
positions are in t#e tra%in" or t#e non;tra%in" oo57
)4>/ Ori"inator or sponsor institutions s#oul% not e ale to circumvent t#e pro#iition of
implicit support 6 usin" t#eir tra%in" oo5s in or%er to provi%e suc# support7
)48/ Directive -..=/48/$C intro%uce% a preferential ris5 1ei"#t un%er t#e stan%ar%ise%
approac# for e8posures to small or me%ium siLe% enterprises or natural persons an% t#e
possiilit6 for institutions to appl6 internal ratin"s ase% approac#es 1#ere t#e6
t#emselves estimate t#e ris5 1ei"#t* reflectin" t#e soun%ness of t#eir o1n particular
un%er1ritin" criteria7 2#e preferential ris5 1ei"#ts s#oul% continue to e in place also
un%er t#is Re"ulation7 Co1ever* t#e possile merits of lo1erin" t#e ris5 1ei"#ts or
e8pan%in" t#eir application to more e8posures s#oul% e revie1e% 1it#in 42 mont#s after
t#e entr6 into force of t#is Re"ulation7 Suc# revie1 s#oul% e evi%ence;ase% an% ta5e into
account reliale %ata on cre%it losses on e8posures to small or me%ium siLe% enterprises or
natural persons %urin" a full economic c6cle7 2#e impact on len%in" to consumers s#oul%
e "iven particular attention in t#e conte8t of t#is revie17
)49/ ?it#out pre!u%ice to t#e %isclosures e8plicitl6 re&uire% 6 t#is Re"ulation* t#e aim of t#e
%isclosure re&uirements s#oul% e to provi%e mar5et participants 1it# accurate an%
compre#ensive information re"ar%in" t#e ris5 profile of in%ivi%ual institutions7 Cre%it
institutions an% investment firms s#oul% t#erefore e re&uire% to %isclose a%%itional
information not e8plicitl6 liste% in t#is Re"ulation 1#ere suc# %isclosure is necessar6 to
meet t#at aim7 At the sae tie, $opetent authorities should pa# appropriate attention
to $ases *here the# suspe$t that inforation *as regarded as proprietar# or $onfidential
!# an institution for the purpose of avoiding dis$losure of that inforation3
)+./ ?#ere an e8ternal cre%it assessment for a securitisation position incorporates t#e effect of
cre%it protection provi%e% 6 t#e investin" institution itself* t#e institution s#oul% not e
ale to enefit from t#e lo1er ris5 1ei"#t resultin" from t#at protection7 +he se$uritisation
position s#oul% not !e dedu$ted from capital Aif t#ere are ot#er 1a6s to %etermine a ris5
1ei"#t in line 1it# t#e actual ris5 of t#e position *hi$h does not take this cre%it protection
into a$$ount3
)+1/ Given t#eir recent 1ea5 performance* t#e stan%ar%s for internal mo%els to calculate mar5et
ris5 capital re&uirements s#oul% e stren"t#ene%7 0n particular* t#eir capture of ris5s s#oul%
e complete% re"ar%in" cre%it ris5s in t#e tra%in" oo57 3urt#ermore* capital c#ar"es
s#oul% inclu%e a component a%e&uate to stress con%itions to stren"t#en capital
re&uirements in vie1 of %eterioratin" mar5et con%itions an% in or%er to re%uce t#e potential
for pro;c6clicalit67 Cre%it institutions an% investment firms s#oul% also carr6 out reverse
stress tests to e8amine 1#at scenarios coul% c#allen"e t#e viailit6 of t#e institution unless
t#e6 can prove t#at suc# a test is %ispensale7 Given t#e recent particular %ifficulties of
treatin" securitisation positions usin" approac#es ase% on internal mo%els* t#e ailit6 of
cre%it institutions an% investment firms to mo%el securitisation ris5s in t#e tra%in" oo5
s#oul% e limite% an% a stan%ar%ise% capital c#ar"e for securitisation positions in t#e
tra%in" oo5 s#oul% e re&uire% 6 %efault7
)+-/ 2#is Re"ulation la6s %o1n limite% e8ceptions for certain correlation tra%in" activities* in
accor%ance 1it# 1#ic# an institution ma6 e permitte% 6 its supervisor to calculate a
compre#ensive ris5 capital c#ar"e su!ect to strict re&uirements7 0n suc# cases t#e
institution s#oul% e re&uire% to su!ect t#ose activities to a capital c#ar"e e&ual to t#e
#i"#er of t#e capital c#ar"e in accor%ance 1it# t#at internall6 %evelope% approac# an% 8 O
of t#e capital c#ar"e for specific ris5 in accor%ance 1it# t#e stan%ar%ise% measurement
met#o%7 0t s#oul% not e re&uire% to su!ect t#ose e8posures to t#e incremental ris5 c#ar"e
ut t#e6 s#oul% e incorporate% into ot# t#e value;at;ris5 measures an% t#e stresse% value;
at;ris5 measures7
)+3/ 0n li"#t of t#e nature an% ma"nitu%e of une8pecte% losses e8perience% 6 cre%it institutions
an% investment firms %urin" t#e financial an% economic crisis* it is necessar6 to improve
furt#er t#e &ualit6 an% #armonisation of o1n fun%s t#at cre%it institutions an% investment
firms are re&uire% to #ol%7 2#is s#oul% inclu%e t#e intro%uction of a ne1 %efinition of t#e
core elements of capital availale to asor une8pecte% losses as t#e6 arise* en#ancements
to t#e %efinition of #6ri% capital an% uniform pru%ential a%!ustments to o1n fun%s7 0t is
also necessar6 to raise si"nificantl6 t#e level of o1n fun%s* inclu%in" ne1 capital ratios
focusin" on t#e core elements of o1n fun%s availale to asor losses as t#e6 arise7 &t is
e5pe$ted that $redit institutions or investent firs *hose shares are listed on an E2
regulated arket should eet their $apital re6uireents regarding the $ore eleents of
$apital *ith these listed $oon shares that eet a stri$t set of $riteria for the $ore
$apital instruents and the dis$losed reserves of the institution onl#3 &n order to
ade6uatel# take into a$$ount the diversit# of legal fors $redit institutions and
investent firs in the European 2nion are operating under, the stri$t set of $riteria for
the $ore $apital instruents *ill ensure that $ore $apital instruents for institutions not
listed on an E2 regulated arket are of highest 6ualit#3 +his should not prevent
institutions fro pa#ing, on shares, that have differentiated or no voting rights,
distri!utions that are a ultiple of those paid on shares *hi$h have relativel# higher
levels of voting rights, provided that, irrespe$tive of the level of voting rights, the stri$t
$riteria for Coon E6uit# +ier 4 instruents are et in$luding those relating to the
fle5i!ilit# of pa#ents, and provided that in $ase a distri!ution is paid it is to !e paid on
all shares issued !# the institution3
(@Ca) +rade finan$e e5posures are diverse in nature !ut share $hara$teristi$s su$h as !eing
sall in value and short in duration and having an identifia!le sour$e of repa#ent3
+he# are underpinned !# oveents of goods and servi$es that support the real
e$ono# and in ost $ases help sall $opanies in their da#=to=da# needs, there!#
$reating e$onoi$ gro*th and 9o! opportunities3 &nflo*s and outflo*s are usuall#
at$hed and li6uidit# risk is therefore liited3
(@Caa) &t is appropriate that EBA keeps an up=to=date list of all of the fors of $apital
instruents in ea$h Me!er "tate that 6ualif# as CE+4 instruents3 EBA should
reove fro that list non=state aid instruents issued after the date of entr# into for$e of
this )egulation not eeting the $riteria spe$ified in this )egulation and should pu!li$l#
announ$e su$h reoval3 ;here instruents reoved !# EBA fro the list $ontinue to
!e re$ognised after EBA7s announ$eent, EBA should full# e5er$ise its po*ers, in
parti$ular those $onferred !# Arti$le 40 of )egulation 4:>CD2:4: $on$erning !rea$hes of
2nion la*3 &t is re$alled that a three=step e$hanis applies for a proportionate
response to instan$es of in$orre$t or insuffi$ient appli$ation of 2nion la*, *here!#, as a
first step, EBA is epo*ered to investigate alleged in$orre$t or insuffi$ient appli$ation
of 2nion la* o!ligations !# national authorities in their supervisor# pra$ti$e, $on$luded
!# a re$oendation3 "e$ond, *here the $opetent national authorit# does not follo*
the re$oendation, the Coission is epo*ered to issue a foral opinion taking
into a$$ount the EBAs re$oendation, re6uiring the $opetent authorit# to take the
a$tions ne$essar# to ensure $oplian$e *ith 2nion la*3 +hird, to over$oe e5$eptional
situations of persistent ina$tion !# the $opetent authorit# $on$erned, the EBA is
epo*ered, as a last resort, to adopt de$isions addressed to individual finan$ial
institutions3 Moreover, it is re$alled that, under Arti$le 2@A +1E2, *here the
Coission $onsiders that a Me!er "tate has failed to fulfil an o!ligation under the
+reaties, it has the po*er to !ring the atter !efore the Court of Eusti$e of the European
2nion3
(@C!) +his )egulation should not affe$t the a!ilit# of $opetent authorities to aintain pre=
approval pro$esses regarding the $ontra$ts governing Additional +ier 4 and +ier 2
$apital instruents3 &n these $ases su$h $apital instruents a# onl# !e $oputed
to*ards the institution7s Additional +ier 4 $apital or +ier 2 $apital on$e the# have
su$$essfull# $opleted these approval pro$esses3
)+4/ 3or t#e purposes of stren"t#enin" mar5et %iscipline an% en#ancin" financial stailit6 it is
necessar6 to intro%uce more %etaile% re&uirements for %isclosure of t#e form an% nature of
re"ulator6 capital an% pru%ential a%!ustments ma%e in or%er to ensure t#at investors an%
depositors are sufficientl6 1ell informe% aout t#e solvenc6 of cre%it institutions an%
investment firms3
(@Ba) &t is further ne$essar# for $opetent authorities to have kno*ledge of the level, at least
in aggregate ters, of repur$hase agreeents, se$urities lending and all fors of
en$u!ran$e of assets3 "u$h inforation should !e reported to the $opetent authorit#3
1or the purposes of strengthening arket dis$ipline, there should !e ore detailed
re6uireents for dis$losure of repur$hase agreeents and se$ured funding7
)++/ 2#e ne1 %efinition of capital an% re"ulator6 capital re&uirements s#oul% e intro%uce% in a
manner t#at ta5es account of t#e fact t#at t#ere are %ifferent national startin" points an%
circumstances* 1it# initial variance aroun% t#e ne1 stan%ar%s re%ucin" over t#e transition
perio%7 0n or%er to ensure t#e appropriate continuit6 in t#e level of o1n fun%s* instruents
issued *ithin the $onte5t of a re$apitalisation easure pursuant to "tate aid=rules and
issued prior to the date of appli$ation of the )egulation 1ill e "ran%fat#ere% for t#e
e8tent of t#e transition perio%3
)elian$e on state aid should !e redu$ed as u$h as possi!le in the future3 Ho*ever, to
the e5tent that state aid proves ne$essar# in $ertain situations, the )egulation should
provide for a frae*ork to deal *ith su$h situations3 &n parti$ular, the )egulation
should spe$if# *hat should !e the treatent for o*n funds instruents issued *ithin the
$onte5t of a re$apitalisation easure pursuant to "tate aid=rules3 +he possi!ilit# for
institutions to !enefit fro su$h treatent should !e su!9e$t to stri$t $onditions3
1urtherore, to the e5tent that su$h treatent allo*s for deviations fro the ne*
$riteria on the 6ualit# of o*n funds instruents those deviations should !e liited to the
largest e5tent possi!le3
+he treatent for e5isting $apital instruents issued *ithin the $onte5t of a
re$apitalisation easure pursuant to "tate aid=rules, should $learl# distinguish !et*een
those $apital instruents that $opl# *ith the re6uireents of this )egulation and those
that do not3 Appropriate transitional provisions for the latter $ase ust therefore !e laid
do*n in this )egulation7
)+=/ Directive -..=/48/$C re&uire% cre%it institutions to provi%e o1n fun%s t#at are at least
e&ual to specifie% minimum amounts until 31 Decemer -.117 0n t#e li"#t of t#e
continuin" effects of t#e financial crisis in t#e an5in" sector an% t#e e8tension of t#e
transitional arran"ements for capital re&uirements a%opte% 6 t#e DCDS* it is appropriate
to reintro%uce a lo1er limit for a limite% perio% of time until sufficient amounts of o1n
fun%s #ave een estalis#e% in accor%ance 1it# t#e transitional arran"ements for o1n
fun%s provi%e% for in t#is Re"ulation t#at 1ill e pro"ressivel6 p#ase% in from the date of
appli$ation to -.197
(@?a) 3or "roups 1#ic# inclu%e si"nificant an5in" or investment usiness an% insurance
usiness* Directive -..-/8>/$C on 3inancial Con"lomerates* provi%es specific rules to
a%%ress suc# (%oule countin"( of capital7 Directive -..-/8>/$C is ase% on internationall6
a"ree% principles for %ealin" 1it# ris5 across sectors7 2#is proposal stren"t#ens t#e 1a6
t#ese finan$ial $ongloerates rules s#all appl6 to an5 an% investment firm "roups*
ensurin" t#eir roust an% consistent application7 ,n6 furt#er c#an"es t#at are necessar6
1ill e a%%resse% in t#e revie1 of Directive -..-/8>/$C* e5pe$ted in 2:4@3
)+>/ 2#e financial crisis #i"#li"#te% t#at cre%it institutions an% investment firms massivel6
un%erestimate% t#e level of counterpart6 cre%it ris5 associate% 1it# over;t#e;counter
)O2C/ %erivatives7 2#is prompte% t#e G-. Fea%ers* in Septemer -..9* to call for more
O2C %erivatives to e cleare% t#rou"# a Central Counterpart6 )CCP/7 3urt#ermore* t#e6
as5e% to su!ect t#ose O2C %erivatives t#at coul% not e cleare% centrall6 to #i"#er o1n
fun%s re&uirements in or%er to properl6 reflect t#e #i"#er ris5s associate% 1it# t#em7
)+8/ 3ollo1in" t#e G;-. Fea%ers( call* t#e DCDS* as part of Dasel 000* materiall6 c#an"e% t#e
counterpart6 cre%it ris5 re"ime7 Dasel 000 is e8pecte% to si"nificantl6 increase t#e o1n fun%
re&uirements associate% 1it# cre%it institutions( an% investment firms( O2C %erivatives an%
securities financin" transactions an% to create important incentives for cre%it institutions
an% investment firms to use CCPs7 Dasel 000 is also e8pecte% to provi%e furt#er incentives
to stren"t#en t#e ris5 mana"ement of counterpart6 cre%it e8posures an% to revise t#e
current re"ime for t#e treatment of counterpart6 cre%it ris5 e8posures to CCPs7
)+9/ 0nstitutions s#oul% #ol% a%%itional o1n fun%s %ue to cre%it valuation a%!ustment ris5
arisin" from O2C %erivatives7 0nstitutions s#oul% also appl6 a #i"#er asset value
correlation in t#e calculation of t#e o1n fun% re&uirements for counterpart6 cre%it ris5
e8posures arisin" from O2C %erivatives an% securities;financin" transactions to certain
financial institutions7 Cre%it institutions an% investment firms s#oul% also !e re6uired to
consi%eral6 improve measurement an% mana"ement of counterpart6 cre%it ris5 6 etter
a%%ressin" 1ron";1a6 ris5* #i"#l6 levera"e% counterparties an% collateral* accompanie%
6 t#e correspon%in" en#ancements in t#e areas of ac5;testin" an% stress testin"7
)=./ 2ra%e e8posures to CCPs usuall6 enefit from t#e multilateral nettin" an% loss;s#arin"
mec#anism provi%e% 6 CCPs7 ,s a conse&uence* t#e6 involve a ver6 lo1 counterpart6
cre%it ris5 an% s#oul% t#erefore e su!ect to a ver6 lo1 o1n fun%s re&uirement7 ,t t#e
same time* t#is re&uirement s#oul% e positive in or%er to ensure t#at cre%it institutions an%
investment firms trac5 an% monitor t#eir e8posures to CCPs as part of "oo% ris5
mana"ement an% to reflect t#at even tra%e e8posures to CCPs are not ris5;free7
)=1/ , CCP(s %efault fun% is a mec#anism t#at allo1s t#e s#arin" )mutualisation/ of losses
amon" t#e CCP(s clearin" memers7 0t is use% in case t#e losses incurre% 6 t#e CCP
follo1in" t#e %efault of a clearin" memer are "reater t#an t#e mar"ins an% %efault fun%
contriutions provi%e% 6 t#at clearin" memer an% an6 ot#er %efence t#e CCP ma6 use
efore recurrin" to t#e %efault fun% contriutions of t#e remainin" clearin" memers7 0n
vie1 of t#is* t#e ris5 of loss associate% 1it# e8posures from %efault fun% contriutions is
#i"#er t#an t#e one associate% 1it# tra%e e8posures7 2#erefore* t#is t6pe of e8posures
s#oul% e su!ect to a #i"#er o1n fun%s re&uirement7
)=-/ 2#e P#6pot#etical capitalQ of a CCP s#oul% e a variale nee%e% to %etermine t#e o1n
fun%s re&uirement for a clearin" memerNs e8posures from its contriutions to a CCPNs
%efault fun%7 0t s#oul% not e un%erstoo% as an6t#in" else7 0n particular* it s#oul% not e
un%erstoo% as t#e amount of capital t#at a CCP is re&uire% to #ol% 6 its competent
aut#orit67
)=3/ 2#e revie1 of t#e treatment of counterpart6 cre%it ris5* an% in particular puttin" in place
#i"#er o1n fun%s re&uirements for ilateral %erivative contracts in or%er to reflect t#e
#i"#er ris5 t#at suc# contracts pose to t#e financial s6stem* forms an inte"ral part of t#e
CommissionNs efforts to ensure efficient* safe an% soun% %erivatives mar5ets7
Conse&uentl6* t#is Re"ulation complements ARe"ulation E2 no ?BAD2:42 on O2C
%erivatives* central counterparties an% tra%e repositories A7
(?Ca) +he Coission should revie* the rules for large e5posures !# C4 (e$e!er 2:4@ at the
latest3 .ending the out$oe of this revie*, Me!er "tates should $ontinue !eing allo*ed
to de$ide on the e5eption of $ertain large e5posures fro those rules for a suffi$ientl#
long transitional period3 Building on the *ork done in the $onte5t of the preparation and
negotiation of dire$tive 2::>D444DEC and taking into a$$ount international and
European developents on these issues, the Coission shall report on *hether
e5eptions in Arti$le CA>(2) should $ontinue to !e applied in a dis$retionar# or in a
ore general *a# and on *hether the risks related to those e5posures are addressed !#
other effe$tive eans laid do*n in this )egulation3
(?C!) &n order to ensure that e5eptions to e5posures !# $opetent authorities do not
9eopardise the $oheren$e of the unifor rules esta!lished !# this )egulation on a
peranent !asis, after a transitional period, and in the a!sen$e of an# out$oe of the
a!ove entioned revie*, the $opetent authorities should $onsult EBA on *hether or
not it is appropriate to $ontinue aking use of this possi!ilit#3
)=4/ 2#e 6ears prece%in" t#e financial crisis 1ere c#aracterise% 6 an e8cessive uil% up in
cre%it institutions( an% investment firms( e8posures in relation to t#eir o1n fun%s
)levera"e/7 Durin" t#e financial crisis* losses an% t#e s#orta"e of fun%in" force% cre%it
institutions an% investment firms to re%uce si"nificantl6 t#eir levera"e over a s#ort perio%
of time7 2#is amplifie% %o1n1ar% pressures on asset prices* causin" furt#er losses for ot#
cre%it institutions an% investment firms 1#ic# in turn le% to furt#er %eclines in t#eir o1n
fun%s7 2#e ultimate results of t#is ne"ative spiral 1ere a re%uction in t#e availailit6 of
cre%it to t#e real econom6 an% a %eeper an% lon"er crisis7
)=+/ Ris5;ase% o1n fun%s re&uirements are essential to ensure sufficient o1n fun%s to cover
une8pecte% losses7 Co1ever* t#e crisis #as s#o1n t#at t#ese re&uirements alone are not
sufficient to prevent cre%it institutions an% investment firms from ta5in" on e8cessive an%
unsustainale levera"e ris57
)==/ 0n Septemer -..9* G;-. lea%ers committe% to %evelopin" internationall6;a"ree% rules to
%iscoura"e an e8cessive levera"e7 2o t#is en%* t#e6 supporte% t#e intro%uction of a
levera"e ratio as a supplementar6 measure to t#e Dasel 00 frame1or57
)=>/ 0n Decemer -.1.* t#e DCDS pulis#e% "ui%elines %efinin" t#e met#o%olo"6 for
calculatin" t#e levera"e ratio7 2#ese rules foresee an oservation perio% t#at 1ill run from
1 <anuar6 -.13 until 1 <anuar6 -.1> %urin" 1#ic# t#e levera"e ratio* its components an%
its e#aviour relative to t#e ris5;ase% re&uirement 1ill e monitore%7 Dase% on t#e results
of t#e oservation perio% t#e DCDS inten%s to ma5e an6 final a%!ustments to t#e %efinition
an% caliration of t#e levera"e ratio in t#e first #alf of -.1>* 1it# a vie1 to mi"ratin" to a
in%in" re&uirement on 1 <anuar6 -.18 ase% on appropriate revie1 an% caliration7 2#e
DCDS "ui%elines also foresee t#e %isclosure of t#e levera"e ratio an% its components
startin" from 1 <anuar6 -.1+7
)=8/ , levera"e ratio is a ne1 re"ulator6 an% supervisor6 tool for t#e 4nion7 0n line 1it#
international a"reements* it s#oul% e intro%uce% first as an a%%itional feature t#at can e
applie% on in%ivi%ual institutions at t#e %iscretion of supervisor6 aut#orities7 Reportin"
oli"ations for institutions 1oul% allo1 appropriate revie1 an% caliration* 1it# a vie1 to
mi"ratin" to a in%in" measure in -.187
)=9/ ?#en revie1in" t#e impact of t#e levera"e ratio on %ifferent usiness mo%els* particular
attention s#oul% e pai% to usiness mo%els 1#ic# are consi%ere% to entail lo1 ris5* suc# as
mort"a"e len%in" an% specialise% len%in" 1it# re"ional "overnments* local aut#orities or
pulic sector entities7
EBA, on the !asis of data re$eived and the findings of the supervisor# revie* during the
o!servation period, should in $ooperation *ith $opetent authorities develop a
$lassifi$ation of !usiness odels and risks3 Based on appropriate anal#sis, also taking
into a$$ount histori$al data or stress s$enarios, there should !e an assessent of the
appropriate levels of the leverage ratio that safeguard the resilien$e of the respe$tive
!usiness odels and *hether the levels of the leverage ratio should !e set as thresholds
or ranges3 After the o!servation period and the $ali!ration of the respe$tive levels of the
leverage ratio, and on the !asis of the assessent, EBA $an pu!lish an appropriate
statisti$al revie*, in$luding averages and standard deviations, of the leverage ratio3 After
its adoption, EBA should pu!lish an appropriate statisti$al revie*, in$luding averages
and standard deviations, of the leverage ratio in relation to the identified $ategories of
institutions3
)>./ ACre%it institutions an% investment firms s#oul% Amonitor t#e level an% c#an"es in t#e
levera"e ratio as 1ell as levera"e ris5 as part of t#e internal capital a%e&uac6 assessment
process )0C,,P/7 2#is monitorin" s#oul% e inclu%e% in t#e supervisor6 revie1 process7
&n parti$ular after the entr# into for$e of the leverage ratio re6uireents, $opetent
authorities should onitor the developents in the !usiness odel and $orresponding
risk profile in order to ensure up to date and proper $lassifi$ation of institutions7
A
)>-/ Goo% "overnance structures* transparenc6 an% %isclosure are essential for soun%
remuneration policies7 0n or%er to ensure a%e&uate transparenc6 to t#e mar5et of t#eir
remuneration structures an% t#e associate% ris5* cre%it institutions an% investments firms
s#oul% %isclose %etaile% information on t#eir remuneration policies* practices an%* for
reasons of confi%entialit6* a""re"ate% amounts for t#ose memers of staff 1#ose
professional activities #ave a material impact on t#e ris5 profile of t#e cre%it institution or
investment firm7 2#at information s#oul% e ma%e availale to all sta5e#ol%ers7 +hese
parti$ular re6uireents should !e *ithout pre9udi$e to ore general dis$losure
re6uireents $on$erning reuneration poli$ies appli$a!le hori<ontall# a$ross se$tors3
Moreover, Me!er "tates should !e allo*ed to re6uire ore detailed inforation on
reuneration to !e ade availa!le !# $redit institutions and investent firs3
(02a) +he re$ognition of a Credit )ating Agen$# as an E5ternal Credit Assessent &nstitution
(ECA&) should not in$rease the fore$losure of a arket alread# doinated !# three ain
undertakings3 EBA and Central Banks, *ithout aking the pro$ess easier or less
deanding, should provide for the re$ognition of ore Credit )ating Agen$ies as ECA&
as a *a# to open the arket to other undertakings3
)>3/ Directive 9+/4= of t#e $uropean Parliament an% of t#e Council of -4 Octoer 199+ on t#e
protection of in%ivi%uals 1it# re"ar% to t#e processin" of personal %ata an% on t#e free
movement of suc# %ata
1
an% Re"ulation )$4/ Bo 4+/-..1 of t#e $uropean Parliament an%
of t#e Council of 18 Decemer -... on t#e protection of in%ivi%uals 1it# re"ar% to t#e
processin" of personal %ata 6 t#e $4 institutions an% o%ies an% on t#e free movement of
suc# %ata
-
* s#oul% e full6 applicale to t#e processin" of personal %ata for t#e purposes of
t#is Re"ulation
1
O< F -81* -37117199+* p7 317
-
O< F 8* 1-717-..1* p7 17
)>4/ Cre%it institutions an% investment firms s#oul% #ol% a diversified !uffer of li&ui% assets
t#at t#e6 can use to cover li&ui%it6 nee%s in a s#ort term li&ui%it6 stress7 As e5=ante it is
not possi!le to kno* *ith $ertaint# *hi$h spe$ifi$ assets *ithin ea$h asset $lass ight !e
su!9e$t to sho$ks e5=post, it *ould !e appropriate to proote a diversified and high
6ualit# li6uidit# !uffer $onsisting of different asset $ategories3 A $on$entration of assets
and overrelian$e on arket li6uidit# $reates s#stei$ risk to the finan$ial se$tor and
should !e avoided3 A !road set of 6ualit# assets should therefore !e taken into
$onsideration during an initial o!servation period *hi$h *ill !e used for the
developent of a definition of a Li6uidit# Coverage )atio (LC))3 ;hen aking a
unifor definition of li6uid assets at least governent !onds, and $overed !onds traded
on transparent arkets *ith an ongoing turnover *ould !e e5pe$ted to !e $onsidered
assets of e5treel# high li6uidit# and $redit 6ualit#3 &t *ould also !e appropriate that
assets $orresponding to Arti$le B:B(4) (a) to ($) should !e in$luded in the !uffer *ithout
liitations3 ;hen $redit institutions and investent firs use the li6uidit# stoc5* t#e6
s#oul% put in place a plan to restore t#eir #ol%in"s of li&ui% assets an% competent
aut#orities s#oul% ensure t#e a%e&uac6 of t#e plan an% its implementation7
)>+/ 2#e stoc5 of li&ui% assets s#oul% e availale at an6 time to meet t#e li&ui%it6 outflo1s7
2#e level of li&ui%it6 nee%s in a s#ort term li&ui%it6 stress s#oul% e %etermine% in a
stan%ar%ise% manner so as to ensure a uniform soun%ness stan%ar% an% a level pla6in"
fiel%7 0t s#oul% e ensure% t#at suc# a stan%ar%ise% %etermination #as no uninten%e%
conse&uences for financial mar5ets* cre%it e8tension an% economic "ro1t#* also ta5in" into
account %ifferent usiness and investent mo%els an% fun%in" environments of cre%it
institutions an% investment firms across t#e 4nion7 2o t#is en%* t#e li&ui%it6 covera"e
re&uirement s#oul% e su!ect to an oservation perio%7 Dase% on t#e oservations an%
supporte% 6 reports fro $D,* t#e Commission s#oul% !e epo*ered to adopt a
delegated a$t to tiel# introdu$e a detailed and haronised li&ui%it6 covera"e
re&uirement for the 2nion3 &n order to ensure glo!al haroni<ation in the area of
li6uidit# regulation an# delegated a$t to introdu$e the li6uidit# $overage re6uireent
(LC)) a$$ording to Arti$le BBB should !e $opara!le to the LC) as set out in the final
international frae*ork for li6uidit# risk easureent, standards and onitoring of
the Basel Coittee on Banking "upervision (HBCB"I) taking into a$$ount European
and Fational spe$ifi$ities3
+o this end, during the o!servation period, the EBA should revie* and assess, inter alia
the appropriateness of a threshold of ?:J on level 4 li6uid assets, a $ap of 0@J of
inflo*s to outflo*s and the phase=in of the LC) fro ?:J fro 4 Eanuar# 2:4@
in$reasing on a graduated !asis to 4::J3 ;hen assessing and reporting on the unifor
definitions of the sto$k of li6uid assets, the EBA should have regard to the BCB"
definition of HKLA for the !asis of its anal#sis, taking European and Fational
spe$ifi$ities into a$$ount3 ;hile EBA should identif# those $urren$ies *here the needs
of E2 institutions for li6uid assets e5$eeds the availa!ilit# of those li6uid assets in that
$urren$#, EBA should also annuall# e5aine *hether derogations, in$luding those
identified in this )egulation, should !e applied3 &n addition, EBA should assess annuall#
*hether in relation to an# su$h derogation as *ell as derogations alread# identified in
this )egulation, an# additional $onditions should !e atta$hed to their use !# E2
institutions or e5isting $onditions should !e revised3 EBA should su!it the results of its
anal#sis in an annual report to the European Coission3
(0@a) ;ith a vie* to in$rease effi$ien$# and redu$e adinistrative !urden, the EBA should set
up a $oherent reporting frae*ork on the !asis of a haronised set of standards for
li6uidit# re6uireents that should !e applied a$ross the 2nion3 +o this end, the EBA
should develop unifor reporting forats and &+ solutions that take into a$$ount the
provisions of this )egulation and the (ire$tive3 2ntil the date of appli$ation of the full
li6uidit# re6uireents, institutions should $ontinue to eet their national reporting
re6uireents3
(0@!) EBA in $ooperation *ith the E")B should issue guidan$e on the prin$iples for use of
li6uid sto$k in a stress situation3
(0@!) &t should not !e taken for granted that $redit institutions or investent firs *ill re$eive
li6uidit# support fro other $redit institutions or investent firs !elonging to the sae
group *hen the# e5perien$e diffi$ulties to eet their pa#ent o!ligations3 Ho*ever,
su!9e$t to stringent $onditions and the individual agreeent of all $opetent authorities
involved, $opetent authorities should !e a!le to *aive the appli$ation of the LC) to
individual $redit institutions or investent firs and su!9e$t those $redit institutions or
investent firs to a $onsolidated re6uireent, in order to allo* institutions to anage
their li6uidit# $entrall# at the group or su!group level3
(0@$) &n the sae vein, *here no *aiver is granted, li6uidit# flo*s !et*een t*o institutions
!elonging to the sae group and *hi$h are su!9e$t to $onsolidated supervision, should,
*hen the LC) !e$oes a !inding easure, re$eive preferential inflo* and outflo* rates
onl# in those $ases *here all the ne$essar# safeguards are in pla$e3 "u$h spe$ifi$
preferential treatents should !e narro*l# defined and linked to the fulfilent of a
nu!er of stringent and o!9e$tive $onditions3 +he spe$ifi$ treatent appli$a!le to a
given intra=group flo* should !e o!tained through a ethodolog# using o!9e$tive
$riteria and paraeters in order to deterine spe$ifi$ levels of inflo*s and outflo*s
!et*een the institution and the $ounterpart#3 Based on the o!servations and supported
!# the EBA report, the Coission should, as appropriate and in a$$ordan$e *ith
Arti$le BBB of this )egulation, !e epo*ered to adopt delegated a$ts to la# do*n these
spe$ifi$ intra=group treatents, the ethodolog# together *ith the o!9e$tive $riteria to
*hi$h the# are linked as *ell as 9oint de$ision odalities for the assessent of those
$riteria3
(0@d) Bonds issued !# the Fational Asset Manageent Agen$# (FAMA) in &reland are of
parti$ular iportan$e to the &rish !anking re$over# and their issue has !een granted
prior approval !# the E2 Me!er "tates, and approved as a state aid !# the E2
Coission as a support easure introdu$ed to reove ipaired assets fro the
!alan$e sheets of $ertain $redit institutions3 +he issuan$e of these !onds, a transitional
easure supported !# the Coission and the ECB, is an integral part in the
restru$turing of the &rish !anking s#ste3 +hese !onds are guaranteed !# the &rish
governent and are eligi!le $ollateral *ith onetar# authorities3 As part of the reports
referred to in Arti$le BA4 and the delegated a$t pursuant to Arti$le BBB the Coission
should address spe$ifi$ grandfathering e$haniss of transfera!le assets issued or
guaranteed !# entities *ith E2 state aid approval3 &n that regard the Coission should
report together *ith, *hen appropriate, a legislative proposal taking into a$$ount that
institutions $al$ulating the Li6uidit# )e6uireents in a$$ordan$e *ith .art ? should !e
peritted to in$lude FAMA senior !onds as assets of e5treel# high li6uidit# and $redit
6ualit# until (e$e!er 2:4>3
"iilarl#, the !onds issued !# the "panish Asset Manageent Copan# are of
parti$ular iportan$e to the "panish !anking re$over# and are a transitional easure
supported !# the Coission and the ECB, as an integral part in the restru$turing of
the "panish !anking s#ste3 "in$e their issuan$e is foreseen in the Meorandu of
2nderstanding on 1inan$ial "e$tor .oli$# Conditionalit# signed !# the Coission and
the "panish Authorities on Eul# 2Crd 2:42, and the transfer of assets re6uires approval
!# the Coission as a "tate aid easure introdu$ed to reove ipaired assets fro the
!alan$e sheets of $ertain $redit institutions, and to the e5tent the# are guaranteed !# the
"panish governent and are eligi!le $ollateral *ith onetar# authorities, as part of the
reports referred to in Arti$le BA4 and the delegated a$t pursuant to Arti$le BBB, the
Coission should address spe$ifi$ grandfathering e$haniss of transfera!le assets
issued or guaranteed !# entities *ith E2 state aid approval3 &n that regard the
Coission should report together *ith, *hen appropriate, a legislative proposal taking
into a$$ount that institutions $al$ulating the Li6uidit# )e6uireents in a$$ordan$e *ith
.art ? should !e peritted to in$lude "panish Asset Manageent Copan# senior
!onds as assets of e5treel# high li6uidit# and $redit 6ualit# until at least
(e$e!er 2:2C3
(0@e) -n the !asis of the reports referred to in Arti$le BA4 and *hen preparing the legislative
proposal on li6uidit# re6uireents pursuant to Arti$le BBB the Coission should also
$onsider if senior !onds issued !# legal entities siilar to FAMA in &reland or the
"panish Asset Manageent Copan#, esta!lished for the sae purpose and of
parti$ular iportan$e for !ank re$over# in an# other Me!er "tate, should !e granted
su$h treatent, to the e5tent the# are guaranteed !# the $entral governent of the
relevant Me!er "tate and are eligi!le $ollateral *ith onetar# authorities3
(0@f) &n developing the draft regulator# te$hni$al standards $orresponding to Arti$le B44,
para C, the EBA shall $onsider an histori$al look !a$k standardised approa$h as a
ethod of easureent of the additional outflo*3
(0@g) .ending the introdu$tion of the Fet "ta!le 1unding )atio (F"1)) as a !inding
iniu standard in a$$ordan$e *ith the pro$edure set out in Arti$le BA4a, institutions
should o!serve the general funding o!ligation as set out in Arti$le B:4a(4)3 +he general
funding o!ligation is not a ratio re6uireent3 &f, pending the introdu$tion of the F"1),
a sta!le funding ratio is introdu$ed as a iniu standard !# *a# of a national
provision% institutions shall $opl# *ith this iniu standard a$$ordingl#7
)>=/ ,part from s#ort;term li&ui%it6 nee%s* cre%it institutions an% investment firms s#oul% also
a%opt fun%in" structures t#at are stale at a lon"er term #oriLon7 0n Decemer -.1.* t#e
DCDS a"ree% t#at t#e BS3R 1ill move to a minimum stan%ar% 6 1 <anuar6 -.18 an% t#at
t#e DCDS 1ill put in place ri"orous reportin" processes to monitor t#e ratio %urin" a
transition perio% an% 1ill continue to revie1 t#e implications of t#ese stan%ar%s for
financial mar5ets* cre%it e8tension an% economic "ro1t#* a%%ressin" uninten%e%
conse&uences as necessar67 2#e DCDS t#us a"ree% t#at t#e BS3R 1ill e su!ect to an
oservation perio% an% 1ill inclu%e a revie1 clause7 0n t#is conte8t* $D, s#oul%* ase% on
reportin" re&uire% 6 t#is Re"ulation* evaluate #o1 a stale fun%in" re&uirement s#oul% e
%esi"ne%7 Dase% on t#is evaluation* t#e Commission s#oul% report to Council an%
$uropean Parliament to"et#er 1it# an6 appropriate proposals in or%er to intro%uce suc# a
re&uirement 6 -.187
)>>/ ?ea5nesses in corporate "overnance in a numer of cre%it institutions an% investment
firms #ave contriute% to e8cessive an% impru%ent ris5;ta5in" in t#e an5in" sector 1#ic#
le% to t#e failure of in%ivi%ual institutions an% s6stemic prolems7
)>8/ 0n or%er to facilitate t#e monitorin" of institutions( corporate "overnance practices an%
improve mar5et %iscipline* cre%it institutions an% investment firms s#oul% pulicl6 %isclose
t#eir corporate "overnance arran"ements7 2#eir mana"ement o%ies s#oul% approve an%
pulicl6 %isclose a statement provi%in" assurance to t#e pulic t#at t#ese arran"ements are
a%e&uate an% efficient7
)0Aa) &n order to take a$$ount of the diversit# of !usiness odels of finan$ial institutions in
the "ingle Market $ertain long=ter stru$tural re6uireents su$h as the Fet "ta!le
1unding )atio and the Leverage )atio should !e e5ained $losel# *ith a vie* of
prooting a variet# of sound !anking stru$tures *hi$h have !een and should $ontinue
to of servi$e to the European E$ono#3
(0A!) 1or the $ontinuous provision of finan$ial servi$es to households and firs a sta!le
funding stru$ture is ne$essar#3 Long=ter funding flo*s in !ank=!ased finan$ial
s#stes in an# Me!er "tates a# generall# possess different $hara$teristi$s than
those found in other international arkets3 &n addition, spe$ifi$ funding stru$tures a#
have developed in Me!er "tates to provide sta!le finan$ing for long=ter investent,
in$luding de$entralised !anking stru$tures to $hannel li6uidit# or spe$ialised ortgage
se$urities *hi$h trade on highl# li6uid arkets or are a *el$oe investent for long=
ter investors3 +hese stru$tural fa$tors should !e $arefull# $onsidered3 &t is essential to
this purpose that, on$e international standards are finali<ed, EBA and the E")B, !ased
on reporting re6uired !# this )egulation, evaluate ho* a sta!le funding re6uireent
should !e designed full# taking into a$$ount the diversit# of funding stru$tures in the
European Banking arket3
)>9/ 0n or%er to ensure pro"ressive conver"ence et1een t#e level of o1n fun%s an% t#e
pru%ential a%!ustments applie% to t#e %efinition of o1n fun%s across t#e 4nion an% to t#e
%efinition of o1n fun%s lai% %o1n in t#is Re"ulation %urin" a transition perio%* t#e p#asin"
in of t#e o1n fun%s re&uirements of t#is Re"ulation s#oul% occur "ra%uall67 0t is vital to
ensure t#at t#is p#asin" in is consistent 1it# t#e recent en#ancements ma%e 6 9emer
States to t#e re&uire% levels of o1n fun%s an% to t#e %efinition of o1n fun%s in place in t#e
9emer States7 2o t#at en%* %urin" t#e transition perio% t#e competent aut#orities s#oul%
%etermine 1it#in %efine% lo1er an% upper limits #o1 rapi%l6 to intro%uce t#e re&uire%
level of o1n fun%s an% pru%ential a%!ustments lai% %o1n in t#is Re"ulation7
)8./ 0n or%er to facilitate smoot# transition from %iver"ent pru%ential a%!ustments currentl6
applie% in 9emer States to t#e set of pru%ential a%!ustments lai% %o1n in t#is Re"ulation*
competent aut#orities s#oul% e ale %urin" a transition perio% to continue to re&uire
institutions* to a limite% e8tent* to ma5e pru%ential a%!ustments to o1n fun%s t#at are a
%ero"ation from t#is Re"ulation7
)81/ 0n or%er to ensure t#at institutions #ave sufficient time to meet t#e ne1 re&uire% levels an%
%efinition of o1n fun%s* certain capital instruments t#at %o not compl6 1it# t#e %efinition
of o1n fun%s lai% %o1n in t#is Re"ulation s#oul% e p#ase% out et1een 1 <anuar6 -.13
an% 31 Decemer -.-17 0n a%%ition* certain state;in!ecte% instruments s#oul% e reco"nise%
full6 in o1n fun%s for a limite% perio%7 1urtherore, share preiu a$$ounts related to
ites that 6ualified as o*n funds under national transposition easures for
(ire$tive 2::?DBADEC shall under $ertain $ir$ustan$es 6ualif# as Coon E6uit#
+ier 43
)8-/ 0n or%er to ensure pro"ressive conver"ence to1ar%s uniform rules on %isclosure 6
institutions to provi%e mar5et participants 1it# accurate an% compre#ensive information
re"ar%in" t#e ris5 profile of in%ivi%ual institutions* %isclosure re&uirements s#oul% e
p#ase% in "ra%uall67
)83/ 0n or%er to ta5e account of mar5et %evelopments an% e8perience in t#e application of t#is
Re"ulation* t#e Commission s#oul% e re&uire% to sumit to t#e $uropean Parliament an%
t#e Council reports* as appropriate to"et#er 1it# an6 le"islative proposals* on t#e possile
effect of capital re&uirements on t#e economic c6cle of minimum* o1n fun%s re&uirements
for e8posures in t#e form of covere% on%s* lar"e e8posures* li&ui%it6 re&uirements*
levera"e* e8posures to transferre% cre%it ris5* counterpart6 cre%it ris5 an% t#e ori"inal
e8posure met#o%* retail e8posures* on t#e %efinition of eli"ile capital* an% t#e level of
application of t#is re"ulation7
(ACa) +he priar# purpose of the legal frae*ork for $redit institutions should !e to ensure
the operation of vital servi$es to the real e$ono# *hile liiting the risk of oral
ha<ard3 +he stru$tural separation of retail and investent !anking a$tivities *ithin a
!anking group $ould !e one of the ke# tools to support this o!9e$tive3 Fo provision in the
$urrent regulation should therefore prevent the introdu$tion of easures to effe$t su$h a
separation3 +he Coission should !e re6uired to anal#se the issue of stru$tural
separation in the 2nion and produ$e a report, a$$opanied, if appropriate, !# legislative
proposals, to the European .arliaent and Coun$il3
"iilarl# *ith a vie* to prote$ting depositors and preserving finan$ial sta!ilit#, Me!er
"tates should also !e peritted to adopt stru$tural easures that re6uire $redit
institutions authorised in that Me!er "tate to redu$e their e5posures to different legal
entities depending on their a$tivities, irrespe$tive of *here those a$tivities are lo$ated3
Ho*ever, !e$ause su$h easures $ould have a negative ipa$t !# fragenting the
single arket, the# should onl# !e approved su!9e$t to stri$t $onditions pending the entr#
into for$e of a future legislative proposal e5pli$itl# haronising su$h easures3
)84/ 0n or%er to specif6 t#e re&uirements set out in t#is Re"ulation* t#e po1er to a%opt acts in
accor%ance 1it# ,rticle -9. of t#e 23$4 s#oul% e %ele"ate% to t#e Commission in
respect of tec#nical a%!ustments to t#is Re"ulation to clarif6 %efinitions to ensure uniform
application of t#is Re"ulation or to ta5e account of %evelopments on financial mar5etsE to
ali"n terminolo"6 on* an% frame %efinitions in accor%ance 1it#* suse&uent relevant actsE E
to a%!ust t#e provisions of t#at Re"ulation on o1n fun%s to reflect %evelopments in
accountin" stan%ar%s or 4nion le"islation* or 1it# re"ar% to t#e conver"ence of
supervisor6 practicesE to e8pan% t#e lists of e8posure classes for t#e purposes of t#e
Stan%ar%ise% ,pproac# or t#e 0RD ,pproac# to ta5e account of %evelopments on financial
mar5etsE to a%!ust certain amounts relevant to t#ose e8posure classes to ta5e into account
t#e effects of inflationE to a%!ust t#e list an% classification of off; alance s#eet itemsE an%
to a%!ust specific provisions an% tec#nical criteria on t#e treatment of counterpart6 cre%it
ris5* t#e Stan%ar%ise% ,pproac# an% t#e 0RD ,pproac#* cre%it ris5 miti"ation*
securitisation* operational ris5* mar5et ris5* li&ui%it6* Alevera"e an% %isclosure in or%er to
ta5e account of %evelopments on financial mar5ets or in accountin" stan%ar%s or 4nion
le"islation* or 1it# re"ar% to t#e conver"ence of supervisor6 practices an% ris5
measurement an% account of t#e outcome of t#e revie1 of various matters relatin" to t#e
scope of Directive -..4/39/$C7
)8+/ 2#e po1er to a%opt acts in accor%ance 1it# ,rticle -9. of t#e 23$4 s#oul% also e
%ele"ate% to t#e Commission in respect of prescriin" a temporar6 re%uction in t#e level of
o1n fun%s or ris5 1ei"#ts specifie% un%er this Re"ulation in or%er to ta5e account of
specific circumstancesE to clarif6 t#e e8emption of certain e8posures from t#e application
of provisions of this Re"ulation on lar"e e8posuresE to specif6 amounts relevant to t#e
calculation of capital re&uirements for t#e tra%in" oo5 to ta5e account of %evelopments in
t#e economic an% monetar6 fiel%E to a%!ust t#e cate"ories of investment firms eli"ile for
certain %ero"ations to re&uire% levels of o1n fun%s to ta5e account of %evelopments on
financial mar5etsE to clarif6 t#e re&uirement t#at investment firms #ol% o1n fun%s
e&uivalent to one &uarter of t#eir fi8e% over#ea%s of t#e prece%in" 6ear to ensure uniform
application of t#is Re"ulationE to %etermine t#e elements of o1n fun%s from 1#ic#
%e%uctions of an institution(s #ol%in"s of t#e instruments of relevant entities s#oul% e
ma%eE to intro%uce a%%itional transitional provisions relatin" to t#e treatment of actuarial
"ains an% losses in measurin" %efine% enefit pension liailities of institutionsE to
temporaril6 increase in t#e level of o1n fun%s A7
)8=/ 0t is of particular importance t#at t#e Commission carr6 out appropriate consultations
%urin" its preparator6 1or5* inclu%in" at e8pert level7 2#e Commission* 1#en preparin"
an% %ra1in" up %ele"ate% acts* s#oul% ensure a simultaneous* timel6 an% appropriate
transmission of relevant %ocuments to t#e $uropean Parliament an% Council7
(A?a) &n a$$ordan$e *ith de$laration C> to the +reat# on Arti$le 2>: of the +reat# on the
1un$tioning of the European 2nion, the Coission should $ontinue to $onsult e5perts
appointed !# the Me!er "tates in preparation of draft delegated a$ts in the finan$ial
servi$es area, in a$$ordan$e *ith the esta!lished pra$ti$e3
)8>/ 2#e Commission s#oul% also e empo1ere% to a%opt A a temporar6 increase in t#e level of
o1n fun%s* ris5 1ei"#ts or an6 pru%ential re&uirements t#at is necessar6 to respon% to
mar5et %evelopments7 A
)88/ 2ec#nical stan%ar%s in financial services s#oul% ensure #armonisation* uniform con%itions
an% a%e&uate protection of %epositors* investors an% consumers across t#e 4nion7 ,s a
o%6 1it# #i"#l6 specialise% e8pertise* it 1oul% e efficient an% appropriate to entrust
$D, 1it# t#e elaoration of %raft re"ulator6 an% implementin" tec#nical stan%ar%s 1#ic#
%o not involve polic6 c#oices* for sumission to t#e Commission7 EBA should ensure
effi$ient adinistrative and reporting pro$esses *hen drafting regulator# te$hni$al
standards3 +he reporting forats should !e proportionate to the nature, s$ale and
$ople5it# of the a$tivities of the institutions3
)89/ 2#e Commission s#oul% a%opt t#e %raft re"ulator6 tec#nical stan%ar%s %evelope% 6 $D,
in t#e areas of utuals, cooperative societies, savings institutions or similar institutions*
certain o1n fun%s instruments* pru%ential a%!ustments* %e%uctions from o1n fun%s*
a%%itional o1n fun%s instruments* minorit6 interests* services ancillar6 to an5in"* t#e
treatment of cre%it ris5 a%!ustment* proailit6 of %efault* loss "iven %efault* Aapproac#es
to ris5;1ei"#tin" of assets* conver"ence of supervisor6 practices* li&ui%it6* an% transitional
arran"ements for o1n fun%s* 6 means of %ele"ate% acts pursuant to ,rticle -9. 23$4 an%
in accor%ance 1it# ,rticles 1. to 14 of Re"ulation )$4/ Bo 1.93/-.1.7 0t is of particular
importance t#at t#e Commission carr6 out appropriate consultations %urin" its preparator6
1or5* inclu%in" at e8pert level3 EBA and the Coission should ensure that those
standards and re6uireents $an !e applied !# all institutions $on$erned in a anner
that is proportionate to the nature, s$ale and $ople5it# of those institutions and their
a$tivities3
(A>a) +he ipleentation of soe delegated a$ts foreseen in this )egulation su$h as the
Li6uidit# Coverage )atio a# potentiall# have a su!stantial ipa$t on supervised
institutions and the real e$ono#3 +he Coission should ensure that the European
.arliaent and the Coun$il are al*a#s *ell infored a!out relevant developents at
international level and $urrent thinking *ithin the Coission alread# !efore the
pu!li$ation of delegated a$ts7
)9./ 2#e Commission s#oul% also e empo1ere% to a%opt implementin" tec#nical stan%ar%s 6
means of implementin" acts pursuant to ,rticle -91 23$4 an% in accor%ance 1it#
,rticle 1+ of Re"ulation )$4/ Bo 1.93/-.1.7 $D, s#oul% e entruste% 1it# %raftin"
implementin" tec#nical stan%ar%s for sumission to t#e Commission 1it# re"ar% to
consoli%ation* !oint %ecisions* reportin"* %isclosure* e8posures secure% 6 mort"a"es* ris5
assessment* approac#es to ris5;1ei"#tin" of assets* ris5;1ei"#ts an% specification of
certain e8posures* t#e treatment of options an% 1arrants* positions in e&uit6 instruments
an% forei"n e8c#an"e* t#e use of internal mo%els* levera"e* an% off;alance;s#eet items7
(>:aa) 8iven the spe$ifi$s and 6uantit# of regulator# te$hni$al standards that should !e adopted
pursuant to this )egulation, it is 9ustified to e5tend the period foreseen in ,EBA
)egulation/ during *hi$h the European .arliaent and the Coun$il a# o!9e$t to a
regulator# te$hni$al standard, *here the Coission adopts a regulator# te$hni$al
standard *hi$h is the sae as the draft regulator# te$hni$al standard su!itted !# the
EBA3 Moreover, the Coission should ai to adopt the regulator# te$hni$al standards
in good tie to perit the European .arliaent and the Coun$il to e5er$ise the full
s$rutin# period, taking a$$ount of the volue and $ople5it# of )+", the spe$ifi$s of the
)ules of .ro$edure, $alendar of *ork and $oposition of !oth institutions3
(>:a) &n order to ensure a high degree of legal $ertaint#, EBA should laun$h $onsultations
relating to the draft te$hni$al standards referred to in this )egulation3 EBA and the
Coission should also start preparing their reports on li6uidit# re6uireents and
leverage, as provided for in this )egulation, as soon as possi!le3
)91/ 0n or%er to ensure uniform con%itions for t#e implementation of t#is Re"ulation*
implementin" po1ers s#oul% e conferre% on t#e Commission7 2#ose po1ers s#oul% e
e8ercise% in accor%ance 1it# Re"ulation )$4/ Bo 18-/-.11 of t#e $uropean Parliament
an% of t#e Council on la6in" %o1n t#e rules an% "eneral principles concernin" mec#anisms
for control 6 t#e 9emer States of t#e Commission(s e8ercise of implementin" po1ers
(>4!) &n referen$e to Arti$le CB@ +1E2, *hi$h states that the +reaties shall in no *a#
pre9udi$e the rules in Me!er "tates governing the s#ste of propert# o*nership, the
provisions of this )egulation shall neither favour nor dis$riinate t#pes of o*nership,
*hi$h are in the s$ope of this )egulation3
C,R$ ,DOP2$D 2C0S R$G4F,20OB:
PART ONE >ENERAL
PRO,I?ION?
2itle 0
Su!ect matter* scope an% %efinitions
Article 1
Scope
2#is Re"ulation la6s %o1n uniform rules concernin" "eneral pru%ential re&uirements t#at all
institutions supervise% un%er Directive Jinserte% 6 OPK must meet in relation to t#e follo1in"
items:
)a/ o1n fun%s re&uirements relatin" to entirel6 &uantifiale* uniform an% stan%ar%ise% elements
of cre%it ris5* mar5et ris5* Aoperational risk, and settleent ris5E
)/ re&uirements limitin" lar"e e8posuresE
)c/ after t#e %ele"ate% act referre% to in ,rticle 444 #as entere% into force* li&ui%it6 re&uirements
relatin" to entirel6 &uantifiale* uniform an% stan%ar%ise% elements of li&ui%it6 ris5E
)%/ reportin" re&uirements relate% to points )a/ to )c/ an% to levera"eE
)e/ pu!li$ dis$losure re&uirements A
A
2#is Re"ulation %oes not "overn pulication re&uirements for competent aut#orities in t#e fiel% of
pru%ential re"ulation an% supervision of institutions as set out in Directive Jinserte% 6 OPK7
Article 2
Supervisory powers
3or t#e purposes of ensurin" compliance 1it# t#is Re"ulation* competent aut#orities s#all #ave t#e
po1ers an% s#all follo1 t#e proce%ures set out in Directive Jinserte% 6 OPK7
Article 3
Application of stricter requirements by institutions
2#is Re"ulation s#all not prevent institutions from #ol%in" o1n fun%s an% t#eir components in
e8cess of* or appl6in" measures t#at are stricter t#an t#ose re&uire% 6 t#is Re"ulation7
Article 4
Definitions
3or t#e purposes of t#is Re"ulation* t#e follo1in" %efinitions s#all appl6:
)1/ Mcre%it institutionN means an un%erta5in" t#e usiness of 1#ic# is to receive %eposits or
ot#er repa6ale fun%s from t#e pulic an% to "rant cre%its for its o1n accountE
)-/ Mcompetent aut#oritiesN means pulic aut#orities or o%ies officiall6 reco"niLe% 6 national
la1* 1#ic# are empo1ere% 6 national la1 to supervise cre%it institutions or investment
firms as part of t#e supervisor6 s6stem in operation in t#e 9emer State concerne%7
)3/ Mfinancial institutionN means an un%erta5in" ot#er t#an an institution* t#e principal activit6
of 1#ic# is to ac&uire #ol%in"s or to pursue one or more of t#e activities liste% in points -
to 1- an% 1+ of ,nne8 0 of Directive Jinserte% 6 OPK3 +his definition in$ludes finan$ial
holding $opanies, i5ed finan$ial holding $opanies, pa#ent institutions *ithin the
eaning of (ire$tive 2::0D?4DEC and asset anageent $opanies, !ut e5$ludes
insuran$e holding $opanies and i5ed a$tivit# insuran$e holding $opaniesE
)4/ (institution( means cre%it institution or investment firm7
)+/ Mconsoli%atin" supervisorN means t#e competent aut#orit6 responsile for t#e e8ercise of
supervision on a consoli%ate% asis of $4 parent institutions an% institutions controlle% 6
$4 parent financial #ol%in" companies or $4 parent mi8e% financial #ol%in" companies7
)=/ Mreco"nise% t#ir%;countr6 investment firmsN means firms meetin" all of t#e follo1in"
con%itions:
)a/ firms 1#ic#* if t#e6 1ere estalis#e% 1it#in t#e 4nion* 1oul% e covere% 6 t#e
%efinition of investment firmE
)/ firms 1#ic# are aut#orise% in a t#ir% countr6E
)c/ firms 1#ic# are su!ect to an% compl6 1it# pru%ential rules consi%ere% 6 t#e
competent aut#orities as at least as strin"ent as t#ose lai% %o1n 6 t#is Re"ulation or
6 Directive Jinserte% 6 OPKE
)>/ Mlocal firmN means a firm %ealin" for its o1n account on mar5ets in financial futures or
options or ot#er %erivatives an% on cas# mar5ets for t#e sole purpose of #e%"in" positions
on %erivatives mar5ets* or %ealin" for t#e accounts of ot#er memers of t#ose mar5ets an%
ein" "uarantee% 6 clearin" memers of t#e same mar5ets* 1#ere responsiilit6 for
ensurin" t#e performance of contracts entere% into 6 suc# a firm is assume% 6 clearin"
memers of t#e same mar5etsE
)8/ Minvestment firmsN means institutions as %efine% in ,rticle 4)1/)1/ of Directive -..4/39/$C
1#ic# are su!ect to t#e re&uirements impose% 6 t#at Directive* e8clu%in" t#e follo1in":
)a/ cre%it institutionsE
)/ local firmsE
)c/ firms not authorised to provide an$illar# servi$e nr 4 referred to in "e$tion B of
Anne5 4 of the (ire$tive 2::BDC>DEC on arkets in finan$ial instruents *hi$h
provide onl# one or ore of the investent servi$es and a$tivities referred to in (4),
(2), (B) and (@) in "e$tion A of Anne5 & to the a!ove entioned (ire$tive and
*hi$h are not allo*ed to hold mone6 or securities elon"in" to t#eir clientsG an%
1#ic# for t#at reason ma6 not at an6 time place t#emselves in %et 1it# t#ose
clients A3
)9/ Mcollective investment un%erta5in" )C04/N means an ,lternative 0nvestment 3un% as
%efine% 6 ,rticle 4)1/)a/ of Directive -.11/=1/$4, in$luding non=E2 A&1 as defined in
Arti$le B(4)(a) of that (ire$tive, or an un%erta5in" for collective investment in transferale
securities )4C02S/ as %efine% in ,rticle 1 of Directive -..9/=+/$4 in$luding, unless
other*ise provided, third $ountr# entities, that $arr# out siilar a$tivities, that are
su!9e$t to supervision pursuant to E2 legislation or to legislation of a third $ountr#
*hi$h applies supervisor# and regulator# re6uireents at least e6uivalent to those
applied in the 2nion7
)1./ Maut#orisationN means an instrument issue% in an6 form 6 t#e aut#orities 6 1#ic# t#e
ri"#t to carr6 on t#e usiness is "rante%E
)11/ Mconsoli%ate% situationN means t#e situation t#at results from appl6in" re&uirements of t#is
re"ulation in accor%ance 1it# 2itle 00 C#apter - to one institution as if t#at institution
forme%* to"et#er 1it# one or more ot#er entities* one sin"le institutionE
)1-/ Mconsoli%ate% asisN means on t#e asis of t#e consoli%ate% situationE
)13/ Mmar5in" to mar5etN means t#e valuation of positions at rea%il6 availale close out prices
t#at are source% in%epen%entl6* inclu%in" e8c#an"e prices* screen prices* or &uotes from
several in%epen%ent reputale ro5ersE
)14/ Mmar5in" to mo%elN means an6 valuation 1#ic# #as to e enc#mar5e%* e8trapolate% or
ot#er1ise calculate% from one or more mar5et inputE
)1+/ Min%epen%ent price verificationN means a process 6 1#ic# mar5et prices or mar5;to;mo%el
inputs are re"ularl6 verifie% for accurac6 an% in%epen%ence7
)1=/ Mranc#N means a place of usiness 1#ic# forms a le"all6 %epen%ent part of an institution
an% 1#ic# carries out %irectl6 all or some of t#e transactions in#erent in t#e usiness of
AinstitutionsE
A
)18/ M#ome 9emer StateN means t#e 9emer State in 1#ic# an institution #as een
aut#orise%E
)19/ M#ost 9emer StateN means t#e 9emer State in 1#ic# an institution #as a ranc# or in
1#ic# it provi%es servicesE
)-./ McontrolN means t#e relations#ip et1een a parent un%erta5in" an% a susi%iar6* as %efine%
in ,rticle 1 of Sevent# Council Directive 83/349/$$C of 13 <une 1983 ase% on t#e
,rticle +4 )3/ )"/ of t#e 2reat6 on consoli%ate% accounts
A
* or the a$$ounting standards to
*hi$h the institution is su!9e$t under )egulation (EC) Fo 4?:?D2::2, or a similar
relations#ip et1een an6 natural or le"al person an% an un%erta5in"E
)-1/ M&ualif6in" #ol%in"N means a %irect or in%irect #ol%in" in an un%erta5in" 1#ic# represents
1. O or more of t#e capital or of t#e votin" ri"#ts or 1#ic# ma5es it possile to e8ercise a
si"nificant influence over t#e mana"ement of t#at un%erta5in"E
)--/ Mpulic sector entitiesN means non;commercial a%ministrative o%ies responsile to central
"overnments* re"ional "overnments or local aut#orities* or aut#orities t#at e8ercise t#e
same responsiilities as re"ional an% local aut#orities* or non;commercial un%erta5in"s
o1ne% 6 or set up and sponsored !# central "overnments A, re"ional governents or
local aut#orities, t#at #ave e8plicit "uarantee arran"ements* an% ma6 inclu%e self
a%ministere% o%ies "overne% 6 la1 t#at are un%er pulic supervisionE
)-3/ Meli"ile capitalN Ameans t#e sum of t#e follo1in":
)a/ A2ier 1 capital as deterined in Arti$le 2CE
A
)c/ 2ier - capital as deterined in Arti$le ?A t#at is e&ual to or less t#an one third of
+ier 4 $apital%
)-4/ Moperational ris5N means t#e ris5 of loss resultin" from ina%e&uate or faile% internal
processes* people an% s6stems or from e8ternal events* an% inclu%es le"al ris5E
)-+/ ME"CB central an5sN means t#e national central an5s t#at are memers of t#e $uropean
S6stem of Central Dan5s, an% t#e $uropean Central Dan5 A3
(2@a) L$entral !anksG eans the E"CB $entral !anks and $entral !anks of third $ountries7
)-=/ M%ilution ris5N means t#e ris5 t#at an amount receivale is re%uce% t#rou"# cas# or non;
cas# cre%its to t#e oli"orE
)->/ Mproailit6 of %efaultN means t#e proailit6 of %efault of a counterpart6 over a one 6ear
perio%E
)-8/ MlossN* for t#e purposes of Part 2#ree* 2itle 00* means economic loss* inclu%in" material
%iscount effects* an% material %irect an% in%irect costs associate% 1it# collectin" on t#e
instrumentE
)-9/ Mloss "iven %efault )FGD/N means t#e ratio of t#e loss on an e8posure %ue to t#e %efault of
a counterpart6 to t#e amount outstan%in" at %efaultE
)3./ Mconversion factorN means t#e ratio of t#e currentl6 un%ra1n amount of a commitment t#at
$ould e %ra1n an% therefore *ould !e outstan%in" at %efault to t#e currentl6 un%ra1n
amount of t#e commitment* t#e e8tent of t#e commitment s#all e %etermine% 6 t#e
a%vise% limit* unless t#e una%vise% limit is #i"#erE
)31/ Me8pecte% loss )$F/N* for t#e purposes of Part 2#ree* 2itle 00* means t#e ratio of t#e amount
e8pecte% to e lost on an e8posure from a potential %efault of a counterpart6 or %ilution
over a one 6ear perio% to t#e amount outstan%in" at %efaultE
)3-/ Mcre%it ris5 miti"ationN means a tec#ni&ue use% 6 an institution to re%uce t#e cre%it ris5
associate% 1it# an e8posure or e8posures 1#ic# t#at institution continues to #ol%E
)33/ Mfun%e% cre%it protectionN means a tec#ni&ue of cre%it ris5 miti"ation 1#ere t#e re%uction
of t#e cre%it ris5 on t#e e8posure of an institution %erives from t#e ri"#t of t#at institution ;
in t#e event of t#e %efault of t#e counterpart6 or on t#e occurrence of ot#er specifie% cre%it
events relatin" to t#e counterpart6 ; to li&ui%ate* or to otain transfer or appropriation of* or
to retain certain assets or amounts* or to re%uce t#e amount of t#e e8posure to* or to replace
it 1it#* t#e amount of t#e %ifference et1een t#e amount of t#e e8posure an% t#e amount
of a claim on t#e institutionE
)34/ Munfun%e% cre%it protectionN means a tec#ni&ue of cre%it ris5 miti"ation 1#ere t#e
re%uction of t#e cre%it ris5 on t#e e8posure of an institution %erives from t#e o!ligation of
a t#ir% part6 to pa6 an amount in t#e event of t#e %efault of t#e orro1er or on t#e
occurrence of ot#er specifie% cre%it eventsE
)3+/ Mrepurc#ase transactionN means an6 transaction "overne% 6 an a"reement fallin" 1it#in
t#e %efinition of Mrepurc#ase a"reementN or Mreverse repurc#ase a"reementN %
)3=/ Mcas# assimilate% instrumentN means a certificate of %eposit* on%s inclu%in" covere%
on%s or an6 ot#er non;suor%inate% instrument* 1#ic# #as een issue% 6 t#e institution*
for 1#ic# t#e institution #as alrea%6 receive% full pa6ment an% 1#ic# s#all e
uncon%itionall6 reimurse% 6 t#e institution at its nominal value
)3>/ MsecuritisationN means a transaction or sc#eme* 1#ere6 t#e cre%it ris5 associate% 1it# an
e8posure or pool of e8posures is tranc#e%* #avin" ot# of t#e follo1in" c#aracteristics:
)a/ pa6ments in t#e transaction or sc#eme are %epen%ent upon t#e performance of t#e
e8posure or pool of e8posuresE
)/ t#e suor%ination of tranc#es %etermines t#e %istriution of losses %urin" t#e on"oin"
life of t#e transaction or sc#emeE
)38/ Mtranc#eN means a contractuall6 estalis#e% se"ment of t#e cre%it ris5 associate% 1it# an
e8posure or numer of e8posures* 1#ere a position in t#e se"ment entails a ris5 of cre%it
loss "reater t#an or less t#an a position of t#e same amount in eac# ot#er suc# se"ment*
1it#out ta5in" account of cre%it protection provi%e% 6 t#ir% parties %irectl6 to t#e #ol%ers
of positions in t#e se"ment or in ot#er se"mentsE
)39/ Msecuritisation positionN means an e8posure to a securitisationE
)4./ Mre;securitisationM means securitisation 1#ere t#e ris5 associate% 1it# an un%erl6in" pool
of e8posures is tranc#e% an% at least one of t#e un%erl6in" e8posures is a securitisation
positionE
)41/ Mre;securitisation positionM means an e8posure to a re;securitisationE
)4-/ Mori"inatorN means eit#er of t#e follo1in":
)a/ an entit6 1#ic#* eit#er itself or t#rou"# relate% entities* %irectl6 or in%irectl6* 1as
involve% in t#e ori"inal a"reement 1#ic# create% t#e oli"ations or potential
oli"ations of t#e %etor or potential %etor "ivin" rise to t#e e8posure ein"
securitise%E
)/ an entit6 1#ic# purc#ases a t#ir% part6(s e8posures for its o1n account an% t#en
securitises t#emE
)43/ MsponsorN means an institution ot#er t#an an ori"inator institution t#at estalis#es an%
mana"es an asset;ac5e% commercial paper pro"ramme or ot#er securitisation sc#eme t#at
purc#ases e8posures from t#ir% part6 entitiesE
)44/ Mcre%it en#ancementN means a contractual arran"ement 1#ere6 t#e cre%it &ualit6 of a
position in a securitisation is improve% in relation to 1#at it 1oul% #ave een if t#e
en#ancement #a% not een provi%e%* inclu%in" t#e en#ancement provi%e% 6 more !unior
tranc#es in t#e securitisation an% ot#er t6pes of cre%it protectionE
)4+/ Msecuritisation special purpose entit6 )SSP$/N means a corporation trust or ot#er entit6*
ot#er t#an an institution* or"anise% for carr6in" on a securitisation or securitisations* t#e
activities of 1#ic# are limite% to t#ose appropriate to accomplis#in" t#at o!ective* t#e
structure of 1#ic# is inten%e% to isolate t#e oli"ations of t#e SSP$ from t#ose of t#e
ori"inator institution* an% t#e #ol%ers of t#e eneficial interests in 1#ic# #ave t#e ri"#t to
ple%"e or e8c#an"e t#ose interests 1it#out restrictionE
)4=/ M"roup of connecte% clientsN means an6 of t#e follo1in":
)a/ t1o or more natural or le"al persons 1#o* unless it is s#o1n ot#er1ise* constitute a
sin"le ris5 ecause one of t#em* %irectl6 or in%irectl6* #as control over t#e ot#er or
ot#ers unless t#e treatment set out in point )c/ appliesE
)/ t1o or more natural or le"al persons et1een 1#om t#ere is no relations#ip of
control as %escrie% in point )a/ ut 1#o are to e re"ar%e% as constitutin" a sin"le
ris5 ecause t#e6 are so interconnecte% t#at* if one of t#em 1ere to e8perience
financial prolems* in particular fun%in" or repa6ment %ifficulties* t#e ot#er or all of
t#e ot#ers 1oul% also e li5el6 to encounter fun%in" or repa6ment %ifficultiesE
)c/ 1#ere a central "overnment #as dire$t control over or is dire$tl# inter$onne$ted *ith
ore than one natural or legal person, the set $onsisting of the $entral governent
and all of the natural or legal persons dire$tl# or indire$tl# $ontrolled !# the
$entral governent a$$ording to point (a) or inter$onne$ted *ith the $entral
governent a$$ording to point (!) is not re6uired to !e $onsidered as a "roup of
connecte% clients7 &nstead the e5isten$e of a group of $onne$ted $lients fored !#
the $entral governent and other natural or legal persons a# !e assessed
separatel# for ea$h of the persons dire$tl# $ontrolled !# the $entral governent
a$$ording to point (a) or dire$tl# inter$onne$ted *ith the $entral governent
a$$ording to point (!) and all of the natural and legal persons *hi$h are $ontrolled
!# that person a$$ording to point (a) or inter$onne$ted *ith that person a$$ording
to point (!), in$luding the $entral governent7 2#e same applies in cases of re"ional
"overnments or local aut#orities to *hi$h Arti$le 44:(2) applies7
)4>/ Mreco"nise% e8c#an"esN means e8c#an"es 1#ic# meet all of t#e follo1in" con%itions:
)a/ t#e6 are a mar5et referre% to in t#e list to e pulis#e% 6 )$S9,/ accor%in" to
,rticle 4> of Directive -..4/39/$C7
)/ t#e6 #ave a clearin" mec#anism 1#ere6 contracts liste% in ,nne8 && are su!ect to
%ail6 mar"in re&uirements 1#ic#* in t#e opinion of t#e competent aut#orities*
provi%e appropriate protectionE
)48/ M%iscretionar6 pension enefitsN means en#ance% pension enefits "rante% on a
%iscretionar6 asis 6 an institution to an emplo6ee as part of t#at emplo6eeNs variale
remuneration pac5a"e* 1#ic# %o not inclu%e accrue% enefits "rante% to an emplo6ee
un%er t#e terms of t#e compan6 pension sc#eme7
)49/ MparticipationN means participation 1it#in t#e meanin" of t#e first sentence of ,rticle 1> of
3ourt# Council Directive >8/==./$$C of -+ <ul6 19>8 on t#e annual accounts of certain
t6pes of companies
A
* or t#e o1ners#ip* %irect or in%irect* of -. O or more of t#e votin"
ri"#ts or capital of an un%erta5in"E
)+./ Me8posureN for t#e purposes of Part 2#ree* 2itle 00 means an asset or off;alance s#eet item7
)+1/ Mmort"a"e len%in" valueN means t#e value of t#e immovale propert6 as %etermine% 6 a
pru%ent assessment of t#e future mar5etailit6 of t#e propert6 ta5in" into account lon";
term sustainale aspects of t#e propert6* t#e normal an% local mar5et con%itions* t#e
current use an% alternative appropriate uses of t#e propert67
(@4a) 7)esidential propert#7 eans a residen$e *hi$h is o$$upied !# the o*ner or the lessee of
the residen$e3 +he right to inha!it an apartent in "*edish housing $ooperatives are
in$luded in residential propert#3
1or the purpose of this )egulation an# referen$e to real estate or residential or
$oer$ial iova!le propert# or ortgage on su$h propert# shall in$lude shares in
1innish residential housing $opanies operating in a$$ordan$e *ith the 1innish
Housing Copan# A$t of 4>>4 or su!se6uent e6uivalent legislation3 Me!er "tates or
their $opetent authorities a# allo* shares $onstituting an e6uivalent indire$t holding
of real estate to !e treated as a dire$t holding of real estate provided that su$h indire$t
holding is spe$ifi$all# regulated in the national la* of the Me!er "tate and, *hen
pledged as $ollateral, provides e6uivalent prote$tion to $reditors3
)+-/ Mmar5et valueN means for t#e purposes of immovale propert6 t#e estimate% amount for
1#ic# t#e propert6 s#oul% e8c#an"e on t#e %ate of valuation et1een a 1illin" u6er an% a
1illin" seller in an arm(s;len"t# transaction after proper mar5etin" 1#erein t#e parties #a%
eac# acte% 5no1le%"eal6* pru%entl6 an% 1it#out compulsion7
)+3/ Mappli$a!le accountin" frame1or5( means t#e accountin" standards to 1#ic# t#e
institution is su!ect un%er Re"ulation )$C/ Bo 1=.=/2::2
1
or Council
Directive 8=/=3+/$$C A7
)+4/ Mone 6ear %efault rateN means t#e ratio et1een t#e numer of %efaults occurre% %urin" a
perio% t#at starts from one 6ear prior to a %ate 2 an% t#e numer of oli"ors assi"ne% to
t#is "ra%e or pool one 6ear prior to t#at %ate7
)++/ Mspeculative immovale propert6 financin"N means loans for t#e purposes of t#e
ac&uisition of or %evelopment on or construction on lan% in relation to iova!le
propert#, or of and in relation to suc# propert6* 1it# t#e intention of resellin" for profit3
(@@a) 7trade finan$e7 eans finan$ing, in$luding guarantees, $onne$ted to the e5$hange of
goods and servi$es through finan$ial produ$ts of fi5ed short=ter aturit# (generall#
less than 4 #ear) *ithout autoati$ rollover, su$h finan$e is generall# un$oitted and
re6uires satisfa$tor# supporting transa$tional do$uentation for ea$h dra*do*n
re6uest ena!ling refusal of the finan$e in the event of an# dou!t a!out $redit=*orthiness
or the supporting transa$tional do$uentation% repa#ent of trade finan$e e5posures is
usuall# independent of the !orro*er% the funds instead $oing fro $ash re$eived fro
iporters or resulting fro pro$eeds of the sales of the underl#ing goods3
7-ffi$iall# supported e5port $redits7 eans loans or $redits to finan$e the e5port of
goods and servi$es for *hi$h an offi$ial e5port $redit agen$# provides guarantees,
insuran$e, or dire$t finan$ing7
)+=/ Mrepurc#ase a"reementN an% Mreverse repurc#ase a"reementN mean an6 a"reement in 1#ic#
an institution or its counterpart6 transfers securities or commo%ities or "uarantee% ri"#ts
relatin" to eit#er of t#e follo1in":
)a/ title to securities or commo%ities 1#ere t#at "uarantee is issue% 6 a reco"nise%
e8c#an"e 1#ic# #ol%s t#e ri"#ts to t#e securities or commo%ities an% t#e a"reement
%oes not allo1 an institution to transfer or ple%"e a particular securit6 or commo%it6
to more t#an one counterpart6 at one time* su!ect to a commitment to repurc#ase
t#emE
)/ sustitute% securities or commo%ities of t#e same %escription at a specifie% price on a
future %ate specifie%* or to e specifie%* 6 t#e transferor* ein" a repurc#ase
a"reement for t#e institution sellin" t#e securities or commo%ities an% a reverse
repurc#ase a"reement for t#e institution u6in" t#em7
(@?a) siple repur$hase agreeent7 eans a repur$hase transa$tion of a single or siilar,
non=$ople5 assets as opposed to a !asket of assets3
8439/13 SO/psc 80
EN
DQPG
)+>/ (financial instrumentsN means an6 of t#e follo1in":
)a/ a contract t#at "ives rise to ot# a financial asset of one part6 an% a financial liailit6
or e&uit6 instrument of anot#er part6E
)/ an6 instrument specifie% in Section C of ,nne8 0 to Directive -..4/39/$CE
)c/ %erivative financial instrumentE
)%/ a primar6 financial instrumentE
)e/ a cas# instrument7
2#e instruments referre% to in points )a/ to )c/ are onl6 financial instruments if t#eir value
is %erive% from t#e price of an un%erl6in" financial instrument or anot#er un%erl6in" item*
a rate* or an in%e87
)+8/ Minitial capitalN means t#e amount an% t6pes of o1n fun%s specifie% in ,rticle 1- of
Directive Jinserte% 6 OPK for cre%it institutions an% in 2itle 0R of t#at Directive for
investment firms7
)+9/ Mpositions #el% 1it# tra%in" intentN means an6 of t#e follo1in":
)a/ proprietar6 positions an% positions arisin" from client servicin" an% arket ma5in"E
)/ positions inten%e% to e resol% s#ort termE
)c/ positions inten%e% to enefit from actual or e8pecte% s#ort term price %ifferences
et1een u6in" an% sellin" prices or from ot#er price or interest rate variationsE
)=./ Mparent un%erta5in"N means:
)a/ a parent un%erta5in" as %efine% in ,rticles 1 an% - of Directive 83/349/$$CE
)/ for t#e purposes of Section 00 of C#apters 3 an% 4 of 2itle R00* 2itle R000 of Directive
Jinserte% 6 OPK an% Part R of t#is Re"ulation a parent un%erta5in" 1it#in t#e
meanin" of ,rticle 1)1/ of Directive 83/349/$$C an% an6 un%erta5in" 1#ic#*
effectivel6 e8ercises a %ominant influence over anot#er un%erta5in"E
in$luding an institution, a finan$ial holding $opan# or a i5ed finan$ial holding
$opan#%
)=1/ Msusi%iar6N means:
)a/ a susi%iar6 as %efine% in ,rticles 1 an% - of Directive 83/349/$$CE
)/ a susi%iar6 1it#in t#e meanin" of ,rticle 1)1/ of Directive 83/349/$$C an% an6
un%erta5in" over 1#ic#* a parent un%erta5in" effectivel6 e8ercises a %ominant
influenceE
,ll susi%iaries of susi%iaries s#all also e consi%ere% to e susi%iaries of t#e
un%erta5in" t#at is t#eir ori"inal parent un%erta5in"E
)=-/ Mtra%in" oo5N means all positions in financial instruments an% commo%ities #el% 6 an
institution eit#er 1it# tra%in" intent or in or%er to #e%"e positions #el% 1it# tra%in" intentE
)=3/ Mfinancial #ol%in" compan6N means a financial institution* t#e susi%iaries of 1#ic# are
eit#er e8clusivel6 or mainl6 institutions or financial institutions* at least one of suc#
susi%iaries ein" an institution* an% 1#ic# is not a mi8e% financial #ol%in" compan6 AE
)=4/ Mparent institution in a 9emer StateN means an institution in a Me!er "tate 1#ic# #as a
institution or a financial institution as a susi%iar6 or 1#ic# #ol%s a participation in suc# an
institution* an% 1#ic# is not itself a susi%iar6 of anot#er institution aut#orise% in t#e same
9emer State* or of a financial #ol%in" compan6 or mi8e% financial #ol%in" compan6 set
up in t#e same 9emer State7
)=+/ M$4 parent institutionN means a parent institution in a Me!er "tate 1#ic# is not a
susi%iar6 of anot#er institution aut#orise% in an6 9emer State* or of a financial #ol%in"
compan6 or mi8e% financial #ol%in" compan6 set up in an6 9emer StateE
)==/ Mparent financial #ol%in" compan6 in a 9emer StateN means a financial #ol%in" compan6
1#ic# is not itself a susi%iar6 of an institution aut#orise% in t#e same 9emer State* or of
a financial #ol%in" compan6 or mi8e% financial #ol%in" compan6 set up in t#e same
9emer StateE
)=>/ M$4 parent financial #ol%in" compan6N means a parent financial #ol%in" compan6 in a
Me!er "tate 1#ic# is not a susi%iar6 of an institution aut#orise% in an6 9emer State
or of anot#er financial #ol%in" compan6 or mi8e% financial #ol%in" compan6 set up in an6
9emer StateE
)=8/ Mparent mi8e% financial #ol%in" compan6 in a 9emer StateN means a mi8e% financial
#ol%in" compan6 1#ic# is not itself a susi%iar6 of an institution aut#orise% in t#e same
9emer State* or of a financial #ol%in" compan6 or mi8e% financial #ol%in" compan6 set
up in t#at same 9emer StateE
)=9/ M$4 parent mi8e% financial #ol%in" compan6N means a parent mi8e% financial #ol%in"
compan6 in a Me!er "tate 1#ic# is not a susi%iar6 of an institution aut#orise% in an6
9emer State or of anot#er financial #ol%in" compan6 or mi8e% financial #ol%in"
compan6 set up in an6 9emer StateE
Lsu!=$onsolidated !asisG eans on the !asis of the $onsolidated situation of the parent
institution, finan$ial holding $opan# or i5ed finan$ial holding $opan# e5$luding a
su!=group of entities or on the !asis of the $onsolidated situation of a parent institution,
finan$ial holding $opan# or a i5ed finan$ial holding $opan# that is not the
ultiate parent institution, finan$ial holding $opan# or i5ed finan$ial holding
$opan#3
)>./ (multilateral tra%in" facilit6( #as t#e same meanin" as un%er ,rticle 4)1+/ of
Directive -..4/39/$CE
)>1/ Mmi8e% activit6 #ol%in" compan6N means a parent un%erta5in"* ot#er t#an a financial
#ol%in" compan6 or an institution or a mi8e% financial #ol%in" compan6 * t#e susi%iaries
of 1#ic# inclu%e at least one institutionE
)>-/ Mclose lin5sN means a situation in 1#ic# t1o or more natural or le"al persons are lin5e% in
an6 of t#e follo1in" 1a6s:
)a/ participation in t#e form of o1ners#ip* %irect or 6 1a6 of control* of -. O or more
of t#e votin" ri"#ts or capital of an un%erta5in"E
)/ controlE
)c/ t#e fact t#at ot# or all are permanentl6 lin5e% to one an% t#e same t#ir% person 6 a
control relations#ip
)>3/ Mcentral counterpart6 )CCP/N means $entral $ounterpart# as defined in Arti$le 2, point 4
of )egulation (E2) Fo3 ?BAD2:42 ,EM&)/
(0Ca) L6ualif#ing $entral $ounterpart# (KCC.)G eans a CC. that has !een either authorised
in a$$ordan$e *ith Arti$le 4B of )egulation (E2) Fo3 ?BAD2:42 or re$ognised in
a$$ordan$e *ith Arti$le 2@ of that )egulationG
)>4/ M%efault fun%N means a fun% estalis#e% 6 a CCP in a$$ordan$e *ith Arti$le B: of
)egulation (E2) 33D33 ,EM&)/ and used in a$$ordan$e *ith Arti$le B2 of that )egulation
(0Ba) Lpre=funded $ontri!ution to t#e Adefault fund of a CC.G eans a $ontri!ution to the
default fund of a CC. that is paid in !# an institutionE
)>+/ Mtra%e e8posureN means t#e A$urrent and potential future e5posure of a $learing e!er
or a $lient to a CC. arising fro transa$tions listed in Arti$le 2>@ para 4 points a to e,
as *ell as initial argin3
1or the purposes of this definition, the $urrent e5posure of a $learing e!er in$ludes
the variation argin due to the $learing e!er !ut not #et re$eived3
)>=/ Minsurance un%erta5in"N #as t#e same meanin" as un%er ,rticle 13)1/ of
Directive -..9/138/$CE
)>>/ Mmi8e% activit6 insurance #ol%in" compan6N #as t#e same meanin" as un%er point )"/ of
,rticle -1-)1/ of Directive -..9/138/$CE
)>8/ Mreinsurance un%erta5in"N #as t#e same meanin" as un%er ,rticle 13)4/ of
Directive -..9/138/$CE
)>9/ Mt#ir% countr6 insurance un%erta5in"N #as t#e same meanin" as un%er ,rticle 13)3/ of
Directive -..9/138/$CE
)8./ Mt#ir% countr6 reinsurance un%erta5in"N #as t#e same meanin" as un%er ,rticle 13)=/ of
Directive -..9/138/$CE
)81/ Mre"ulate% mar5et means a mar5et referre% to in t#e list to e pulis#e% 6 t#e $uropean
Securities an% 9ar5ets ,ut#orit6 )$S9,/ accor%in" to ,rticle 4> of Directive
-..4/39/$CE
)8-/ Mmana"ement o%6N has the sae eaning as under Arti$le B of (ire$tive ,inserted !#
-./%
A
)84/ Msenior mana"ementN has the sae eaning as under Arti$le B of (ire$tive ,inserted !#
-./E
)8+/ mi8e% financial #ol%in" compan6N has the sae eaning as under Arti$le 2(4@) of
(ire$tive 2::2DA0DECE
)8=/ Mlevera"eN means t#e relative siLe of an institution(s assets* off;alance s#eet oli"ations
an% contin"ent oli"ations to pa6 or to %eliver or to provi%e collateral* inclu%in"
oli"ations from receive% fun%in"* ma%e commitments* %erivates or repurc#ase
a"reements* ut e8clu%in" oli"ations 1#ic# can onl6 e enforce% %urin" t#e li&ui%ation of
an institution* compare% to t#at institutionNs o1n fun%s7
(AA) 7$redit risk ad9ustent7 is the aount of spe$ifi$ and general loan loss provision for
$redit risks that has !een re$ognised in the finan$ial stateents of the institution in
a$$ordan$e *ith the appli$a!le a$$ounting frae*ork%
(A>) Lan$illar# servi$es undertakingG eans an undertaking the prin$ipal a$tivit# of *hi$h
$onsists in o*ning or anaging propert#, anaging data=pro$essing servi$es, or an#
other siilar a$tivit# *hi$h is an$illar# to the prin$ipal a$tivit# of one or ore
institutions%
(>:) Linternal hedgeG eans a position that ateriall# offsets the $oponent risk eleents
!et*een a trading !ook and a non=trading !ook position or sets of positions%
(>4) Lasset anageent $opan#G eans an asset anageent $opan# defined in
Arti$le 2(@) of (ire$tive 2::2DA0DEC and an alternative investent fund anager *ithin
the eaning of (ire$tive 2:44D?4DEC in$luding, unless other*ise provided, third $ountr#
entities, that $arr# out siilar a$tivities, that are su!9e$t to legislation of a third $ountr#
*hi$h applies supervisor# and regulator# re6uireents at least e6uivalent to those
applied in the 2nion%
(>2) Lfinan$ial se$tor entit#G eans an# of the follo*ing'
(a) an institution%
(!) a finan$ial institution%
(!a) an an$illar# servi$es undertaking in$luded in the $onsolidated finan$ial situation
of an institution%
($) an insuran$e undertaking%
(d) a third $ountr# insuran$e undertaking%
(e) a reinsuran$e undertaking%
(f) a third $ountr# reinsuran$e undertaking%
(g) an insuran$e holding $opan#%
(ga) a i5ed a$tivit# holding $opan#%
(g!) a i5ed a$tivit# insuran$e holding $opan#%
(g$) an undertaking e5$luded fro the s$ope of (ire$tive 2::>D4CADEC in a$$ordan$e
*ith the re6uireents laid do*n in Arti$le B of that (ire$tive%
(h) a third $ountr# undertaking *ith a ain !usiness $opara!le to an# of the entities
in points (a) to (g$) a!ove3
(>B) E5ternal Credit Assessent &nstitution (ECA&) eans a $redit rating agen$# that is
registered or $ertified in a$$ordan$e *ith )egulation (EC) Fo 4:?:D2::> or a $entral
!ank issuing $redit ratings *hi$h are e5ept fro the appli$ation of )egulation (EC)
Fo 4:?:D2::>3 HFoinated ECA&I eans an ECA& noinated !# an institution3
(>@) Lreferen$e o!ligationG eans the o!ligation used for the purposes of deterining the
$ash settleent value of a $redit derivative
2itle 00
Fevel of application of re&uirements
C#apter 1
,pplication of re&uirements on an in%ivi%ual asis
Article
!eneral principles
17 0nstitutions s#all compl6 1it# t#e oli"ations lai% %o1n in Parts 21o to 3ive on an
in%ivi%ual asis7
-7 $ver6 institution 1#ic# is either a susi%iar6 in t#e 9emer State 1#ere it is aut#orise%
an% supervise%* or a parent un%erta5in"* an% ever6 institution Ainclu%e% in t#e
consoli%ation pursuant to ,rticle 1>* does not need to compl6 1it# t#e oli"ations lai%
%o1n in ,rticle 84 to A? on an in%ivi%ual asis7
37 $ver6 institution 1#ic# is either a parent un%erta5in"* or a susi%iar6* an% ever6 institution
Ainclu%e% in t#e consoli%ation pursuant to ,rticle 1>* does not need to compl6 1it# t#e
oli"ations lai% %o1n in Part $i"#t on an in%ivi%ual asis7
47 Credit institutions and investment firms t#at are aut#orise% to provi%e t#e investment
services liste% in points 3 an% = of Section , of ,nne8 0 to Directive -..4/39/$C s#all
compl6 1it# t#e oli"ations lai% %o1n in .art "i5 on an individual !asis3 .ending the
report fro the Coission in a$$ordan$e *ith arti$le BA:(2), $opetent authorities
a# e5ept investent firs fro $oplian$e *ith the o!ligations laid do*n in .art "i5
taking into a$$ount the nature, s$ale and $ople5it# of investent fir7s a$tivities7
+7 0nstitutions, e5$ept for investent firs referred to in Arti$les >:(4) and >4(4) and
institutions for *hi$h $opetent authorities have e5er$ised the derogation spe$ified in
Arti$le ?(4), or Arti$le ?(C), s#all compl6 1it# t#e oli"ations lai% %o1n in part seven on
an in%ivi%ual asis7
Article "
Dero#ation to the application of pru$ential requirements on an in$ivi$ual basis
17 Competent aut#orities ma6 1aive t#e application of ,rticle +)1/ to an6 susi%iar6 of an
institution* 1#ere ot# t#e susi%iar6 an% t#e institution are su!ect to aut#orisation an%
supervision 6 t#e 9emer State concerne%* an% t#e susi%iar6 is inclu%e% in t#e
supervision on a consoli%ate% asis of t#e institution 1#ic# is t#e parent un%erta5in"* an%
all of t#e follo1in" con%itions are satisfie%* in or%er to ensure t#at o1n fun%s are
%istriute% a%e&uatel6 amon" t#e parent un%erta5in" an% t#e susi%iaries:
)a/ t#ere is no current or foreseen material practical or le"al impe%iment to t#e prompt
transfer of o1n fun%s or repa6ment of liailities 6 its parent un%erta5in"E
)/ eit#er t#e parent un%erta5in" satisfies t#e competent aut#orit6 re"ar%in" t#e pru%ent
mana"ement of t#e susi%iar6 an% #as %eclare%* 1it# t#e permission of t#e
competent aut#orit6* t#at it "uarantees t#e commitments entere% into 6 t#e
susi%iar6* or t#e ris5s in t#e susi%iar6 are of ne"li"ile interestE
)c/ t#e ris5 evaluation* measurement an% control proce%ures of t#e parent un%erta5in"
cover t#e susi%iar6E
)%/ t#e parent un%erta5in" #ol%s more t#an +. O of t#e votin" ri"#ts attac#e% to s#ares
in t#e capital of t#e susi%iar6 or #as t#e ri"#t to appoint or remove a ma!orit6 of t#e
memers of t#e mana"ement o%6 of t#e susi%iar67
-7 Competent aut#orities ma6 e8ercise t#e option provi%e% for in para"rap# 1 1#ere t#e
parent un%erta5in" is a financial #ol%in" compan6 or a mi8e% financial #ol%in" compan6
set up in t#e same 9emer State as t#e institution* provi%e% t#at it is su!ect to t#e same
supervision as t#at e8ercise% over institutions* an% in particular to t#e stan%ar%s lai% %o1n
in ,rticle 1.)1/7
37 Competent aut#orities ma6 1aive t#e application of ,rticle +)1/ to a parent institution in a
9emer State 1#ere t#at institution is su!ect to aut#orisation an% supervision 6 t#e
9emer State concerne%* an% it is inclu%e% in t#e supervision on a consoli%ate% asis* an%
all t#e follo1in" con%itions are satisfie%* in or%er to ensure t#at o1n fun%s are %istriute%
a%e&uatel6 amon" t#e parent un%erta5in" an% t#e susi%iaries:
)a/ t#ere is no current or foreseen material practical or le"al impe%iment to t#e prompt
transfer of o1n fun%s or repa6ment of liailities to t#e parent institution in a 9emer
StateE
)/ t#e ris5 evaluation* measurement an% control proce%ures relevant for consoli%ate%
supervision cover t#e parent institution in a 9emer State7
2#e competent aut#orit6 1#ic# ma5es use of t#is para"rap# s#all inform t#e competent
aut#orities of all ot#er 9emer States7
Article %
Dero#ation to the application of liqui$ity requirements on an in$ivi$ual basis
17 2#e competent aut#orities a# 1aive in full or in part t#e application of .art "i5 to an
institution an% to all or some of its susi%iaries in t#e $uropean 4nion an% supervise t#em
as a sin"le li&ui%it6 su;"roup so lon" as t#e6 fulfil all of t#e follo1in" con%itions:
)a/ 2#e parent institution on a $onsolidated !asis or a su!sidiar# institution on a su!=
$onsolidated !asis complies 1it# t#e oli"ations lai% %o1n in .art "i5E
)/ 2#e parent institution on a $onsolidated !asis or the su!sidiar# institution on a su!=
$onsolidated !asis monitors an% #as oversi"#t at all times over t#e li&ui%it6 positions
of all institutions 1it#in t#e "roup or su;"roup* t#at are su!ect to t#e 1aiver and
ensures a suffi$ient level of li6uidit# for all of these institutionsE
)c/ 2#e institutions #ave entere% into contracts t#at are to the satisfa$tion of the
$opetent authorities that provi%e for t#e free movement of fun%s et1een t#em to
enale t#em to meet t#eir in%ivi%ual an% !oint oli"ations as t#e6 come %ueE
)%/ 2#ere is no current or foreseen material practical or le"al impe%iment to t#e
fulfilment of t#e contracts referre% to in )c/3
B# C4 (e$e!er 2:4C the Coission shall report to the European .arliaent and the
Coun$il on an# legal o!sta$les *hi$h are $apa!le of rendering ipossi!le the
appli$ation of point ($) of the first su!paragraph and is invited to ake, if appropriate, a
legislative proposal !# C4 (e$e!er 2:4@ on *hi$h of those o!sta$les should !e
reoved7
-7 +he $opetent authorities a# *aive in full or in part the appli$ation of .art "i5 to an
institution and to all or soe of its su!sidiaries *here all institutions of t#e sin"le
li&ui%it6 su;"roup are authori<ed in t#e same 9emer State and provided that $onditions
of para"rap# 1 are fulfilled7
2a3 ?#ere institutions of t#e sin"le li&ui%it6 su;"roup are aut#orise% in several 9emer
States* para"rap# 1 s#all onl6 e applie% after follo1in" t#e proce%ure lai% %o1n in
,rticle 19 an% onl6 to t#e institutions 1#ose competent aut#orities a"ree aout t#e
follo1in" elements:
)a/ their assessent of t#e $oplian$e of t#e or"anisation an% of t#e treatment of
li&ui%it6 ris5 *ith the $onditions re&uire% 6 ,rticle 84 of Directive Jinserte% 6 OPK
a$ross the single li6uidit# su!=groupE
)/ t#e %istriution of amounts* location an% o1ners#ip of t#e re&uire% li&ui% assets to e
#el% 1it#in t#e single li6uidit# su;"roupE
)c/ on the deterination of minimum amounts of li&ui% assets to e #el% 6 institutions
for 1#ic# t#e application of .art "i5 *ill !e 1aive%E
)%/ t#e nee% for stricter parameters t#an t#ose set out in Part Si8 A %
(e) unrestri$ted sharing of $oplete inforation !et*een the $opetent authorities7
(da) a full understanding of the ipli$ations of su$h a *aiver3
2!3 Competent aut#orities ma6 also appl6 para"rap# 4, 2 and 2a to institutions 1#ic# A are
memers of t#e same institutional protection sc#eme referre% to in Arti$le 1.8)>/)/*
provi%e% t#at t#e6 meet all t#e con%itions lai% %o1n in ,rticle 1.8)>/, and to other
institutions linked !# a relationship referred to in Arti$le 4:A(?) provided that the# eet
all the $onditions laid do*n therein7 Competent aut#orities s#all in t#at case %etermine
one of t#e institutions su!ect to t#e 1aiver to meet .art "i5 on t#e asis of t#e
consoli%ate% situation of all institutions of t#e sin"le li&ui%it6 su;"roup7
A
Ca3 ?#ere a 1aiver #as een "rante% un%er para"rap# 4 or paragraph 2, t#e competent
aut#orities ma6 also appl# Arti$le AB (ire$tive ,55/, or parts thereof, at the level of the
single li6uidit# su!=group and 1aive t#e application of ,rticle AB (ire$tive ,55/, or parts
thereof, on the individual !asis3
Article &
'n$ivi$ual consoli$ation metho$
17 Su!ect to para"rap#s - an% 3 of t#is ,rticle an% to ,rticle 134)3/ of Directive Jinserte% 6
OPK* t#e competent aut#orities ma6 permit on a case 6 case asis parent institutions to
incorporate in t#e calculation of t#eir re&uirement un%er ,rticle +)1/ susi%iaries 1#ic#
meet t#e con%itions lai% %o1n in points )c/ an% )%/ of ,rticle =)1/* an% 1#ose material
e8posures or material liailities are to t#at parent institution7
-7 2#e treatment in para"rap# 1 s#all e permitte% onl6 1#ere t#e parent institution
%emonstrates full6 to t#e competent aut#orities t#e circumstances an% arran"ements*
inclu%in" le"al arran"ements* 6 virtue of 1#ic# t#ere is no material practical or le"al
impe%iment* an% none are foreseen* to t#e prompt transfer of o1n fun%s* or repa6ment of
liailities 1#en %ue 6 t#e susi%iar6 to its parent un%erta5in"7
37 ?#ere a competent aut#orit6 e8ercises t#e %iscretion lai% %o1n in para"rap# 1* it s#all on a
re"ular asis an% not less t#an once a 6ear inform t#e competent aut#orities of all t#e ot#er
9emer States of t#e use ma%e of para"rap# 1 an% of t#e circumstances an% arran"ements
referre% to in para"rap# -7 ?#ere t#e susi%iar6 is in a t#ir% countr6* t#e competent
aut#orities s#all provi%e t#e same information to t#e competent aut#orities of t#at t#ir%
countr6 as 1ell7
Article (
)aiver for cre$it institutions permanently affiliate$ to a central bo$y
43 Competent aut#orities ma6, in a$$ordan$e *ith national la*, partiall# or full# 1aive t#e
application of t#e re&uirements set out in Parts 21o to A$i"#t to one or more cre%it
institutions situate% in t#e same 9emer State an% 1#ic# are permanentl6 affiliate% to a
central o%6 1#ic# supervises t#em an% 1#ic# is estalis#e% in t#e same 9emer State* if
At#e follo1in" $onditions are et:
)a/ t#e commitments of t#e central o%6 an% affiliate% institutions are !oint an% several
liailities or t#e commitments of its affiliate% institutions are entirel6 "uarantee% 6
t#e central o%6E
)/ t#e solvenc6 an% li&ui%it6 of t#e central o%6 an% of all t#e affiliate% institutions are
monitore% as a 1#ole on t#e asis of consoli%ate% accounts of t#ese institutionsE
)c/ t#e mana"ement of t#e central o%6 is empo1ere% to issue instructions to t#e
mana"ement of t#e affiliate% institutions7
Me!er "tates a# aintain and ake use of e5isting national legislation regarding
the appli$ation of this *aiver as long as it does not $onfli$t *ith the provisions set out in
this )egulation and (ire$tive ,inserted !# -./3
23 ;here the $opetent authorities are satisfied that the $onditions set out in the first
paragraph are et, and *here the lia!ilities or $oitents of the $entral !od# are
entirel# guaranteed !# the affiliated institutions, the $opetent authorities a# *aive the
appli$ation of .arts +*o to Eight to the $entral !od# on an individual !asis3
C#apter -
Pru%ential consoli%ation
S$C20OB 1
,PPF0C,20OB O3 R$Q40R$9$B2S OB , COBSOF0D,2$D D,S0S
Article 1*
!eneral treatment
17 Parent institutions in a 9emer State s#all compl6* to t#e e8tent an% in t#e manner
prescrie% in ,rticle 1=* 1it# t#e oli"ations lai% %o1n in Parts 21o to 3our an% Seven on
t#e asis of t#eir consoli%ate% situation3 +he parent undertakings and their su!sidiaries
su!9e$t to this )egulation shall set up a proper organisational stru$ture and appropriate
internal $ontrol e$haniss in order to ensure that the data re6uired for $onsolidation
are dul# pro$essed and for*arded3 &n parti$ular, the# shall ensure that su!sidiaries not
su!9e$t to this )egulation ipleent arrangeents, pro$esses and e$haniss to
ensure a proper $onsolidation7
-7 0nstitutions controlle% 6 a parent financial #ol%in" compan6 or a parent mi8e% financial
#ol%in" compan6 in a 9emer State s#all compl6* to t#e e8tent an% in t#e manner
prescrie% in ,rticle 1=* 1it# t#e oli"ations lai% %o1n in Parts 21o to 3our an% Seven on
t#e asis of t#e consoli%ate% situation of t#at financial #ol%in" compan6 or mi8e% financial
#ol%in" compan67
?#ere more t#an one institution is controlle% 6 a parent financial #ol%in" compan6 or 6
a parent mi8e% financial #ol%in" compan6 in a 9emer State* t#e first supara"rap# s#all
appl6 onl6 to t#e institution to 1#ic# supervision on a consoli%ate% asis applies in
accor%ance 1it# ,rticle 1.= of Directive Jinserte% 6 OPK7
37 $4 parent institutions an% institutions controlle% 6 an $4 parent financial #ol%in"
compan6 an% institutions controlle% 6 an $4 parent mi8e% financial #ol%in" compan6
s#all compl6 1it# t#e oli"ations lai% %o1n in .art "i5 on t#e asis of t#e consoli%ate%
situation of t#at parent institution* financial #ol%in" compan6 or mi8e% financial #ol%in"
compan6* if t#e "roup comprises one or more cre%it institutions or investment firms t#at
are aut#orise% to provi%e t#e investment services liste% in points 3 an% = of Section , of
,nne8 0 to Directive -..4/39/$C7 .ending the report fro the Coission in
a$$ordan$e *ith arti$le BA:(2), and if the group $oprises onl# investent firs,
$opetent authorities a# e5ept investent firs fro $oplian$e *ith the
o!ligations laid do*n in .art "i5 on a $onsolidated !asis, taking into a$$ount the nature,
s$ale and $ople5it# of investent firGs a$tivities3
47 ?#ere ,rticle 9 is applie%* t#e central o%6 referre% to in t#at ,rticle s#all compl6 1it#
t#e re&uirements of Parts 21o to Eight on t#e asis of t#e consoli%ate% situation of t#e
*hole as $onstituted !# the central o%6 together *ith its affiliated institutions3
&n addition to the re6uireents in paragraphs 4 to B, and *ithout pre9udi$e to other
provisions of this )egulation and (ire$tive ,insert !# -./, *hen it is 9ustified for
supervisor# purposes !# the spe$ifi$ities of the risk or of the $apital stru$ture of an
institution or *here Me!er "tates ena$t national la*s re6uiring the stru$tural
separation of a$tivities *ithin a !anking group, $opetent authorities a# re6uire the
stru$turall# separated institutions to $opl# *ith the o!ligations laid do*n in .arts +*o
to 1our and .art "i5 to Eight and in +itle M&& on (ire$tive ,insert !# -./ on su!=
$onsolidated !asis3
Appl#ing this approa$h shall !e *ithout pre9udi$e to effe$tive supervision on a
$onsolidated !asis and a# not entail disproportionate adverse effe$ts on the *hole or
parts of the finan$ial s#ste in other Me!er "tates or of the E2 as a *hole nor a# it
for or $reate an o!sta$le to the fun$tioning of the internal arket3
Article 11
+inancial hol$in# company or mi,e$ financial hol$in# company with both a subsi$iary cre$it
institution an$ a subsi$iary investment firm
?#ere a financial #ol%in" compan6 or a mi8e% financial #ol%in" compan6 #as at least one cre%it
institution an% one investment firm as susi%iaries* t#e re&uirements t#at appl6 on t#e asis of t#e
consoli%ate% situation of t#e financial #ol%in" compan6 or of t#e mi8e% financial #ol%in" compan6
s#all appl6 to t#e cre%it institution7
Article 12
Application of $isclosure requirements on a consoli$ate$ basis
17 $4 parent institutions s#all compl6 1it# t#e oli"ations lai% %o1n in Part $i"#t on t#e
asis of t#eir consoli%ate% situation7
Si"nificant susi%iaries of $4 parent institutions and those su!sidiaries *hi$h are of
aterial signifi$an$e for their lo$al arket s#all %isclose t#e information specifie% in
,rticle 4-4* 4-+* B20, B2A, BC@, BC? an% BCA, on an in%ivi%ual or su;consoli%ate% asis7
-7 0nstitutions controlle% 6 an $4 parent financial #ol%in" compan6 or $4 parent mi8e%
financial #ol%in" compan6 s#all compl6 1it# t#e oli"ations lai% %o1n in Part $i"#t on t#e
asis of t#e consoli%ate% situation of t#at financial #ol%in" compan6 or mi8e% financial
#ol%in" compan67
Si"nificant susi%iaries of $4 parent financial #ol%in" companies or $4 parent mi8e%
#ol%in" companies and those su!sidiaries *hi$h are of aterial signifi$an$e for their
lo$al arket s#all %isclose t#e information specifie% in ,rticle B2B, an% 4-+* B20, B2A,
BC@, 43= and BCA on an in%ivi%ual or su;consoli%ate% asis7
37 Para"rap#s 1 an% - s#all not appl6 in full or in part to $4 parent institutions* institutions
controlle% 6 an $4 parent financial #ol%in" compan6 or $4 parent mi8e% financial
#ol%in" compan6* to t#e e8tent t#at t#e6 are inclu%e% 1it#in e&uivalent %isclosures
provi%e% on a consoli%ate% asis 6 a parent un%erta5in" estalis#e% in a t#ir% countr67
47 ?#ere ,rticle 9 is applie%* t#e central o%6 referre% to in t#at ,rticle s#all compl6 1it#
t#e re&uirements of Part $i"#t on t#e asis of t#e consoli%ate% situation of t#e central o%67
,rticle 1=)1/ s#all appl6 to t#e central o%6 an% t#e affiliate% institutions s#all e treate%
as t#e susi%iaries of t#e central o%67
Article 13
Application of requirements of Part +ive on a consoli$ate$ basis
17 Parent un%erta5in"s an% t#eir susi%iaries su!ect to t#is Re"ulation s#all meet t#e
oli"ations lai% %o1n in Part 3ive on a consoli%ate% or su;consoli%ate% asis* to ensure
t#at t#eir arran"ements* processes an% mec#anisms re&uire% 6 t#ose provisions are
consistent an% 1ell;inte"rate% an% t#at an6 %ata an% information relevant to t#e purpose of
supervision can e pro%uce%7 0n particular* t#e6 s#all ensure t#at susi%iaries not su!ect to
t#is Re"ulation implement arran"ements* processes an% mec#anisms to ensure compliance
1it# t#ose provisions7
-7 0nstitutions s#all appl6 an a%%itional ris5 1ei"#t in accor%ance 1it# ,rticle 39= 1#en
appl6in" ,rticle 8> on a consoli%ate% or su;consoli%ate% asis if t#e re&uirements of
,rticles 394 or 39+ are reac#e% at t#e level of an entit6 estalis#e% in a t#ir% countr6
inclu%e% in t#e consoli%ation in accor%ance 1it# ,rticle 1= if t#e reac# is material in
relation to t#e overall ris5 profile of t#e "roup7
37 Oli"ations resultin" from Part 3ive concernin" susi%iaries* not t#emselves su!ect to t#is
Re"ulation* s#all not appl6 if t#e $4 parent institution or institutions controlle% 6 an $4
parent financial #ol%in" compan6 or $4 parent mi8e% financial #ol%in" compan6* can
%emonstrate to t#e competent aut#orities t#at t#e application of Part 3ive is unla1ful un%er
t#e la1s of t#e t#ir% countr6 1#ere t#e susi%iar6 is estalis#e%7
Article 14
Dero#ation to the application of own fun$s requirements on a consoli$ate$ basis for #roups of
investment firms
17 +he $onsolidating supervisor ma6 1aive* on a case;6;case asis* t#e application of art
+hree and +itle M&& Chapter B of the (ire$tive ,inserted !# -./ on a consoli%ate% asis
provi%e% t#at t#e follo1in" con%itions e8ist:
)a/ eac# $4 investment firm in the "roup uses t#e alternative calculation of total ris5
e8posure amount referre% to in ,rticle 9.)-/E
)/ all investment firms in the "roup fall 1it#in t#e cate"ories in ,rticles 9.)1/ an%
91)1/E
)c/ eac# $4 investment firm in the "roup meets t#e re&uirements impose% in ,rticle 9.
on an in%ivi%ual asis an% at t#e same time %e%ucts from its Common $&uit6 2ier 1
items an6 contin"ent liailit6 in favour of investment firms* financial institutions*
asset mana"ement companies an% ancillar6 services un%erta5in"s* 1#ic# 1oul%
ot#er1ise e consoli%ate%E
)%/ an6 financial #ol%in" compan6 1#ic# is t#e parent financial #ol%in" compan6 in a
9emer State of an6 investment firm in the "roup #ol%s* at least as muc# capital*
%efine% #ere as t#e sum of t#e Aitems referre% to in ,rticles -4)1/* 48)1/ an% +9)1/E
as to $over the su of the follo*ing'
)ii/ t#e sum of t#e full oo5 value of an6 #ol%in"s* suor%inate% claims an%
instruments referre% to in ,rticles 33)1/)#/ an% )i/* +3)1/)c/ an% )%/* an%
=3)1/)c/ an% )%/ in investment firms* financial institutions* asset mana"ement
companies an% ancillar6 services un%erta5in"s 1#ic# 1oul% ot#er1ise e
consoli%ate%E an%
)iii/ t#e total amount of an6 contin"ent liailit6 in favour of investment firms*
financial institutions* asset mana"ement companies an% ancillar6 services
un%erta5in"s 1#ic# 1oul% ot#er1ise e consoli%ate%E
)e/ t#e "roup %oes not in$lude cre%it institutions A
?#ere t#e criteria in t#e first supara"rap# are met* eac# $4 investment firm s#all #ave in
place s6stems to monitor an% control t#e sources of capital an% fun%in" of all financial
#ol%in" companies* investment firms* financial institutions* asset mana"ement companies
an% ancillar6 services un%erta5in"s 1it#in t#e "roup7
-7 2#e competent aut#orities ma6 also appl6 t#e 1aiver if t#e financial #ol%in" companies
#ol%s a lo1er amount of o1n fun%s t#an t#e amount calculate% un%er para"rap# 1)%/* ut
no lo1er t#an t#e sum of t#e o1n fun%s re&uirements impose% on an in%ivi%ual asis to
investment firms* financial institutions* asset mana"ement companies an% ancillar6
services un%erta5in"s 1#ic# 1oul% ot#er1ise e consoli%ate% an% t#e total amount of an6
contin"ent liailit6 in favour of investment firms* financial institutions* asset mana"ement
companies an% ancillar6 services un%erta5in"s 1#ic# 1oul% ot#er1ise e consoli%ate%7 3or
t#e purposes of t#is para"rap#* t#e o1n fun%s re&uirement for investment un%erta5in"s of
t#ir% countries* financial institutions* asset mana"ement companies an% ancillar6 services
un%erta5in"s is a notional o1n fun%s re&uirement7
Arti$le 4Ba
(erogation to the appli$ation of the leverage ratio re6uireents on a $onsolidated !asis for
groups of investent firs
;here all entities in a group of investent firs, in$luding the parent entit#, are investent
firs that are e5ept fro the appli$ation of the re6uireents laid do*n in .art "even on an
individual !asis in a$$ordan$e *ith Arti$le @(@), the parent investent fir a# $hoose not to
appl# the re6uireents laid do*n in .art "even on a $onsolidated !asis3
Article 1
Supervision of investment firms waive$ from the application of own fun$s requirements on a
consoli$ate$ basis
0nvestment firms in a "roup 1#ic# #as een "rante% t#e 1aiver provi%e% for in ,rticle 14 s#all
notif6 t#e competent aut#orities of t#e ris5s 1#ic# coul% un%ermine t#eir financial positions*
inclu%in" t#ose associate% 1it# t#e composition an% sources of t#eir o1n fun%s* internal capital an%
fun%in"7
?#ere t#e competent aut#orities responsi!le for the prudential supervision of the investent fir
1aive t#e oli"ation of supervision on a consoli%ate% asis as provi%e% for in ,rticle 14* t#e6 s#all
ta5e ot#er appropriate measures to monitor t#e ris5s* nota!l# lar"e e8posures* of t#e 1#ole "roup*
inclu%in" an6 un%erta5in"s not locate% in a 9emer State7
?#ere t#e competent aut#orities responsi!le for the prudential supervision of the investent fir
1aive t#e application of o1n fun%s re&uirements on a consoli%ate% asis as provi%e% for in
,rticle 14* t#e re&uirements of Part $i"#t s#all appl6 on an in%ivi%ual asis7
S$C20OB -
9$2CODS 3OR PR4D$B20,F COBSOF0D,20OB
Article 1"
-etho$s for pru$ential consoli$ation
17 2#e institutions t#at are re&uire% to compl6 1it# t#e re&uirements referre% to in Section 1
on t#e asis of t#eir consoli%ate% situation s#all carr6 out a full consoli%ation of all
institutions an% financial institutions t#at are its susi%iaries or* 1#ere relevant* t#e
susi%iaries of t#e same parent financial #ol%in" compan6 or mi8e% parent financial
#ol%in" compan67 Para"rap#s - to 8 of t#is ,rticle s#all not appl6 1#ere .art "i5 appl6 on
t#e asis of an institution(s consoli%ate% situation7
-7 Co1ever* t#e competent aut#orities ma6 on a case;6;case asis permit proportional
consoli%ation accor%in" to t#e s#are of capital t#at t#e parent un%erta5in" #ol%s in t#e
susi%iar67 Proportional consoli%ation ma6 onl6 e permitte% 1#ere all of t#e follo1in"
con%itions are fulfille%:
)a/ t#e liailit6 of t#e parent un%erta5in" is limite% to t#e s#are of capital t#at t#e parent
un%erta5in" #ol%s in t#e susi%iar6 in vie1 of t#e liailit6 of t#e ot#er s#are#ol%ers
or memersE
)/ t#e solvenc6 of t#ose ot#er shareholders or memers is satisfactor6E
)c/ t#e liailit6 of t#e ot#er s#are#ol%ers an% memers is clearl6 estalis#e% in a le"all6
in%in" 1a67
37 ?#ere un%erta5in"s are lin5e% 6 a relations#ip 1it#in t#e meanin" of ,rticle 1-)1/ of
Directive 83/349/$$C* t#e competent aut#orities s#all %etermine #o1 consoli%ation is to
e carrie% out7
47 2#e $onsolidating supervisor s#all re&uire t#e proportional consoli%ation accor%in" to t#e
s#are of capital #el% of participations in institutions an% financial institutions mana"e% 6
an un%erta5in" inclu%e% in t#e consoli%ation to"et#er 1it# one or more un%erta5in"s not
inclu%e% in t#e consoli%ation* 1#ere t#ose un%erta5in"s( liailit6 is limite% to t#e s#are of
t#e capital t#e6 #ol%7
+7 0n t#e case of participations or capital ties ot#er t#an t#ose referre% to in para"rap#s 1 an%
-* t#e competent aut#orities s#all %etermine 1#et#er an% #o1 consoli%ation is to e carrie%
out7 0n particular* t#e6 ma6 permit or re&uire use of t#e e&uit6 met#o%7 2#at met#o% s#all
not* #o1ever* constitute inclusion of t#e un%erta5in"s concerne% in supervision on a
consoli%ate% asis7
=7 2#e competent aut#orities s#all %etermine 1#et#er an% #o1 consoli%ation is to e carrie%
out in t#e follo1in" cases:
)a/ 1#ere* in t#e opinion of t#e competent aut#orities* an institution e8ercises a
si"nificant influence over one or more institutions or financial institutions* ut
1it#out #ol%in" a participation or ot#er capital ties in t#ese institutionsE an%
)/ 1#ere t1o or more institutions or financial institutions are place% un%er sin"le
mana"ement ot#er t#an pursuant to a contract or clauses of t#eir memoran%a or
,rticles of association7
0n particular* t#e competent aut#orities ma6 permit* or re&uire use of* t#e met#o% provi%e%
for in ,rticle 1- of Directive 83/349/$$C7 2#at met#o% s#all not* #o1ever* constitute
inclusion of t#e un%erta5in"s concerne% in consoli%ate% supervision7
>7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 con%itions accor%in" to
1#ic# consoli%ation s#all e carrie% out in t#e cases referre% to in para"rap#s - to = of t#is
,rticle7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
Decemer -.1=7
Po1ers are conferre% on t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle
1+ of Re"ulation )$4/ Bo 1.93/-.1.7
87 ?#ere consoli%ate% supervision is re&uire% pursuant to ,rticle 1.= of Directive Jinserte%
6 OPK* ancillar6 services un%erta5in"s an% asset mana"ement companies as %efine% in
Directive -..-/8>/$C s#all e inclu%e% in consoli%ations in t#e cases* an% in accor%ance
1it# t#e met#o%s* lai% %o1n in t#is ,rticle7
S$C20OB 3
SCOP$ O3 PR4D$B20,F COBSOF0D,20OB
Article 1%
Entities e,clu$e$ from the scope of pru$ential consoli$ation
17 ,n institution* financial institution or an ancillar6 services un%erta5in" 1#ic# is a
susi%iar6 or an un%erta5in" in 1#ic# a participation is #el%* nee% not to e inclu%e% in t#e
consoli%ation 1#ere t#e total amount of assets an% off;alance s#eet items of t#e
un%erta5in" concerne% is less t#an t#e smaller of t#e follo1in" t1o amounts:
)a/ $4R 1. millionE
)/ 1 O of t#e total amount of assets an% off;alance s#eet items of t#e parent
un%erta5in" or t#e un%erta5in" t#at #ol%s t#e participation7
-7 2#e competent aut#orities responsile for e8ercisin" supervision on a consoli%ate% asis
pursuant to ,rticle 1.= of Directive Jinserte% 6 OPK ma6 on a case;6;case asis %eci%e in
t#e follo1in" cases t#at an institution* financial institution or ancillar6 services un%erta5in"
1#ic# is a susi%iar6 or in 1#ic# a participation is #el% nee% not e inclu%e% in t#e
consoli%ation:
)a/ 1#ere t#e un%erta5in" concerne% is situate% in a t#ir% countr6 1#ere t#ere are le"al
impe%iments to t#e transfer of t#e necessar6 informationE
)/ 1#ere t#e un%erta5in" concerne% is of ne"li"ile interest onl6 1it# respect to t#e
o!ectives of monitorin" cre%it institutionsE
)c/ 1#ere* in t#e opinion of t#e competent aut#orities responsile for e8ercisin"
supervision on a consoli%ate% asis* t#e consoli%ation of t#e financial situation of t#e
un%erta5in" concerne% 1oul% e inappropriate or mislea%in" as far as t#e o!ectives
of t#e supervision of cre%it institutions are concerne%7
37 ?#ere* in t#e cases referre% to in para"rap# 1 an% point )/ of para"rap# -* several
un%erta5in"s meet t#e aove criteria set out t#erein* t#e6 s#all nevert#eless e inclu%e% in
t#e consoli%ation 1#ere collectivel6 t#e6 are of non;ne"li"ile interest 1it# respect to t#e
specifie% o!ectives7
Article 1&
.oint $ecisions on pru$ential requirements
17 2#e competent aut#orities s#all 1or5 to"et#er* in full consultation:
)a/ in t#e case of applications for t#e permissions referre% to in ,rticles 138)1/* 14=)B),
4B?(9/* 200, 3.1)-/* 3+- of this Re"ulation A respectivel6 A sumitte% 6 an $4
parent institution an% its susi%iaries* or !ointl6 6 t#e susi%iaries of an $4 parent
financial #ol%in" compan6 or $4 parent mi8e% financial #ol%in" compan6* to %eci%e
1#et#er or not to "rant t#e permission sou"#t an% to %etermine t#e terms an%
con%itions* if an6* to 1#ic# suc# permission s#oul% e su!ect7
)/ for t#e purposes of deterining *hether the $riteria for a spe$ifi$ intra;"roup
treatment as referre% to in Arti$les 41.)8a/ an% 413)4a) $opleented !# the EBA
regulator# te$hni$al standards referred to in Arti$le B4:(>) and B4C(B!) are et3
,pplications s#all e sumitte% onl6 to t#e consoli%atin" supervisor7
2#e application referre% to in ,rticle 3.1)-/* s#all inclu%e a %escription of t#e
met#o%olo"6 use% for allocatin" operational ris5 capital et1een t#e %ifferent entities of
t#e "roup7 2#e application s#all in%icate 1#et#er an% #o1 %iversification effects are
inten%e% to e factore% in t#e ris5 measurement s6stem7
-7 2#e competent aut#orities s#all %o ever6t#in" 1it#in t#eir po1er to reac# a !oint %ecision
1it#in si8 mont#s on:
)a/ t#e application referre% to in para"rap# 1)a/E
)/ t#e assessent of the $riteria and the deterination of the spe$ifi$ treatment
referre% to in para"rap# 1)/ A%
2#is !oint %ecision s#all e set out in a %ocument containin" t#e full6 reasone% %ecision
1#ic# s#all e provi%e% to t#e applicant 6 t#e competent aut#orit6 referre% to in
para"rap# 17
37 2#e perio% referre% to in para"rap# - s#all e"in:
)a/ on t#e %ate of receipt of t#e complete application referre% to in para"rap# 1)a/ 6 t#e
consoli%atin" supervisor7 2#e consoli%atin" supervisor s#all for1ar% t#e complete
application to t#e ot#er competent aut#orities 1it#out %ela6E
)/ on t#e %ate of receipt 6 competent aut#orities of a report prepare% 6 t#e
consoli%atin" supervisor anal6sin" intra;"roup commitments 1it#in t#e "roup7
47 0n t#e asence of a !oint %ecision et1een t#e competent aut#orities 1it#in si8 mont#s* t#e
consoli%atin" supervisor s#all ma5e its o1n %ecision on para"rap# 1)a/ A7 2#e %ecision of
t#e consoli%atin" supervisor s#all not limit t#e po1ers of t#e competent aut#orities un%er
,rticle 4::a of (ire$tive ,inserted !# -./3
2#e %ecision s#all e set out in a %ocument containin" t#e full6 reasone% %ecision an% s#all
ta5e into account t#e vie1s an% reservations of t#e ot#er competent aut#orities e8presse%
%urin" t#e si8 mont#s perio%7
2#e %ecision s#all e provi%e% to t#e $4 parent institution* t#e $4 parent financial #ol%in"
compan6 or to t#e $4 parent mi8e% financial #ol%in" compan6 an% t#e ot#er competent
aut#orities 6 t#e consoli%atin" supervisor7
0f* at t#e en% of t#e si8 mont# perio%* an6 of t#e competent aut#orities concerne% #as
referre% t#e matter to $D, in accor%ance 1it# ,rticle 19 of Re"ulation )$4/
Bo 1.93/-.1.* t#e consoli%atin" supervisor s#all %efer its %ecision on paragraph 4(a) and
a*ait an# de$ision that EBA a# take in a$$ordan$e *ith Arti$le 4>(C) of that
)egulation on its de$ision, and shall take its de$ision in $onforit# *ith the de$ision of
EBA3 +he si5=onth period shall !e deeed the $on$iliation period *ithin the eaning
of that )egulation3 EBA shall take its de$ision *ithin 4 onth3 +he atter shall not !e
referred to EBA after the end of the si5 onth period or after a 9oint de$ision has !een
rea$hed3
Ba3 &n the a!sen$e of a 9oint de$ision !et*een the $opetent authorities *ithin si5 onths,
the $opetent authorit# responsi!le for the supervision of the su!sidiar# on an
individual !asis shall ake its o*n de$ision on paragraph 4(!)3
+he de$ision shall !e set out in a do$uent $ontaining the full# reasoned de$ision and
shall take into a$$ount the vie*s and reservations of the other $opetent authorities
e5pressed during the si5 onths period3
+he de$ision shall !e provided to the $onsolidating supervisor that infors the E2
parent institution, the E2 parent finan$ial holding $opan# or to the E2 parent i5ed
finan$ial holding $opan#3
&f, at the end of the si5 onth period, the $onsolidating supervisor has referred the
atter to EBA in a$$ordan$e *ith Arti$le 4> of )egulation (E2) Fo 4:>CD2:4:, the
$opetent authorit# responsi!le for the supervision of the su!sidiar# on an individual
!asis shall defer its de$ision on paragraph 4(!) an% a1ait an6 %ecision t#at $D, ma6 ta5e
in accor%ance 1it# ,rticle 19)3/ of t#at Re"ulation on its %ecision* an% s#all ta5e its
%ecision in conformit6 1it# t#e %ecision of $D,7 2#e si8;mont# perio% s#all e %eeme%
t#e conciliation perio% 1it#in t#e meanin" of t#at Re"ulation7 $D, s#all ta5e its %ecision
1it#in 1 mont#7 2#e matter s#all not e referre% to $D, after t#e en% of t#e si8 mont#
perio% or after a !oint %ecision #as een reac#e%7
+7 ?#ere an $4 parent institution an% its susi%iaries* t#e susi%iaries of an $4 parent
financial #ol%in" compan6 or an $4 parent mi8e% financial #ol%in" compan6 use an
,%vance% 9easurement ,pproac# referre% to in ,rticle 3.1)-/ or an 0RD ,pproac#
referre% to in ,rticle 138 on a unifie% asis* t#e competent aut#orities s#all allo1 t#e
&ualif6in" criteria set out in ,rticle 31. an% 311 or in Part 2#ree, +itle &&* C#apter 3*
Section = respectivel6 to e met 6 t#e parent an% its susi%iaries consi%ere% to"et#er* in a
1a6 t#at is consistent 1it# t#e structure of t#e "roup an% its ris5 mana"ement s6stems*
processes an% met#o%olo"ies7
=7 2#e %ecisions referre% to in para"rap#s 2, B an% 4a s#all e re$ognised as deterinative
and applied !# t#e competent aut#orities in t#e 9emer States concerne%7
>7 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 t#e !oint %ecision
process referre% to in para"rap# 1)a/* 1it# re"ar% to t#e applications for permissions
referre% to in ,rticles 138)1/* 14=)B), 4B?(9/* 3.1)-/* 200 and C@2 1it# a vie1 to
facilitatin" !oint %ecisions7
$D, s#all sumit t#ose tec#nical stan%ar%s to t#e Commission 6 31 Decemer -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in
,rticle 1+ of Re"ulation )$4/ Bo 1.93/-.1.7
Article 1(
.oint $ecisions on the level of application of liqui$ity requirements
17 4pon application of an $4 parent institution or an $4 parent financial #ol%in" compan6 or
$4 parent mi8e% financial #ol%in" compan6 or a su!=$onsolidating su!sidiar# of an E2
parent institution or an E2 parent finan$ial holding $opan# or E2 parent i5ed
finan$ial holding $opan#* t#e consoli%atin" supervisor an% t#e competent aut#orities
responsile for t#e supervision of susi%iaries of an $4 parent institution or an $4 parent
financial #ol%in" compan6 or $4 parent mi8e% financial #ol%in" compan6 in a 9emer
State s#all %o ever6t#in" 1it#in t#eir po1er to reac# a !oint %ecision on *hether the
$onditions of (a) to (d) of Arti$le 0(4) are et and i%entif6in" a sin"le li&ui%it6 su;"roup
for t#e application of ,rticle >7
2#is !oint %ecision s#all e reac#e% 1it#in si8 mont#s after sumission 6 t#e
consoli%atin" supervisor of a report i%entif6in" sin"le li&ui%it6 su;"roups on t#e asis of
t#e criteria lai% %o1n in ,rticle >7 0n t#e event of %isa"reement %urin" t#e si8 mont#s
perio%* t#e consoli%atin" supervisor s#all consult $D, at t#e re&uest of an6 of t#e ot#er
competent aut#orities concerne%7 2#e consoli%atin" supervisor ma6 consult $D, on its
o1n initiative7
2#e !oint %ecision ma6 also impose constraints on t#e location an% o1ners#ip of li&ui%
assets an% re&uire minimum amounts of li&ui% assets to e #el% 6 Ainstitutions t#at are
e8empt from t#e application of .art "i53
+his !oint %ecision s#all e set out in a do$uent $ontaining the full6 reasone% de$ision
*hi$h shall !e su!itted to t#e parent institution of t#e li&ui%it6 su"roup !# the
$onsolidating supervisor7
-7 0n t#e asence of a !oint %ecision 1it#in si8 mont#s* eac# competent aut#orit6 responsile
for supervision on an in%ivi%ual asis s#all ta5e its o1n %ecision7
Co1ever* an6 competent aut#orit6 ma6 %urin" t#e si8 mont#s perio% refer to $D, t#e
&uestion 1#et#er t#e con%itions of )a/ to )%/ of ,rticle >)1/ are met3 &n this $ase, EBA a#
$arr# out its non=!inding ediation in accor%ance 1it# ,rticle C4 ($) of Re"ulation Bo
)$C/ 1.93/-.1.7 &n su$h a $ase* all t#e competent aut#orities involve% s#all %efer t#eir
%ecisions pen%in" the $on$lusion of the non=!inding ediation3 ;here, during the
ediation, no agreeent has !een rea$hed !# the $opetent authorities *ithin C
onths, ea$h $opetent authorit# responsi!le for supervision on an individual !asis
shall take its o*n de$ision taking into a$$ount the proportionalit# of !enefits and risks at
the level of the Me!er "tate of the parent institution and the proportionalit# of !enefits
and risks at the level of the Me!er "tate of the su!sidiar#7 2#e matter s#all not e
referre% to $D, after t#e en% of t#e si8 mont# perio% or after a !oint %ecision #as een
reac#e%7
2#e !oint %ecision referre% to in para"rap# 1 an% t#e de$isions referre% to in t#e previous
supara"rap# s#all e in%in" A3
37 ,n6 relevant competent aut#orit6 ma6 also %urin" t#e si8 mont#s perio% consult $D, in
$ase of disagreeent on t#e Acon%itions of )a/ to )%/ of ,rticle >)-a/ A7 0n t#is case* $D,
ma6 carr6 out its non;in%in" me%iation in accor%ance 1it# ,rticle 31)c/ of Re"ulation Bo
)$C/ 1.93/-.1.7 0n suc# case* all t#e competent aut#orities involve% s#all %efer t#eir
%ecisions pen%in" t#e conclusion of t#e non;in%in" me%iation7 ?#ere* %urin" t#e
me%iation* no a"reement #as een reac#e% 6 t#e competent aut#orities 1it#in 3 mont#s*
eac# competent aut#orit6 responsile for supervision on an in%ivi%ual asis s#all ta5e its
o1n %ecision7
A
Article 2*
Sub/consoli$ation in cases of entities in thir$ countries
Susi%iar6 institutions s#all appl6 t#e re&uirements lai% %o1n in Part 2#ree* ,rticle 84 to A? an%
Part R on t#e asis of t#eir su;consoli%ate% situation if t#ose institutions* or t#e parent un%erta5in"
1#ere it is a financial #ol%in" compan6 or mi8e% financial #ol%in" compan6* #ave an institution or
a financial institution Aas a susi%iar6 in a t#ir% countr6* or #ol% a participation in suc# an
un%erta5in"7
Article 21
0n$erta1in#s in thir$ countries
3or t#e purposes of appl6in" supervision on a consoli%ate% asis in accor%ance 1it# t#is C#apter*
t#e terms Minvestment firm*N (cre%it institution(* financial institution* an% (institution( s#all also appl6
to un%erta5in"s estalis#e% in t#ir% countries* 1#ic#* 1ere t#e6 estalis#e% in t#e 4nion* 1oul%
fulfil t#e %efinitions of t#ose terms in ,rticle 1=7
43 +he valuation of assets and off=!alan$e=sheet ites shall !e effe$ted in a$$ordan$e *ith
the a$$ounting frae*ork to *hi$h the institution is su!9e$t under )egulation (EC)
Fo 4?:?D2::2 and (ire$tive A?D?C@DEEC3
23 B# derogation to paragraph 4, $opetent authorities a# re6uire that institutions effe$t
the valuation of assets and off=!alan$e sheet ites and the deterination of o*n funds
in a$$ordan$e *ith &nternational A$$ounting "tandards as appli$a!le under )egulation
(EC) Fo 4?:?D2::23
P,R2 2?O
O?B 34BDS
2itle 0
Definitions specific to o1n fun%s
Article 22
Definitions
1or the purposes of this .art, the follo*ing definitions shall appl#'
)1/ Maccumulate% ot#er compre#ensive incomeN #as t#e same meanin" as un%er 0nternational
,ccountin" Stan%ar% )0,S/ 1* as applicale un%er Re"ulation )$C/ Bo 1=.=/-..-E
A
)4/ (asic o1n fun%s( means asic o1n fun%s 1it#in t#e meanin" of ,rticle 88 of
Directive -..9/138/$CE
)+/ (2ier 1 o1n;fun% insurance items( means asic o1n;fun% items of un%erta5in"s su!ect to
t#e re&uirements of Directive -..9/138/$C 1#ere t#ose items are classifie% in 2ier 1
1it#in t#e meanin" of Directive -..9/138/$C in accor%ance 1it# para"rap# 1 of ,rticle 94
of t#at DirectiveE
)=/ Ma%%itional 2ier 1 o1n;fun% insurance items( means asic o1n;fun% items of un%erta5in"s
su!ect to t#e re&uirements of Directive -..9/138/$C t#e items are classifie% as 2ier 1
capital 1it#in t#e meanin" of Directive -..9/138/$C in accor%ance 1it# para"rap# 1 of
,rticle 94 of t#at Directive an% t#e inclusion of t#ose items is limite% 6 t#e %ele"ate% acts
a%opte% in accor%ance 1it# ,rticle 99 of t#at DirectiveE
)>/ (2ier - o1n;fun% insurance items( means asic o1n;fun% items of un%erta5in"s su!ect to
t#e re&uirements of Directive -..9/138/$C 1#ere t#ose items are classifie% as 2ier -
1it#in t#e meanin" of Directive -..9/138/$C in accor%ance 1it# para"rap# - of ,rticle 94
of t#at DirectiveE
)8/ (2ier 3 o1n;fun% insurance items( means asic o1n;fun% insurance items of un%erta5in"s
su!ect to t#e re&uirements of Directive -..9/138/$C 1#ere t#ose items are classifie% as
2ier 3 1it#in t#e meanin" of Directive -..9/138/$C in accor%ance 1it# para"rap# 3 of
,rticle 94 of t#at DirectiveE
)9/ (%eferre% ta8 assets( #as t#e same meanin" as un%er t#e applicale accountin" frae*orkE
)1./ M%eferre% ta8 assets t#at rel6 on future profitailit6N means %eferre% ta8 assets t#e future
value of 1#ic# ma6 e realise% onl6 in t#e event t#e institution "enerates ta8ale profit in
t#e futureE
)11/ M%eferre% ta8 liailitiesN #as t#e same meanin" as un%er t#e applicale accountin"
frae*orkE
)1-/ M%efine% enefit pension fun% assetsN means t#e assets of a %efine% pension fun% or plan* as
applicale* calculate% after t#e6 #ave een re%uce% 6 t#e amount of oli"ations un%er t#e
same fun% or planE
)13/ M%istriutionsN means t#e pa6ment of %ivi%en%s or interest in an6 formE
)14/ (financial un%erta5in"( #as t#e same meanin" as un%er points )/ an% )%/ of ,rticle 13)-+/
of Directive -..9/138/$CE
)1+/ Mfun%s for "eneral an5in" ris5N #as t#e same meanin" as un%er ,rticle 38 of Directive
8=/=3+/$$CE
)1=/ M"oo%1illN #as t#e same meanin" as un%er t#e applicale accountin" frae*orkE
)1>/ Min%irect #ol%in"N means an# e5posure to an interediate entit# that has an e5posure to
$apital instruents issued !# a finan$ial se$tor entit# 1#ere* in t#e event t#e $apital
instruents issued !# the finan$ial se$tor entit# *ere peranentl# *ritten off, the loss
that the institution *ould in$ur as a result 1oul% not e materiall6 %ifferent from t#e loss
At#e institution *ould in$ur from a %irect #ol%in" of those $apital instruents issued !#
the finan$ial se$tor entit#E
)18/ Mintan"ile assetsN #as t#e same meanin" as un%er t#e applicale accountin" frae*ork
and in$ludes good*ill
A
)-1/ Mot#er capital instrumentsN means capital instruments issue% 6 finan$ial se$tor entities
t#at %o not &ualif6 as Common $&uit6 2ier 1* ,%%itional 2ier 1 or 2ier - instruments or
2ier 1 o*n=fund insurance A items* a%%itional 2ier 1 o1n;fun% insurance items* 2ier -
o1n;fun% insurance items or 2ier 3 o1n;fund insurance itemsE
)--/ Mot#er reservesN means reserves 1it#in t#e meanin" of t#e applicale accountin"
frae*ork t#at are re&uire% to e %isclose% un%er t#at applicale accountin" stan%ar%*
e8clu%in" an6 amounts alrea%6 inclu%e% in accumulate% ot#er compre#ensive income or
retaine% earnin"sE
)-3/ Mo1n fun%sN means t#e sum of 2ier 1 capital an% 2ier - capitalE
)-4/ Mo1n fun%s instrumentsN means capital instruments issue% 6 t#e institution t#at &ualif6 as
Common $&uit6 2ier 1* ,%%itional 2ier 1 or 2ier - instrumentsE
(2Ba) a Linorit# interestG eans the aount of Coon E6uit# +ier 4 $apital of a su!sidiar#
of an institution that is attri!uta!le to natural or legal persons other than those in$luded
in the prudential s$ope of $onsolidation of the institution3
)-+/ MprofitN #as t#e same meanin" as un%er t#e applicale accountin" frae*orkE
)-=/ Mreciprocal cross #ol%in"N means a #ol%in" 6 an institution of t#e o1n fun%s instruments
or ot#er capital instruments issue% 6 finan$ial se$tor entities 1#ere t#ose entities also
#ol% o1n fun%s instruments issue% 6 t#e institutionE
A
)-8/ Mretaine% earnin"sN means profits an% losses rou"#t for1ar% as a result of t#e final
application of profit or loss un%er t#e applicale accountin" frae*orkE
)-9/ Ms#are premium accountN #as t#e same meanin" as un%er t#e applicale accountin"
frae*orkE
)3./ Mtemporar6 %ifferences( #as t#e same meanin" as un%er t#e applicale accountin"
frae*ork7
(C:a) 7s#ntheti$ holding7 eans an investent !# an institution in a finan$ial instruent the
value of *hi$h is dire$tl# linked to the value of the $apital instruents issued !# a
finan$ial se$tor entit#3
(C:!) L$ross=guarantee s$hee7 eans a s$hee that eets all of the follo*ing $onditions'
(a) the institutions fall *ithin the sae institutional prote$tion s$hee as referred to
in Arti$le 4:A(0)%
(!) the institutions are full# $onsolidated a$$ording to Arti$le 4(4)(!), ($), (d) or (2) of
the "eventh Coun$il (ire$tive ACDCB>DEEC on $onsolidated a$$ounts
4
and are
in$luded in the supervision on a $onsolidated !asis of the institution *hi$h is the
parent institution in a Me!er "tate a$$ording to Chapter 2 of +itle && of .art -ne
and su!9e$t to an o*n=funds re6uireent%
($) the parent institution in a Me!er "tate and the su!sidiaries are esta!lished in the
sae Me!er "tate and are su!9e$t to authorisation and supervision !# the sae
$opetent authorit#%
(d) the parent institution in a Me!er "tate and the su!sidiaries have entered into a
$ontra$tual or statutor# lia!ilit# arrangeent *hi$h prote$ts those institutions and
in parti$ular ensures their li6uidit# and solven$#, in order to avoid !ankrupt$# in
the $ase that it !e$oes ne$essar#%
(e) arrangeents are in pla$e to ensure the propt provision of finan$ial eans in
ters of $apital and li6uidit# if re6uired under the $ontra$tual or statutor# lia!ilit#
arrangeent referred to in point (d)%
(f) the ade6ua$# of the arrangeents referred to in points (d) and (e) is onitored on
a regular !asis !# the $opetent authorit#%
4
-E L 4>C, 4A3034>AC, p3 43
(g) the iniu period of noti$e for a voluntar# e5it of a su!sidiar# fro the lia!ilit#
arrangeent is 4: #ears%
(h) the $opetent authorit# is epo*ered to prohi!it a voluntar# e5it of a su!sidiar#
fro the lia!ilit# arrangeent3
(C:$) 7distri!uta!le ites7 eans the aount of the profits at the end of the last finan$ial #ear
plus an# profits !rought for*ard and reserves availa!le for this purpose !efore
distri!utions to holders of o*n funds instruents less an# losses !rought for*ard,
profits *hi$h are non=distri!uta!le pursuant to provisions in legislation or the
institutionGs !#e=la*s and sus pla$ed to non=distri!uta!le reserves in a$$ordan$e *ith
appli$a!le national la* or the statutes of the institution, *hereas these losses and
reserves shall !e deterined on the !asis of the individual a$$ounts of the institution
and not on the !asis of the $onsolidated a$$ounts3
2itle 00 $lements of
o1n fun%s
C#apter 1
2ier 1 capital
Article 23
Tier 1 capital
2#e 2ier 1 capital of an institution consists of t#e sum of t#e Common $&uit6 2ier 1 capital an%
,%%itional 2ier 1 capital of t#e institution7
C#apter -
Common $&uit6 2ier 1 capital
S$C20OB 1
CO99OB $Q402H 20$R 1 02$9S ,BD 0BS2R49$B2S
Article 24
2ommon Equity Tier 1 items
17 Common $&uit6 2ier 1 items of institutions consist of t#e follo1in":
)a/ capital instruments* provi%e% t#e con%itions lai% %o1n in ,rticle -= or *here
appli$a!le in Arti$le 20 are metE
)/ s#are premium accounts relate% to t#e instruments referre% to in point )a/E
)c/ retaine% earnin"sE
)%/ accumulate% ot#er compre#ensive incomeE
)e/ ot#er reserves A
)f/ fun%s for "eneral an5in" ris57
+he ites referred to in points ($) to (f) shall !e re$ognised as Coon E6uit# +ier 4
onl# *here the# are availa!le to the institution for unrestri$ted and iediate use to
$over risks or losses as soon as these o$$ur3
-7 3or t#e purposes of point )c/ of para"rap# 1* institutions ma6 inclu%e interim or 6ear;en%
profits in Common $&uit6 2ier 1 capital efore t#e institution #as ta5en a formal %ecision
confirmin" t#e final profit or loss of t#e institution for t#e 6ear onl6 1it# t#e prior
perission of t#e competent aut#orit67 2#e competent aut#orit6 s#all grant perission
1#ere t#e follo1in" con%itions are met:
)a/ t#ose profits #ave een verified 6 persons in%epen%ent of t#e institution t#at are
responsile for t#e au%itin" of t#e accounts of t#at institutionE
)/ t#e institution #as %emonstrate% to t#e satisfaction of t#e competent aut#orit6 t#at
an6 foreseeale c#ar"e or %ivi%en% #as een %e%ucte% from t#e amount of t#ose
profits7
, verifi$ation of t#e interim or 6ear;en% profits of t#e institution s#all provi%e an a%e&uate
level of assurance t#at t#ose profits #ave een evaluate% in accor%ance 1it# t#e principles
set out in t#e applicale accountin" frae*ork7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e meanin" of
foreseeale 1#en %eterminin" 1#et#er an6 foreseeale c#ar"e or %ivi%en% #as een
%e%ucte%7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this )egulation3 3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
47 Copetent authorities shall evaluate *hether issues of Coon E6uit# +ier 4
instruents eet the $riteria set out in Arti$le 2? or, *here appli$a!le, in Arti$le 203
;ith respe$t to issues after the date of entr# into for$e of this )egulation, institutions
shall $lassif# $apital as Coon E6uit# +ier 4 instruents onl# after perission is
granted !# the $opetent authorities, *hi$h a# $onsult EBA3
1or o*n funds instruents, *ith the e5$eption of state aid, that are approved as eligi!le
Coon E6uit# +ier 4 instruents !# the $opetent authorit# !ut *here, in the opinion
of the EBA, the $oplian$e *ith the $riteria in Arti$le 2? or as appli$a!le in Arti$le 20 is
ateriall# $ople5 to as$ertain, the $opetent authorities shall e5plain their reasoning
to EBA3
8439/13 SO/psc 130
EN
DQPG
-n the !asis of inforation fro ea$h $opetent authorit#, $D, s#all estalis#* maintain
an% pulis# a list of all of t#e forms of capital instrument in eac# 9emer State t#at &ualif6
as Common $&uit6 2ier 1 instruments7 $D, s#all estalis# an% pulis# t#is list *ithin one
onth of the date of entr# into for$e of this )egulation for the first tie3
EBA a#, after the revie* pro$ess set out in Arti$le 0@ and, *here there is signifi$ant
eviden$e of those instruents not eet the $riteria set out in Arti$le 2? or, *here
appli$a!le, Arti$le 20, de$ide to reove non=state aid $apital instruents issued after the
entr# into for$e of this )egulation fro the list and a# ake an announ$eent to this
effe$t3
Article 2
2apital instruments of mutuals3 cooperative societies, savings institutions or similar institutions in
2ommon Equity Tier 1 items
17 Common $&uit6 2ier 1 items s#all inclu%e an6 capital instrument issue% 6 an institution
un%er its statutor6 terms provi%e% t#e follo1in" con%itions are met:
)aa/ the institution is of a t#pe that is defined under appli$a!le national la* and *hi$h
$opetent authorities $onsider to 6ualif# as an# of the follo*ing'
(i) a utual%
(ii) a $o=operative so$iet#%
(iia) a savings institution%
(iii) a siilar institution%
(iv) a $redit institution *hi$h is *holl# o*ned !# one of the institutions
entioned under (i) to (iii), and has approval fro the relevant $opetent
authorit# to ake use of the provisions in this Arti$le and provided that, and
for as long as, 4::J of the ordinar# shares in issue in the $redit institution
are held dire$tl# or indire$tl# !# an institution des$ri!ed in points (i) to (iii)%
A
)/ t#e con%itions lai% %o1n in ,rticles -= an% the aending $onditions in Arti$le ->
are metE
A
A$D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e Acon%itions accor%in" to
1#ic# competent aut#orities ma6 %etermine t#at a t6pe of un%erta5in" reco"nise% un%er applicale
national la1 &ualifies as a mutual* $o=operative societ6, savings institution or similar institution for
t#e purposes of t#is Part A3
A
+hose utuals, $ooperative so$ieties or savings institutions re$ognised as su$h under appli$a!le
national la* prior to C4 (e$e!er 2:42 shall $ontinue to !e $lassified as su$h for the purposes of
this .art, provided that the# $ontinue to eet the $riteria that deterined su$h re$ognition3
$D, s#all sumit that %raft re"ulator6 tec#nical standard to t#e Commission *ithin one onth of
the date of entr# into for$e of this )egulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to in t#e
first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of Re"ulation
)$4/ Bo 1.93/-.1.7
Article 2"
2ommon Equity Tier 1 instruments
17 Capital instruments s#all &ualif6 as Common $&uit6 2ier 1 instruments onl6 if all t#e
follo1in" con%itions are met:
)a/ t#e instruments are issue% %irectl6 6 t#e institution 1it# t#e prior approval of t#e
o1ners of t#e institution or* 1#ere permitte% un%er applicale national la1* t#e
mana"ement o%6 of t#e institutionE
)/ t#e instruments are pai% up an% t#eir purc#ase is not fun%e% %irectl6 or in%irectl6 6
t#e institutionE
)c/ t#e instruments meet all t#e follo1in" con%itions as re"ar%s t#eir classification:
)i/ t#e6 &ualif6 as capital 1it#in t#e meanin" of ,rticle -- of Directive
8=/=3+/$$CE
)ii/ t#e6 are classifie% as e&uit6 1it#in t#e meanin" of t#e applicale accountin"
frae*ork%
)iii/ t#e6 are classifie% as e&uit6 capital for t#e purposes of %eterminin" alance
s#eet insolvenc6* 1#ere applicale un%er national insolvenc6 la1E
)%/ t#e instruments are clearl6 an% separatel6 %isclose% on t#e alance s#eet in t#e
financial statements of t#e institutionE
)e/ t#e instruments are perpetualE
)f/ t#e principal amount of t#e instruments ma6 not e re%uce% or repai%* e8cept in
eit#er of t#e follo1in" cases:
)i/ t#e li&ui%ation of t#e institutionE
(ii/ %iscretionar6 repurc#ases of t#e instruments or ot#er %iscretionar6 means of
re%ucin" capital* 1#ere t#e institution #as receive% t#e prior permission of t#e
competent aut#orit6 in accor%ance 1it# ,rticle>-E
)"/ t#e provisions "overnin" t#e instruments %o not in%icate e8pressl6 or implicitl6 t#at
t#e principal amount of t#e instruments 1oul% or mi"#t e re%uce% or repai% ot#er
t#an in t#e li&ui%ation, of t#e institution * an% t#e institution %oes not ot#er1ise
provi%e suc# an in%ication prior to or at issuance of t#e instruments* e8cept in t#e
case of instruments referre% to in ,rticle -+ 1#ere t#e refusal 6 t#e institution to
re%eem suc# instruments is pro#iite% un%er applicale national la1E
)#/ t#e instruments meet t#e follo1in" con%itions as re"ar%s %istriutions:
)i/ t#ere is no preferential distri!ution treatent regarding the order of
distri!ution pa#ents* inclu%in" in relation to ot#er Common $&uit6 2ier 1
instruments* an% t#e terms "overnin" t#e instruments %o not provi%e
preferential ri"#ts to pa6ment of %istriutionsE
)ii/ %istriutions to #ol%ers of t#e instruments ma6 e pai% onl6 out of %istriutale
itemsE
)iii/ t#e con%itions "overnin" t#e instruments %o not inclu%e a cap or ot#er
restriction on t#e ma8imum level of %istriutions* e8cept in t#e case of t#e
instruments referre% to in ,rticle 2@3
)iv/ t#e level of %istriutions is not %etermine% on t#e asis of t#e amount for 1#ic#
t#e instruments 1ere purc#ase% at issuance A* e8cept in t#e case of t#e
instruments referre% to in ,rticle -+E
)v/ t#e con%itions "overnin" t#e instruments %o not inclu%e an6 oli"ation for t#e
institution to ma5e %istriutions to t#eir #ol%ers an% t#e institution is not
ot#er1ise su!ect to suc# an oli"ationE
)vi/ non;pa6ment of %istriutions %oes not constitute an event of %efault of t#e
institutionE
(vii) the $an$ellation of distri!utions iposes no restri$tions on the institution%
)i/ compare% to all t#e capital instruments issue% 6 t#e institution* t#e instruments
asor t#e first an% proportionatel6 "reatest s#are of losses as t#e6 occur* an% eac#
instrument asors losses to t#e same %e"ree as all ot#er Common $&uit6 2ier 1
instrumentsE
)!/ t#e instruments ran5 elo1 all ot#er claims in t#e event of insolvenc6 or li&ui%ation
of t#e institutionE
)5/ t#e instruments entitle t#eir o1ners to a claim on t#e resi%ual assets of t#e institution*
1#ic#* in t#e event of its li&ui%ation an% after t#e pa6ment of all senior claims* is
proportionate to t#e amount of suc# instruments issue% an% is not fi8e% or su!ect to
a cap* e8cept in t#e case of t#e capital instruments referre% to in ,rticle -+E
)l/ t#e instruments are not secure%* or su!9e$t to a guarantee that enhan$es the
seniorit# of the $lai 6 an6 of t#e follo1in":
)i/ t#e institution or its susi%iariesE
)ii/ t#e parent undertaking of the institution or its susi%iariesE
)iii/ t#e parent financial #ol%in" compan6 or its susi%iariesE
)iv/ t#e mi8e% activit6 #ol%in" compan6 or its susi%iariesE
)v/ t#e mi8e% financial #ol%in" compan6 an% its susi%iariesE
)vi/ an6 un%erta5in" t#at #as close lin5s 1it# t#e entities referre% to in points )i/ to
)v/E
)m/ t#e instruments are not su!ect to an6 arran"ement* contractual or ot#er1ise* t#at
en#ances t#e seniorit6 of claims un%er t#e instruments in insolvenc6 or li&ui%ation7
+he $ondition set out in point (9) of the first su!paragraph shall !e deeed to !e et,
not*ithstanding the instruents are in$luded in Additional +ier 4 or +ier 2 !# virtue of
Arti$le B?C(C), provided that the# rank pari passu3
-7 2#e con%itions lai% %o1n in point )i/ of para"rap# 1 s#all e deeed to !e met
not1it#stan%in" a 1rite %o1n on a permanent asis of t#e principal amount of ,%%itional
2ier 1 or +ier 2 instruments3
+he $ondition laid do*n in paragraph 4, point (f) shall !e deeed to !e et
not*ithstanding the redu$tion of the prin$ipal aount of the $apital instruent *ithin a
resolution pro$edure or as a $onse6uen$e of a *rite=do*n of $apital instruents
re6uired !# the resolution authorit# responsi!le for the institution3
+he $ondition laid do*n in paragraph 4, point (g) shall !e deeed to !e et
not*ithstanding the provisions governing the $apital instruent indi$ating e5pressl# or
ipli$itl# that the prin$ipal aount of the instruent *ould or ight !e redu$ed *ithin
a resolution pro$edure or as a $onse6uen$e of a *rite=do*n of $apital instruents
re6uired !# the resolution authorit# responsi!le for the institution3
2!3 +he $ondition in paragraph 4, point (h)(iii) shall !e deeed to !e et not*ithstanding
the instruent pa#ing a dividend ultiple, provided that su$h dividend ultiple does not
result in a distri!ution that $auses a disproportionate drag on $apital3
2$3 1or the purpose of paragraph 4, point (h)(i), differentiated distri!ution should onl#
refle$t differentiated voting rights3 &n this respe$t, higher distri!ution shall onl# appl#
to Coon E6uit# +ier 4 instruents *ith fe*er or no voting rights7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e applicale forms an% nature of in%irect fun%in" of capital instrumentsE
A
(!a) ;hether and *hen ultiple distri!utions *ould $onstitute a disproportionate drag
on Coon E6uit# +ier 4 $apital%
(!!) the eaning of preferential %istriutions%
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this )egulation33
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
Article 2%
2apital instruments issue$ by mutuals3 cooperative societies,
savings institutions an$ similar institutions
17 Capital instruments issue% 6 mutuals* cooperative societies, savings institutions an%
similar institutions s#all &ualif6 as Common $&uit6 2ier 1 instruments onl6 if t#e
con%itions lai% %o1n in ,rticle -= *ith odifi$ations resulting fro appli$ation of t#is
,rticle are met7
-7 2#e follo1in" con%itions s#all e met as re"ar%s re%emption of t#e capital instruments:
)a/ e8cept 1#ere pro#iite% un%er applicale national la1* t#e institution s#all e ale to
refuse t#e re%emption of t#e instrumentsE
)/ 1#ere t#e refusal 6 t#e institution of t#e re%emption of instruments is pro#iite%
un%er applicale national la1* t#e provisions "overnin" t#e instruments s#all "ive t#e
institution t#e ailit6 to limit t#eir re%emptionE
)c/ refusal to re%eem t#e instruments* or t#e limitation of t#e re%emption of t#e
instruments 1#ere applicale* ma6 not constitute an event of %efault of t#e
institution7
37 2#e capital instruments ma6 inclu%e a cap or restriction on t#e ma8imum level of
%istriutions onl6 1#ere t#at cap or restriction is set out un%er applicale national la1 or
t#e statute of t#e institution7
47 ?#ere t#e capital instruments provi%e t#e o1ner 1it# ri"#ts to t#e reserves of t#e
institution in t#e event of insolvenc6 or li&ui%ation t#at are limite% to t#e nominal value of
t#e instruments* suc# a limitation s#all appl6 to t#e same %e"ree to t#e #ol%ers of all ot#er
Common $&uit6 2ier 1 instruments issue% 6 t#at institution7
+he $ondition laid do*n in the first su!=paragraph is *ithout pre9udi$e to the possi!ilit#
for a utual, $ooperative so$iet#, savings institution or a siilar institution to re$ogni<e
*ithin CE+4 $apital instruents that do not afford voting rights to the holder and that
eet all the follo*ing $onditions'
(a) the $lai of the holders of the non=voting instruents in the insolven$# or
li6uidation of the institution is proportionate to the share of the total Coon
E6uit# +ier 4 instruents that those non=voting instruents represent%
(!) the instruents ot#er1ise 6ualif# as Coon E6uit# +ier 4 instruents3
+7 ?#ere t#e capital instruments entitle t#eir o1ners to a claim on t#e assets of t#e institution
in t#e event of its insolvenc6 or li&ui%ation t#at is fi8e% or su!ect to a cap* suc# a
limitation s#all appl6 to t#e same %e"ree to all #ol%ers of all Common $&uit6 2ier 1
instruments issue% 6 t#e institution7
=7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e nature of t#e
limitations on re%emption necessar6 1#ere t#e refusal 6 t#e institution of t#e re%emption
of o1n fun%s instruments is pro#iite% un%er applicale national la17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one onth
of the date of entr# into for$e of this )egulation3 3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to in t#e
first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of Re"ulation
)$4/ Bo 1.93/-.1.7
Article 2&
2onsequences of the con$itions for 2ommon Equity Tier 1 instruments ceasin# to be met
2#e follo1in" s#all appl6 1#ere* in t#e case of a Common $&uit6 2ier 1 instrument* t#e con%itions
lai% %o1n in ,rticle -=* an% ,rticle -> 1#ere applicale* cease to e met:
)a/ t#at instrument s#all iediatel# cease to &ualif6 as a Common $&uit6 2ier 1 instrumentE
)/ t#e s#are premium accounts t#at relate to t#at instrument s#all iediatel# cease to &ualif6
as Common $&uit6 2ier 1 items7
Arti$le 2Aa
Capital instruents su!s$ri!ed !# pu!li$ authorities in eergen$# situations
43 &n eergen$# situations, $opetent authorities a# perit institutions to in$lude in
Coon E6uit# +ier 4, $apital instruents that $opl# at least *ith $onditions in
Arti$le 2?(4), point (!) to (e) *here all the follo*ing $onditions are et'
43 +he $apital instruents are issued after the date of appli$ation of this )egulation3
23 +he $apital instruents are $onsidered "tate aid !# the Coission3
C3 +he $apital instruents are issued *ithin the $onte5t of re$apitalisation easures
pursuant to "tate aid=rules e5isting at the tie3
B3 +he $apital instruents are full# su!s$ri!ed and held !# the "tate or a relevant pu!li$
authorit# or pu!li$=o*ned entit#3
@3 +he $apital instruents are a!le to a!sor! losses3
?3 E5$ept for the $ase of the $apital instruents referred to in Arti$le 2@, in the event of
li6uidation, the $apital instruents entitle their o*ners to a $lai on the residual assets
of the institution after the pa#ent of all senior $lais3
03 +here are ade6uate e5it e$haniss of the "tate or, *here appli$a!le, a relevant pu!li$
authorit# or pu!li$=o*ned entit#3
A3 +he $opetent authorit# has granted its prior perission and has pu!lished its de$ision
together *ith an e5planation of this de$ision3
2pon reasoned re6uest !# and in $ooperation *ith the relevant $opetent authorit#,
EBA shall $onsider these $apital instruents as e6uivalent to Coon E6uit# +ier 4
instruents for the purpose of this )egulation3
?ECTION 2
PRU$ENTIAL FILTER?
,rticle -9
Securitise% assets
17 ,n institution s#all e8clu%e from an6 element of o1n fun%s an6 increase in its e&uit6 un%er
t#e applicale accountin" frae*ork t#at results from securitise% assets* inclu%in" t#e
follo1in":
)a/ suc# an increase associate% 1it# future mar"in income t#at results in a "ain on sale
for t#e institutionE
)/ 1#ere t#e institution is t#e ori"inator of a securitisation* net "ains t#at arise from t#e
capitalisation of future income from t#e securitise% assets t#at provi%e cre%it
en#ancement to positions in t#e securitisation7
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 furt#er t#e concept of a
"ain on sale referre% to in point )a/ of para"rap# 17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
Article 3*
2ash flow he$#es an$ chan#es in the value of own liabilities
0nstitutions s#all not inclu%e t#e follo1in" items in an6 element of o1n fun%s:
)a/ t#e fair value reserves relate% to "ains or losses on cas# flo1 #e%"es of financial
instruments t#at are not value% at fair value* inclu%in" pro!ecte% cas# flo1sE
)/ "ains or losses on liailities of t#e institution t#at are value% at fair value t#at result
from c#an"es in t#e o1n cre%it stan%in" of t#e institution7
($) all fair value gains and losses arising fro the institution7s o*n $redit risk related
to derivative lia!ilities,
23 1or the purposes of paragraph 4, point ($), institutions shall not offset the fair value
gains and losses arising fro the institution7s o*n $redit risk *ith those arising fro its
$ounterpart# $redit risk3
C3 ;ithout pre9udi$e to paragraph 4, point (!), an institution a# in$lude the aount of
gains and losses on its lia!ilities in o*n funds *here all the follo*ing $onditions are
et'
(a) the lia!ilities are in the for of !onds as defined in Arti$le @2(B) of (ire$tive
2::>D?@DEC%
(!) the $hanges in the value of the institution7s assets and lia!ilities are due to the
sae $hanges in the institutionGs o*n $redit standing%
($) there is a $lose $orresponden$e !et*een the value of the !onds referred to in point
(a) and the value of the institution7s assets%
(d) it is possi!le to redee the ortgage loans !# !u#ing !a$k the !onds finan$ing the
ortgage loans at arket or noinal value3
B3 EBA shall develop draft regulator# te$hni$al standards to spe$if# *hat $onstitutes the
$lose $orresponden$e !et*een the value of the !onds and the value of the assets, as
entioned in paragraph C, point ($)3
EBA shall su!it those draft regulator# te$hni$al standards to the Coission *ithin
one onth of the date of entr# into for$e of this regulation3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3
Article 31
A$$itional value a$4ustments
17 0nstitutions s#all appl6 t#e re&uirements of ,rticle 1.. to all t#eir assets measure% at fair
value 1#en calculatin" t#e amount of t#eir o1n fun%s an% s#all %e%uct from Common
$&uit6 2ier 1 capital t#e amount of an6 a%%itional value a%!ustments necessar67
A
Article 32
0nrealise$ #ains an$ losses measure$ at fair value
$8cept in t#e case of t#e items referre% to in ,rticle 3.* institutions s#all not ma5e a%!ustments to
remove from t#eir o1n fun%s unrealise% "ains or losses on t#eir assets or liailities measure% at fair
value7
S$C20OB 3
D$D4C20OBS 3RO9 CO99OB $Q402H 20$R 1 02$9S* $G$9P20OBS ,BD
,F2$RB,20R$S
S4D;S$C20OB 1
D$D4C20OBS 3RO9 CO99OB $Q402H 20$R 1 02$9S
Article 33
De$uctions from 2ommon Equity Tier 1 items
17 0nstitutions s#all %e%uct t#e follo1in" from Common $&uit6 2ier 1 items:
)a/ losses for t#e current financial 6earE
)/ intan"ile assetsE
)c/ %eferre% ta8 assets t#at rel6 on future profitailit6E
)%/ for institutions calculatin" ris5;1ei"#te% e8posure amounts usin" t#e 0nternal
Ratin"s Dase% ,pproac#* ne"ative amounts resultin" from t#e calculation of
e8pecte% loss amounts lai% %o1n in ,rticles 1+4 an% 1++ AE
)e/ %efine% enefit pension fun% assets on the !alan$e sheet of t#e institution A3
)f/ %irect, in%irect and s#ntheti$ #ol%in"s 6 an institution of o1n Common $&uit6 2ier
1 instruments* inclu%in" o1n Common $&uit6 2ier 1 instruments t#at an institution
is un%er an actual or contin"ent oli"ation to purc#ase 6 virtue of an e8istin"
contractual oli"ationE
)"/ dire$t, indire$t and s#ntheti$ #ol%in"s of t#e Common $&uit6 2ier 1 instruments of
finan$ial se$tor entities 1#ere t#ose entities #ave a reciprocal cross #ol%in" 1it# t#e
institution t#at t#e competent aut#orit6 consi%ers to #ave een %esi"ne% to inflate
artificiall6 t#e o1n fun%s of t#e institutionE
)#/ t#e applicale amount of %irect, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of
Common $&uit6 2ier 1 instruments of finan$ial se$tor entities 1#ere t#e institution
%oes not #ave a si"nificant investment in t#ose entitiesE
)i/ t#e applicale amount of %irect, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of
t#e Common $&uit6 2ier 1 instruments of finan$ial se$tor entities 1#ere t#e
institution #as a si"nificant investment in t#ose entitiesE
)!/ t#e amount of items re&uire% to e %e%ucte% from ,%%itional 2ier 1 items pursuant to
,rticle +3 t#at e8cee%s t#e ,%%itional 2ier 1 capital of t#e institutionE
)5/ t#e e8posure amount of t#e follo1in" items 1#ic# &ualif6 for a ris5 1ei"#t of
1 -+. O* 1#ere t#e institution %e%ucts t#at e8posure amount from the aount of
Common $&uit6 2ier 1 ites as an alternative to appl6in" a ris5 1ei"#t of 1 -+. O:
)i/ &ualif6in" #ol%in"s outsi%e t#e financial sectorE
)ii/ securitisation positions* in accor%ance 1it# ,rticles -38)1/)/* -39)1/)/ an%
-+3E
)iii/ free %eliveries* in accor%ance 1it# ,rticle 3=9)3/E
(iv) positions in a !asket for *hi$h an institution $annot deterine the risk
*eight under the &)B approa$h, in a$$ordan$e *ith Arti$le 4BA(A)%
(v) e6uit# e5posures under an internal odels approa$h, in a$$ordan$e *ith
Arti$le 4@:(B)3
)l/ an6 ta8 c#ar"e relatin" to Common $&uit6 2ier 1 items foreseeale at t#e moment of
its calculation* e8cept 1#ere t#e institution suital6 a%!usts t#e amount of Common
$&uit6 2ier 1 items insofar as suc# ta8 c#ar"es re%uce t#e amount up to 1#ic# t#ose
items ma6 e applie% to cover ris5s or losses7
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e application of t#e
%e%uctions referre% to in points )a/* )c/* )e/, (f), (h), (i) an% )l/ of para"rap# 1 and related
dedu$tions $ontained in points (a), ($), (d) and (f) of Arti$le @C and points (a), ($) and (d)
of Arti$le ?C3
EBA shall su!it those draft regulator# te$hni$al standards to the Coission *ithin
one onth of the date of entr# into for$e of this regulation3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3
C3 EBA shall develop draft regulator# te$hni$al standards to spe$if# t#e t6pes of capital
instruents financial institutions and, in $onsultation *ith E&-.A, of t#ir% countr6
insurance an% reinsurance un%erta5in"s* an% un%erta5in"s e8clu%e% from t#e scope of
Directive -..9/138/$C in accor%ance 1it# ,rticle 4 of t#at Directive t#at s#all e
%e%ucte% from t#e follo1in" elements of o1n fun%s:
)i/ Common $&uit6 2ier 1 itemsE
)ii/ ,%%itional 2ier 1 itemsE
)iii/ 2ier - items7
$D, s#all sumit t#ose draft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Coission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
Article 34
De$uction of intan#ible assets
0nstitutions s#all %etermine t#e aount of intan"ile assets to e %e%ucte% in accor%ance 1it# t#e
follo1in":
)a/ t#e amount to e %e%ucte% s#all e re%uce% 6 t#e amount of associate% %eferre% ta8 liailities
t#at 1oul% e e8tin"uis#e% if t#e intan"ile assets ecame impaire% or 1ere %ereco"nise%
un%er t#e appli$a!le accountin" frae*ork%
)/ t#e amount to e %e%ucte% s#all inclu%e "oo%1ill inclu%e% in t#e valuation of si"nificant
investments of t#e institution7
Article 3
De$uction of $eferre$ ta, assets that rely on future profitability
17 0nstitutions s#all %etermine t#e amount of %eferre% ta8 assets t#at rel6 on future
profitailit6 t#at re&uire %e%uction in accor%ance 1it# t#is ,rticle7
-7 $8cept 1#ere t#e con%itions lai% %o1n in para"rap# 3 are met* t#e amount of %eferre% ta8
assets t#at rel6 on future profitailit6 s#all e calculate% 1it#out re%ucin" it 6 t#e amount
of t#e associate% %eferre% ta8 liailities of t#e institution7
37 2#e amount of %eferre% ta8 assets t#at rel6 on future profitailit6 ma6 e re%uce% 6 t#e
amount of t#e associate% %eferre% ta8 liailities of t#e institution* provi%e% t#e follo1in"
con%itions are met:
)a/ the entit# has the legall# enfor$ea!le right under appli$a!le national la* to set off
those $urrent ta8 assets against $urrent ta8 liailities AE
)/ t#e A%eferre% ta8 assets an% t#e deferred ta5 lia!ilities relate to ta5es levied !# the
sae ta5ation authorit# and on the sae ta5a!le entit#3
47 ,ssociate% %eferre% ta8 liailities of t#e institution use% for t#e purposes of para"rap# 3
ma6 not inclu%e %eferre% ta8 liailities t#at re%uce t#e amount of intan"ile assets or
%efine% enefit pension fun% assets re&uire% to e %e%ucte%7
+7 2#e amount of associate% %eferre% ta8 liailities referre% to in para"rap# 4 s#all e
allocate% et1een t#e follo1in":
)a/ %eferre% ta8 assets t#at rel6 on future profitailit6 an% arise from temporar6
%ifferences t#at are not %e%ucte% in accor%ance 1it# ,rticle 4+)1/E
)/ all ot#er %eferre% ta8 assets t#at rel6 on future profitailit67
0nstitutions s#all allocate t#e associate% %eferre% ta8 liailities accor%in" to t#e proportion
of %eferre% ta8 assets t#at rel6 on future profitailit6 t#at t#e items referre% to in points )a/
an% )/ represent7
Article 3"
+a5 overpa#ents, ta5 loss $arr# !a$ks and $eferre$ ta, assets
that $o not rely on future profitability A
A
23 +he follo*ing ites shall not !e dedu$ted fro o*n funds and shall !e su!9e$t to a risk
*eight in a$$ordan$e *ith Chapter 2 or C of +itle && of .art +hree, as appli$a!le,'
)a/ overpa6ments of ta8 6 t#e institution for t#e current 6earE
)/ current 6ear ta8 losses of t#e institution carrie% ac5 to previous 6ears t#at "ive rise
to a claim on* or a receivale from* a central "overnment* re"ional "overnment or
local ta8 aut#orit6E
)c/
C3 (eferred ta5 assets that do not rel# on future profita!ilit# shall !e liited to %eferre% ta8
assets arisin" from temporar6 %ifferences* *here all the follo*ing $onditions are et'
(a) the# are autoati$all# and andatoril# repla$ed *ithout dela# *ith a ta5 $redit in
the event that the institution reports a loss *hen the annual finan$ial stateents of
the institution are forall# approved, or in the event of li6uidation or insolven$# of
the institution%
(!) an institution shall !e a!le under the appli$a!le national ta5 la* to offset a ta5
$redit referred to in point (a) against an# ta5 lia!ilit# of the institution or an# other
undertaking in$luded in the sae $onsolidation as the institution for ta5 purposes
under that la* or an# other undertaking su!9e$t to the supervision on a
$onsolidated asis in accor%ance 1it# Chapter 2 of +itle && of .art -ne%
($) *here the aount of ta5 $redits referred to in point (!) e5$eeds the ta5 lia!ilities
referred to in that point, an# su$h e5$ess is repla$ed *ithout dela# *ith a dire$t
claim on t#e central "overnment of t#e 9emer State in 1#ic# t#e institution is
incorporate% A3
&nstitutions shall appl# a risk *eight of 4::J to deferred ta5 assets *here the $onditions
laid do*n in points a) to $) are et7
Article 3%
De$uction of ne#ative amounts resultin# from the calculation of e,pecte$ loss amounts
2#e amount to e %e%ucte% in accor%ance 1it# point )%/ of ,rticle 33)1/ s#all not e re%uce% 6 a
rise in t#e level of %eferre% ta8 assets t#at rel6 on future profitailit6* or ot#er a%%itional ta8 effect*
t#at coul% occur if provisions 1ere to rise to t#e level of e8pecte% losses referre% to in Section 3 of
C#apter 3 of 2itle 007
Article 3&
De$uction of $efine$ benefit pension fun$ assets
17 3or t#e purposes of point )e/ of ,rticle 33)1/* t#e amount of %efine% enefit pension fun%
assets to e %e%ucte% s#all e re%uce% 6 t#e follo1in":
)a/ t#e amount of an6 associate% %eferre% ta8 liailit6 1#ic# coul% e e8tin"uis#e% if t#e
assets ecame impaire% or 1ere %ereco"nise% un%er t#e applicale accountin"
frae*orkE
)/ t#e amount of assets in t#e %efine% enefit pension fun% 1#ic# t#e institution #as an
unrestricte% ailit6 to use* provi%e% t#e institution #as receive% t#e prior perission
of t#e competent aut#orit67 2#ose assets use% to re%uce t#e amount to e %e%ucte%
s#all receive a ris5 1ei"#t in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree*
as applicale7
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e criteria accor%in" to
1#ic# a competent aut#orit6 s#all permit an institution to re%uce t#e amount of assets in
t#e %efine% enefit pension fun% as specifie% in point )/ of para"rap# 17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this )egulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
Article 3(
De$uction of hol$in#s of own 2ommon Equity Tier 1 instruments
3or t#e purposes of point )f/ of ,rticle 33)1/* institutions s#all calculate #ol%in"s of o1n Common
$&uit6 2ier 1 instruments on t#e asis of "ross lon" positions su!ect to t#e follo1in" e8ceptions:
)a/ institutions ma6 calculate t#e amount of #ol%in"s of o1n Common $&uit6 2ier 1 instruments
Aon t#e asis of t#e net lon" position provi%e% that !oth the follo*ing $onditions are et'
(i) t#e lon" an% s#ort positions are in t#e same un%erl6in" e8posure an% t#e s#ort positions
involve no counterpart6 ris5E
)ii) !oth long and short positions are held either in the trading !ook or in the non=trading
!ook%
)/ institutions s#all %etermine t#e amount to e %e%ucte% for dire$t, in%irect and s#ntheti$
#ol%in"s of in%e8 securities 6 calculatin" t#e un%erl6in" e8posure to o1n Common $&uit6
2ier 1 instruments inclu%e% in those in%icesE
)c/ institutions ma6 net "ross lon" positions in o1n Common $&uit6 2ier 1 instruments
Aresultin" from #ol%in"s of in%e8 securities a"ainst s#ort positions in o1n Common $&uit6
2ier 1 instruments resultin" from s#ort positions in t#e un%erl6in" in%ices* inclu%in" 1#ere
t#ose s#ort positions involve counterpart6 ris5, provided that !oth the follo*ing $onditions
are et'
(i) the long and short positions are in the sae underl#ing indi$es%
(ii) !oth long and short positions are held either in the trading !ook or in the non=trading
!ook7
Article 4*
Si#nificant investment in a finan$ial se$tor entity
3or t#e purposes of %e%uction* a si"nificant investment of an institution in a finan$ial se$tor entit6
s#all arise 1#ere an6 of t#e follo1in" con%itions is met:
)a/ t#e institution o1ns more t#an 1. O of t#e Common $&uit6 2ier 1 instruments issue% 6
t#at entit6E
)/ t#e institution #as close lin5s 1it# t#at entit6 an% o1ns Common $&uit6 2ier 1 instruments
issue% 6 t#at entit6E
)c/ t#e institution o1ns Common $&uit6 2ier 1 instruments issue% 6 t#at entit6 an% t#e entit6
is not inclu%e% in consoli%ation pursuant to C#apter - of 2itle 00 of Part One ut is inclu%e%
in t#e same accountin" consoli%ation as t#e institution for t#e purposes of financial
reportin" un%er t#e applicale accountin" frae*ork7
Article 41
De$uction of hol$in#s of 2ommon Equity Tier 1 instruments of finan$ial se$tor entities an$ where
an institution has a reciprocal cross hol$in# $esi#ne$ artificially to inflate own fun$s
0nstitutions s#all ma5e t#e %e%uctions referre% to in points )"/* )#/ an% )i/ of ,rticle 33)1/ in
accor%ance 1it# t#e follo1in":
)a/ #ol%in"s of Common $&uit6 2ier 1 instruments an% ot#er capital instruments of finan$ial
se$tor entities s#all e calculate% on t#e asis of t#e "ross lon" positionsE
)/ 2ier 1 o1n;fun% insurance items s#all e treate% as #ol%in"s of Common $&uit6 2ier 1
instruments for t#e purposes of %e%uction7
Article 42
De$uction of hol$in#s of 2ommon Equity Tier 1 instruments of finan$ial se$tor entities
0nstitutions s#all ma5e t#e %e%uctions re&uire% 6 points )#/ an% )i/ of ,rticle 33)1/ in accor%ance
1it# t#e follo1in" provisions:
)a/ t#e6 ma6 calculate dire$t, indire$t and s#ntheti$ #ol%in"s Aof t#e finan$ial se$tor entities
on t#e asis of t#e net lon" position in t#e same un%erl6in" e8posure provi%e% that !oth
the follo*ing $onditions are et'
(i) t#e maturit6 of t#e s#ort position matc#es t#e maturit6 of t#e lon" position or #as a
resi%ual maturit6 of at least one 6earE
(ii) !oth short and long positions are held either in the trading !ook or in the non=
trading !ook%
)/ t#e6 s#all %etermine t#e amount to e %e%ucte% for dire$t, indire$t and s#ntheti$ #ol%in"s
of in%e8 securities 6 calculatin" t#e un%erl6in" e8posure to t#e capital instruments of t#e
finan$ial se$tor entities in those in%ices7
Article 43
De$uction of hol$in#s where an institution $oes not have a si#nificant investment in a finan$ial
se$tor entity
17 3or t#e purposes of point )#/ of ,rticle 33)1/* institutions s#all calculate t#e applicale
amount to e %e%ucte% 6 multipl6in" t#e amount referre% to in point )a/ 6 t#e factor
%erive% from t#e calculation referre% to in point )/:
)a/ t#e a""re"ate amount 6 1#ic# t#e %irect, in%irect and s#ntheti$ #ol%in"s 6 t#e
institution of t#e Common $&uit6 2ier 1* ,%%itional 2ier 1 an% 2ier - instruments of
finan$ial se$tor entities in 1#ic# the institution does not have a signifi$ant
investent e8cee%s 1.O of t#e Common $&uit6 2ier 1 items of t#e institution
calculate% after appl6in" t#e follo1in" to Common $&uit6 2ier 1 items:
)i/ ,rticles -9 to 3-E
)ii/ t#e %e%uctions referre% to in points )a/ to )"/ A, ) k)(ii/ to k(v) and )l/ of ,rticle
33)1/* e8clu%in" t#e amount to e %e%ucte% for %eferre% ta8 assets t#at rel6 on
future profitailit6 an% arise from temporar6 %ifferencesE
)iii/ ,rticles 41 an% 4- A
)/ t#e amount of %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e
Common $&uit6 2ier 1 instruments of those finan$ial se$tor entities in *hi$h the
institution does not have a signifi$ant investent %ivi%e% 6 t#e a""re"ate amount
of %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e o1n fun%s
instruments of t#ose finan$ial se$tor entities7
-7 0nstitutions s#all e8clu%e un%er1ritin" positions #el% for + 1or5in" %a6s or fe1er from t#e
amount referre% to in point )a/ of para"rap# 1 an% from t#e calculation of t#e factor
referre% to in point )/ of para"rap# 17
37 +he aount to !e dedu$ted pursuant to paragraph 4 shall !e apportioned a$ross all
Coon E6uit# +ier 4 instruents held3 0nstitutions s#all %etermine t#e portion of
#ol%in"s of Common $&uit6 2ier 1 instruments t#at is %e%ucte% pursuant to para"rap# 1 6
Aultipl#ing t#e amount specifie% in point )a/ 6 t#e proportion specifie% in point )/:
)a/ t#e amount of #ol%in"s re&uire% to e %e%ucte% pursuant to para"rap# 1E
)/ t#e proportion of the a""re"ate amount of %irect A, in%irect and s#ntheti$ #ol%in"s
6 t#e institution of t#e Coon E6uit# +ier 4 instruments of finan$ial se$tor
entities in 1#ic# t#e institution %oes not #ave a si"nificant investment represented !#
ea$h Coon E6uit# +ier 4 instruent held7
47 2#e amount of #ol%in"s referre% to in point )#/ of ,rticle 33)1/ t#at is e&ual to or less t#an
1. O of t#e Common $&uit6 2ier 1 items of t#e institution after appl6in" t#e provisions
lai% %o1n in points )a/)i/ to )iii/ of para"rap# 1 s#all not e %e%ucte% an% s#all e su!ect
to t#e applicale ris5 1ei"#ts in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree
an% t#e re&uirements lai% %o1n in 2itle 0R of Part 2#ree* as applicale7
+7 0nstitutions s#all %etermine t#e portion of #ol%in"s of o1n fun%s instruments t#at is ris5
1ei"#te% 6 %ivi%in" t#e amount specifie% in point )a/ 6 t#e amount specifie% in
point )/:
)a/ t#e amount of #ol%in"s re&uire% to e ris5 1ei"#te% pursuant to para"rap# 4E
)/ the aount in point (i) divided !# the aount in point (ii)'
(i) the total aount of the Coon E6uit# +ier 4 instruents%
(ii) the a""re"ate amount of %irect in%irect and s#ntheti$ #ol%in"s 6 t#e
institution of t#e Coon E6uit# +ier 4 instruments of finan$ial se$tor
entities in 1#ic# t#e institution %oes not #ave a si"nificant investment (!)7
Article 44
De$uction of hol$in#s of 2ommon Equity Tier 1 instruments where an institution has a si#nificant
investment in a finan$ial se$tor entity
3or t#e purposes of point )i/ of ,rticle 33)1/* t#e applicale amount to e %e%ucte% from Common
$&uit6 2ier 1 items s#all e8clu%e un%er1ritin" positions #el% for + 1or5in" %a6s or fe1er an% s#all
e %etermine% in accor%ance 1it# ,rticles 41 an% 4- an% Su;Section -7
?UB9?ECTION 2
E-E*PTION? FRO* AN$ ALTERNATI,E? TO $E$UCTION FRO* CO**ON E@UITA
TIER 1 ITE*?
,rticle 4+
2#res#ol% e8emptions from %e%uction from Common $&uit6 2ier 1 items
17 0n ma5in" t#e %e%uctions re&uire% pursuant to points )c/ an% )i/ of ,rticle 33)1/*
institutions are not re6uired to %e%uct t#e aounts of the items liste% in points )a/ an% )/
1#ic# in a""re"ate are e&ual to or less t#an the threshold aount referred to in
paragraph 4a3:
)a/ %eferre% ta8 assets t#at are %epen%ent on future profitailit6 an% arise from
temporar6 %ifferences* an% in a""re"ate are e&ual to or less t#an 1. O of t#e
Common $&uit6 2ier 1 items of t#e institution calculate% after appl6in" t#e
follo1in":
)i/ ,rticles -9 to 3-E
)ii/ points )a/ to )#/, point )k)(ii/ to k(v) and )l/ of ,rticle 33)1/* e8clu%in"
%eferre% ta8 assets t#at rel6 on future profitailit6 an% arise from temporar6
%ifferences7
)/ 1#ere an institution #as a si"nificant investment in a finan$ial se$tor entit6* t#e
%irect A, in%irect and s#ntheti$ #ol%in"s of t#at institution of t#e Common $&uit6
2ier 1 instruments of t#ose entities t#at in a""re"ate are e&ual to or less t#an 1. O of
t#e Common $&uit6 2ier 1 items of t#e institution calculate% after appl6in" t#e
follo1in":
)i/ ,rticle -9 to 3-E
)ii/ points )a/ to )#/, point )k)(ii/ to k(v) and )l/ Ae8clu%in" %eferre% ta8 assets t#at
rel6 on future profitailit6 an% arise from temporar6 %ifferences7
4a3 1or the purposes of paragraph 4, the threshold aount is e6ual to the aount in point
(a) ultiplied !# the per$entage in point (!)'
(a) the residual aount of Coon E6uit# +ier 4 ites after appl#ing the ad9ustents
and dedu$tions in Arti$les 2> to CC in full%
(!) 403?@J3
4!3 1or the purposes of paragraph 4, an institution shall deterine the portion of deferred
ta5 assets in the total aount of ites that is not re6uired to !e dedu$ted !# dividing the
aount spe$ified in point (a) !# the aount spe$ified in point (!)'
(a) the aount of deferred ta5 assets that are dependent on future profita!ilit# and
arise fro teporar# differen$es, and in aggregate are e6ual to or less than 4: J
of the Coon E6uit# +ier 4 ites of the institution% (!) the su of the follo*ing'
(i) the aount referred to in point (a)%
(ii) the aount of dire$t, indire$t and s#ntheti$ holdings !# the institution of the
o*n funds instruents of finan$ial se$tor entities in *hi$h the institution
has a signifi$ant investent, and in aggregate are e6ual to or less than 4: J
of the Coon E6uit# +ier 4 ites of the institution3
+he proportion of signifi$ant investents in the total aount of ites that is not
re6uired to !e dedu$ted is e6ual to one inus the proportion referred to in the first
su!paragraph3
-7 +he aounts of the ites t#at are not %e%ucte% pursuant to para"rap# 1 s#all e ris5
1ei"#te% at -+. O A7
Article 4"
)e6uireent for $e$uction where consoli$ation, suppleentar# supervision or institutional
prote$tion s$hees are applie$
17 1or the purposes of $al$ulating o*n funds on an individual !asis, a su!$onsolidated
!asis and a $onsolidated !asis, *here the $opetent authorities re6uire or perit
institutions to appl6 met#o%s 4 or 2 of ,nne8 0 to (ire$tive 2::2DA0DEC, the $opetent
authorities a# perit institutions not to dedu$t the holdings of o*n funds instruents
of a finan$ial se$tor entit# in *hi$h the parent institution, parent finan$ial holding
$opan# or parent i5ed finan$ial holding $opan# or institution has a signifi$ant
investent, provided that the $onditions laid do*n in points (a) to (e) are et'
(a) the finan$ial se$tor entit# is an insuran$e undertaking, a re=insuran$e undertaking
or an insuran$e holding $opan#%
(!) that insuran$e undertaking, re=insuran$e undertaking or insuran$e holding
$opan# is in$luded in the sae suppleentar# supervision under (ire$tive
2::2DA0DEC as the parent institution, parent finan$ial holding $opan# or parent
i5ed finan$ial holding $opan# or institution that has the holding%
($) the institution A #as receive% t#e prior perission of t#e competent authorities%
(d) prior to granting the perission referred to in point ($), and on a $ontinuing !asis,
the $opetent authorities are satisfie% t#at t#e level of inte"rate% mana"ement, risk
anageent an% internal control re"ar%in" t#e entities t#at 1oul% e inclu%e% in t#e
scope of consoli%ation un%er met#o% 1 or 2 is a%e&uate A%
(e) the holdings in the entit# !elongs to one of the follo*ing'
(i) the parent $redit institution%
(ii) the parent finan$ial holding $opan#%
(iii) the parent i5ed finan$ial holding $opan#%
(iv) the institution%
(v) a su!sidiar# of one of the entities referred to in points (i) to (iv) that is
in$luded in the s$ope of $onsolidation pursuant to Chapter 2 of +itle && of
.art -ne3
+he ethod $hosen shall !e applied in a $onsistent anner over tie3
-7 3or t#e purposes of calculatin" o1n fun%s on an individual !asis and a su!=$onsolidated
asis* institutions su!ect to supervision on a consoli%ate% asis in accor%ance 1it#
C#apter - of 2itle 00 of Part One s#all not %e%uct #ol%in"s Aof o*n funds instruents
issued !# finan$ial se$tor entities inclu%e% in t#e scope of consoli%ate% supervision,
unless for spe$ifi$ purposes, espe$iall# for the purposes of stru$tural separation of
!anking a$tivities, and resolution planning, the $opetent authorities deterine those
dedu$tions to !e re6uired for the purposes of supervision on an individual or su!=
$onsolidated !asis3
Appl#ing this approa$h a# not entail disproportionate adverse effe$ts on the *hole or
parts of the finan$ial s#ste in other Me!er "tates or of the E2 as a *hole foring or
$reating an o!sta$le to the fun$tioning of the internal arket7
37 Competent aut#orities ma6, for the purposes of $al$ulating o*n funds on an individual
or su!=$onsolidated !asis permit institutions not to %e%uct holdings of o*n funds
instruents in t#e follo1in" cases:
A
)/ 1#ere an institution A#as a #ol%in" in anot#er Ainstitution and con%itions (ii) to (vi)
are met :
A
(i)
)ii/ t#e institutions fall 1it#in t#e same institutional protection sc#eme referre% to
in ,rticle 1.8)>/E
)iii/ t#e competent aut#orities #ave "rante% t#e permission referre% to in ,rticle
1.8)>/E
)iv/ t#e con%itions lai% %o1n in ,rticle 1.8)>/ are satisfie%E
A
(v) the institutional prote$tion s$hee dra*s up a $onsolidated !alan$e sheet
referred to in point (e) of arti$le 4:A(0) or, *here it is not re6uired to dra* up
$onsolidated a$$ounts, an e5tended aggregated $al$ulation that is, to the
satisfa$tion of the $opetent authorities, e6uivalent to the provisions of
Coun$il (ire$tive A?D?C@DEEC of A (e$e!er 4>A? on the annual a$$ounts
and $onsolidated a$$ounts of !anks and other finan$ial institutions, *hi$h
in$orporates $ertain adaptations of the provisions of "eventh Coun$il
(ire$tive ACDCB>DEEC of 4C Eune 4>AC on $onsolidated a$$ounts or of
)egulation (EC) Fo 4?:?D2::2 of the European .arliaent and of the
Coun$il of 4> Eul# 2::2 on the appli$ation of international a$$ounting
standards , governing the $onsolidated a$$ounts of groups of $redit
institutions3 +he e6uivalen$e of this e5tended aggregated $al$ulation shall !e
verified !# an e5ternal auditor and in parti$ular that the ultiple use of
eleents eligi!le for the $al$ulation of o*n funds as *ell as an#
inappropriate $reation of o*n funds !et*een the e!ers of the institutional
prote$tion s$hee is eliinated in the $al$ulation3 +he $onsolidated !alan$e
sheet or the e5tended aggregated $al$ulation shall !e reported to the
$opetent authorities no less fre6uentl# than the fre6uen$# laid do*n in
Arti$le >@3
(vi) the institutions in$luded in an institutional prote$tion s$hee eet together
on a $onsolidated or e5tended aggregated !asis the re6uireents laid do*n
in Arti$le A0 and $arr# out reporting of $oplian$e *ith those re6uireents
in a$$ordan$e *ith Arti$le >@3 ;ithin an institutional prote$tion s$hee the
dedu$tion of the interest o*ned !# $o=operative e!ers or legal entities,
*hi$h are not e!ers of the &.", is not re6uired, provided that the ultiple
use of eleents eligi!le for the $al$ulation of o*n funds as *ell as an#
inappropriate $reation of o*n funds !et*een the e!ers of the institutional
prote$tion s$hee and the inorit# shareholder, *hen it is an institution, is
eliinated3
)c/ 1#ere a re"ional cre%it institution #as a #ol%in" in its central or anot#er re"ional
cre%it institution an% t#e con%itions lai% %o1n in point )/)ii/ to )vi/ are met7
Ca3(a) +he holdings in respe$t of *hi$h dedu$tion is not ade in a$$ordan$e *ith paragraphs
4, 2 or C shall 6ualif# as e5posures and shall !e risk *eighted in a$$ordan$e *ith
Chapter 2 or C of +itle && of .art +hree, as appli$a!le3
C!3 ;here an institution applies ethods 4 or 2 of Anne5 & to (ire$tive 2::2DA0DEC, the
institution shall dis$lose the suppleentar# o*n funds re6uireent and $apital
ade6ua$# ratio of the finan$ial $ongloerate as $al$ulated in a$$ordan$e *ith Arti$le ?
and Anne5 & to that (ire$tive
47 $D,* $0OP, an% $S9, s#all* t#rou"# t#e <oint Committee* %evelop %raft re"ulator6
tec#nical stan%ar%s to specif6 for t#e purposes of t#is ,rticle t#e con%itions of application
of t#e calculation met#o%s liste% in ,nne8 0* Part 00 an% ,rticle --8)1/ of
Directive -..-/8>/$C for t#e purposes of t#e alternatives to %e%uction referre% to in
para"rap# 1 an% point )a/ of para"rap# 37
$D,* $0OP, an% $S9, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e
Commission *ithin one onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
?ECTION 3
CO**ON E@UITA TIER 1 CAPITAL
,rticle 4>
Common $&uit6 2ier 1 capital
2#e Common $&uit6 2ier 1 capital of an institution s#all consist of Common $&uit6 2ier 1 items
after t#e application of t#e a%!ustments re&uire% 6 ,rticle -9 to 3-* t#e %e%uctions pursuant to
,rticle 33 an% t#e e8emptions an% alternatives lai% %o1n in ,rticle 4+* 4= an% >47
C#apter 3
,%%itional 2ier 1 capital
S$C20OB 1
,DD020OB,F 20$R 1 02$9S ,BD 0BS2R49$B2S
Article 4&
A$$itional Tier 1 items
,%%itional 2ier 1 items s#all consist of t#e follo1in":
)a/ capital instruments* 1#ere t#e con%itions lai% %o1n in ,rticle 49)1/ are metE
)/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )a/7
&nstruents in$luded under point (a) shall not 6ualif# as Coon E6uit# +ier 4 or +ier 2 ites3
Article 4(
A$$itional Tier 1 instruments
17 Capital instruments s#all &ualif6 as ,%%itional 2ier 1 instruments onl6 if t#e follo1in"
con%itions are met:
)a/ t#e instruments are issue% an% pai% upE
)/ t#e instruments are not purc#ase% 6 an6 of t#e follo1in":
)i/ t#e institution or its susi%iariesE
)ii/ an un%erta5in" in 1#ic# t#e institution #as participation in t#e form of
o1ners#ip* %irect or 6 1a6 of control* of -.O or more of t#e votin" ri"#ts or
capital of t#at un%erta5in"E
)c/ t#e purc#ase of t#e instruments is not fun%e% %irectl6 or in%irectl6 6 t#e institutionE
)%/ t#e instruments ran5 elo1 2ier - instruments in t#e event of t#e insolvenc6 of t#e
institutionE
)e/ t#e instruments are not secure%* or su!9e$t to a guarantee that enhan$es the
seniorit# of the $lais 6 an6 of t#e follo1in":
)i/ t#e institution or its susi%iariesE
)ii/ t#e parent undertaking of the institution or its susi%iariesE
)iii/ t#e parent financial #ol%in" compan6 or its susi%iariesE
)iv/ t#e mi8e% activit6 #ol%in" compan6 or its susi%iariesE
)v/ t#e mi8e% financial #ol%in" compan6 an% its susi%iariesE
)vi/ an6 un%erta5in" t#at #as close lin5s 1it# entities referre% to in points )i/ or )v/
A
)f/ t#e instruments are not su!ect to an6 arran"ement* contractual or ot#er1ise* t#at
en#ances t#e seniorit6 of t#e claim un%er t#e instruments in insolvenc6 or
li&ui%ationE
)"/ t#e instruments are perpetual an% t#e provisions "overnin" t#em inclu%e no incentive
for t#e institution to re%eem t#emE
)#/ 1#ere t#e provisions "overnin" t#e instruments inclu%e one or more call options* t#e
option to call ma6 e e8ercise% at t#e sole %iscretion of t#e issuerE
)i/ t#e instruments ma6 e calle%* re%eeme% or repurc#ase% onl6 1#ere t#e con%itions
lai% %o1n in ,rticle >- are met* an% not efore five 6ears after t#e %ate of issuance
e5$ept *here the $onditions laid do*n in Arti$le 0C(2a) are etE
)!/ t#e provisions "overnin" t#e instruments %o not in%icate e8plicitl6 or implicitl6 t#at
t#e instruments 1oul% or mi"#t e calle%* re%eeme% or repurc#ase% an% t#e
institution %oes not ot#er1ise provi%e suc# an in%ication , e5$ept in the follo*ing
$ases'
(i) the li6uidation of the institution
(ii) dis$retionar# repur$hases of the instruents or other dis$retionar# eans of
redu$ing $apital, *here the institution has re$eived the prior perission of
the $opetent authorit# in a$$ordan$e *ith Arti$le 023
)5/ t#e institution %oes not in%icate e8plicitl6 or implicitl6 t#at t#e competent aut#orit6
1oul% consent to a re&uest to call* re%eem or repurc#ase t#e instrumentsE
)l/ %istriutions un%er t#e instruments meet t#e follo1in" con%itions:
)i/ t#e6 are pai% out of %istriutale itemsE
)ii/ t#e level of %istriutions ma%e on t#e instruments 1ill not e mo%ifie% ase%
on t#e cre%it stan%in" of t#e institution or its parent undertaking%
)iii/ t#e provisions "overnin" t#e instruments "ive t#e institution full %iscretion at
all times to cancel t#e %istriutions on t#e instruments for an unlimite% perio%
an% on a non;cumulative asis* an% t#e institution ma6 use suc# cancelle%
pa6ments 1it#out restriction to meet its oli"ations as t#e6 fall %ueE
)iv/ cancellation of %istriutions %oes not constitute an event of %efault of t#e
institutionE
)v/ t#e cancellation of %istriutions imposes no restrictions on t#e institutionE
)m/ t#e instruments %o not contriute to a %etermination t#at t#e liailities of an
institution e8cee% its assets* 1#ere suc# a %etermination constitutes a test of
insolvenc6 un%er applicale national la1E
)n/ t#e provisions "overnin" t#e instruments re&uire t#e principal amount of t#e
instruments to e 1ritten %o1n on a peranent or teporar# !asis or t#e
instruments to e converte% to Common $&uit6 2ier 1 instruments* upon t#e
occurrence of a tri""er event A3
)o/ t#e provisions "overnin" t#e instruments inclu%e no feature t#at coul% #in%er t#e
recapitalisation of t#e institutionE
)p/ 1#ere t#e instruments are not issue% %irectl6 6 an institution A, !oth of the
follo*ing $onditions shall !e et'
(i) the instruents are issued through an entit6 1it#in t#e consoli%ation pursuant
to C#apter - of 2itle 00 of Part One A%
(ii) t#e procee%s are imme%iatel6 availale 1it#out limitation in a form t#at
satisfies t#e con%itions lai% %o1n in t#is para"rap# to that institution3
A
+he $ondition set out in point (d) of the first su!paragraph shall !e deeed to !e et
not*ithstanding the instruents are in$luded in Additional +ier 4 or +ier 2 !# virtue of
Arti$le B?C(C), provided that the# rank pari passu3
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 all t#e follo1in":
)a/ t#e form an% nature of incentives to re%eemE
)/ t#e nature of an# *rite up of the prin$ipal aount of an Additional +ier 4
instruent follo*ing a 1rite %o1n of its principal amount on a teporar# !asis3
)c/ t#e proce%ures an% timin" for t#e follo1in":
)i/ %eterminin" t#at a tri""er event #as occurre%E
A
(ii)
)iii/ 1ritin" up t#e principal amount of an Additional 2ier 1 instrument follo*ing a
*rite do*n of its prin$ipal aount on a teporar# !asis%
)%/ features of instruments t#at coul% #in%er t#e recapitalisation of t#e institutionE
)e/ t#e use of special purposes entities for in%irect issuance of o1n fun%s instruments7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
Article *
5estrictions on the cancellation of $istributions on A$$itional Tier 1 instruments an$ features that
coul$ hin$er the recapitalisation of the institution
3or t#e purposes of points )l/)v/ an% )o/ of ,rticle 49)1/* t#e provisions "overnin" ,%%itional 2ier 1
instruments shall* in particular* not inclu%e t#e follo1in":
)a/ a re&uirement for %istriutions on t#e instruments to e ma%e in t#e event of a %istriution
ein" ma%e on an instrument issue% 6 t#e institution t#at ran5s to t#e same %e"ree as* or
more !unior t#an* an ,%%itional 2ier 1 instrument* inclu%in" a Common $&uit6 2ier 1
instrumentE
)/ a re&uirement for t#e pa6ment of %istriutions on Common $&uit6 2ier 1* ,%%itional
2ier 1 or 2ier - instruments to e cancelle% in t#e event t#at %istriutions are not ma%e on
t#ose ,%%itional 2ier 1 instrumentsE
)c/ an oli"ation to sustitute t#e pa6ment of interest or %ivi%en% 6 a pa6ment in an6 ot#er
form7 2#e institution s#all not ot#er1ise e su!ect to suc# an oli"ation7
Article 1
)rite $own or conversion of A$$itional Tier 1 instruments
43 3or t#e purposes of point )n/ of ,rticle 49)1/* t#e follo1in" provisions s#all appl6 to
,%%itional 2ier 1 instruments:
)a/ a tri""er event occurs 1#en t#e Common $&uit6 2ier 1 capital ratio of t#e institution
referre% to in point )a/ of ,rticle 8> falls elo1 eit#er of t#e follo1in":
)i/ +71-+ OE
)ii/ a level #i"#er t#an +71-+ O* 1#ere %etermine% 6 t#e institution an% specifie%
in t#e provisions "overnin" t#e instrumentE
(aa) institutions a# spe$if# in the provisions governing the instruent one or ore
trigger events in addition to that referred to in point (a)%
)/ 1#ere t#e provisions "overnin" t#e instruments re&uire t#em to e converte% into
Common $&uit6 2ier 1 instruments upon t#e occurrence of a tri""er event* t#ose
provisions s#all specif6 eit#er of t#e follo1in":
)i/ t#e rate of suc# conversion an% a limit on t#e permitte% amount of conversionE
)ii/ a ran"e 1it#in 1#ic# t#e instruments 1ill convert into Common $&uit6 2ier 1
instrumentsE
)c/ 1#ere t#e provisions "overnin" t#e instruments re&uire t#eir principal amount to e
1ritten %o1n upon t#e occurrence of a tri""er event* t#e 1rite %o1n s#all re%uce all
t#e follo1in":
)i/ t#e claim of t#e #ol%er of t#e instrument in t#e insolven$# or li&ui%ation of t#e
institutionE
)ii/ t#e amount re&uire% to e pai% in t#e event of t#e call or redeption of t#e
instrumentE
)iii/ t#e %istriutions ma%e on t#e instrument7
23 ;rite do*n or $onversion of an Additional +ier 4 instruent shall, under the appli$a!le
a$$ounting frae*ork, generate ites that 6ualif# as Coon E6uit# +ier 4 ites3
C3 +he aount of Additional +ier 4 instruents re$ognised in Additional +ier 4 ites is
liited to the iniu aount Coon E6uit# +ier 4 ites that *ould !e generated if
the prin$ipal aount of the Additional +ier 4 instruents *ere full# *ritten do*n or
$onverted into Coon E6uit# +ier 4 instruents3
B3 +he aggregate aount of Additional +ier 4 instruents that is re6uired to !e *ritten
do*n or $onverted upon the o$$urren$e of a trigger event shall !e no less than the lo*er
of the follo*ing'
(a) the aount re6uired to restore full# the Coon E6uit# +ier 4 ratio of the
institution to @342@J%
(!) the full prin$ipal aount of the instruent3
@3 ;hen a trigger event o$$urs institutions shall do the follo*ing'
(a) iediatel# infor the $opetent authorities%
(a4) infor the holders of the Additional +ier 4 instruents%
(!) *rite do*n the prin$ipal aount of the instruents, or $onvert the instruents
into Coon E6uit# +ier 4 instruents *ithout dela#, !ut no later than in one
onth, in a$$ordan$e *ith the re6uireent laid do*n in this Arti$le3
?3 An institution issuing Additional +ier 4 instruents that $onvert to Coon E6uit# +ier
4 on the o$$urren$e of a trigger event shall ensure that its authorised share $apital is at
all ties suffi$ient, for $onverting all su$h Additional +ier 4 instruents into shares if a
trigger event o$$urs3 All ne$essar# authorisations shall !e o!tained at the date of
issuan$e of su$h $onverti!le Additional +ier 4 instruents3 +he institution shall
aintain at all ties the ne$essar# prior authorisation to issue the Coon E6uit# +ier
4 instruents into *hi$h su$h Additional +ier 4 instruents *ould $onvert upon a
trigger event3
03 An institution issuing Additional +ier 4 instruents that $onvert to Coon E6uit# +ier
4 on the o$$urren$e of a trigger event shall ensure that there are no pro$edural
ipedients to that $onversion !# virtue of its in$orporation or statutes3
Article 2
2onsequences of the con$itions for A$$itional Tier 1 instruments ceasin# to be met
2#e follo1in" s#all appl6 1#ere* in t#e case of an ,%%itional 2ier 1 instrument* t#e con%itions lai%
%o1n in ,rticle 49)1/ cease to e met:
)a/ t#at instrument s#all iediatel# cease to &ualif6 as an ,%%itional 2ier 1 instrument E
)/ t#e part of t#e s#are premium accounts t#at relates to t#at instrument s#all iediatel#
cease to &ualif6 as ,%%itional 2ier 1 items7
S$C20OB -
D$D4C20OBS 3RO9 ,DD020OB,F 20$R 1 02$9S
,rticle +3
De%uctions from ,%%itional 2ier 1 items
0nstitutions s#all %e%uct t#e follo1in" from ,%%itional 2ier 1 items:
)a/ %irect A, in%irect and s#ntheti$ #ol%in"s 6 an institution of o1n ,%%itional 2ier 1
instruments* inclu%in" o1n ,%%itional 2ier 1 instruments t#at an institution coul% e
oli"e% to purc#ase as a result of e8istin" contractual oli"ationsE
)/ dire$t, indire$t and s#ntheti$ #ol%in"s of t#e ,%%itional 2ier 1 instruments of finan$ial
se$tor entities 1it# 1#ic# t#e institution #as reciprocal cross #ol%in"s t#at t#e competent
aut#orit6 consi%ers to #ave een %esi"ne% to inflate artificiall6 t#e o1n fun%s of
t#e institutionE
)c/ t#e applicale amount %etermine% in accor%ance 1it# ,rticle +> of %irect A, in%irect and
s#ntheti$ #ol%in"s of t#e ,%%itional 2ier 1 instruments of finan$ial se$tor entities* 1#ere
an institution %oes not #ave a si"nificant investment in t#ose entitiesE
)%/ %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e ,%%itional 2ier 1
instruments of finan$ial se$tor entities 1#ere t#e institution #as a si"nificant investment in
t#ose entities* e8clu%in" un%er1ritin" positions #el% for + 1or5in" %a6s or fe1erE
)e/ t#e amount of items re&uire% to e %e%ucte% from 2ier - items pursuant to ,rticle =3 t#at
e8cee% t#e 2ier - capital of t#e institutionE
)f/ an6 ta8 c#ar"e relatin" to ,%%itional 2ier 1 items foreseeale at t#e moment of its
calculation* e8cept 1#ere t#e institution suital6 a%!usts t#e amount of ,%%itional 2ier 1
items insofar as suc# ta8 c#ar"es re%uce t#e amount up to 1#ic# t#ose items ma6 e
applie% to cover ris5s or losses7
,rticle +4
De%uctions of #ol%in"s of o1n ,%%itional 2ier 1 instruments
3or t#e purposes of point )a/ of ,rticle +3* institutions s#all calculate #ol%in"s of o1n ,%%itional
2ier 1 instruments on t#e asis of "ross lon" positions su!ect to t#e follo1in" e8ceptions:
)a/ institutions ma6 calculate t#e amount of #ol%in"s of o1n ,%%itional 2ier 1 instruments
Aon t#e asis of t#e net lon" position provi%e% that !oth the follo*ing $onditions
are et'
(i) t#e lon" an% s#ort positions are in t#e same un%erl6in" e8posure an% t#e s#ort
positions involve no counterpart6 ris5E
(ii) !oth long and short positions are held either in the trading !ook or in the
non=trading !ook%
)/ institutions s#all %etermine t#e amount to e %e%ucte% for dire$t, indire$t or s#ntheti$
#ol%in"s of in%e8 securities 6 calculatin" t#e un%erl6in" e8posure to o1n
,%%itional 2ier 1 instruments in those in%icesE
)c/ institutions a# net "ross lon" positions in o1n ,%%itional 2ier 1 instruments Aresultin"
from #ol%in"s of in%e8 securities A a"ainst s#ort positions in o1n ,%%itional 2ier 1
instruments resultin" from s#ort positions in t#e un%erl6in" in%ices* inclu%in" 1#ere
t#ose s#ort positions involve counterpart6 ris5, provided that !oth the follo*ing
$onditions are et '
(i) the long and short positions are in the sae underl#ing indi$es%
(ii) !oth long and short positions are held either in the trading !ook or in the non=
trading !ook%
,rticle ++
De%uction of #ol%in"s of ,%%itional 2ier 1 instruments of finan$ial se$tor entities
an% 1#ere an institution #as a reciprocal cross #ol%in"
%esi"ne% artificiall6 to inflate o1n fun%s
0nstitutions s#all ma5e t#e %e%uctions re&uire% 6 points )/* )c/ an% )%/ of ,rticle +3 in accor%ance
1it# t#e follo1in":
)a/ #ol%in"s of ,%%itional 2ier 1 instruments s#all e calculate% on t#e asis of t#e "ross
lon" positionsE
)/ ,%%itional 2ier 1 o1n;fun% insurance items s#all e treate% as #ol%in"s of
,%%itional 2ier 1 instruments for t#e purposes of %e%uction7
,rticle +=
De%uction of #ol%in"s of ,%%itional 2ier 1 instruments of finan$ial se$tor entities
0nstitutions s#all ma5e t#e %e%uctions re&uire% 6 points )c/ an% )%/ of ,rticle +3 in accor%ance
1it# t#e follo1in":
)a/ t#e6 a# calculate dire$t, indire$t and s#ntheti$ #ol%in"s Aof t#e finan$ial se$tor
entities on t#e asis of t#e net lon" position in t#e same un%erl6in" e8posure provi%e%
that !oth the follo*ing $onditions are et'
(i) t#e maturit6 of t#e s#ort position matc#es t#e maturit6 of t#e lon" position or #as a
resi%ual maturit6 of at least one 6earE
(ii) !oth short position and long position are held either in the trading !ook or in the
non=trading !ook3
)/ t#e6 s#all %etermine t#e amount to e %e%ucte% for dire$t, indire$t and s#ntheti$ #ol%in"s
of in%e8 securities 6 calculatin" t#e un%erl6in" e8posure to t#e capital instruments of t#e
finan$ial se$tor entities in those in%ices7
,rticle +>
De%uction of #ol%in"s of ,%%itional 2ier 1 instruments 1#ere an institution %oes not #ave a
si"nificant investment in a finan$ial se$tor entit6
17 3or t#e purposes of point )c/ of ,rticle +3* institutions s#all calculate t#e applicale
amount to e %e%ucte% 6 multipl6in" t#e amount referre% to in point )a/ 6 t#e factor
%erive% from t#e calculation referre% to in point )/:
)a/ t#e a""re"ate amount 6 1#ic# t#e %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e
institution of t#e Common $&uit6 2ier 1* ,%%itional 2ier 1 an% 2ier - instruments
of finan$ial se$tor entities e8cee%s 1. O of t#e Common $&uit6 2ier 1 items of t#e
institution calculate% after appl6in" t#e follo1in":
)i/ ,rticle -9 to 3-E
)ii/ points )a/ to )"/, point )k)(ii/ to k(v) and )l/ of ,rticle 33)1/* e8clu%in"
%eferre% ta8 assets t#at rel6 on future profitailit6 an% arise from
temporar6 %ifferencesE
)iii/ ,rticles 41 an% 4-E
)/ t#e amount of %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e
,%%itional 2ier 1 instruments of those finan$ial se$tor entities in *hi$h the
institution does not have a signifi$ant investent %ivi%e% 6 t#e a""re"ate amount
of all %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e
Common $&uit6 2ier 1* ,%%itional 2ier 1 an% 2ier - instruments of t#ose
finan$ial se$tor entities7
-7 0nstitutions s#all e8clu%e un%er1ritin" positions #el% for + 1or5in" %a6s or fe1er from
t#e amount referre% to in point )a/ of para"rap# 1 an% from t#e calculation of t#e factor
referre% to in point )/ of para"rap# 17
37 +he aount to !e dedu$ted pursuant to paragraph 4 shall !e apportioned a$ross all
,%%itional 2ier 1 instruments held3 +he aount to !e dedu$ted fro ea$h Additional
+ier 4 instruent pursuant to paragraph 4 shall !e $al$ulated !# ultipl#ing t#e
amount specifie% in point )a/ 6 t#e proportion specifie% in point )/:
)a/ t#e amount of #ol%in"s re&uire% to e %e%ucte% pursuant to para"rap# 1E
)/ the aount in point (i) divided !# the aount in point (ii)'
(i) the total aount of the Additional +ier 4 instruent%
(ii) the a""re"ate aount of %irect Ain%irect and s#ntheti$ #ol%in"s 6 t#e
institution of t#e Additional +ier 4 instruments of finan$ial se$tor entities in
1#ic# t#e institution %oes not #ave a si"nificant investment7
(B) +he aount of holdings referred to in point ($) of Arti$le @C that is e6ual to or less
than 4: J of the Coon E6uit# +ier 4 ites of the institution after appl#ing the
provisions laid do*n in points (a)(i) to (iii) of paragraph 4 shall not !e dedu$ted and
shall !e su!9e$t to the appli$a!le risk *eights in a$$ordan$e *ith Chapter 2 or C of
+itle && of .art +hree and the re6uireents laid do*n in +itle &M of .art +hree,
as appli$a!le3
?ECTION 3
A$$ITIONAL TIER 1 CAPITAL
,rticle +8
,%%itional 2ier 1 capital
2#e ,%%itional 2ier 1 capital of an institution s#all consist of ,%%itional 2ier 1 items after t#e
%e%uction of t#e items referre% to in ,rticle +3 an% t#e application of ,rticle >47
C#apter 4
2ier - capital
S$C20OB 1
20$R - 02$9S ,BD 0BS2R49$B2S
,rticle +9
2ier - items
2ier - items s#all consist of t#e follo1in":
)a/ capital instruments and su!ordinated loans 1#ere t#e con%itions lai% %o1n in ,rticle =.
are metE
)/ t#e s#are premium accounts relate% to Ainstruments referre% to in point )a/E
)c/ for institutions calculatin" ris5;1ei"#te% e8posure amounts in accor%ance 1it# C#apter -
of 2itle 00* "eneral cre%it ris5 a%!ustments* "ross of ta8 effects* of up to 17-+ O of
ris5;1ei"#te% e8posure amounts calculate% in accor%ance 1it# C#apter - of 2itle 00 of
Part 2#reeE
)%/ for institutions calculatin" ris5;1ei"#te% e8posure amounts un%er C#apter 3 of 2itle 00*
positive amounts* "ross of ta8 effects* resultin" from t#e calculation lai% %o1n in
,rticle 1+4 an% 1++ up to .*= O of ris5 1ei"#te% e8posure amounts calculate% un%er
C#apter 3 of 2itle 00 of Part 2#ree7
&tes in$luded under point (a) shall not 6ualif# as Coon E6uit# +ier 4 or Additional
+ier 4 ites3
,rticle =.
2ier - instruments
Capital instruments and su!ordinated loans s#all &ualif6 as 2ier - instruments provi%e% t#e
follo1in" con%itions are met:
)a/ t#e instruments are issue% or the su!ordinated loans are granted, as appli$a!le, an%
full6 pai%;upE
)/ t#e instruments are not purc#ase% or the su!ordinated loans are not granted, as
appli$a!le, 6 an6 of t#e follo1in":
)i/ t#e institution or its susi%iariesE
)ii/ an un%erta5in" in 1#ic# t#e institution #as participation in t#e form of o1ners#ip*
%irect or 6 1a6 of control* of -. O or more of t#e votin" ri"#ts or capital of
t#at un%erta5in"E
)c/ t#e purc#ase of t#e instruments or the granting of the su!ordinated loans, as appli$a!le,
is not fun%e% %irectl6 or in%irectl6 6 t#e institutionE
)%/ t#e claim on t#e principal amount of t#e instruments un%er t#e provisions "overnin" t#e
instruments or the $lai of the prin$ipal aount of the su!ordinated loans under the
provisions governing the su!ordinated loans, as appli$a!le, is 1#oll6 suor%inate% to
claims of all non;suor%inate% cre%itorsE
)e/ t#e instruments or su!ordinated loans, as appli$a!le, are not secure%* or su!9e$t to a
guarantee that enhan$es the seniorit# of the $lai 6 an6 of t#e follo1in":
)i/ t#e institution or its susi%iariesE
)ii/ t#e parent undertaking of the institution or its susi%iariesE
)iii/ t#e parent financial #ol%in" compan6 or its susi%iariesE
)iv/ t#e mi8e% activit6 #ol%in" compan6 or its susi%iariesE
)v/ t#e mi8e% financial #ol%in" compan6 an% its susi%iariesE
)vi/ an6 un%erta5in" t#at #as close lin5s 1it# entities referre% to in points )i/ or )v/E
)f/ t#e instruments or su!ordinated loans, as appli$a!le, are not su!ect to an6 arran"ement
t#at ot#er1ise en#ances t#e seniorit6 of t#e claim un%er t#e instruments or su!ordinated
loans respe$tivel#E
)"/ t#e instruments or su!ordinated loans, as appli$a!le, #ave an ori"inal maturit6 of at
least + 6earsE
)#/ t#e provisions "overnin" t#e instruments or su!ordinated loans, as appli$a!le, %o not
inclu%e an6 incentive for their prin$ipal aount to e re%eeme% or repaid, as appli$a!le
6 t#e institution prior to their aturit#E
)i/ 1#ere t#e instruments or su!ordinated loans, as appli$a!le, inclu%e one or more call
options* t#e options are e8ercisale at t#e sole %iscretion of t#e issuerE
)!/ t#e instruments or su!ordinated loans, as appli$a!le, ma6 e calle%* re%eeme% or
repurc#ase% onl6 1#ere t#e con%itions lai% %o1n in ,rticle >- are met* an% not efore five
6ears after t#e %ate of issuance or granting, as appli$a!le, e5$ept *here the $onditions
laid do*n in Arti$le 0C(2a) are etE
)5/ t#e provisions "overnin" t#e instruments or su!ordinated loans, as appli$a!le, %o not
in%icate e5pli$itl# or ipli$itl# t#at t#e instruments or su!ordinated loans, as appli$a!le,
1oul% or mi"#t e re%eeme% A, repurc#ase% or repaid, as appli$a!le !# the institution
ot#er t#an in the insolven$# or li6uidation of the institution an% t#e institution %oes not
ot#er1ise provi%e suc# an in%ication AE
)l/ t#e provisions "overnin" t#e instruments or su!ordinated loans, as appli$a!le, %o not "ive
t#e #ol%er t#e ri"#t to accelerate t#e future sc#e%ule% pa6ment of interest or principal*
ot#er t#an in t#e insolvenc6 or li&ui%ation of t#e institutionE
)m/ t#e level of interest or %ivi%en% pa6ments, as appli$a!le, %ue on t#e instruments or
su!ordinated loans, as appli$a!le, 1ill not e mo%ifie% ase% on t#e cre%it stan%in" of t#e
institution or its parent undertakingE
)n/ 1#ere t#e instruments are not issue% %irectl6 6 an institution, or *here the
su!ordinated loans are not re$eived dire$tl# !# an institution, as appli$a!le, !oth of the
follo*ing $onditions shall !e et'
(i) the instruents are issued or su!ordinated loans are re$eived, as appli$a!le,
through an entit# not in$luded 1it#in t#e consoli%ation pursuant to C#apter - of
2itle 00 of Part One A%
(ii) t#e procee%s are imme%iatel6 availale 1it#out limitation in a form t#at satisfies t#e
con%itions lai% %o1n in t#is para"rap# to that institution3
A
,rticle =1
,mortisation of 2ier - instruments
2#e e8tent to 1#ic# 2ier - instruments &ualif6 as 2ier - items %urin" t#e final + 6ears of maturit6 of
t#e instruments is calculate% 6 multipl6in" t#e result %erive% from t#e calculation in point )a/ 6
t#e amount referre% to in point )/ as follo1s:
)a/ t#e nominal amount of t#e instruments or suor%inate% loans on t#e first %a6 of t#e final
five 6ear perio% of t#eir contractual maturit6 %ivi%e% 6 t#e numer of calen%ar %a6s in
t#at perio%E
)/ t#e numer of remainin" calen%ar %a6s of contractual maturit6 of t#e instruments or
suor%inate% loans7
,rticle =-
Conse&uences of t#e con%itions for 2ier - instruments ceasin" to e met
?#ere in t#e case of a 2ier - instrument t#e con%itions lai% %o1n in ,rticle =. cease to e met* t#e
follo1in" s#all appl6:
)a/ t#at instrument s#all iediatel# cease to &ualif6 as a 2ier - instrumentE
)/ t#e part of t#e s#are premium accounts t#at relate to t#at instrument s#all iediatel#
cease to &ualif6 as 2ier - items7
?ECTION 2
$E$UCTION? FRO* TIER 2 ITE*?
,rticle =3
De%uctions from 2ier - items
2#e follo1in" s#all e %e%ucte% from 2ier - items:
)a/ %irect A, in%irect and s#ntheti$ #ol%in"s 6 an institution of o1n 2ier - instruments*
inclu%in" o1n 2ier - instruments t#at an institution coul% e oli"e% to purc#ase as a result
of e8istin" contractual oli"ationsE
)/ dire$t, indire$t and s#ntheti$ #ol%in"s of t#e 2ier - instruments of finan$ial se$tor entities
1it# 1#ic# t#e institution #as reciprocal cross #ol%in"s t#at t#e competent aut#orit6
consi%ers to #ave een %esi"ne% to inflate artificiall6 t#e o1n fun%s of t#e institutionE
)c/ t#e applicale amount %etermine% in accor%ance 1it# ,rticle => of %irect A, in%irect and
s#ntheti$ #ol%in"s of t#e 2ier - instruments of finan$ial se$tor entities* 1#ere an
institution %oes not #ave a si"nificant investment in t#ose entitiesE
)%/ %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e 2ier - instruments of
finan$ial se$tor entities 1#ere t#e institution #as a si"nificant investment in t#ose entities*
e8clu%in" un%er1ritin" positions #el% for fe1er t#an + 1or5in" %a6s7
,rticle =4
De%uctions of #ol%in"s of o1n 2ier - instruments A
3or t#e purposes of point )a/ of ,rticle =3* institutions s#all calculate #ol%in"s on t#e asis of t#e
"ross lon" positions su!ect to t#e follo1in" A:
)a/ institutions ma6 calculate t#e amount of #ol%in"s A on t#e asis of t#e net lon" position
provi%e% that !oth the follo*ing $onditions are et'
(i) t#e lon" an% s#ort positions are in t#e same un%erl6in" e8posure an% t#e s#ort
positions involve no counterpart6 ris5E
(ii) !oth long and short positions are held either in the trading !ook or
non=trading !ook3
)/ institutions s#all %etermine t#e amount to e %e%ucte% for dire$t, in%irect and s#ntheti$
#ol%in"s of in%e8 securities 6 calculatin" t#e un%erl6in" e8posure to o1n 2ier -
instruments in those in%icesE
)c/ institutions ma6 net "ross lon" positions in o1n 2ier - instruments A resultin" from
#ol%in"s of in%e8 securities a"ainst s#ort positions in o1n 2ier - instruments resultin"
from s#ort positions in t#e un%erl6in" in%ices* inclu%in" 1#ere t#ose s#ort positions
involve counterpart6 ris57
,rticle =+
De%uction of #ol%in"s of 2ier - instruments of finan$ial se$tor entities
an% 1#ere an institution #as a reciprocal cross #ol%in" %esi"ne%
artificiall6 to inflate o1n fun%s
0nstitutions s#all ma5e t#e %e%uctions re&uire% 6 points )/* )c/ an% )%/ of ,rticle =3 in accor%ance
1it# t#e follo1in" provisions:
)a/ #ol%in"s of 2ier - instruments A s#all e calculate% on t#e asis of t#e "ross
lon" positionsE
)/ #ol%in"s of 2ier - o1n;fun% insurance items an% 2ier 3 o1n;fun% insurance items s#all e
treate% as #ol%in"s of 2ier - instruments for t#e purposes of %e%uction7
,rticle ==
De%uction of #ol%in"s of 2ier - instruments of finan$ial se$tor entities
0nstitutions s#all ma5e t#e %e%uctions re&uire% 6 points )c/ an% )%/ of ,rticle =3 in accor%ance
1it# t#e follo1in":
)a/ t#e6 ma6 calculate #ol%in"s Aof t#e capital instruments of finan$ial se$tor entities on t#e
asis of t#e net lon" position in t#e same un%erl6in" e8posure provi%e% t#e maturit6 of t#e
s#ort position matc#es t#e maturit6 of t#e lon" position or #as a resi%ual maturit6 of at
least one 6earE
)/ t#e6 s#all %etermine t#e amount to e %e%ucte% for dire$t, indire$t and s#ntheti$ #ol%in"s
of in%e8 securities 6 loo5in" t#rou"# to t#e un%erl6in" e8posure to t#e capital instruments
of t#e finan$ial se$tor entities in those in%ices7
,rticle =>
De%uction of 2ier - instruments 1#ere an institution %oes not #ave
a si"nificant investment in a relevant entit6
17 3or t#e purposes of point )c/ of ,rticle =3* institutions s#all calculate t#e applicale
amount to e %e%ucte% 6 multipl6in" t#e amount referre% to in point )a/ 6 t#e factor
%erive% from t#e calculation referre% to in point )/:
)a/ t#e a""re"ate amount 6 1#ic# t#e %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e
institution of t#e Common $&uit6 2ier 1* ,%%itional 2ier 1 an% 2ier - instruments of
finan$ial se$tor entities e8cee%s 1. O of t#e Common $&uit6 2ier 1 items of t#e
institution calculate% after appl6in" t#e follo1in":
)i/ ,rticle -9 to 3-E
)ii/ points )a/ to )"/, )k)(ii/ to (v) and )l/ of ,rticle 33)1/* e8clu%in" t#e amount to
e %e%ucte% for %eferre% ta8 assets t#at rel6 on future profitailit6 an% arise
from temporar6 %ifferencesE
)iii/ ,rticles 41 an% 4-E
)/ t#e amount of %irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e
2ier - instruments of finan$ial se$tor entities %ivi%e% 6 t#e a""re"ate amount of all
%irect A, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e Common $&uit6
2ier 1* ,%%itional 2ier 1 an% 2ier - instruments of t#ose finan$ial se$tor entities7
-7 0nstitutions s#all e8clu%e un%er1ritin" positions #el% for + 1or5in" %a6s or fe1er from t#e
amount referre% to in point )a/ of para"rap# 1 an% from t#e calculation of t#e factor
referre% to in point )/ of para"rap# 17
37 +he aount to !e dedu$ted pursuant to paragraph 4 a$ross ea$h +ier 2 instruent held3
0nstitutions s#all %etermine t#e portion of #ol%in"s of 2ier - instruments t#at is %e%ucte%
6 ultipl#ing t#e amount specifie% in point )a/ 6 t#e proportion specifie% in point )/:
)a/ t#e total amount of #ol%in"s re&uire% to e %e%ucte% pursuant to para"rap# 1E
)/ the aount in point (i) divided !# the aount in point (ii)'
(i) the total aount of the +ier 2 instruent%
(ii) the a""re"ate amount of %irect Ain%irect and s#ntheti$ #ol%in"s 6 t#e
institution of t#e +ier 2 instruments of finan$ial se$tor entities in 1#ic# t#e
institution %oes not #ave a si"nificant investment7
?ECTION 3
TIER 2 CAPITAL
,rticle =8
2ier - capital
2#e 2ier - capital of an institution s#all consist of t#e 2ier - items of t#e institution after t#e
%e%uctions referre% to in ,rticle =3 an% t#e application of ,rticle >47
C6pter 7
O<n 1un.s
,rticle =9
O1n fun%s
2#e o1n fun%s of an institution s#all consist of t#e sum of its 2ier 1 capital an% 2ier - capital7
C6pter 6
>enerl re/uire0ents
Arti$le ?>a
(istri!utions on o*n funds instruents
43 Capital instruents for *hi$h an institution has the sole dis$retion to de$ide to pa#
distri!utions in a for other than $ash or an o*n funds instruent shall not !e $apa!le
of 6ualif#ing as Coon E6uit# +ier 4, Additional +ier 4 or +ier 2 instruents unless
the institution has re$eived the prior perission of the $opetent authorities3
23 Copetent authorities shall grant the perission referred to in paragraph 4 onl# *here
the# $onsider all the follo*ing $onditions to !e et'
(a) the a!ilit# of the institution to $an$el pa#ents under the instruent *ould not !e
adversel# affe$ted !# the dis$retion referred to in paragraph 4, or !# the for in
*hi$h distri!utions $ould !e ade%
(!) the a!ilit# of the instruent to a!sor! losses *ould not !e adversel# affe$ted !# the
dis$retion referred to in paragraph 4, or !# the for in *hi$h distri!utions $ould
!e ade%
($) the 6ualit# of the $apital instruent *ould not other*ise !e redu$ed !# the
dis$retion referred to in paragraph 4 or the for in *hi$h distri!utions $ould
!e ade3
C3 Capital instruents for *hi$h a legal person other than the institution issuing the has
the dis$retion to de$ide or re6uire that the pa#ent of distri!utions on the instruent
shall !e ade in a for other than $ash or an o*n funds instruent shall not !e
$apa!le of 6ualif#ing as Coon E6uit# +ier 4, Additional +ier 4 or +ier 2 instruents3
B3 &nstitutions a# use a !road arket inde5 as one of the !ases for deterining the level
of distri!utions on Additional +ier 4 and +ier 2 instruents3
@3 .aragraph B shall not appl# *here the institution is a referen$e entit# in that !road
arket inde5 unless !oth the follo*ing $onditions are et'
(a) the institution $onsiders oveents in that !road arket inde5 not to !e
signifi$antl# $orrelated to the $redit standing of the institution, its parent
institution or parent finan$ial holding $opan# or parent i5ed finan$ial holding
$opan# or parent i5ed a$tivit# holding $opan#%
(!) the $opetent authorit# has not rea$hed a different deterination fro that
referred to in point (a)3
@3a &nstitutions shall report and dis$lose the !road arket indi$es on *hi$h their $apital
instruents rel#,3
?3 +he EBA shall develop draft regulator# te$hni$al standards to spe$if# the $onditions
a$$ording to *hi$h the indi$es shall !e deeed to 6ualif# as !road indi$es for the
purposes of paragraph B3
EBA shall su!it those draft regulator# te$hni$al standards to the Coission *ithin
one onth of the date of entr# into for$e of this )egulation3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in the first su!=paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3
,rticle >.
Holdings of capital instruments of re"ulate% finan$ial se$tor entities
t#at %o not &ualif6 as re"ulator6 capital
0nstitutions s#all not %e%uct from an6 element of o1n fun%s dire$t, indire$t or s#ntheti$ #ol%in"s of
a re"ulate% financial se$tor entit6 A t#at %o not &ualif6 as re"ulator6 capital of t#at entit67
0nstitutions s#all appl6 a ris5 1ei"#t to suc# #ol%in"s in accor%ance 1it# C#apter - or 3 of 2itle 00
of Part 2#ree* as applicale7
Arti$le 0:a
(edu$tion and aturit# re6uireents for short positions
+he aturit# re6uireents for short positions referred to in Arti$les B2(a), @?(a) and ??(a) shall
!e deeed to !e et in respe$t of positions held *here the follo*ing $onditions are et%
(a) the institution has the $ontra$tual right to sell on a spe$ifi$ future date to the
$ounterpart# providing the hedge the long position that is !eing hedged%
(!) the $ounterpart# providing the hedge to the institution is $ontra$tuall# o!liged to
pur$hase fro the institution on that spe$ifi$ future date the long position referred to
in point (a)3
,rticle >1
&nde5 holdings of $apital instruents
:3 1or the purposes of Arti$les C>(a), B2(a), @B(a), @?(a), ?B(a) and ??(a), institutions a#
redu$e the aount of a long position in a $apital instruent !# the portion of the inde5
that is ade up of the sae underl#ing e5posure that is !eing hedged, provided the
follo*ing $onditions are et'
(a) the long position !eing hedged and the short position in an inde5 used to hedge
that long position are !oth held either in the trading !ook or in the
non=trading !ooks%
(!) the positions referred to in point (a) are held at fair value on the !alan$e sheet of
the institution%
($) the short position referred to in point (a) 6ualifies as an effe$tive hedge under the
internal $ontrol pro$esses of the institution%
(d) the $opetent authorities assess the ade6ua$# of the $ontrol pro$esses referred to
in point ($) on at least an annual !asis and are satisfied *ith their $ontinuing
appropriateness3
17 A?#ere t#e competent aut#orit6 #as "iven its prior perission, an institution ma6 use a
conservative estimate of t#e un%erl6in" e8posure of t#e institution to $apital instruents
in$luded in indi$es as an alternative to an institution $al$ulating its e5posure to the
ites referred to in either or !oth of points (a) and (!)'
(a) o*n Coon E6uit# +ier 4, Additional +ier 4 and +ier 2 instruents in$luded
in indi$es%
(!) Coon E6uit# +ier 4, Additional +ier 4 and +ier 2 instruents of finan$ial
se$tor entities, in$luded in indi$es
-7 Copetent authorities s#all grant su$h perission onl6 1#ere t#e institution #as
%emonstrate% to their satisfaction At#at it 1oul% e operationall6 ur%ensome for t#e
institution to monitor its un%erl6in" e8posure to t#e ites referred to in one or !oth of
points (a) or (!), as appropriate, of paragraph 43
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6:
)a/ t#e e8tent of conservatism re&uire% in estimates use% as an alternative to t#e
calculation of un%erl6in" e8posure referre% to in para"rap# 1E
)/ t#e meanin" of operationall6 ur%ensome for t#e purposes of para"rap# -7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this )egulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1.
to 14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle >-
Con%itions for re%ucin" o1n fun%s
,n institution s#all re&uire t#e prior perission of t#e competent aut#orit6 to %o t#e follo1in":
)a/ re%uce, redee or repurc#ase Common $&uit6 2ier 1 instruments issue% 6 t#e institution
in a manner t#at is permitte% un%er applicale national la1E
)/ effect t#e call* re%emption, repa#ent or repurc#ase of ,%%itional 2ier 1 instruments or
2ier - instruments as appli$a!le, prior to t#e %ate of t#eir contractual maturit67
,rticle >3
Supervisor6 perission for re%ucin" o1n fun%s
17 2#e competent aut#orit6 s#all "rant perission for an institution to re%uce* repurc#ase*
call or re%eem Common $&uit6 2ier 1* ,%%itional 2ier 1 or 2ier - instruments 1#ere an6
of t#e follo1in" con%itions is met:
)a/ earlier t#an or at t#e same time as t#e action referre% to in ,rticle 02, t#e institution
replaces t#e instruments referre% to in ,rticle >- 1it# o1n fun%s instruments of
e&ual or #i"#er &ualit6 at terms t#at are sustainale for t#e income capacit6 of
t#e institutionE
)/ t#e institution #as %emonstrate% to t#e satisfaction of t#e competent aut#orit6 t#at t#e
o1n fun%s of t#e institution 1oul%* follo1in" t#e action in &uestion* e8cee% t#e
re&uirements lai% %o1n in ,rticle 8>)1/ 6 a mar"in t#at t#e competent aut#orit6
a# $onsider ne$essar# on the !asis of Arti$le 4::(2) of the (ire$tive ,inserted
!# -./
4a3 ;hen assessing under point (a) the sustaina!ilit# of the repla$eent instruents for the
in$oe $apa$it# of the institution, $opetent authorities shall $onsider the e5tent to
*hi$h those repla$eent $apital instruents *ould !e ore $ostl# for the institution
than those the# *ould repla$e3
-7 ?#ere an institution ta5es an action referre% to in point )a/ of ,rticle >- an% t#e refusal of
re%emption of Common $&uit6 2ier 1 instruments referre% to in ,rticle -+ is pro#iite% 6
applicale national la1* t#e competent aut#orit6 ma6 1aive t#e con%itions lai% %o1n in
para"rap# 1 of t#is ,rticle provi%e% t#e competent aut#orit6 re&uires t#e institution to limit
t#e re%emption of suc# instruments on an appropriate asis7
2a3 +he $opetent authorities a# perit institutions to redee Additional +ier 4 or +ier 2
instruents !efore @ #ears of the date of issue onl# *here the $onditions laid do*n in
paragraph 4 and point (a) or (!) of this paragraph are et'
(a) there is a $hange in the regulator# $lassifi$ation of those instruents that *ould
!e likel# to result in their e5$lusion fro o*n funds or re$lassifi$ation as a lo*er
6ualit# for of o*n funds, and !oth the follo*ing $onditions are et'
(i) the $opetent authorit# $onsiders su$h a $hange to !e suffi$ientl# $ertain%
(ii) the institution deonstrates to the satisfa$tion of the $opetent authorities
that the regulator# re$lassifi$ation of those instruents *as not reasona!l#
foreseea!le at the tie of their issuan$e%
(!) there is a $hange in the appli$a!le ta5 treatent of those instruents *hi$h the
institution deonstrates to the satisfa$tion of the $opetent authorities is aterial
and *as not reasona!l# foreseea!le at the tie of their issuan$e3
37 $D, s#all develop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e meanin" of sustainale for t#e income capacit6 of t#e institutionE
)/ t#e appropriate ases of limitation of re%emption referre% to in para"rap# -E
)c/ t#e process an% %ata re&uirements for an application 6 an institution for t#e
perission of t#e competent aut#orit6 to carr6 out an action liste% in ,rticle >-*
inclu%in" t#e pro$ess to !e applied in the $ase of redeption of shares issued to
e!ers of $ooperative so$ieties, and the time perio% for processin" suc#
an application7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1.
to 14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle >4
2emporar6 1aiver from %e%uction from o1n fun%s
17 ?#ere an institution #ol%s $apital instruents and su!ordinated loans t#at &ualif6 as
Common $&uit6 2ier 1* ,%%itional 2ier 1 or 2ier - instruments in a finan$ial se$tor entit6
temporaril6 an% t#e competent aut#orit6 %eems t#ose #ol%in"s to e for t#e purposes of a
financial assistance operation %esi"ne% to reor"anise an% save t#at entit6* t#e competent
aut#orit6 ma6 1aive on a temporar6 asis t#e provisions on %e%uction t#at 1oul%
ot#er1ise appl6 to t#ose instruments7
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e concept of temporar6
for t#e purposes of para"rap# 1 an% t#e con%itions accor%in" to 1#ic# a competent
aut#orit6 ma6 %eem those temporar6 #ol%in"s Ato e for t#e purposes of a financial
assistance operation %esi"ne% to reor"anise an% save a relevant entit67
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this )egulation33
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1.
to 14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle >+
Continuin" revie1 of &ualit6 of o1n fun%s
17 $D, s#all monitor t#e &ualit6 of o1n fun%s instruments issue% 6 institutions across t#e
4nion an% s#all notif6 t#e Commission imme%iatel6 1#ere t#ere is si"nificant evi%ence of
At#ose instruments not eeting the $riteria set out in Arti$le 2? or, *here appli$a!le,
Arti$le 203
Copetent authorities shall, *ithout dela#, upon re6uest !# EBA, for*ard all
inforation that the EBA dees relevant $on$erning ne* $apital instruents issued in
order to ena!le the EBA to onitor the 6ualit# of o*n funds instruents issued !#
institutions a$ross the 2nion7
-7 , notification s#all inclu%e t#e follo1in":
)a/ a %etaile% e8planation of t#e nature an% e8tent of t#e shortfall i%entifie%E
)/ tec#nical a%vice on t#e action 6 t#e Commission t#at $D, consi%ers to
e necessar67
($) signifi$ant developents in the ethodolog# of EBA for stress testing the solven$#
of institutions3
37 $D, s#all provi%e tec#nical a%vice to t#e Commission on an6 si"nificant c#an"es it
consi%ers to e re&uire% to t#e %efinition of o1n fun%s as a result of an6 of t#e follo1in":
)a/ relevant %evelopments in mar5et stan%ar%s or practiceE
)/ c#an"es in relevant le"al or accountin" stan%ar%sE
)c/ si"nificant %evelopments in t#e met#o%olo"6 of $D, for stress testin" t#e solvenc6
of institutions7
47 $D, s#all provi%e tec#nical a%vice to t#e Commission 6 31 Decemer -.13 on possile
treatments of unrealise% "ains measure% at fair value ot#er t#an inclu%in" t#em in
Common $&uit6 2ier 1 1it#out a%!ustment7 Suc# recommen%ations s#all ta5e into account
relevant %evelopments in international accountin" stan%ar%s an% in international
a"reements on pru%ential stan%ar%s for an5s7
202F$ 000
9inorit6 interest an% ,%%itional 2ier 1 an% 2ier - instruments
issue% 6 susi%iaries
,rticle >=
9inorit6 interests t#at &ualif6 for inclusion in consoli%ate% Common $&uit6 2ier 1 capital
17 9inorit6 interests s#all comprise t#e Common $&uit6 2ier 1 instruments* plus t#e relate%
retaine% earnin"s A, s#are premium accounts and other reserves* of a susi%iar6 1#ere t#e
follo1in" con%itions are met:
)a/ t#e susi%iar6 is one of t#e follo1in":
)i/ an institutionE
)ii/ an un%erta5in" t#at is su!ect 6 virtue of applicale national la1 to t#e
re&uirements of t#is Re"ulation an% Directive Jinserte% 6 OPK*
)!/ t#e susi%iar6 is inclu%e% full6 in t#e consoli%ation pursuant to C#apter - of 2itle 00
of Part OneE
)$/ t#ose Common $&uit6 2ier 1 instruments are o1ne% 6 persons ot#er t#an t#e
un%erta5in"s inclu%e% in t#e consoli%ation pursuant to C#apter - of 2itle 00 of
Part One7
-7 9inorit6 interests t#at are fun%e% %irectl6 or in%irectl6* t#rou"# a special purpose entit6 or
ot#er1ise* 6 t#e parent undertaking of the institution* or its susi%iaries s#all not &ualif6
as consoli%ate% Common $&uit6 2ier 1 capital7
,rticle >>
Qualif6in" ,%%itional 2ier 1* 2ier 1* 2ier - capital an% &ualif6in" o1n fun%s
Qualif6in" ,%%itional 2ier 1* 2ier 1* 2ier - capital an% &ualif6in" o1n fun%s s#all comprise t#e
minorit6 interest* ,%%itional 2ier A1 or 2ier - instruments* as applicale* plus t#e relate% retaine%
earnin"s an% s#are premium accounts* of a susi%iar6 1#ere t#e follo1in" con%itions are met:
)a/ t#e susi%iar6 is eit#er of t#e follo1in":
)i/ an institutionE
)ii/ an un%erta5in" t#at is su!ect 6 virtue of applicale national la1 to t#e re&uirements
of t#is Re"ulation an% Directive Jinserte% 6 OPKE
)/ t#e susi%iar6 is inclu%e% full6 in t#e scope of consoli%ation pursuant to C#apter - of
2itle 00 of Part OneE
)c/ t#ose instruments are o1ne% 6 persons ot#er t#an t#e un%erta5in"s inclu%e% in t#e
consoli%ation pursuant to C#apter - of 2itle 00 of Part One7
,rticle >8
Qualif6in" ,%%itional 2ier 1 an% 2ier - capital issue% 6 a special purpose entit6
17 ,%%itional 2ier 1 an% 2ier - instruments issue% 6 special purpose entit6* an% t#e relate%
As#are premium accounts A are inclu%e% in &ualif6in" ,%%itional 2ier 1* 2ier 1 or 2ier -
capital or &ualif6in" o1n fun%s* as applicale* onl6 1#ere t#e follo1in" con%itions
are met:
)a/ t#e special purpose entit6 issuin" t#ose instruments is inclu%e% full6 in t#e
consoli%ation pursuant to C#apter - of 2itle 00 of Part OneE
)/ t#e instruments* an% t#e relate% As#are premium accounts* are inclu%e% in &ualif6in"
,%%itional 2ier 1 capital onl6 1#ere t#e con%itions lai% %o1n in ,rticle 49)1/
are satisfie%E
)c/ t#e instruments* an% t#e relate% As#are premium accounts* are inclu%e% in &ualif6in"
2ier - capital onl6 1#ere t#e con%itions lai% %o1n in ,rticle =. are satisfie%E
)%/ t#e onl6 asset of t#e special purpose entit6 is its investment in t#e o1n fun%s of the
parent undertaking or a su!sidiar# thereof that is in$luded full# in the
$onsolidation pursuant to Chapter 2 of +itle 2 of .art -ne* t#e form of 1#ic#
satisfies t#e relevant con%itions lai% %o1n in ,rticles 49)1/ or =.* as applicale7
?#ere t#e competent aut#orit6 consi%ers t#e assets of a special purpose entit6 other than
its investent in the o*n funds of the parent undertaking or a su!sidiar# thereof that is
in$luded in the s$ope of $onsolidation pursuant to Chapter 2 of +itle && of .art -ne, to
e minimal an% insi"nificant for suc# an entit6* t#e competent aut#orit6 ma6 1aive t#e
con%ition specifie% in point )%/7
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e t#pes of assets that
$an relate to the operation of spe$ial purpose entities and the concepts of minimal an%
insi"nificant referre% to in the se$ond su!paragraph of para"rap# 17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1.
to 14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle >9
9inorit6 interests inclu%e% in consoli%ate% Common $&uit6 2ier 1 capital
43 0nstitutions s#all %etermine t#e amount of minorit6 interests of a susi%iar6 t#at is inclu%e%
in consoli%ate% Common $&uit6 2ier 1 capital 6 sutractin" from t#e minorit6 interests of
t#at un%erta5in" t#e result of multipl6in" t#e amount referre% to in point )a/ 6 t#e
percenta"e referre% to in point )/:
)a/ t#e Common $&uit6 2ier 1 capital of t#e susi%iar6 minus t#e lo1er of
t#e follo1in":
)i/ t#e amount of Common $&uit6 2ier 1 capital of t#at susi%iar6 re&uire% to meet
t#e sum of t#e re&uirement lai% %o1n in point )a/ of ,rticle 8>)1/, the
re6uireents referred to in Arti$le BBC A and BBC B, the spe$ifi$ o*n funds
re6uireents referred to in Arti$le 4:: of (ire$tive ,inserted !# -./ t#e
comine% uffer referre% to in ,rticle 1--)-/ of Directive Jinserte% 6 OPK, the
re6uireents in Arti$le B0? and an# additional lo$al supervisor# regulations
in non E2 e!er states insofar as those re6uireents are to !e et !#
Coon E6uit# +ier 4 $apitalE
)ii/ t#e amount of consoli%ate% Common $&uit6 2ier 1 capital t#at relates to t#at
susi%iar6 t#at is re&uire% on a consoli%ate% asis to meet t#e sum of t#e
re&uirement lai% %o1n in point )a/ of ,rticle 8>)1/, the re6uireents referred
to in Arti$le BBC A and BBC B, the spe$ifi$ o*n funds re6uireents referred
to in Arti$le 4:: of (ire$tive ,inserted !# -./, t#e comine% uffer referre% to
in ,rticle 1--)-/ of Directive Jinserte% 6 OPK, the re6uireents in
Arti$le B0? and an# additional lo$al supervisor# regulations in non E2
e!er states insofar as those re6uireents are to !e et !# Coon
E6uit# +ier 4 $apital3
)/ t#e minorit6 interests of t#e susi%iar6 e8presse% as a percenta"e of all Common
$&uit6 2ier 1 instruments of t#at un%erta5in" plus t#e relate% As#are premium
accounts, retained earnings and other reserves3
23 +he $al$ulation referred to in paragraph 4 shall !e undertaken on a su!=$onsolidated
!asis for ea$h su!sidiar# referred to in Arti$le 0?(4)3
An institution a# $hoose not to undertake this $al$ulation for a su!sidiar# referred to
in Arti$le 0?(4)3 ;here an institution takes su$h a de$ision, the inorit# interest of that
su!sidiar# a# not !e in$luded in $onsolidated Coon E6uit# +ier 43
2a3 ;here a $opetent authorit# derogates fro the appli$ation of prudential re6uireents
on an individual !asis, as laid do*n in Arti$le ?, inorit# interest *ithin the su!sidiaries
to *hi$h the *aiver is applied shall not !e re$ognised in o*n funds at the su!=
$onsolidated or at the $onsolidated level, as appli$a!le3
C3 EBA shall develop draft regulator# te$hni$al standards to spe$if# the su!=$onsolidation
$al$ulation re6uired in a$$ordan$e *ith paragraph 2 of this Arti$le, Arti$les A: and A2,
EBA shall su!it those draft regulator# te$hni$al standards to the Coission *ithin
one onth of the date of entr# into for$e of this )egulation3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in the first su!=paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3
Ca3 Copetent authorities a# grant a *aiver fro the appli$ation of this Arti$le to a parent
finan$ial holding $opan# that satisfies all the follo*ing $onditions'
a) its prin$ipal a$tivit# is to a$6uire holdings%
!) it is su!9e$t to prudential supervision on a $onsolidated !asis%
$) it $onsolidates a su!sidiar# institution in *hi$h it has onl# a inorit# holding !#
virtue of the $ontrol relationship defined in Arti$le 4 of the "eventh Coun$il
(ire$tive ACDCB>DEEC%
d) ore than >: J of the $onsolidated re6uired Coon E6uit# +ier 4 $apital arises
fro the su!sidiar# institution referred to in point $) $al$ulated on a
su!=$onsolidated !asis3
;here, after the date of entr# into for$e of this )egulation, a parent finan$ial holding
$opan# that eets the $onditions laid do*n in the first su!paragraph !e$oes a parent
i5ed finan$ial holding $opan#, $opetent authorities a# grant the *aiver referred
to in the first su!=paragraph to that parent i5ed finan$ial holding $opan# provided
that it eets the $onditions laid do*n in that su!paragraph3
C!3 ;here $redit institutions peranentl# affiliated in a net*ork to a $entral !od# and
institutions esta!lished *ithin an institutional prote$tion s$hee su!9e$t to the
$onditions laid do*n in arti$le 4:A(0) have $ross=guarantee arrangeents that provide
that there is no $urrent or foreseen aterial, pra$ti$al or legal ipedient to the
transfer of the aount of o*n funds a!ove the regulator# re6uireents fro the
$ounterpart# to the $redit institution, these institutions are e5epted fro the provisions
of this arti$le regarding dedu$tions and a# re$ognise an# inorit# interest arising
*ithin the $ross=guarantee s$hee in full7
,rticle 8.
Qualif6in" 2ier 1 instruments inclu%e% in consoli%ate% 2ier 1 capital
43 0nstitutions s#all %etermine t#e amount of &ualif6in" 2ier 1 capital of a susi%iar6 t#at is
inclu%e% in consoli%ate% o*n funds 6 sutractin" from t#e o*n funds of t#at un%erta5in"
t#e result of multipl6in" t#e amount referre% to in point )a/ 6 t#e percenta"e referre% to in
point )/7
)a/ t#e +ier 4 $apital of the su!sidiar# inus the lo1er of t#e follo1in":
)i/ t#e amount of 2ier 1 capital of t#e susi%iar6 re&uire% to meet t#e sum of t#e
re&uirement lai% %o1n in point )/ of ,rticle 8>)1/, the re6uireents referred
to in Arti$le BBC A and BBC B the spe$ifi$ o*n funds re6uireents referred to
in Arti$le 4:: of (ire$tive ,inserted !# -./, t#e comine% uffer referre% to in
,rticle 1--)-/of Directive Jinserte% 6 OPK, the re6uireents in Arti$le B0?
and an# additional lo$al supervisor# regulations in non E2 e!er states
insofar as those re6uireents are to !e et !# +ier 4 CapitalE
)ii/ t#e amount of consoli%ate% 2ier 1 capital t#at relates to t#e susi%iar6 t#at is
re&uire% on a consoli%ate% asis to meet t#e sum of t#e re&uirement lai% %o1n
in point )/ of ,rticle 8>)1/, the re6uireents referred to in Arti$le BBC A
and BBC B, the spe$ifi$ o*n funds re6uireents referred to in Arti$le 4:: of
(ire$tive ,inserted !# -./, t#e comine% uffer referre% to in ,rticle 1--)-/of
Directive Jinserte% 6 OPK, the re6uireents in Arti$le B0? and an#
additional lo$al supervisor# regulations in non E2 e!er states insofar as
those re6uireents are to !e et !# +ier 4 CapitalE
)/ t#e &ualif6in" 2ier 1 capital of t#e susi%iar6 e8presse% as a percenta"e of all 2ier 1
instruments of t#at un%erta5in" plus t#e relate% share preiu a$$ounts, retained
earnings and other reserves3
23 +he $al$ulation referred to in paragraph 4 shall !e undertaken on a su!=$onsolidated
!asis for ea$h su!sidiar# referred to in Arti$le 0?(4)3
An institution a# $hoose not to undertake this $al$ulation for a su!sidiar# referred to
in Arti$le 0?(4)3 ;here an institution takes su$h a de$ision, the 6ualif#ing +ier 4 $apital
of that su!sidiar# a# not !e in$luded in $onsolidated +ier 4 $apital3
2a3 ;here a $opetent authorit# derogates fro the appli$ation of prudential re6uireents
on an individual !asis, as laid do*n in Arti$le ?, +ier 4 instruents *ithin the
su!sidiaries to *hi$h the *aiver is applied shall not !e re$ognised in o*n funds at the
su!=$onsolidated or at the $onsolidated level, as appli$a!le3
,rticle 81
Qualif6in" 2ier 1 capital inclu%e% in consoli%ate% ,%%itional 2ier 1 capital
;ithout pre9udi$e to Arti$le 0> (4a) ne* and (4!) ne* institutions s#all %etermine t#e amount of
&ualif6in" 2ier 1 capital of a susi%iar6 t#at is inclu%e% in consoli%ate% ,%%itional 2ier 1 capital 6
sutractin" from t#e &ualif6in" 2ier 1 capital of t#at un%erta5in" inclu%e% in consoli%ate% 2ier 1
capital t#e minorit6 interests of t#at un%erta5in" t#at are inclu%e% in consoli%ate% Common $&uit6
2ier 1 capital7
,rticle 8-
Qualif6in" o1n fun%s inclu%e% in consoli%ate% o1n fun%s
43 0nstitutions s#all %etermine t#e amount of &ualif6in" o1n fun%s of a susi%iar6 t#at is
inclu%e% in consoli%ate% o1n fun%s 6 sutractin" from t#e &ualif6in" o1n fun%s of t#at
un%erta5in" t#e result of multipl6in" t#e amount referre% to in point )a/ 6 t#e percenta"e
referre% to in point )/:
)a/ the o*n funds of the su!sidiar# inus t#e lo1er of t#e follo1in":
)i/ t#e amount of o1n fun%s of t#e susi%iar6 re&uire% to meet t#e sum of t#e
re&uirement lai% %o1n in point )c/ of ,rticle 8>)1/, the re6uireents referred
to in Arti$le BBC A and BBC B, the spe$ifi$ o*n funds re6uireents referred
to in Arti$le 4:: of (ire$tive ,inserted !# -./, t#e comine% uffer referre% to
in ,rticle 1--)-/ of Directive Jinserte% 6 OPK, the re6uireents in
Arti$le B0? and an# additional lo$al supervisor# regulations in non E2
e!er states%
)ii/ t#e amount of o1n fun%s t#at relates to t#e susi%iar6 t#at is re&uire% on a
consoli%ate% asis to meet t#e sum of t#e re&uirement lai% %o1n in point )c/ of
,rticle 8>)1/, the re6uireents referred to in Arti$le BBC A and BBC B, the
spe$ifi$ o*n funds re6uireents referred to in Arti$le 4:: of (ire$tive
,inserted !# -./, t#e comine% uffer referre% to in ,rticle 1--)-/of Directive
Jinserte% 6 OPK the re6uireents in Arti$le B0? and an# additional lo$al
supervisor# o*n funds re6uireent in non E2 e!er statesE
)/ t#e &ualif6in" o1n fun%s of t#e un%erta5in"* e8presse% as a percenta"e of all o1n
fun%s instruments of t#e susi%iar6 t#at are inclu%e% in Common $&uit6 2ier 1*
,%%itional 2ier 1 an% 2ier - items an% t#e relate% As#are premium accounts, the
retained earnings and other reserves3
23 +he $al$ulation referred to in paragraph 4 shall !e undertaken on a su!=$onsolidated
!asis for ea$h su!sidiar# referred to in Arti$le 0?(4)3
An institution a# $hoose not to undertake this $al$ulation for a su!sidiar# referred to
in Arti$le 0?(4)3 ;here an institution takes su$h a de$ision, the 6ualif#ing o*n funds of
that su!sidiar# a# not !e in$luded in $onsolidated o*n funds3
2a3 ;here a $opetent authorit# derogates fro the appli$ation of prudential re6uireents
on an individual !asis, as laid do*n in Arti$le ?, o*n funds instruents *ithin the
su!sidiaries to *hi$h the *aiver is applied shall not !e re$ognised in o*n funds at the
su!=$onsolidated or at the $onsolidated level, as appli$a!le3
,rticle 83
Qualif6in" o1n fun%s instruments inclu%e% in consoli%ate% 2ier - capital
;ithout pre9udi$e to Arti$le 0> (4a) ne* and (4!)ne*, institutions s#all %etermine t#e amount of
&ualif6in" o1n fun%s of a susi%iar6 t#at is inclu%e% in consoli%ate% 2ier - capital 6 sutractin"
from t#e &ualif6in" o1n fun%s of t#at un%erta5in" t#at are inclu%e% in consoli%ate% o1n fun%s t#e
&ualif6in" 2ier 1 capital of t#at un%erta5in" t#at is inclu%e% in consoli%ate% 2ier 1 capital A
Title I,
@uli1:in5 6ol.in5s outsi.e t6e 1inn2il se2tor
,rticle 84
Ris5 1ei"#tin" an% pro#iition of &ualif6in" #ol%in"s outsi%e t#e financial sector
17 , &ualif6in" #ol%in"* t#e amount of 1#ic# e8cee%s 1+ O of t#e eli"ile capital of t#e
institution* in an un%erta5in" 1#ic# is not one of t#e follo1in" s#all e su!ect to t#e
provisions lai% %o1n in para"rap# 3:
)a/ a finan$ial se$tor entit6E
)/ an un%erta5in"* t#at is not a finan$ial se$tor entit6* carr6in" on activities 1#ic# t#e
competent aut#orit6 consi%ers to e an# of t#e follo1in":
)i/ a %irect e8tension of an5in"E A
)ii/ ancillar6 to an5in"*
)iii/ leasin"* factorin"* t#e mana"ement of unit trusts* t#e mana"ement of %ata
processin" services or an6 ot#er similar activit67
-7 2#e total amount of t#e &ualif6in" #ol%in"s of an institution in un%erta5in"s ot#er t#an
t#ose referre% to in )a/ an% )/ of para"rap# 1 t#at e8cee%s =. O of its eli"ile capital s#all
e su!ect to t#e provisions lai% %o1n in para"rap# 37
37 Competent aut#orities s#all appl6 t#e re&uirements lai% %o1n in point )a/ or )/ to
&ualif6in" #ol%in"s of institutions referre% to in para"rap#s 1 an% -:
)a/ for the purpose of $al$ulating the $apital re6uireent in a$$ordan$e *ith .art
+hree of this )egulation, institutions s#all appl6 a ris5 1ei"#t of 1 -+. O to the
greater of t#e follo1in":
)i/ t#e amount of &ualif6in" #ol%in"s referre% to in para"rap# 1 in e8cess of 1+ O
of eli"ile capitalE
)ii/ t#e total amount of &ualif6in" #ol%in"s referre% to in para"rap# - t#at
e8cee% =. O of t#e eli"ile capital of t#e institutionE
)/ t#e competent aut#orities s#all pro#iit institutions from #avin" &ualif6in" #ol%in"s
referre% to in para"rap#s 1 an% - t#e amount of 1#ic# e8cee%s t#e percenta"es of
eli"ile capital lai% %o1n in t#ose para"rap#s7
Copetent authorities shall pu!lish their $hoi$e of (a) or (!)3
47 1or the purposes of paragraph 4 point (!) EBA shall issue guidelines spe$if#ing the
follo*ing $on$epts'
)a/ activities t#at are a %irect e8tension of an5in"E
)/ activities Aancillar6 to an5in"E
)c/ similar activities A3
A
+he guidelines shall !e adopted in accor%ance 1it# Arti$le 4? of Re"ulation )$4/
Bo 1.93/-.1.7
,rticle 8+
,lternative to 1 -+. O ris5 1ei"#t
,s an alternative to appl6in" a 1 -+. O ris5 1ei"#t to t#e amounts in e8cess of t#e limits specifie%
in para"rap#s 1 an% - of ,rticle 84* institutions ma6 %e%uct t#ose amounts from Common $&uit6
2ier 1 items in accor%ance 1it# point )5/ of ,rticle 33)1/7
,rticle 8=
$8ceptions
17 S#ares of un%erta5in"s not referre% to in Arti$le AB, paragraph (4), points )a/ an% )/
As#all not e inclu%e% in calculatin" t#e eli"ile capital limits specifie% in that ,rticle A
1#ere an6 of t#e follo1in" con%itions is met:
)a/ t#ose s#ares are #el% temporaril6 %urin" a financial assistan$e operation as referred
to in Arti$le 0B%
)/ t#e #ol%in" of those s#ares is an un%er1ritin" position #el% for + 1or5in" %a6s
or fe1erE
)c/ t#ose s#ares are #el% in t#e o1n name of t#e institution an% on e#alf of ot#ers7
-7 S#ares 1#ic# are not financial fi8e% assets as %efine% in ,rticle 3+)-/ of
Directive 8=/=3+/$$C s#all not e inclu%e% in t#e calculation specifie% in ,rticle 847
P,R2 2CR$$ C,P02,F
R$Q40R$9$B2S
2itle 0
General Re&uirements* valuation an% reportin"
C#apter 1
Re&uire% level of o1n fun%s
S$C20OB 1
O?B 34BDS R$Q40R$9$B2S 3OR 0BS202420OBS
,rticle 8>
O1n fun%s re&uirements
17 Su!ect to ,rticles 88 an% 89* institutions s#all at all times satisf6 t#e follo1in" o1n
fun%s re&uirements:
)a/ a Common $&uit6 2ier 1 capital ratio of 47+ OE
)/ a 2ier 1 capital ratio of = OE
)c/ a total capital ratio of 8 O7
-7 0nstitutions s#all calculate t#eir capital ratios as follo1s:
)a/ t#e Common $&uit6 2ier 1 capital ratio is t#e Common $&uit6 2ier 1 capital of t#e
institution e8presse% as a percenta"e of t#e total ris5 e8posure amountE
)/ t#e 2ier 1 capital ratio is t#e 2ier 1 capital of t#e institution e8presse% as a
percenta"e of t#e total ris5 e8posure amountE
)c/ t#e total capital ratio is t#e o1n fun%s of t#e institution e8presse% as a percenta"e of
t#e total ris5 e8posure amount7
37 2otal ris5 e8posure amount s#all e calculate% as t#e sum of A points )a/ to )f/ after ta5in"
into account t#e provisions lai% %o1n in para"rap# 4:
)a/ t#e ris5 1ei"#te% e8posure amounts for cre%it ris5 an% %ilution ris5* calculate% in
accor%ance 1it# 2itle 00 of Part 2#ree and Arti$le C?>, in respect of all t#e usiness
activities of an institution* e8clu%in" ris5 1ei"#te% e8posure amounts from t#e
tra%in" oo5 usiness of t#e institutionE
)/ t#e o1n fun%s re&uirements* %etermine% in accor%ance 1it# 2itle 0R of Part 2#ree or
Part 3our* as applicale* for t#e tra%in";oo5 usiness of an institution* for
t#e follo1in":
)i/ position ris5E
)ii/ lar"e e8posures e8cee%in" t#e limits specifie% in ,rticles 384 to 39.* to t#e
e8tent an institution is permitte% to e8cee% t#ose limitsE
)c/ t#e o1n fun%s re&uirements %etermine% in accor%ance 1it# 2itle 0R of Part 2#ree or
2itle R of Part 2#ree *ith the e5$eption of Arti$le C?>, as applicale* for
t#e follo1in":
)i/ forei"n;e8c#an"e ris5E
)ii/ settlement ris5E
)iii/ commo%ities ris5E
)%/ t#e o1n fun%s re&uirements calculate% in accor%ance 1it# 2itle R0 for cre%it
valuation a%!ustment ris5 of O2C %erivative instruments ot#er t#an cre%it %erivatives
reco"nise% to re%uce ris5;1ei"#te% e8posure amounts for cre%it ris5E
)e/ t#e o1n fun%s re&uirements %etermine% in accor%ance 1it# 2itle 000 of Part 2#ree for
operational ris5E
)f/ t#e ris5 1ei"#te% e8posure amounts %etermine% in accor%ance 1it# 2itle 00 of Part
2#ree for counterpart6 ris5 arisin" from t#e tra%in" oo5 usiness of t#e institution
for t#e follo1in" t6pes of transactions an% a"reements:
)i/ O2C %erivative instruments an% cre%it %erivativesE
)ii/ repurc#ase transactions* securities or commo%ities len%in" or orro1in"
transactions ase% on securities or commo%itiesE
)iii/ mar"in len%in" transactions ase% on securities or commo%itiesE
)iv/ lon" settlement transactions7
47 2#e follo1in" provisions s#all appl6 in t#e calculation of t#e total e8posure amount
referre% to in para"rap# 3:
)a/ t#e o1n fun%s re&uirements referre% to in points )c/ to )e/ of t#at para"rap# s#all
inclu%e t#ose arisin" from all t#e usiness activities of an institutionE
)/ institutions s#all multipl6 t#e o1n fun%s re&uirements set out in points )/ to )e/ of
t#at para"rap# 6 1-7+7
,rticle 88
0nitial capital re&uirement on "oin" concern
17 2#e o1n fun%s of an institution ma6 not fall elo1 t#e amount of initial capital re&uire% at
t#e time of its aut#orisation7
-7 Credit institutions t#at 1ere alrea%6 in e8istence on 1 <anuar6 1993* t#e aount of o1n
fun%s of 1#ic# %o not attain t#e amount of initial capital re&uire% ma6 continue to carr6 on
t#eir activities7 0n t#at event* t#e aount of o1n fun%s of t#ose institutions ma6 not fall
elo1 t#e #i"#est level reac#e% 1it# effect from -- Decemer 19897
2a3 Authorised investent firs and firs that *ere $overed !# Arti$le ? of
(ire$tive 2::?DB>DEC *hi$h *ere in e5isten$e !efore C4 (e$e!er 4>>@, the aount of
o*n funds of *hi$h do not attain the aount of initial $apital re6uired a# $ontinue to
$arr# on their a$tivities3 +he o*n funds of su$h firs or investent firs shall not fall
!elo* the highest referen$e level $al$ulated after the date of notifi$ation $ontained in
(ire$tive >CD?DEEC3 +hat referen$e level shall !e the average dail# level of o*n funds
$al$ulated over a si5=onth period pre$eding the date of $al$ulation3 &t shall !e
$al$ulated ever# si5 onths in respe$t of the $orresponding pre$eding period3
37 ?#ere control of an institution fallin" 1it#in t#e cate"or6 referre% to in para"rap# - or 2a
is ta5en 6 a natural or le"al person ot#er t#an t#e person 1#o controlle% t#e institution
previousl6* t#e aount of o1n fun%s of t#at institution s#all attain t#e amount of initial
capital re&uire%7
47 ?#ere t#ere is a mer"er of t1o or more institutions fallin" 1it#in t#e cate"or6 referre% to in
para"rap# 2 or 2a, t#e aount of o1n fun%s of t#e institution resultin" from t#e mer"er
s#all not fall elo1 t#e total o1n fun%s of t#e mer"e% institutions at t#e time of t#e mer"er*
as lon" as t#e amount of initial capital re&uire% #as not een attaine%7
+7 ?#ere competent aut#orities consi%er it necessar6 to ensure t#e solvenc6 of an institution
t#at t#e re&uirement lai% %o1n in para"rap# 1 is met* t#e provisions lai% %o1n in
para"rap#s - to 4 s#all not appl67
,rticle 89
Dero"ation for small tra%in" oo5 usiness
17 0nstitutions ma6 replace t#e capital re&uirement referre% to in A,rticle 8> (C), point (!)6
a capital re&uirement calculate% in accor%ance 1it# point )a/ of t#at para"rap# in respect of
t#eir tra%in";oo5 usiness* provi%e% t#at t#e siLe of t#eir on; an% off;alance;s#eet
tra%in";oo5 usiness meets !oth t#e follo1in" con%itions:
)a/ is normall6 less t#an + O of t#e total assets an% S1+ millionE
)/ never e8cee%s = O of total assets an% S-. million7
-7 0n calculatin" t#e siLe of on; an% off;alance;s#eet usiness* %et instruments s#all e
value% at t#eir mar5et prices or t#eir nominal values* e&uities at t#eir mar5et prices an%
%erivatives accor%in" to t#e nominal or mar5et values of t#e instruments un%erl6in" t#em7
Fon" positions an% s#ort positions s#all e summe% re"ar%less of t#eir si"ns7
37 ?#ere an institution fails to meet t#e con%ition in point )/ of para"rap# 1 it s#all
imme%iatel6 notif6 t#e competent aut#orit67 0f* follo1in" assessment 6 t#e competent
aut#orit6* t#e competent aut#orit6 %etermines an% notifies t#e institution t#at t#e
re&uirement in point )a/ of para"rap# 1 is not met* t#e institution s#all cease to ma5e use of
para"rap# 1 from t#e ne8t reportin" %ate7
S$C20OB -
O?B 34BDS R$Q40R$9$B2S 3OR 0BR$S29$B2 30R9S ?02C F0902$D
,42COR0S,20OB 2O PROR0D$ 0BR$S29$B2 S$RR0C$S
,rticle 9.
O1n fun%s re&uirements for investment firms 1it# limite% aut#orisation
to provi%e investment services
17 3or t#e purposes of ,rticle 8>)3/* investment firms t#at are not aut#orise% to provi%e t#e
investment services liste% in points 3 an% = of Section , of ,nne8 0 to
Directive -..4/39/$C s#all use t#e calculation of t#e total ris5 e8posure amount specifie%
in para"rap# -7
-7 0nvestment firms referre% to in para"rap# 1 and firs referred to in point ($) of point A of
Arti$le B that provide the investent servi$es and a$tivities referred to in points (2)
and (B) of "e$tion A of Anne5 & of (ire$tive 2::BDC>DEC s#all calculate t#e total ris5
e8posure amount as t#e #i"#er of t#e follo1in":
)a/ t#e sum of t#e items referre% to in points )a/ to )%/ an% )f/ of ,rticle 8>)3/ after
appl6in" para"rap# 8>)4/E
)/ 1-7+ multiplie% 6 t#e amount specifie% in ,rticle 9-7
1irs referred to in point ($) of point A of Arti$le B that provide the investent servi$es
and a$tivities referred to in points (2) and (B) of "e$tion A of Anne5 & of
(ire$tive 2::BDC>DEC shall eet the re6uireents in Arti$le A0(4) and (2) !ased on the
total risk e5posure aount referred to in the first su!paragraph3
Copetent authorities a# set the o*n fund re6uireents for firs referred to in
point ($) of point A of Arti$le B that provide the investent servi$es and a$tivities
referred to in nr (2) and (B) of "e$tion A of Anne5 & of (ire$tive 2::BDC>DEC on arkets
in finan$ial instruents as the o*n fund re6uireents that *ould !e !inding on those
firs a$$ording to the national transposition easures in for$e on C4 (e$e!er 2:4C
for (ire$tive 2::?DB>DEC and (ire$tive 2::?DBADEC3
37 0nvestment firms referre% to in para"rap# 1 are su!ect to all ot#er provisions re"ar%in"
operational ris5 lai% %o1n in 2itle R00* C#apter 3* section 00* Su;section 1 of Directive
Jinserte% 6 OPK7
,rticle 91
O1n fun%s re&uirements for investment firms 1#ic# #ol% initial capital
as lai% %o1n in ,rticle 2A(2) of Directive Jinserte% 6 OPK
17 3or t#e purposes of ,rticle 8>)3/* t#e follo1in" cate"ories of investment firm 1#ic# #ol%
initial capital in accor%ance 1it# ,rticle 2A(2) of Directive Jinserte% 6 OPK s#all use t#e
calculation of t#e total ris5 e8posure amount specifie% in para"rap# -:
)a/ investment firms t#at %eal on o1n account onl6 for t#e purpose of fulfillin" or
e8ecutin" a client or%er or for t#e purpose of "ainin" entrance to a clearin" an%
settlement s6stem or a reco"nise% e8c#an"e 1#en actin" in an a"enc6 capacit6 or
e8ecutin" a client or%erE
)/ investment firms t#at eet all of the follo*ing $onditions'
(i) that %o not #ol% client mone6 or securitiesE
)ii/ At#at un%erta5e onl6 %ealin" on o1n accountE
)iii/ At#at #ave no e8ternal customersE
)iv/ Afor 1#ic# t#e e8ecution an% settlement 1#ose transactions ta5es place un%er
t#e responsiilit6 of a clearin" institution an% are "uarantee% 6 t#at
clearin" institution7
-7 3or investment firms referre% to in para"rap# 1* total ris5 e8posure amount s#all e
$al$ulated as t#e sum of t#e follo1in":
)a/ points )a/ to )%/ an% )f/ of ,rticle 8>)3/ after appl6in" para"rap# 8>)4/E
)/ t#e amount referre% to in ,rticle 9- multiplie% 6 1-7+7
37 0nvestment firms referre% to in para"rap# 1 are su!ect to all ot#er provisions re"ar%in"
operational ris5 lai% %o1n in 2itle R00* C#apter 3* Section -* Su;section 1 of Directive
Jinserte% 6 OPK7
,rticle 9-
O1n 3un%s ase% on 3i8e% Over#ea%s
17 0n accor%ance 1it# ,rticle 9. an% 91* an investment firm and firs referred to in point ($)
of point A of Arti$le B that provide the investent servi$es and a$tivities referred to in
nr (2) and (B) of "e$tion A of Anne5 & of (ire$tive 2::BDC>DEC on arkets in finan$ial
instruents s#all #ol% eli"ile capital of at least one &uarter of t#e fi8e% over#ea%s of t#e
Aprece%in" 6ear7
-7 ?#ere t#ere is a c#an"e in t#e usiness of an investment firm since t#e prece%in" 6ear t#at
t#e competent aut#orit6 consi%ers to e material* t#e competent aut#orit6 ma6 a%!ust t#e
re&uirement lai% %o1n in para"rap# 17
37 ?#ere an investment firm #as not complete% usiness for one 6ear* startin" from t#e %a6 it
starts up* an investment firm s#all #ol% eli"ile capital of at least one &uarter of t#e fi8e%
over#ea%s pro!ecte% in its usiness plan* e8cept 1#ere t#e competent aut#orit6 re&uires t#e
usiness plan to e a%!uste%7
47 $D, in $onsultation *ith E"MA s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to
specif6 in "reater %etail t#e follo1in":
)a/ t#e calculation of t#e re&uirement to #ol% eli"ile capital of at least one &uarter of t#e
fi8e% over#ea%s of t#e previous 6earE
)/ t#e con%itions for t#e a%!ustment 6 t#e competent aut#orit6 of t#e re&uirement to
#ol% eli"ile capital of at least one &uarter of t#e fi8e% over#ea%s of t#e
previous 6earE
)c/ t#e calculation of pro!ecte% fi8e% over#ea%s in t#e case of an investment firm t#at #as
not complete% usiness for one 6ear7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 1 Mar$h 2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1.
to 14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 93
O1n fun%s for investment firms on a consoli%ate% asis
17 0n t#e case of t#e investment firms referre% to in ,rticle 9.)1/ in a "roup* 1#ere t#at "roup
%oes not inclu%e cre%it institutions* a parent investment firm in a 9emer State s#all appl6
,rticle 8> at a consoli%ate% level as follo1s:
)a/ usin" t#e calculation of total ris5 e8posure amount specifie% in ,rticle 9.)-/E
)/ o1n fun%s calculate% on t#e asis of t#e consoli%ate% financial situation of t#e parent
investment firm7
-7 0n t#e case of investment firms referre% to in ,rticle 91)1/ in a "roup* 1#ere t#at "roup
%oes not inclu%e cre%it institutions* a parent investent fir in a Me!er "tate and an
investment firm controlle% 6 a financial #ol%in" compan6 s#all appl6 ,rticle 8> at a
consoli%ate% level as follo1s:
)a/ it s#all use t#e calculation of total ris5 e8posure amount specifie% in ,rticle 91)-/E
)/ it shall use o1n fun%s calculate% on t#e asis of t#e consoli%ate% financial situation
of t#e parent investment firm or that of the finan$ial holding $opan#, as
appli$a!le, and in $oplian$e *ith Chapter 2 of .art -ne7
C#apter -
Calculation an% reportin" re&uirements
6
,rticle 9+
Reportin" on o1n fun%s re&uirements and finan$ial inforation
17 AReportin" 6 institutions to the $opetent authorities on t#e oli"ations lai% %o1n in
Arti$le A0 s#all e carrie% out at least on a seiannual !asis7
A
23 &nstitutions su!9e$t to Arti$le B under )egulation (EC) Fo 4?:?D2::2 and those $redit
institutions, other than those referred to in Arti$le B that prepare their $onsolidated
a$$ounts in $onforit# *ith the international a$$ounting standards adopted in
a$$ordan$e *ith the pro$edure laid do*n in Arti$le ?(2), shall also report
finan$ial inforation3
C3 Copetent authorities a# re6uire those $redit institutions appl#ing &nternational
A$$ounting "tandards as appli$a!le under )egulation (EC) Fo 4?:?D2::2 for the
reporting of o*n funds on a $onsolidated !asis !# the virtue of Arti$le 24a(2) to also
report finan$ial inforation as laid do*n in the previous su!paragraph3
1inan$ial inforation shall !e reported to the e5tent this is ne$essar# to o!tain a
$oprehensive vie* of the risk profile of an institution7s a$tivities and a vie* on the
s#stei$ risks posed !# institutions to the finan$ial se$tor or the real e$ono# in
a$$ordan$e *ith )egulation (E2) Fo 4:>CD2:4:3
-7 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 t#e uniform
formats* fre&uencies A, %ates of reportin", definitions an% t#e 02 solutions to e applie%
in t#e 4nion for suc# reportin" in paragraph 43
2#e reportin" re6uireents s#all e proportionate to t#e nature* scale an% comple8it6 of
t#e activities of t#e institutions7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission *ithin
one onth of the date of entr# into for$e of this )egulation3 3
Po1er is %ele"ate% to t#e Commission to a%opt t#e implementin" stan%ar%s referre% to in
t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
C3 &f the $opetent authorit# $onsiders the finan$ial inforation re6uired !# paragraph 4
is ne$essar# to o!tain a $oprehensive vie* of the risk profile of an institution7s
a$tivities and a vie* on the s#stei$ risks posed !# institutions to the finan$ial se$tor or
the real e$ono# for institutions other than those referred to in Arti$le >@(4), se$ond
and third su!=paragraph, su!9e$t to an a$$ounting frae*ork !ased on
(ire$tive A?D?C@DEEC, the $opetent authorities shall $onsult EBA on the e5tension of
the reporting re6uireents of finan$ial inforation on a $onsolidated !asis to those
institutions, *here institutions are not alread# reporting on su$h a !asis3
EBA shall develop ipleenting te$hni$al standards to spe$if# the forats to !e used
!# institutions through *hi$h the $opetent authorities a# e5tend the reporting
re6uireents on finan$ial inforation of institutions su!9e$t to an a$$ounting
frae*ork !ased on (ire$tive A?D?C@DEEC3
EBA shall su!it those draft ipleenting standards to the Coission *ithin one
onth of the date of entr# into for$e of this )egulation3
.o*er is delegated to the Coission to adopt the regulator# standards referred to in
the se$ond su!=paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$le 4@ of
)egulation (E2) Fo 4:>CD2:4:3
B3 ;here a $opetent authorit# $onsiders inforation not $overed !# the ipleenting
te$hni$al standard of paragraph 2 ne$essar# for the purposes set out in the first
paragraph, it shall notif# EBA and the E")B a!out the additional inforation it dees
ne$essar# to in$lude in the ipleenting te$hni$al standard of paragraph 23
Additional reporting re6uireents
&nstitutions shall report to the $opetent authorities the level, at least in aggregate
ters, of their repur$hase agreeents, se$urities lending and all fors of en$u!ran$e
of assets3
EBA shall in$lude this inforation in the ipleenting te$hni$al standard on reporting
of Arti$le >@ paragraph 23
,rticle 9=
Specific reportin" oli"ations
17 0nstitutions s#all report on a seiannual !asis t#e follo1in" %ata to t#e competent
aut#orities for ea$h national propert# arket to *hi$h the# are e5posed:
)a/ losses stemmin" from e5posures for *hi$h an institution has re$ognised
iova!le residential propert# as $ollateral , up to the lo*er of the pledged
aount and 8. O of t#e mar5et value or 8. O of t#e mort"a"e len%in" value
Aunless ot#er1ise %eci%e% un%er ,rticle 119)-/ AE
)/ overall losses stemmin" from e5posures for *hi$h an institution has re$ognised
iova!le 6 resi%ential propert6 as $ollateral, up to the part of the e5posure
treated as full# se$ured !# iova!le residential propert# a$$ording to
Arti$le 44>(4)%
(!a) the e5posure value of all outstanding e5posures for *hi$h an institution has
re$ognised iova!le residential propert# as $ollateral liited to the part treated
as full# se$ured !# iova!le residential propert# a$$ording to Arti$le 44>(4)%
)c/ losses stemmin" from e5posures for *hi$h an institution has re$ognised
iova!le $oer$ial propert# as $ollateral, up to the lo*er of the pledged
aount and +. O of t#e mar5et value or =. O of t#e mort"a"e len%in" value
Aunless ot#er1ise %eci%e% un%er ,rticle 119)-/ AE
)%/ overall losses stemmin" from e5posures for *hi$h an institution has re$ognised
iova!le $oer$ial propert# as $ollateral, up to the part of the e5posure treated
as full# se$ured !# iova!le $oer$ial propert# a$$ording to Arti$le 44>(4)7
(e) the e5posure value of all outstanding e5posures for *hi$h an institution has
re$ognised iova!le $oer$ial propert# as $ollateral liited to the part treated
as full# se$ured !# iova!le $oer$ial propert# a$$ording to Arti$le 44>(4)3
+he data shall !e reported
(i) to the $opetent authorit# of the hoe e!er state of the relevant institution, in
$ase of an institution having a !ran$h in another Me!er "tate, the data relating
to that !ran$h shall also !e reported to the $opetent authorit# of the host
Me!er "tate,
(ii) ,deleted/
(iii) separatel# for ea$h propert# arket *ithin the EEA to *hi$h the relevant
institution is e5posed to3
-7 2#e competent aut#orities s#all pulis# annuall6 on an a""re"ate% asis t#e %ata specifie%
in points )a/ to )e/ of para"rap# 1* to"et#er 1it# #istorical %ata* 1#ere availale7 ,
competent aut#orit6 s#all* upon t#e re&uest of anot#er competent aut#orit6 in a 9emer
State or t#e $D, provi%e to t#at competent aut#orit6 or t#e $D, more %etaile%
information on t#e con%ition of t#e resi%ential or commercial immovale propert6 mar5ets
in t#at 9emer State7
37 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ uniform formats* definitions, fre&uencies an% %ates of reportin", as *ell as
t#e &+ solutions referre% to in para"rap# 1E
)/ uniform formats* definitions, fre&uencies an% %ates of reporting, as *ell
as &+ solutions, of t#e a""re"ate %ata referre% to in para"rap# -7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission *ithin
one onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in
,rticle 1+ of Re"ulation )$4/ Bo 1.93/-.1.7
C#apter 3
2ra%in" oo5
,rticle 9>
Re&uirements for t#e 2ra%in" Doo5
17 Positions in t#e tra%in" oo5 s#all e eit#er free of restrictions on t#eir tra%ailit6 or ale
to e #e%"e%7
-7 2ra%in" intent s#all e evi%ence% on t#e asis of t#e strate"ies* policies an% proce%ures set
up 6 t#e institution to mana"e t#e position or portfolio in accor%ance 1it# ,rticle 987
37 0nstitutions s#all estalis# an% maintain s6stems an% controls to mana"e t#eir tra%in" oo5
in accor%ance 1it# ,rticles 99 an% 1..7
47 0nstitutions ma6 inclu%e internal #e%"es in t#e calculation of capital re&uirements for
position ris5 provi%e% t#at t#e6 are #el% 1it# tra%in" intent an% t#at t#e re&uirements of
,rticles 98 to 1.1 are met7
,rticle 98
9ana"ement of t#e tra%in" oo5
0n mana"in" its positions or sets of positions in t#e tra%in" oo5 t#e institution s#all compl6 1it# all
of t#e follo1in" re&uirements:
)a/ t#e institution s#all #ave in place a clearl6 %ocumente% tra%in" strate"6 for t#e
position/instrument or portfolios* approve% 6 senior mana"ement* 1#ic# s#all inclu%e t#e
e8pecte% #ol%in" perio%E
)/ t#e institution s#all #ave in place clearl6 %efine% policies an% proce%ures for t#e active
mana"ement of positions entere% into on a tra%in" %es537 2#ose policies an% proce%ures
s#all inclu%e t#e follo1in":
)i/ 1#ic# positions ma6 e entere% into 6 1#ic# tra%in" %es5E
)ii/ position limits are set an% monitore% for appropriatenessE
)iii/ %ealers #ave t#e autonom6 to enter into an% mana"e t#e position 1it#in a"ree% limits
an% accor%in" to t#e approve% strate"6E
)iv/ positions are reporte% to senior mana"ement as an inte"ral part of t#e institution(s
ris5 mana"ement processE
)v/ positions are activel6 monitore% 1it# reference to mar5et information sources an% an
assessment ma%e of t#e mar5etailit6 or #e%"e;ailit6 of t#e position or its
component ris5s* inclu%in" t#e assessment* t#e &ualit6 an% availailit6 of mar5et
inputs to t#e valuation process* level of mar5et turnover* siLes of positions tra%e% in
t#e mar5etE
(va) a$tive anti fraud pro$edures and $ontrols3
)c/ t#e institution s#all #ave in place clearl6 %efine% policies an% proce%ures to monitor t#e
positions a"ainst t#e institution(s tra%in" strate"6 inclu%in" t#e monitorin" of turnover an%
positions for 1#ic# t#e ori"inall6 inten%e% #ol%in" perio% #as een e8cee%e%7
,rticle 99
0nclusion in t#e 2ra%in" Doo5
17 0nstitutions s#all #ave in place clearl6 %efine% policies an% proce%ures for %eterminin"
1#ic# position to inclu%e in t#e tra%in" oo5 for t#e purposes of calculatin" t#eir capital
re&uirements* in accor%ance 1it# t#e re&uirements set out in ,rticle >0 an% t#e %efinition
of tra%in" oo5 in accor%ance 1it# ,rticle B(?2), ta5in" into account t#e institution(s ris5
mana"ement capailities an% practices7 2#e institution s#all full6 %ocument its compliance
1it# t#ese policies an% proce%ures an% s#all su!ect t#em to perio%ic internal au%it7
-7 0nstitutions s#all #ave in place clearl6 %efine% policies an% proce%ures for t#e overall
mana"ement of t#e tra%in" oo57 2#ese policies an% proce%ures s#all at least a%%ress:
)a/ t#e activities t#e institution consi%ers to e tra%in" an% as constitutin" part of t#e
tra%in" oo5 for o1n fun%s re&uirement purposesE
)/ t#e e8tent to 1#ic# a position can e mar5e%;to;mar5et %ail6 6 reference to an
active* li&ui% t1o;1a6 mar5etE
)c/ for positions t#at are mar5e%;to;mo%el* t#e e8tent to 1#ic# t#e institution can:
)i/ i%entif6 all material ris5s of t#e positionE
)ii/ #e%"e all material ris5s of t#e position 1it# instruments for 1#ic# an active*
li&ui% t1o;1a6 mar5et e8istsE
)iii/ %erive reliale estimates for t#e 5e6 assumptions an% parameters use% in
t#e mo%elE
)%/ t#e e8tent to 1#ic# t#e institution can* an% is re&uire% to* "enerate valuations for t#e
position t#at can e vali%ate% e8ternall6 in a consistent mannerE
)e/ t#e e8tent to 1#ic# le"al restrictions or ot#er operational re&uirements 1oul% impe%e
t#e institution(s ailit6 to effect a li&ui%ation or #e%"e of t#e position in t#e
s#ort termE
)f/ t#e e8tent to 1#ic# t#e institution can* an% is re&uire% to* activel6 mana"e t#e ris5s of
positions 1it#in its tra%in" operationE
)"/ t#e e8tent to 1#ic# t#e institution ma6 transfer ris5 or positions et1een t#e non;
tra%in" an% tra%in" oo5s an% t#e criteria for suc# transfers A
,rticle 1..
Re&uirements for Pru%ent Raluation
17 ,ll tra%in" oo5 positions s#all e su!ect to t#e stan%ar%s for pru%ent valuation specifie%
in t#is ,rticle7 0nstitutions s#all in particular ensure t#at t#e pru%ent valuation of t#eir
tra%in" oo5 positions ac#ieves an appropriate %e"ree of certaint6 #avin" re"ar% to t#e
%6namic nature of tra%in" oo5 positions* t#e %eman%s of pru%ential soun%ness an% t#e
mo%e of operation an% purpose of capital re&uirements in respect of tra%in" oo5 positions7
-7 0nstitutions s#all estalis# an% maintain s6stems an% controls sufficient to provi%e pru%ent
an% reliale valuation estimates7 2#ose s6stems an% controls s#all inclu%e at least t#e
follo1in" elements:
)a/ %ocumente% policies an% proce%ures for t#e process of valuation* inclu%in" clearl6
%efine% responsiilities of t#e various areas involve% in t#e %etermination of t#e
valuation* sources of mar5et information an% revie1 of t#eir appropriateness*
"ui%elines for t#e use of unoservale inputs reflectin" t#e institution(s assumptions
of 1#at mar5et participants 1oul% use in pricin" t#e position* fre&uenc6 of
in%epen%ent valuation* timin" of closin" prices* proce%ures for a%!ustin" valuations*
mont# en% an% a%;#oc verification proce%uresE
)/ reportin" lines for t#e %epartment accountale for t#e valuation process t#at are clear
an% in%epen%ent of t#e front office7
2#e reportin" line s#all ultimatel6 e to At#e mana"ement o%67
37 0nstitutions s#all revalue tra%in" oo5 positions at least %ail67
47 0nstitutions s#all mar5 t#eir positions to mar5et 1#enever possile* inclu%in" 1#en
appl6in" tra%in" oo5 capital treatment7
+7 ?#en mar5in" to mar5et* an institution s#all use t#e more pru%ent si%e of i% an% offer
unless t#e institution $an $lose out at id arket3 ;here institutions ake use of this
derogation, the# shall ever# ? onths infor their $opetent authorities of the positions
$on$erned and furnish eviden$e that the# $an $lose out at id=mar5et7
=7 ?#ere mar5in" to mar5et is not possile* institutions s#all conservativel6 mar5 to mo%el
t#eir positions an% portfolios* inclu%in" 1#en calculatin" o1n fun%s re&uirements for
positions in t#e tra%in" oo57
>7 0nstitutions s#all compl6 1it# t#e follo1in" re&uirements 1#en mar5in" to mo%el:
)a/ senior mana"ement s#all e a1are of t#e elements of t#e tra%in" oo5 or of ot#er
fair;value% positions 1#ic# are su!ect to mar5 to mo%el an% s#all un%erstan% t#e
materialit6 of t#e uncertaint6 t#ere6 create% in t#e reportin" of t#e ris5/performance
of t#e usinessE
)/ institutions s#all source mar5et inputs* 1#ere possile* in line 1it# mar5et prices*
an% s#all assess t#e appropriateness of t#e mar5et inputs of t#e particular position
ein" value% an% t#e parameters of t#e mo%el on a fre&uent asisE
)c/ 1#ere availale* institutions s#all use valuation met#o%olo"ies 1#ic# are accepte%
mar5et practice for particular financial instruments or commo%itiesE
)%/ 1#ere t#e mo%el is %evelope% 6 t#e institution itself* it s#all e ase% on appropriate
assumptions* 1#ic# #ave een assesse% an% c#allen"e% 6 suital6 &ualifie% parties
in%epen%ent of t#e %evelopment processE
)e/ institutions s#all #ave in place formal c#an"e control proce%ures an% s#all #ol% a
secure cop6 of t#e mo%el an% use it perio%icall6 to c#ec5 valuationsE
)f/ ris5 mana"ement s#all e a1are of t#e 1ea5nesses of t#e mo%els use% an% #o1 est
to reflect t#ose in t#e valuation outputE an%
)"/ institutions7 odels s#all e su!ect to perio%ic revie1 to %etermine t#e accurac6 of
their performance* 1#ic# s#all inclu%e assessin" t#e continue% appropriateness of
assumptions* anal6sis of profit an% loss versus ris5 factors* an% comparison of actual
close out values to mo%el outputs7
3or t#e purposes of point )%/* t#e mo%el s#all e %evelope% or approve% in%epen%entl6 of
t#e tra%in" %es5 an% s#all e in%epen%entl6 teste%* inclu%in" vali%ation of t#e mat#ematics*
assumptions an% soft1are implementation7
87 0nstitutions s#all perform in%epen%ent price verification in a%%ition to %ail6 mar5in" to
mar5et or mar5in" to mo%el7 Rerification of mar5et prices an% mo%el inputs s#all e
performe% 6 a person or unit in%epen%ent from persons or units t#at enefit from t#e
tra%in" oo5* at least mont#l6* or more fre&uentl6 %epen%in" on t#e nature of t#e mar5et or
tra%in" activit67 ?#ere in%epen%ent pricin" sources are not availale or pricin" sources are
more su!ective* pru%ent measures suc# as valuation a%!ustments ma6 e appropriate7
97 0nstitutions s#all estalis# an% maintain proce%ures for consi%erin" valuation a%!ustments7
1.7 0nstitutions s#all formall6 consi%er t#e follo1in" valuation a%!ustments' unearne% cre%it
sprea%s* close;out costs* operational ris5s, arket pri$e un$ertaint#* earl6 termination*
investin" an% fun%in" costs* future a%ministrative costs an%* 1#ere relevant* mo%el ris57
117 0nstitutions s#all estalis# an% maintain proce%ures for calculatin" an a%!ustment to t#e
current valuation of an6 less li&ui% positions* 1#ic# can in particular arise from mar5et
events or institution;relate% situations suc# as concentrate% positions an%/or positions for
1#ic# t#e ori"inall6 inten%e% #ol%in" perio% #as een e8cee%e%7 0nstitutions s#all* 1#ere
necessar6* ma5e suc# a%!ustments in a%%ition to an6 c#an"es to t#e value of t#e position
re&uire% for financial reportin" purposes an% s#all %esi"n suc# a%!ustments to reflect t#e
illi&ui%it6 of t#e position7 4n%er t#ose proce%ures* institutions s#all consi%er several
factors 1#en %eterminin" 1#et#er a valuation a%!ustment is necessar6 for less li&ui%
positions7 2#ose factors inclu%e t#e follo1in":
)a/ t#e amount of time it 1oul% ta5e to #e%"e out t#e position or t#e ris5s 1it#in
t#e positionE
)/ t#e volatilit6 an% avera"e of i%/offer sprea%sE
)c/ t#e availailit6 of mar5et &uotes )numer an% i%entit6 of mar5et ma5ers/ an% t#e
volatilit6 an% avera"e of tra%in" volumes inclu%in" tra%in" volumes %urin" perio%s
of mar5et stressE
)%/ mar5et concentrationsE
)e/ t#e ageing of positionsE
)f/ t#e e8tent to 1#ic# valuation relies on mar5in";to;mo%elE
)"/ t#e impact of ot#er mo%el ris5s7
1-7 ?#en usin" t#ir% part6 valuations or mar5in" to mo%el* institutions s#all consi%er 1#et#er
to appl6 a valuation a%!ustment7 0n a%%ition* institutions s#all consi%er t#e nee% for
estalis#in" a%!ustments for less li&ui% positions an% on an on"oin" asis revie1 t#eir
continue% suitailit63 &nstitutions shall also e5pli$itl# assess the need for valuation
ad9ustents relating to the un$ertaint# of paraeter inputs used !# odels7
137 ?it# re"ar% to comple8 pro%ucts* inclu%in" securitisation e8posures an% n;t#;to;%efault
cre%it %erivatives* institutions s#all e8plicitl6 assess t#e nee% for valuation a%!ustments to
reflect t#e mo%el ris5 associate% 1it# usin" a possil6 incorrect valuation met#o%olo"6 an%
t#e mo%el ris5 associate% 1it# usin" unoservale )an% possil6 incorrect/ caliration
parameters in t#e valuation mo%el7
4B3 EBA shall develop draft regulator# te$hni$al standards to spe$if# the $onditions
a$$ording to *hi$h the re6uireents of Arti$le 4:: shall !e applied for the purposes of
paragraph 43
EBA shall su!it those draft regulator# te$hni$al standards to the Coission one
onth after entr# into for$e of this regulation3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3
,rticle 1.1
0nternal Ce%"es
17 ,n internal #e%"e s#all in particular meet t#e follo1in" re&uirements:
)a/ it s#all not e primaril6 inten%e% to avoi% or re%uce o1n fun%s re&uirementsE
)/ it s#all e properl6 %ocumente% an% su!ect to particular internal approval an%
au%it proce%uresE
)c/ it s#all e %ealt 1it# at mar5et con%itionsE
)%/ t#e mar5et ris5 t#at is "enerate% 6 t#e internal #e%"e s#all e %6namicall6 mana"e%
in t#e tra%in" oo5 1it#in t#e aut#orise% limitsE
)e/ it s#all e carefull6 monitore%7
9onitorin" s#all e ensure% 6 a%e&uate proce%ures7
-7 2#e re&uirements of para"rap# 1 appl6 1it#out pre!u%ice to t#e re&uirements applicale to
t#e #e%"e% position in t#e non;tra%in" oo57
37 D6 1a6 of %ero"ation from para"rap#s 1 an% -* 1#en an institution #e%"es a non;tra%in"
oo5 cre%it ris5 e8posure or counterpart6 ris5 e8posure usin" a cre%it %erivative oo5e% in
its tra%in" oo5 usin" an internal #e%"e* t#e non;tra%in" oo5 e5posure or counterpart6
ris5 e8posure s#all not e %eeme% to e #e%"e% for t#e purposes of calculatin" ris5
1ei"#te% e8posure amounts unless t#e institution purc#ases from an eli"ile t#ir% part6
protection provi%er a correspon%in" cre%it %erivative meetin" t#e re&uirements for
unfun%e% cre%it protection in t#e non;tra%in" oo57 ?it#out pre!u%ice to point )h/ of
,rticle -93* 1#ere suc# t#ir% part6 protection is purc#ase% an% reco"nise% as a #e%"e of a
non;tra%in" oo5 e8posure for t#e purposes of calculatin" capital re&uirements* neit#er t#e
internal nor e8ternal cre%it %erivative #e%"e s#all e inclu%e% in t#e tra%in" oo5 for t#e
purposes of calculatin" capital re&uirements7
2itle 00
Capital re&uirements for cre%it ris5
C#apter 1
General principles
,rticle 1.-
,pproac#es to cre%it ris5
43 0nstitutions s#all appl6 eit#er t#e Stan%ar%ise% ,pproac# provi%e% for in C#apter - or* if
permitte% 6 t#e competent aut#orities in accor%ance 1it# ,rticle 138* t#e 0nternal Ratin"s
Dase% ,pproac# provi%e% for in C#apter 3 to calculate t#eir ris5;1ei"#te% e8posure
amounts for t#e purposes of points )a/ an% )f/ of ,rticle 8>)3/7
1or trade e5posures and for default fund $ontri!utions to a $entral $ounterpart#,
institutions shall appl# the treatent spe$ified in Chapter ?, "e$tion > to $al$ulate their
risk=*eighted e5posure aounts for the purposes of points (a) and (f) of Arti$le A0(C)3
1or all other t#pes of e5posures to a $entral $ounterpart#, institutions should treat those
e5posures as follo*s'
(a) for other t#pes of e5posures to a 6ualif#ing CC., institutions should treat those
e5posures as e5posures to an institution%
(!) for other t#pes of e5posures to a non=6ualif#ing CC., institutions should treat
those e5posures as e5posures to a $orporate3
23 1or the purposes of this regulation, e5posures to third=$ountr# investent firs as
defined in Arti$le B(4)(4) of (ire$tive 2::BDC>DEC, e5posures to third $ountr# $redit
institutions and e5posures to third $ountr# $learing houses and e5$hanges shall !e
treated as e5posures to institutions if and onl# if the entit# is su!9e$t to legislation of a
third $ountr# *hi$h applies prudential supervisor# and regulator# re6uireents at least
e6uivalent to those applied in the European 2nion3
C3 1or the purposes of paragraph 2, the Coission a# adopt, !# *a# of ipleenting
a$ts, and su!9e$t to the e5aination pro$edure referred to in Arti$le BB0(2), a de$ision as
to *hether a third $ountr# applies prudential supervisor# and regulator# re6uireents at
least e6uivalent to those applied in the European 2nion3 &n the a!sen$e of su$h a
de$ision, until 4 Eanuar# 2:4@, institutions a# $ontinue to appl# the treatent set out
in this paragraph to third $ountries *here the relevant $opetent authorities had
approved the third $ountr# as eligi!le for this treatent !efore 4 Eanuar# 2:4B3
,rticle 1.3
4se of cre%it ris5 miti"ation tec#ni&ue
un%er t#e Stan%ar%ise% ,pproac# an% t#e 0RD ,pproac#
17 3or an e8posure to 1#ic# an institution applies t#e Stan%ar%ise% ,pproac# un%er C#apter -
or applies t#e 0RD ,pproac# un%er C#apter 3 ut 1it#out usin" its o1n estimates of FGD
an% conversion factors un%er ,rticle 14=* t#e institution ma6 use cre%it ris5 miti"ation in
accor%ance 1it# C#apter 4 in t#e calculation of ris5;1ei"#te% e8posure amounts for t#e
purposes of points )a/ an% )f/ of ,rticle 8>)3/ or* as relevant* e8pecte% loss amounts for t#e
purposes of t#e calculation referre% to in point )%/ of ,rticle 33)1/ an% point )c/ of
,rticle +97
-7 3or an e8posure to 1#ic# an institution applies t#e 0RD ,pproac# 6 usin" t#eir o1n
estimates of FGD an% conversion factors un%er ,rticles 14=* t#e institution ma6 use cre%it
ris5 miti"ation in accor%ance 1it# C#apter 37
,rticle 1.4
2reatment of securitise% e8posures un%er t#e Stan%ar%ise% ,pproac# an% t#e 0RD ,pproac#
17 ?#ere an institution uses t#e Stan%ar%ise% ,pproac# un%er C#apter - for t#e calculation of
ris5;1ei"#te% e8posure amounts for t#e e8posure class to 1#ic# t#e securitise% e8posures
1oul% e assi"ne% un%er ,rticle1.>* it s#all calculate t#e ris5;1ei"#te% e8posure amount
for a securitisation position in accor%ance 1it# ,rticles -4.* -41 an% -4= to -+37
0nstitutions usin" t#e Stan%ar%ise% ,pproac# ma6 also use t#e internal assessment
approac# 1#ere t#is #as een permitte% un%er ,rticle -+4)3/7
-7 ?#ere an institution uses t#e 0RD ,pproac# un%er C#apter 3 for t#e calculation of ris5;
1ei"#te% e8posures amounts for t#e e8posure class to 1#ic# t#e securitise% e8posure
1oul% e assi"ne% un%er ,rticle 14-it s#all calculate t#e ris5;1ei"#te% e8posure amount in
accor%ance 1it# ,rticles -4.* -41 an% -+4 to -=17
$8cept for t#e internal assessment approac#* 1#ere t#e 0RD ,pproac# is use% onl6 for a
part of t#e securitise% e8posures un%erl6in" a securitisation* t#e institution s#all use t#e
approac# correspon%in" to t#e pre%ominant s#are of securitise% e8posures un%erl6in"
t#is securitisation7
,rticle 1.+
2reatment of cre%it ris5 a%!ustment
17 0nstitutions appl6in" t#e Stan%ar%ise% ,pproac# s#all treat "eneral cre%it ris5 a%!ustments
in accor%ance 1it# ,rticle +9 )c/7
-7 0nstitutions appl6in" t#e 0RD ,pproac# s#all treat "eneral cre%it ris5 a%!ustments in
accor%ance 1it# ,rticle 1++, Arti$le @> (d) and Arti$le CC (4)(d)3
3or t#e purposes of t#is ,rticle an% C#apters - an% 3* "eneral an% specific cre%it ris5
a%!ustments s#all e8clu%e fun%s for "eneral an5in" ris57
37 0nstitutions usin" t#e 0RD ,pproac# t#at appl6 t#e Stan%ar%ise% ,pproac# for a part of
t#eir e8posures on consoli%ate% or in%ivi%ual asis* in accor%ance 1it# ,rticle 143 an% 14+
s#all %etermine t#e part of "eneral cre%it ris5 a%!ustment t#at s#all e assi"ne% to t#e
treatment of "eneral cre%it ris5 a%!ustment un%er t#e Stan%ar%ise% ,pproac# an% to t#e
treatment of "eneral cre%it ris5 a%!ustment un%er t#e 0RD ,pproac# as follo1s:
)a/ 1#ere applicale 1#en an institution inclu%e% in t#e consoli%ation e8clusivel6
applies t#e 0RD ,pproac#* "eneral cre%it ris5 a%!ustments of t#is institution s#all e
assi"ne% to t#e treatment set out in para"rap# -E
)/ 1#ere applicale* 1#en an institution inclu%e% in t#e consoli%ation e8clusivel6
applies t#e "tandardised ,pproac#* "eneral cre%it ris5 a%!ustment of t#is institution
s#all e assi"ne% to t#e treatment set out in para"rap# 1 AE
)c/ 2#e remain%er of cre%it ris5 a%!ustment s#all e assi"ne% on a pro rata asis
accor%in" to t#e proportion of ris5 1ei"#te% e8posure amounts su!ect to t#e
Stan%ar%ise% ,pproac# an% su!ect to t#e 0RD ,pproac#7
47 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e calculation of
specific cre%it ris5 a%!ustments an% "eneral cre%it ris5 a%!ustments un%er t#e appli$a!le
accountin" frame1or5 for t#e follo1in":
)a/ e8posure value un%er t#e Stan%ar%ise% ,pproac# referre% to in Arti$le1.= AE
)/ e8posure value un%er t#e 0RD ,pproac# referre% to in ,rticles 1=- to 1=4E
)c/ treatment of e8pecte% loss amounts referre% to in ,rticle 1++E
)%/ e8posure value for t#e calculation of t#e ris5;1ei"#te% e8posure amounts for
securitisation position referre% to in ,rticle -41 an% -=1E
)e/ t#e %etermination of %efault un%er ,rticle 1>4E
A
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this regulation3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 stan%ar%s referre% to in t#e
first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
C6pter 2
?tn.r.ise. Appro26
?ECTION 1
>ENERAL PRINCIPLE?
,rticle 1.=
$8posure value
17 2#e e8posure value of an asset item s#all e its accountin" value remainin" after specific
cre%it ris5 a%!ustments, additional value ad9ustents in a$$ordan$e *ith Arti$le C4
and 4:@ and other o*n funds redu$tions related to the asset ite #ave een applie%7 2#e
e8posure value of an off;alance s#eet item liste% in ,nne8 0 s#all e t#e follo1in"
percenta"e of its nominal value after re%uction of specific cre%it ris5 a%!ustments:
)a/ 1.. O if it is a full;ris5 itemE
)/ +. O if it is a me%ium;ris5 itemE
)c/ -. O if it is a me%ium/lo1;ris5 itemE
)%/ . O if it is a lo1;ris5 item7
2#e off;alance s#eet items referre% to in t#e secon% sentence of t#e first supara"rap#
s#all e assi"ne% to ris5 cate"ories as in%icate% in ,nne8 07
?#en an institution is usin" t#e 3inancial Collateral Compre#ensive 9et#o% un%er ,rticle
-18* t#e e8posure value of securities or commo%ities sol%* poste% or lent un%er a
repurc#ase transaction or un%er a securities or commo%ities len%in" or orro1in"
transaction* an% mar"in len%in" transactions s#all e increase% 6 t#e volatilit6 a%!ustment
appropriate to suc# securities or commo%ities as prescrie% in ,rticles -18 to --.7
-7 2#e e8posure value of a %erivative instrument liste% in ,nne8 00 s#all e %etermine% in
accor%ance 1it# C#apter = 1it# t#e effects of contracts of novation an% ot#er nettin"
a"reements ta5en into account for t#e purposes of t#ose met#o%s in accor%ance 1it#
C#apter =7 2#e e8posure value of repurc#ase transaction* securities or commo%ities len%in"
or orro1in" transactions* lon" settlement transactions an% mar"in len%in" transactions
ma6 e %etermine% eit#er in accor%ance 1it# C#apter = or C#apter 47
37 ?#ere an e8posure is su!ect to fun%e% cre%it protection* t#e e8posure value applicale to
t#at item ma6 e mo%ifie% in accor%ance 1it# C#apter 47
,rticle 1.>
$8posure classes
$ac# e8posure s#all e assi"ne% to one of t#e follo1in" e8posure classes:
)a/ e5posures to central "overnments or central an5s A
)/ e5posures to re"ional "overnments or local aut#oritiesE
)c/ e5posures to pulic sector entitiesE
)%/ e5posures to multilateral %evelopment an5sE
)e/ e5posures to international or"anisationsE
)f/ e5posures to institutionsE
)"/ e5posures to corporatesE
)#/ retail e5posuresE
)i/ e5posures secure% 6 mort"a"es on immovale propert6E
)!/ e8posures in %efaultE
(9a) e5posures asso$iated *ith parti$ularl# high risk
)5/ e5posures in t#e form of covere% on%s A
)l/ ites representing securitisation positions A
)m/ e5posures to institutions an% $orporates 1it# a s#ort;term cre%it assessment A
)n/ e5posures in t#e form of units or s#ares in collective investment un%erta5in"s )MC04sN/E
)o/ e&uit6 e5posures
)p/ ot#er items7
,rticle 1.8
Calculation of ris5 1ei"#te% e8posure amounts
17 2o calculate ris5;1ei"#te% e8posure amounts* ris5 1ei"#ts s#all e applie% to all
e8posures* unless %e%ucte% from o1n fun%s* in accor%ance 1it# t#e provisions of
Section -7 2#e application of ris5 1ei"#ts s#all e ase% on t#e e8posure class to 1#ic#
t#e e8posure is assi"ne% an%* to t#e e8tent specifie% in Section -* its cre%it &ualit67 Cre%it
&ualit6 ma6 e %etermine% 6 reference to t#e cre%it assessments of $8ternal Cre%it
,ssessment 0nstitutions )#ereinafter referre% to as M$C,0sN/ as %efine% in ,rticle B(>B) or
t#e cre%it assessments of $8port Cre%it ,"encies in accor%ance 1it# Section 37
-7 3or t#e purposes of appl6in" a ris5 1ei"#t* as referre% to in para"rap# 1* t#e e8posure
value s#all e multiplie% 6 t#e ris5 1ei"#t specifie% or %etermine% in accor%ance 1it#
Section -7
37 ?#ere an e8posure is su!ect to cre%it protection t#e ris5 1ei"#t applicale to t#at item
ma6 e mo%ifie% in accor%ance 1it# C#apter 47
47 Ris5;1ei"#te% e8posure amounts for securitise% e8posures s#all e calculate% in
accor%ance 1it# C#apter +7
+7 $8posures for 1#ic# no calculation is provi%e% in Section - s#all e assi"ne% a ris5;1ei"#t
of 1.. O7
=7 ?it# t#e e8ception of e8posures "ivin" rise to ACommon $&uit6 2ier 1* ,%%itional
2ier 1 or 2ier - items* an institution ma6* su!ect to t#e prior approval of t#e competent
aut#orities* %eci%e not to appl6 t#e re&uirements of para"rap# 1 of t#is ,rticle to t#e
e8posures of t#at institution to a counterpart6 1#ic# is its parent un%erta5in"* its
susi%iar6* a susi%iar6 of its parent un%erta5in" or an un%erta5in" lin5e% 6 a
relations#ip 1it#in t#e meanin" of ,rticle 1-)1/ of Directive 83/349/$$C3 Competent
aut#orities are empo1ere% to grant approval if t#e follo1in" con%itions are fulfille%:
)a/ t#e counterpart6 is an institution* a financial #ol%in" compan6 or a mi8e% financial
#ol%in" compan6* financial institution* asset mana"ement compan6 or ancillar6
services un%erta5in" su!ect to appropriate pru%ential re&uirementsE
)/ t#e counterpart6 is inclu%e% in t#e same consoli%ation as t#e institution on a
full asisE
)c/ t#e counterpart6 is su!ect to t#e same ris5 evaluation* measurement an% control
proce%ures as t#e institutionE
)%/ t#e counterpart6 is estalis#e% in t#e same 9emer State as t#e institutionE
)e/ t#ere is no current or foreseen material practical or le"al impe%iment to t#e prompt
transfer of o1n fun%s or repa6ment of liailities from t#e counterpart6 to t#e
institution7
?#ere t#e institution* in accor%ance 1it# t#is para"rap#* is authorised not to appl6 t#e
re&uirements of para"rap# 1* it a# assi"n a ris5 1ei"#t of . O7
>7 ?it# t#e e8ception of e8posures "ivin" rise to ACommon $&uit6 2ier 1* ,%%itional 2ier 1
an% 2ier - items* institutions ma6* su!ect to t#e prior permission of t#e competent
aut#orities* not appl6 t#e re&uirements of para"rap# 1 of t#is ,rticle to e8posures to
counterparties 1it# 1#ic# t#e institution #as entere% into an institutional protection sc#eme
t#at is a contractual or statutor6 liailit6 arran"ement 1#ic# protects t#ose institutions an%
in particular ensures t#eir li&ui%it6 an% solvenc6 to avoi% an5ruptc6 in case it ecomes
necessar67 Competent aut#orities are empo1ere% to grant perission if t#e follo1in"
con%itions are fulfille%:
)a/ t#e re&uirements set out in points )a/* )%/ an% )e/ of para"rap# = are metE
)/ t#e arran"ements ensure t#at t#e institutional protection sc#eme is ale to "rant
support necessar6 un%er its commitment from fun%s rea%il6 availale to itE
)c/ t#e institutional protection sc#eme %isposes of suitale an% uniforml6 stipulate%
s6stems for t#e monitorin" an% classification of ris5* 1#ic# "ives a complete
overvie1 of t#e ris5 situations of all t#e in%ivi%ual memers an% t#e institutional
protection sc#eme as a 1#ole* 1it# correspon%in" possiilities to ta5e influenceE
t#ose s6stems s#all suital6 monitor %efaulte% e8posures in accor%ance 1it#
,rticle 1>4)1/E
)%/ t#e institutional protection sc#eme con%ucts its o1n ris5 revie1 1#ic# is
communicate% to t#e in%ivi%ual memersE
)e/ t#e institutional protection sc#eme %ra1s up an% pulis#es on an annual asis* a
consoli%ate% report comprisin" t#e alance s#eet* t#e profit;an%;loss account* t#e
situation report an% t#e ris5 report* concernin" t#e institutional protection sc#eme as
a 1#ole* or a report comprisin" t#e a""re"ate% alance s#eet* t#e a""re"ate% profit;
an%;loss account* t#e situation report an% t#e ris5 report* concernin" t#e institutional
protection sc#eme as a 1#oleE
)f/ memers of t#e institutional protection sc#eme are oli"e% to "ive a%vance notice of
at least -4 mont#s if t#e6 1is# to en% t#e institutional protection sc#emeE
)"/ t#e multiple use of elements eli"ile for t#e calculation of o1n fun%s )#ereinafter
referre% to as Mmultiple "earin"N/ as 1ell as an6 inappropriate creation of o1n fun%s
et1een t#e memers of t#e institutional protection sc#eme s#all e eliminate%E
)#/ 2#e institutional protection sc#eme s#all e ase% on a roa% memers#ip of cre%it
institutions of a pre%ominantl6 #omo"eneous usiness profileE
)i/ t#e a%e&uac6 of t#e s6stems referre% to in points ($) and )%/ is approve% an%
monitore% at re"ular intervals 6 t#e relevant competent aut#orities7
?#ere t#e institution* in accor%ance 1it# t#is para"rap#* %eci%es not to appl6 t#e
re&uirements of para"rap# 1* it a# assi"n a ris5 1ei"#t of . O7
A
?ECTION 2
RI?B CEI>HT?
,rticle 1.9
$8posures to central "overnments or central an5s
17 $8posures to central "overnments an% central an5s s#all e assi"ne% a 1.. O ris5 1ei"#t*
unless t#e treatments set out in para"rap#s - to + appl67
-7 $8posures to central "overnments an% central an5s for 1#ic# a cre%it assessment 6 a
nominate% $C,0 is availale s#all e assi"ne% a ris5 1ei"#t accor%in" to 2ale 1 1#ic#
correspon%s to t#e cre%it assessment of t#e A$C,0 in accor%ance 1it# ,rticle 1317
2ale 1
Cre%it &ualit6 step 1 - 3 4 + =
Ris5 1ei"#t . O -. O +. O 1.. O 1.. O 1+. O
37 $8posures to t#e $uropean Central Dan5 s#all e assi"ne% a . O ris5 1ei"#t7
47 $8posures to 9emer States( central "overnments, an% central an5s %enominate% an%
fun%e% in t#e %omestic currenc6 of t#at central "overnment an% central an5 s#all e
assi"ne% a ris5 1ei"#t of . O3
Ba3 2ntil C4 (e$e!er 2:40, the sae risk *eight shall !e assigned in relation to e5posures
to the $entral governents or $entral !anks of Me!er "tates denoinated and funded
in the doesti$ $urren$# of an# Me!er "tate as *ould !e applied to su$h e5posures
denoinated and funded in their doesti$ $urren$#3
B!3 1or e5posures indi$ated in paragraph Ba'
= in 2:4A the $al$ulated risk *eighted e5posure aounts shall !e 2: J of the risk
*eight assigned to these e5posures in a$$ordan$e *ith Arti$le 4:>(2)%
= in 2:4> the $al$ulated risk *eighted e5posure aounts shall !e @: J of the risk
*eight assigned to these e5posures in a$$ordan$e *ith Arti$le 4:>(2)%
= in 2:2: and on*ards the $al$ulated risk *eighted e5posure aounts shall
!e 4:: J of the risk *eight assigned to these e5posures in a$$ordan$e *ith
Arti$le 4:>(2)7
+7 ?#en t#e competent aut#orities of a t#ir% countr6 1#ic# appl6 supervisor6 an% re"ulator6
arran"ements at least e&uivalent to t#ose applie% in t#e 4nion assi"n a ris5 1ei"#t 1#ic# is
lo1er t#an t#at in%icate% in para"rap#s 1 to - to e8posures to t#eir central "overnment an%
central an5 %enominate% an% fun%e% in t#e %omestic currenc6* institutions ma6 ris5
1ei"#t suc# e8posures in t#e same manner7
3or t#e purposes of t#is para"rap#* t#e Commission ma6 a%opt* 6 1a6 of implementin"
acts* an% su!ect to t#e e8amination proce%ure referre% to in ,rticle 44>)-/* a %ecision as to
1#et#er a t#ir% countr6 applies supervisor6 an% re"ulator6 arran"ements at least e&uivalent
to t#ose applie% in t#e 4nion7 0n t#e asence of suc# a %ecision* until 1 <anuar6 2:4@,
institutions ma6 continue to appl6 t#e treatment set out in t#is para"rap# to the e5posures
to the $entral governent or $entral !ank of the t#ir% countr6 1#ere t#e relevant
competent aut#orities #a% approve% t#e t#ir% countr6 as eli"ile for t#is treatment
efore 1 <anuar6 2:4B3
,rticle 11.
$8posures to re"ional "overnments or local aut#orities
17 $8posures to re"ional "overnments or local aut#orities s#all e ris5;1ei"#te% as e8posures
to institutions unless t#e6 are treate% as e8posures to central "overnments un%er
para"rap#s - or 4 or re$eive a risk *eight as spe$ified in paragraph @3 2#e preferential
treatment for s#ort;term e8posures specifie% in ,rticles 11+)-/* an% 114)-/ s#all not
e applie%7
-7 $8posures to re"ional "overnments or local aut#orities s#all e treate% as e8posures to t#e
central "overnment in 1#ose !uris%iction t#e6 are estalis#e% 1#ere t#ere is no %ifference
in ris5 et1een suc# e8posures ecause of t#e specific revenue;raisin" po1ers of t#e
former* an% t#e e8istence of specific institutional arran"ements t#e effect of 1#ic# is to
re%uce t#eir ris5 of %efault7
$D, s#all aintain a pu!li$l# availa!le data!ase of all lo$al and re"ional "overnments
*ithin the E2 *hi$h relevant $opetent aut#orities treat as e8posures to their central
"overnments A3
A
37 $8posures to c#urc#es or reli"ious communities constitute% in t#e form of a le"al person
un%er pulic la1 s#all* in so far as t#e6 raise ta8es in accor%ance 1it# le"islation
conferrin" on t#em t#e ri"#t to %o so* e treate% as e8posures to re"ional "overnments an%
local aut#orities7 .aragraph - s#all not appl67 0n t#is case for t#e purposes of
,rticle 14+)1/)a/* permission to appl6 t#e Stan%ar%ise% ,pproac# s#all not e e8clu%e%7
47 ?#en competent aut#orities of a t#ir% countr6 !uris%iction 1#ic# applies supervisor6 an%
re"ulator6 arran"ements at least e&uivalent to t#ose applie% in t#e 4nion treat e8posures to
re"ional "overnments or local aut#orities as e8posures to t#eir central "overnment an%
t#ere is no %ifference in ris5 et1een suc# e8posures ecause of t#e specific revenue;
raisin" po1ers of re"ional "overnment or local aut#orities an% to specific institutional
arran"ements to re%uce t#e ris5 of %efault* institutions ma6 ris5 1ei"#t e8posures to suc#
re"ional "overnments an% local aut#orities in t#e same manner7
3or t#e purposes of t#is para"rap#* t#e Commission ma6 a%opt* 6 1a6 of implementin"
acts* an% su!ect to t#e e8amination proce%ure referre% to in ,rticle 44>)-/* a %ecision as to
1#et#er a t#ir% countr6 applies supervisor6 an% re"ulator6 arran"ements at least e&uivalent
to t#ose applie% in t#e 4nion7 0n t#e asence of suc# a %ecision* until 1 <anuar6 2:4@,
institutions ma6 continue to appl6 t#e treatment set out in t#is para"rap# to the t#ir%
countr6 1#ere t#e relevant competent aut#orities #a% approve% t#e t#ir% countr6 as eli"ile
for t#is treatment efore 1 <anuar6 2:4B3
+7 $8posures to re"ional "overnments or local aut#orities of t#e 9emer States t#at are not
referre% to in para"rap#s - to 4 an% are %enominate% an% fun%e% in t#e %omestic currenc6
of t#at re"ional "overnment an% local aut#orit6 s#all e assi"ne% a ris5 1ei"#t of -. O7
,rticle 111
$8posures to pulic sector entities
17 $8posures to pulic sector entities for 1#ic# a cre%it assessment 6 a nominate% $C,0 is
not availale s#all e assi"ne% a ris5 1ei"#t accor%in" to t#e cre%it &ualit6 step to 1#ic#
e8posures to t#e central "overnment of t#e !uris%iction in 1#ic# t#e Pulic Sector $ntit6 is
incorporate% are assi"ne% in accor%ance 1it# t#e follo1in" 2ale -:
2ale -
Cre%it &ualit6 step to 1#ic#
central "overnment is
assi"ne%
1 - 3 4 + =
Ris5 1ei"#t -. O +. O 1.. O 1.. O 1.. O 1+. O
3or e8posures to pulic sector entities incorporate% in countries 1#ere t#e central
"overnment is unrate%* t#e ris5 1ei"#t s#all e 1.. O7
-7 $8posures to pulic sector entities for 1#ic# a cre%it assessment 6 a nominate% $C,0 is
availale s#all e treate% accor%in" to ,rticle 11+7 2#e preferential treatment for s#ort;
term e8posures specifie% in ,rticles 114)-/ an% 11+)-/* s#all not e applie% to
t#ose entities7
37 3or e8posures to pulic sector entities 1it# an ori"inal maturit6 of 3 mont#s or less* t#e
ris5 1ei"#t s#all e -. O7
47 &n e5$eptional $ir$ustan$es, e5posures to pulic;sector entities ma6 e treate% as
e8posures to t#e central "overnment, regional governent or lo$al authorit# in 1#ose
!uris%iction t#e6 are estalis#e% 1#ere in the opinion of the $opetent authorities of this
9urisdi$tion t#ere is no %ifference in ris5 et1een suc# e8posures ecause of t#e e8istence
of an appropriate "uarantee 6 t#e central "overnment, regional governent or
lo$al authorit#
+7 ;hen $opetent authorities of a third $ountr# 9urisdi$tion, *hi$h appl# supervisor# and
regulator# arrangeents at least e6uivalent to those applied in the 2nion, treat
e5posures to pu!li$ se$tor entities a$$ording to paragraph 4 or 2, institutions a# risk
*eight e5posures to su$h pu!li$ se$tor entities in the sae anner3 -ther*ise the
institutions shall appl# a risk *eight of 4::J3
1or t#e purposes of t#is para"rap#* t#e Commission ma6 a%opt* 6 1a6 of implementin"
acts* an% su!ect to t#e e8amination proce%ure referre% to in ,rticle 44>)-/* a %ecision as to
1#et#er a t#ir% countr6 applies supervisor6 an% re"ulator6 arran"ements at least e&uivalent
to t#ose applie% in t#e 4nion7 0n t#e asence of suc# a %ecision* until 1 <anuar6 2:4@,
institutions ma6 continue to appl6 t#e treatment set out in t#is para"rap# to the t#ir%
countr6 1#ere t#e relevant competent aut#orities #a% approve% t#e t#ir% countr6 as eli"ile
for t#is treatment efore 1 <anuar6 2:4B7
A
,rticle 11-
$8posures to multilateral %evelopment an5s
17 $8posures to multilateral %evelopment an5s t#at are not referre% to in para"rap# - s#all e
treate% in t#e same manner as e8posures to institutions7 2#e preferential treatment for
s#ort;term e8posures as specifie% in ,rticles 44B)-/* 11+)2) and 44? (C/ s#all not
e applie%7
2#e 0nter;,merican 0nvestment Corporation* t#e Dlac5 Sea 2ra%e an% Development Dan5
A, t#e Central ,merican Dan5 for $conomic 0nte"ration and the CA1=(evelopent Bank
of Latin Aeri$a s#all e consi%ere% 9ultilateral Development Dan5s )9DD/7
-7 $8posures to t#e follo1in" multilateral %evelopment an5s s#all e assi"ne% a . O
ris5 1ei"#t:
)a/ t#e 0nternational Dan5 for Reconstruction an% DevelopmentE
)/ t#e 0nternational 3inance CorporationE
)c/ t#e 0nter;,merican Development Dan5E
)%/ t#e ,sian Development Dan5E
)e/ t#e ,frican Development Dan5E
)f/ t#e Council of $urope Development Dan5E
)"/ t#e Bor%ic 0nvestment Dan5E
)#/ t#e Cariean Development Dan5E
)i/ t#e $uropean Dan5 for Reconstruction an% DevelopmentE
)!/ t#e $uropean 0nvestment Dan5E
)5/ t#e $uropean 0nvestment 3un%E
)l/ t#e 9ultilateral 0nvestment Guarantee ,"enc6E
)m/ t#e 0nternational 3inance 3acilit6 for 0mmunisationE
)n/ t#e 0slamic Development Dan57
37 , ris5 1ei"#t of -. O s#all e assi"ne% to t#e portion of unpai% capital suscrie% to t#e
$uropean 0nvestment 3un%7
,rticle 113
$8posures to international or"anisations
$8posures to t#e follo1in" international or"anisations s#all e assi"ne% a . O ris5 1ei"#t:
)a/ t#e $uropean 4nionE
)/ t#e 0nternational 9onetar6 3un%E
)c/ t#e Dan5 for 0nternational SettlementsE
)%/ t#e $uropean 3inancial Stailit6 3acilit6
(da) the European "ta!ilit# Me$hanis%
)e/ an international financial institution estalis#e% 6 t1o or more 9emer States* 1#ic# #as
t#e purpose to moilise fun%in" an% provi%e financial assistance to t#e enefit of its
memers t#at are e8periencin" or t#reatene% 6 severe financin" prolems7
,rticle 114
$8posures to institutions
17 $8posures to institutions for 1#ic# a cre%it assessment 6 a nominate% $C,0 is availale
s#all e ris5;1ei"#te% in accor%ance 1it# ,rticle 11+7 $8posures to institutions for 1#ic# a
cre%it assessment 6 a nominate% $C,0 is not availale s#all e ris5;1ei"#te% in
accor%ance 1it# ,rticle 11=7
-7 $8posures to institutions of a resi%ual maturit6 of 3 mont#s or less %enominate% an%
fun%e% in t#e national currenc6 of the !orro*er s#all e assi"ne% a ris5 1ei"#t t#at is one
cate"or6 less favourale t#an t#e preferential ris5 1ei"#t* as %escrie% in ,rticles 1.9)4/
to 1.9)+/* assi"ne% to e8posures to the central "overnment in *hi$h the institution
is in$orporated7
37 Bo e8posures 1it# a resi%ual maturit6 of 3 mont#s or less %enominate% an% fun%e% in t#e
national currenc6 of t#e orro1er s#all e assi"ne% a ris5 1ei"#t less t#an -. O7
47 $8posure to an institution in t#e form of minimum reserves re&uire% 6 t#e $CD or 6 t#e
central an5 of a 9emer State to e #el% 6 an institution ma6 e ris5;1ei"#te% as
e8posures to t#e central an5 of t#e 9emer State in &uestion provi%e%:
)a/ t#e reserves are #el% in accor%ance 1it# Re"ulation )$C/ Bo 1>4+/-..3 of t#e
$uropean Central Dan5 of 1- Septemer -..3 on t#e application of minimum
reserves or a suse&uent replacement re"ulation or in accor%ance 1it# national
re&uirements in all material respects e&uivalent to t#at Re"ulationE
)/ in t#e event of t#e an5ruptc6 or insolvenc6 of t#e institution 1#ere t#e reserves are
#el%* t#e reserves are full6 repai% to t#e institution in a timel6 manner an% are not
ma%e availale to meet ot#er liailities of t#e institution7
+7 $8posures to financial institutions aut#orise% an% supervise% 6 t#e competent aut#orities
an% su!ect to pru%ential re&uirements $opara!le to t#ose applie% to institutions in ters
of ro!ustness s#all e treate% as e8posures to institutions7
,rticle 11+
$8posures to rate% institutions
17 $8posures to institutions 1it# a resi%ual maturit6 of more t#an t#ree mont#s for 1#ic# a
cre%it assessment 6 a nominate% $C,0 is availale s#all e assi"ne% a ris5 1ei"#t
accor%in" to 2ale 3 1#ic# correspon%s to t#e cre%it assessment of t#e A$C,0 in
accor%ance 1it# ,rticle 1317
2ale 3
Cre%it &ualit6 step 1 - 3 4 + =
Ris5 1ei"#t -. O +. O +. O 1.. O 1.. O 1+. O
-7 $8posures to an institution of up to t#ree mont#s resi%ual maturit6 for 1#ic# a cre%it
assessment 6 a nominate% $C,0 is availale s#all e assi"ne% a ris5;1ei"#t accor%in" to
2ale 4 1#ic# correspon%s to t#e cre%it assessment of t#e A$C,0 in accor%ance 1it#
,rticle 131:
2ale 4
Cre%it &ualit6 step 1 - 3 4 + =
Ris5 1ei"#t -. O -. O -. O +. O +. O 1+. O
37 2#e interaction et1een t#e treatment of s#ort term cre%it assessment un%er ,rticle 1-=
an% t#e "eneral preferential treatment for s#ort term e8posures set out in para"rap# - s#all
e as follo1s:
)a/ 0f t#ere is no s#ort;term e8posure assessment* t#e "eneral preferential treatment for
s#ort;term e8posures as specifie% in para"rap# - s#all appl6 to all e8posures to
institutions of up to t#ree mont#s resi%ual maturit6E
)/ 0f t#ere is a s#ort;term assessment an% suc# an assessment %etermines t#e application
of a more favourale or i%entical ris5 1ei"#t t#an t#e use of t#e "eneral preferential
treatment for s#ort;term e8posures* as specifie% in para"rap# -* t#en t#e s#ort;term
assessment s#all e use% for t#at specific e8posure onl67 Ot#er s#ort;term e8posures
s#all follo1 t#e "eneral preferential treatment for s#ort;term e8posures* as specifie%
in para"rap# -E
)c/ 0f t#ere is a s#ort;term assessment an% suc# an assessment %etermines a less
favourale ris5 1ei"#t t#an t#e use of t#e "eneral preferential treatment for s#ort;
term e8posures* as specifie% in para"rap# -* t#en t#e "eneral preferential treatment
for s#ort;term e8posures s#all not e use% an% all unrate% s#ort;term claims s#all e
assi"ne% t#e same ris5 1ei"#t as t#at applie% 6 t#e specific s#ort;term assessment7
,rticle 11=
$8posures to unrate% institutions
17 $8posures to institutions for 1#ic# a cre%it assessment 6 a nominate% $C,0 is not
availale s#all e assi"ne% a ris5 1ei"#t accor%in" to t#e cre%it &ualit6 step to 1#ic#
e8posures to t#e central "overnment of t#e !uris%iction in 1#ic# t#e institution is
incorporate% are assi"ne% in accor%ance 1it# 2ale +7
2ale +
Cre%it &ualit6 step to 1#ic# central
"overnment is assi"ne%
1 - 3 4 + =
Ris5 1ei"#t of e8posure -. O +. O 1.. O 1.. O 1..
O
1+. O
-7 3or e8posures to unrate% institutions incorporate% in countries 1#ere t#e central
"overnment is unrate%* t#e ris5 1ei"#t s#all e 1.. O7
37 3or e8posures to unrate% institutions 1it# an ori"inal effective maturit6 of t#ree mont#s or
less* t#e ris5 1ei"#t s#all e -. O7
Fot*ithstanding paragraph 2 and C for trade finan$e e5posures = referred to in point !
of the se$ond su!paragraph of Arti$le 4@A(C), = to unrated institutions, the risk *eight
shall !e @: J and *here the residual aturit# of these trade finan$e e5posures to
unrated institutions is three onths or less, the risk *eight shall !e 2: J3
,rticle 11>
$8posures to corporates
17 $8posures for 1#ic# a cre%it assessment 6 a nominate% $C,0 is availale s#all e
assi"ne% a ris5 1ei"#t accor%in" to 2ale = 1#ic# correspon%s to t#e cre%it assessment of
t#e A$C,0 in accor%ance 1it# ,rticle 1317
2ale =
Cre%it &ualit6 step 1 - 3 4 + =
Ris5 1ei"#t -. O +. O 1.. O 1.. O 1+. O 1+. O
-7 $8posures for 1#ic# suc# a cre%it assessment is not availale s#all e assi"ne% a 1.. O
ris5 1ei"#t or t#e ris5 1ei"#t of e5posures to the central "overnment of the 9urisdi$tion in
*hi$h the $orporate is in$orporated* 1#ic#ever is t#e #i"#er7
,rticle 118
Retail e8posures
$8posures t#at compl6 1it# t#e follo1in" criteria s#all e assi"ne% a ris5 1ei"#t of >+ O:
)a/ t#e e8posure s#all e eit#er to an natural person or persons* or to a small or me%ium
siLe% enterpriseE
)/ t#e e8posure s#all e one of a si"nificant numer of e8posures 1it# similar c#aracteristics
suc# t#at t#e ris5s associate% 1it# suc# len%in" are sustantiall6 re%uce%E
)c/ t#e total amount o1e% to t#e institution an% parent un%erta5in"s an% its susi%iaries*
inclu%in" an6 e8posure in %efault* 6 t#e oli"or client or "roup of connecte% clients* ut
e8clu%in" e5posures full# and $opletel# secure% on resi%ential propert6 collateral that
have !een assigned to the e5posure $lass laid do*n in Arti$le 4:0 (i)* s#all not* to t#e
5no1le%"e of t#e institution* e8cee% $4R 1 million7 2#e institution s#all ta5e reasonale
steps to ac&uire t#is 5no1le%"e7
Securities s#all not e eli"ile for t#e retail e8posure class7
E5posures that do not $opl# *ith the $riteria (a) to ($) shall not !e eligi!le for the retail
e5posures $lass3
2#e present value of retail minimum lease pa6ments is eli"ile for t#e retail e8posure class7
,rticle 119
$8posures secure% 6 mort"a"es on immovale propert6
17 ,n e8posure or an6 part of an e8posure full6 secure% 6 mort"a"e on immovale propert6
s#all e assi"ne% a ris5 1ei"#t of 1.. O* 1#ere t#e con%itions un%er ,rticle 1-. an%
,rticle 1-1 are not met* e8cept for an6 part of t#e e8posure 1#ic# is assi"ne% to anot#er
e8posure class7 +he part of the e5posure that e5$eeds the ortgage value of the propert#
shall !e assigned the risk *eight appli$a!le to the unse$ured e5posures of the
$ounterpart# involved3
2#e part of an e8posure treate% as full6 Asecure% 6 immovale propert6 s#all not e
#i"#er t#an t#e ple%"e% amount of t#e mar5et value or in t#ose 9emer States t#at #ave
lai% %o1n ri"orous criteria for t#e assessment of t#e mort"a"e len%in" value in statutor6 or
re"ulator6 provisions* t#e mort"a"e len%in" value of t#e propert6 in &uestion7
-7 Dase% on t#e %ata collecte% un%er ,rticle 9=* an% an6 ot#er relevant in%icators* t#e
competent aut#orities s#all perio%icall6* an% at least annuall6* assess 1#et#er t#e ris5;
1ei"#t of 3+ O for e8posures secure% 6 mort"a"es on resi%ential propert6 referre% to in
,rticle 1-. an% t#e ris5 1ei"#t of +. O for e8posures secure% on commercial immovale
propert6 referre% to in ,rticle 1-1 locate% in their territor6 are appropriatel# ase% on '
(a) t#e loss e8perience of e8posures secure% 6 immovale propert6 A%
(!) for1ar%;loo5in" immovale propert6 mar5ets %evelopments A%
Copetent authorities ma6 set a #i"#er ris5 1ei"#t or stricter criteria t#an t#ose set out in
,rticle 1-.)-/ an% 1-1)-/* 1#ere appropriate* on t#e asis of financial
stailit6 consi%erations7 A
1or e5posures se$ured !# ortgages on residential propert#, the $opetent authorit#
shall set the risk *eight at a per$entage fro C@ J through 4@: J,
1or e5posures se$ured on $oer$ial iova!le propert#, the $opetent authorit#
shall set the risk *eight at a per$entage fro @: J through 4@: J,
;ithin these ranges, the higher risk *eight shall !e set !ased on loss e5perien$e and
taking into a$$ount for*ard=looking arkets developents and finan$ial sta!ilit#
$onsiderations3 ;here the assessent deonstrates that the risk *eights set out in
Arti$le 42:(2) and 424(2) do not refle$t the a$tual risks related to one or ore propert#
segents of su$h e5posures, full# se$ured !# ortgages on residential propert# or on
$oer$ial iova!le propert# lo$ated in one or ore parts of its territor#, the
$opetent authorities shall set, for those propert# segents of e5posures, a higher risk
*eight $orresponding to the a$tual risks3
2#e competent aut#orities s#all consult $D, on t#e a%!ustments to t#e ris5 1ei"#ts an%
criteria applie%, *hi$h *ill !e $al$ulated in a$$ordan$e *ith the $riteria set out a!ove as
spe$ified !# the regulator# te$hni$al standards referred to in paragraph 2! of this
Arti$le7 $D, s#all pulis# t#e ris5 1ei"#ts an% criteria t#at t#e competent aut#orities set
for e8posures referre% to in ,rticles 1-.* 1-1 an% 19+7
2a3 ;hen $opetent authorities set a higher risk *eight or stri$ter $riteria, institutions shall
have a ?=onth transitional period to appl# the ne* risk *eight3
2!3 $D, s#all %evelop re"ulator6 tec#nical stan%ar%s to specif6
(a) the rigorous $riteria for the assessent of the ortgage lending value referred to
in paragraph 4%
(!) t#e con%itions referred to in paragraph 2 t#at competent aut#orities s#all ta5e into
account 1#en %eterminin" higher ris5;1ei"#ts, in parti$ular the ter of "finan$ial
sta!ilit# $onsiderations"7
$D, s#all sumit t#ose %raft tec#nical stan%ar%s to t#e Commission
6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
37 2#e institutions of one 9emer State s#all appl6 t#e ris5;1ei"#ts an% criteria t#at #ave
een %etermine% 6 t#e competent aut#orities of anot#er 9emer State to e8posures
secure% 6 mort"a"es on commercial an% resi%ential immovale propert6 locate% in t#at
9emer State7
,rticle 1-.
$8posures full6 an% completel6 secure% 6 ortgages on resi%ential propert6
17 4nless ot#er1ise %eci%e% 6 t#e competent aut#orities in accor%ance 1it# ,rticle 119)-/*
e8posures full6 an% completel6 secure% 6 mort"a"es on resi%ential propert6 s#all e
treate% as follo1s:
)a/ e8posures or an6 part of an e8posure full6 an% completel6 secure% 6 mort"a"es on
resi%ential propert6 1#ic# is or s#all e occupie% or let 6 t#e o1ner* or t#e
eneficial o1ner in t#e case of personal investment companies* s#all e assi"ne% a
ris5 1ei"#t of 3+ OE
A
)c/ e8posures to a tenant un%er a propert6 leasin" transaction concernin" resi%ential
propert6 un%er 1#ic# t#e institution is t#e lessor an% t#e tenant #as an option to
purc#ase* s#all e assi"ne% a ris5 1ei"#t of 3+ O provi%e% t#at t#e e8posure of t#e
institution is full6 an% completel6 secure% 6 its o1ners#ip of t#e propert67
-7 0nstitutions s#all consi%er an e8posure or an6 part of an e8posure as full6 an% completel6
secure% for t#e purposes of para"rap# 1 onl6 if t#e follo1in" con%itions are met:
)a/ t#e value of t#e propert6 shall not materiall6 %epen% upon t#e cre%it &ualit6 of t#e
orro1er7 0nstitutions ma6 e8clu%e situations 1#ere purel6 macro;economic factors
affect ot# t#e value of t#e propert6 an% t#e performance of t#e orro1er from t#eir
%etermination of t#e materialit6 of suc# %epen%enceE
)/ t#e ris5 of t#e orro1er shall not materiall6 %epen% upon t#e performance of t#e
un%erl6in" propert6 or pro!ect* ut on t#e un%erl6in" capacit6 of t#e orro1er to
repa6 t#e %et from ot#er sources* an% as a conse&uence* t#e repa6ment of t#e
facilit6 shall not materiall6 %epen% on an6 cas# flo1 "enerate% 6 t#e un%erl6in"
propert6 servin" as collateral7 3or t#ose ot#er sources* institutions s#all %etermine
ma8imum loan;to;income ratios as part of t#eir len%in" polic6 an% otain suitale
evi%ence of t#e relevant income 1#en "rantin" t#e loan7
)c/ t#e re&uirements set out in ,rticle -.3 an% t#e valuation rules set out in
,rticle --4)1/ are metE
)%/ t#e part of t#e loan to 1#ic# t#e 3+ O ris5 1ei"#t unless ot#er1ise %etermine% un%er
,rticle 119)-/ is assi"ne% %oes not e8cee% 8. O unless ot#er1ise %etermine% un%er
,rticle 119)-/ of t#e mar5et value of t#e propert6 in &uestion or 8. O of t#e
mort"a"e len%in" value unless ot#er1ise %etermine% un%er ,rticle 119)-/ of t#e
propert6 in &uestion in t#ose 9emer States t#at #ave lai% %o1n ri"orous criteria for
t#e assessment of t#e mort"a"e len%in" value in statutor6 or re"ulator6 provisions7
37 0nstitutions ma6 %ero"ate from point )/ in para"rap# - for e8posures full6 an% completel6
secure% 6 mort"a"es on resi%ential propert6 1#ic# is situate% 1it#in t#e territor6 of a
9emer State* 1#ere t#e competent aut#orit6 of t#at 9emer State #as pulis#e% evi%ence
s#o1in" t#at a 1ell;%evelope% an% lon";estalis#e% resi%ential propert6 mar5et is present
in t#at territor6 1it# loss rates 1#ic# %o not e8cee% t#e follo1in" limits:
)a/ losses stemmin" from len%in" collateralise% 6 resi%ential propert6 up to 8. O of t#e
mar5et value or 8. O of t#e mort"a"e len%in" value unless ot#er1ise %eci%e% un%er
,rticle 119)-/ %o not e8cee% .*3 O of t#e outstan%in" loans collateralise% 6
resi%ential propert6 in an6 "iven 6earE
)/ overall losses stemmin" from len%in" collateralise% 6 resi%ential propert6 %o not
e8cee% .*+ O of t#e outstan%in" loans collateralise% 6 resi%ential propert6 in
an6 "iven 6ear7
47 0f eit#er of t#e limits referre% to in para"rap# 3 is not satisfie% in a "iven 6ear* t#e
eli"iilit6 to use para"rap# 3 s#all cease an% t#e con%ition containe% in para"rap# -)/
s#all appl6 until t#e con%itions in para"rap# 3 are satisfie% in a suse&uent 6ear7
Article 121
E,posures fully an$ completely secure$ by mort#a#es on commercial immovable property
17 4nless ot#er1ise %eci%e% 6 t#e competent aut#orities in accor%ance 1it# ,rticle 119)-/*
e8posures full6 an% completel6 secure% 6 mort"a"es on commercial immovale propert6
s#all e treate% as follo1s:
)a/ e8posures or an6 part of an e8posure full6 an% completel6 secure% 6 mort"a"es on
offices or ot#er commercial premises ma6 e assi"ne% a ris5 1ei"#t of +. OE
A
)c/ e8posures relate% to propert6 leasin" transactions concernin" offices or ot#er
commercial premises un%er 1#ic# t#e institution is t#e lessor an% t#e tenant #as an
option to purc#ase ma6 e assi"ne% a ris5 1ei"#t of +. O provi%e% t#at t#e e8posure
of t#e institution is full6 an% completel6 secure% 6 its o1ners#ip of t#e propert67
-7 &nstitutions shall $onsider an e5posure or an# part of an e5posure as full# and
$opletel# se$ured for the purposes of para"rap# 1 onl# if t#e follo1in" con%itions
are et:
)a/ t#e value of t#e propert6 s#all not materiall6 %epen% upon t#e cre%it &ualit6 of t#e
orro1er7 0nstitutions ma6 e8clu%e situations 1#ere purel6 macro;economic factors
affect ot# t#e value of t#e propert6 an% t#e performance of t#e orro1er from t#eir
%etermination of t#e materialit6 of suc# %epen%enceE
)/ t#e ris5 of t#e orro1er s#all not materiall6 %epen% upon t#e performance of t#e
un%erl6in" propert6 or pro!ect* ut Aon t#e un%erl6in" capacit6 of t#e orro1er to
repa6 t#e %et from ot#er sources* an% as a conse&uence* t#e repa6ment of t#e
facilit6 s#all not materiall6 %epen% on an6 cas# flo1 "enerate% 6 t#e un%erl6in"
propert6 servin" as collateralE
)c/ t#e re&uirements set out in ,rticle -.3 an% t#e valuation rules set out in
Arti$le --4)1/ are metE
)%/ 2#e +. O ris5 1ei"#t unless ot#er1ise provi%e% un%er ,rticle 119)-/ s#all e
assi"ne% to t#e part of t#e loan t#at %oes not e8cee% +. O of t#e mar5et value of t#e
propert6 or =. O of t#e mort"a"e len%in" value unless ot#er1ise provi%e% un%er
,rticle 119)-/ of t#e propert6 in &uestion in t#ose 9emer States t#at #ave lai%
%o1n ri"orous criteria for t#e assessment of t#e mort"a"e len%in" value in statutor6
or re"ulator6 provisions7
37 0nstitutions ma6 %ero"ate from point )/ in para"rap# - for e8posures full6 an% completel6
secure% 6 mort"a"es on commercial propert6 1#ic# is situate% 1it#in t#e territor6 of a
9emer State* 1#ere t#e competent aut#orit6 of t#at 9emer State #as pulis#e% evi%ence
s#o1in" t#at a 1ell;%evelope% an% lon";estalis#e% commercial immovale propert6
mar5et is present in t#at territor67
)a/ losses stemmin" from len%in" collateralise% 6 commercial immovale propert6 up
to +. O of t#e mar5et value or =. O of t#e mort"a"e len%in" value )unless ot#er1ise
%etermine% un%er ,rticle 119)-// %o not e8cee% .*3 O of t#e outstan%in" loans
collateralise% 6 commercial immovale propert6E
)/ overall losses stemmin" from len%in" collateralise% 6 commercial immovale
propert6 %o not e8cee% .*+ O of t#e outstan%in" loans collateralise% 6 commercial
immovale propert67
47 ?#ere eit#er of t#e limits referre% to in para"rap# 3 is not satisfie% in a "iven 6ear* t#e
eli"iilit6 to use para"rap# 3 s#all cease an% t#e con%ition containe% in para"rap# -)/
s#all appl6 until t#e con%itions in para"rap# 3 are satisfie% in a suse&uent 6ear7
,rticle 1--
$8posures in %efault
Coun$il initial proposal
17 2#e unsecure% part of an6 item *here the o!ligor has defaulted a$$ording to Arti$le 40B,
or in the $ase of retail e5posures, the unse$ured part of an# $redit fa$ilit# *hi$h #as
defaulted accor%in" to ,rticle 1>4 s#all e assi"ne% a ris5 1ei"#t of:
)a/ 1+. O* 1#ere specific cre%it ris5 a%!ustments are less t#an -. O of t#e unsecure%
part of t#e e8posure value if t#ese specific cre%it ris5 a%!ustments 1ere not applie%E
)/ 1.. O* 1#ere specific cre%it ris5 a%!ustments are no less t#an -. O of t#e unsecure%
part of t#e e8posure value if t#ese specific cre%it ris5 a%!ustments 1ere not applie%7
-7 3or t#e purpose of %eterminin" t#e secure% part of t#e past %ue item* eli"ile collateral an%
"uarantees s#all e t#ose eli"ile for cre%it ris5 miti"ation purposes un%er C#apter 47
37 +he e5posure value reaining after spe$ifi$ $redit risk ad9ustents of e5posures full6
an% completel6 secure% 6 mort"a"es on resi%ential propert6 in accor%ance 1it#
,rticle 1-. s#all e assi"ne% a ris5 1ei"#t of 1.. AJ if a %efault #as occurre% accor%in"
to ,rticle 1>47
47 +he e5posure value reaining after spe$ifi$ $redit risk ad9ustents of e5posures full6
an% completel6 secure% 6 mort"a"es on commercial immovale propert6 in accor%ance
1it# ,rticle 1-1 s#all e assi"ne% a ris5 1ei"#t of 1.. O if a %efault #as occurre%
accor%in" to ,rticle 1>47
,rticle 1-3
0tems associate% 1it# particular #i"# ris5
17 0nstitutions s#all assi"n a 1+. O ris5 1ei"#t to e8posures* inclu%in" e8posures in t#e form
of s#ares or units in a Collective 0nvestment 4n%erta5in" t#at are associate% 1it#
particularl6 #i"# ris5s* 1#ere appropriate7
-7 $8posures 1it# particularl6 #i"# ris5s s#all inclu%e an6 of t#e follo1in" e5posures:
)a/ investments in venture capital firmsE
)/ investents in alternative investment fun%s as %efine% 6 ,rticle 4)1/)a) of
(ire$tive 2:44D?4DE2 (-E L 40BD4, 43032:44) e5$ept *here the andate of the
fund does not allo* a leverage higher than the one re6uired under Arti$le @4(C)
of (ire$tive 2::>D?@DEC%
(!a) investents in private e6uit#E
)c/ speculative immovale propert6 financin"7
37 ?#en assessin" 1#et#er an e8posure ot#er t#an e8posures referre% to in t#e para"rap# - is
associate% 1it# particularl6 #i"# ris5s* institutions s#all ta5e into account t#e follo1in"
ris5 c#aracteristics:
)a/ t#ere is a #i"# ris5 of loss as a result of a %efault of t#e oli"orE
)/ it is impossile to assess a%e&uatel6 1#et#er t#e e8posure falls un%er point )a/7
$D, s#all issue "ui%elines specif6in" 1#ic# t6pes of e8posures are associate% 1it#
particularl6 #i"# ris5 an% un%er 1#ic# circumstances7
2#e "ui%elines s#all e a%opte% in accor%ance 1it# ,rticle 1= of Re"ulation )$4/
Bo 1.93/-.1.7
,rticle 1-4
$8posures in t#e form of covere% on%s
17 2o e eli"ile for t#e preferential treatment set out in para"rap# C and B, on%s as %efine%
in ,rticle +-)4/ of Directive -..9/=+/$C of t#e $uropean Parliament an% of t#e Council
of 13 <ul6 -..9 on t#e coor%ination of la1s* re"ulations an% a%ministrative provisions
relatin" to un%erta5in"s for collective investment in transferale securities )4C02S/
1
$overed !onds shall eet the re6uireents set out in paragraph @a and shall !e
collateralise% 6 an6 of t#e follo1in" eli"ile assets:
)a/ e8posures to or "uarantee% 6 central "overnments* E"CB central an5s* pulic
sector entities* re"ional "overnments or local aut#orities in t#e 4nion A
4
O< F .-* 1>7117-..9* p7 -7
)/ e8posures to or "uarantee% 6 t#ir% countr6 central "overnments* third=$ountr#
central an5s* multilateral %evelopment an5s* international or"anisations t#at
&ualif6 for t#e cre%it &ualit6 step 1 as set out in t#is C#apter* an% e8posures to or
"uarantee% 6 third=$ountr# pulic sector entities* Athird=$ountr# re"ional
"overnments or third=$ountr# local aut#orities t#at are ris5 1ei"#te% as e8posures to
institutions or central "overnments an% central an5s accor%in" to
,rticles 11.)1/* 11.)-/* 111)1/* 111)-/ or 111)4/ respectivel6 an% t#at &ualif6 for t#e
cre%it &ualit6 step 1 as set out in t#is C#apter* an% e8posures *ithin t#e eaning of
t#is point t#at &ualif6 as a minimum for t#e cre%it &ualit6 step - as set out in t#is
C#apter* provi%e% t#at t#e6 %o not e8cee% -. O of t#e nominal amount of
outstan%in" covere% on%s of the issuin" institutionsE
)c/ e8posures to institutions t#at &ualif6 for t#e cre%it &ualit6 step 1 as set out in t#is
C#apter7 2#e total e8posure of t#is 5in% s#all not e8cee% 1+ O of t#e nominal
amount of outstan%in" covere% on%s of t#e issuin" institution7 $8posures cause% 6
transmission an% mana"ement of pa6ments of t#e oli"ors of* or li&ui%ation procee%s
in respect of* loans secure% 6 immovale propert6 to t#e #ol%ers of covere% on%s
s#all not e comprise% 6 t#e 1+ O limit7 $8posures to institutions in t#e $4 1it# a
maturit6 not e8cee%in" 1.. %a6s s#all not e comprise% 6 t#e step 1 re&uirement
ut t#ose institutions s#all as a minimum &ualif6 for cre%it &ualit6 step - as set out in
t#is C#apterE
2#e competent aut#orities ma6* after $onsulting the $D,* partl6 1aive t#e application of
point ($) of the first su!paragraph an% allo1 cre%it &ualit6 step - for up to 1. O of t#e
total e8posure of t#e nominal amount of outstan%in" covere% on%s of t#e issuin"
institution* provi%e% t#at si"nificant potential concentration prolems in t#e 9emer States
concerne% can e %ocumente% %ue to t#e application of t#e cre%it &ualit6 step 1
re&uirement referre% to in point ($) of the first su!paragraph%
)%/ loans secure% 6
(i) resi%ential propert6 A up to t#e lesser of t#e principal amount of t#e liens t#at
are comine% 1it# an6 prior liens an% 8. O of t#e value of t#e ple%"e%
properties% or A
(ii) senior units issue% 6 3renc# 3on%s Communs %e +itrisation or e&uivalent
securitisation entities "overne% 6 t#e la1s of a 9emer State securitisin"
resi%ential propert6 e8posures7 0n t#e event of suc# senior units ein" use% as
collateral* t#e special pulic supervision to protect on% #ol%ers as provi%e% for
in ,rticle +-)4/ of Directive -..9/=+/$C A s#all ensure t#at t#e assets
un%erl6in" suc# units s#all* at an6 time 1#ile t#e6 are inclu%e% in t#e cover
pool e at least 9. O compose% of resi%ential mort"a"es t#at are comine%
1it# an6 prior liens up to t#e lesser of t#e principal amounts %ue un%er t#e
units* t#e principal amounts of t#e liens* an% 8. O of t#e value of t#e ple%"e%
properties* t#at t#e units &ualif6 for t#e cre%it &ualit6 step 1 as set out in t#is
C#apter an% t#at suc# units %o not e8cee% 1. O of t#e nominal amount of t#e
outstan%in" issueE
$8posures cause% 6 transmission an% mana"ement of pa6ments of t#e oli"ors of*
or li&ui%ation procee%s in respect of* loans secure% 6 ple%"e% properties of t#e
senior units or %et securities s#all not e comprise% in calculatin" t#e 9. O limitE
(da) residential loans full# guaranteed !# an eligi!le prote$tion provider referred to in
Arti$le 4>0 6ualif#ing for the $redit 6ualit# step 2 or a!ove as set out in this
Chapter, *here the portion of ea$h of the loans that is used to eet the
re6uireent set out in to this paragraph for $ollateralisation of the $overed !ond
does not represent ore than A: J of the value of the $orresponding residential
propert# lo$ated in 1ran$e, and *here a loan=to=in$oe ratio respe$ts at
ost CC J *hen the loan has !een granted3 +here shall !e no ortgage liens on
the residential propert# *hen the loan is granted, and for the loans granted fro
4st Eanuar# 2:4B the !orro*er shall !e $ontra$tuall# $oitted not to grant su$h
liens *ithout the $onsent of the $redit institution that granted the loan3 +he loan=
to=in$oe ratio represents the share of the gross in$oe of the !orro*er that
$overs the rei!urseent of the loan, in$luding the interests3 +he prote$tion
provider shall !e either a finan$ial institution authorised and supervised !# the
$opetent authorities and su!9e$t to prudential re6uireents $opara!le to those
applied to institutions in ters of ro!ustness or an institution or an insuran$e
undertaking3 &t shall esta!lish a utual guarantee fund or e6uivalent prote$tion
for insuran$e undertakings to a!sor! $redit risk losses, *hose $ali!ration shall !e
periodi$all# revie*ed !# the $opetent authorities3 Both the $redit institution and
the prote$tion provider shall $arr# out a $redit*orthiness assessent of
the !orro*er3
)e/ loan
(i)
s secure% 6 '
commercial immovale propert6 Aup to t#e lesser of t#e principal amount of
t#e liens t#at are comine% 1it# an6 prior liens an% =. O of t#e value of t#e
ple%"e% properties% or A
(ii) senior units issue% 6 3renc# 3on%s Communs %e +itrisation or e&uivalent
securitisation entities "overne% 6 t#e la1s of a 9emer State securitisin"
commercial immovale propert6 e8posures7 0n t#e event of suc# senior units
ein" use% as collateral* t#e special pulic supervision to protect on% #ol%ers
as provi%e% for in ,rticle +-)4/ of Directive -..9/=+/$C s#all ensure t#at t#e
assets un%erl6in" suc# units s#all* at an6 time 1#ile t#e6 are inclu%e% in t#e
cover pool e at least 9. O compose% of commercial mort"a"es t#at are
comine% 1it# an6 prior liens up to t#e lesser of t#e principal amounts %ue
un%er t#e units* t#e principal amounts of t#e liens* an% =. O of t#e value of t#e
ple%"e% properties* t#at t#e units &ualif6 for t#e cre%it &ualit6 step 1 as set out
in t#is C#apter an% t#at suc# units %o not e8cee% 1. O of t#e nominal amount
of t#e outstan%in" issue7 Foans secure% 6 commercial immovale propert6 are
eli"ile 1#ere t#e Foan to Ralue ratio of =. O is e8cee%e% up to a ma8imum
level of >. O if t#e value of t#e total assets ple%"e% as collateral for t#e
covere% on%s e8cee% t#e nominal amount outstan%in" on t#e covere% on% 6
at least 1. O* an% t#e on%#ol%ers( claim meets t#e le"al certaint6 re&uirements
set out in C#apter 47 2#e on%#ol%ersN claim s#all ta5e priorit6 over all ot#er
claims on t#e collateral7 $8posures cause% 6 transmission an% mana"ement of
pa6ments of t#e oli"ors of* or li&ui%ation procee%s in respect of* loans secure%
6 ple%"e% properties of t#e senior units or %et securities s#all not e
comprise% in calculatin" t#e 9. O limitE
)f/ loans secure% 6 aritie liens on ships up to the differen$e !et*een ?: O of t#e
value of t#e ple%"e% s#ip and the value of an# prior aritie liens7
4a3 +he situations in paragraph 4 )a/ to )f/ shall also inclu%e collateral t#at is e8clusivel6
restricte% 6 le"islation to t#e protection of t#e on%;#ol%ers a"ainst losses7
-7 0nstitutions s#all for immovale propert6 collateralisin" covere% on%s meet t#e
re&uirements set out in ,rticle -.3 an% t#e valuation rules set out in ,rticle --4)1/7
37 Covere% on%s for 1#ic# a cre%it assessment 6 a nominate% $C,0 is availale s#all e
assi"ne% a ris5 1ei"#t accor%in" to 2ale =a 1#ic# correspon%s to t#e cre%it assessment of
t#e A$C,0 in accor%ance 1it# ,rticle 1317
2ale =a
Cre%it &ualit6 step 1 - 3 4 + =
Ris5 1ei"#t 1. O -. O -. O +. O +. O 1.. O
47 Covere% on%s for 1#ic# a cre%it assessment 6 a nominate% $C,0 is not availale s#all e
assi"ne% a ris5 1ei"#t on t#e asis of t#e ris5 1ei"#t assi"ne% to senior unsecure%
e8posures to t#e institution 1#ic# issues t#em7 2#e follo1in" correspon%ence et1een ris5
1ei"#ts s#all appl6:
)a/ if t#e e8posures to t#e institution are assi"ne% a ris5 1ei"#t of -. O* t#e covere%
on% s#all e assi"ne% a ris5 1ei"#t of 1. OE
)/ if t#e e8posures to t#e institution are assi"ne% a ris5 1ei"#t of +. O* t#e covere%
on% s#all e assi"ne% a ris5 1ei"#t of -. OE
)c/ if t#e e8posures to t#e institution are assi"ne% a ris5 1ei"#t of 1.. O* t#e covere%
on% s#all e assi"ne% a ris5 1ei"#t of +. OE
)%/ if t#e e8posures to t#e institution are assi"ne% a ris5 1ei"#t of 1+. O* t#e covere%
on% s#all e assi"ne% a ris5 1ei"#t of 1.. O7
+7 Covere% on%s issue% efore 31 Decemer -..> are not su!ect to t#e re&uirements of
para"rap# 1 an% -7 2#e6 are eli"ile for t#e preferential treatment un%er para"rap# 3 and B
until t#eir maturit63
@a3 E5posures in the for of $overed !onds are eligi!le for preferential treatent, provided
that the institution investing in the $overed !onds $an deonstrate to the $opetent
authorities that'
(a) it re$eives portfolio inforation at least on'
(i) the value of the $over pool and outstanding $overed !onds,
(ii) the geographi$al distri!ution and t#pe of $over assets, loan si<e, interest rate
and $urren$# risks,
(iii) the aturit# stru$ture of $over assets and $overed !onds, and
(iv) the per$entage of loans ore than ninet# da#s past due3
(!) the issuer akes the inforation referred to in point (a) availa!le to the institution
at least sei annuall#7
,rticle 1-+
0tems representin" securitisation positions
Ris5 1ei"#te% e8posure amounts for securitisation positions s#all e %etermine% in accor%ance 1it#
C#apter +7
,rticle 1-=
$8posures to institutions an% corporates 1it# a s#ort;term cre%it assessment
$8posures to institutions an% e8posures to corporates for 1#ic# a s#ort;term cre%it assessment 6 a
nominate% $C,0 is availale s#all e assi"ne% a ris5 1ei"#t accor%in" to 2ale > 1#ic#
correspon%s to t#e cre%it assessment of t#e A$C,0 in accor%ance 1it# ,rticle 1317
2ale >
Cre%it Qualit6 Step 1 - 3 4 + =
Ris5 1ei"#t -. O +. O 1.. O 1+. O 1+. O 1+. O
,rticle 1->
$8posures in t#e form of units or s#ares in collective investment un%erta5in"s )C04S/
17 $8posures in t#e form of units or s#ares in collective investment un%erta5in"s )#ereinafter
referre% to as (C04s(/ s#all e assi"ne% a ris5 1ei"#t of 1.. O* unless t#e institution applies
t#e cre%it ris5 assessment met#o% un%er para"rap# -* or t#e loo5;t#rou"# approac# in
para"rap# 4 or t#e avera"e ris5 1ei"#t approac# un%er para"rap# + 1#en t#e con%itions in
para"rap# 3 are met7
-7 $8posures in t#e form of units or s#ares in C04s for 1#ic# a cre%it assessment 6 a
nominate% $C,0 is availale s#all e assi"ne% a ris5 1ei"#t accor%in" to 2ale A 1#ic#
correspon%s to t#e cre%it assessment of t#e A$C,0 in accor%ance 1it# ,rticle 1317
2ale 8
Cre%it &ualit6 step 1 - 3 4 + =
Ris5 1ei"#t -. O +. O 1.. O 1.. O 1+. O 1+. O
37 0nstitutions ma6 %etermine t#e ris5 1ei"#t for a C04 A a$$ording to paragraphs B and @,
if t#e follo1in" eli"iilit6 criteria are met:
)a/ t#e C04 is mana"e% 6 a compan6 t#at is su!ect to supervision in a 9emer State
or* in t#e case of t#ir% countr6 C04* 1#ere t#e follo1in" con%itions are met:
)i/ t#e C04 is mana"e% 6 a compan6 1#ic# is su!ect to supervision t#at is
consi%ere% e&uivalent to t#at lai% %o1n in 4nion le"islationE
)ii/ cooperation et1een competent aut#orities is sufficientl6 ensure%E
)/ t#e C04(s prospectus or e&uivalent %ocument inclu%es t#e follo1in":
)i/ t#e cate"ories of assets in 1#ic# t#e C04 is aut#orise% to investE
)ii/ if investment limits appl6* t#e relative limits an% t#e met#o%olo"ies to
calculate t#emE
)c/ t#e usiness of t#e C04 is reported on at least an annual asis to enale an
assessment to e ma%e of t#e assets an% liailities* income an% operations over t#e
reportin" perio%7
3or t#e purposes of point )a/* t#e Commission ma6 a%opt* 6 1a6 of implementin" acts*
an% su!ect to t#e e8amination proce%ure referre% to in ,rticle 44>)-/* a %ecision as to
1#et#er a t#ir% countr6 applies supervisor6 an% re"ulator6 arran"ements at least
e&uivalent to t#ose applie% in t#e A4nion7 0n t#e asence of suc# a %ecision*
until 1 <anuar6 2:4@, institutions ma6 continue to appl6 t#e treatment set out in t#is
para"rap# to e5posures in the for of units or shares of C&2s fro third $ountries
1#ere t#e relevant competent aut#orities #a% approve% t#e t#ir% countr6 as eli"ile for
t#is treatment efore 1 <anuar6 2:4B3
47 ?#ere t#e institution is a1are of t#e un%erl6in" e8posures of a C04* it ma6 loo5 t#rou"#
to t#ose un%erl6in" e8posures in or%er to calculate an avera"e ris5 1ei"#t for its
e8posures in t#e form of units or s#ares in t#e C04s in accor%ance 1it# t#e met#o%s set
out in t#is C#apter7 ?#ere an un%erl6in" e8posure of t#e C04 is itself an e8posure in t#e
form of s#ares in anot#er C04 1#ic# fulfils t#e criteria of para"rap# 3* t#e institution ma6
loo5 t#rou"# to t#e un%erl6in" e8posures of t#at ot#er C047
+7 ?#ere t#e institution is not a1are of t#e un%erl6in" e8posures of a C04* it ma6 calculate
an avera"e ris5 1ei"#t for its e8posures in t#e form of a unit or s#are in t#e C04 in
accor%ance 1it# t#e met#o%s set out in t#is C#apter su!ect to t#e assumption t#at t#e
C04 first invests* to t#e ma8imum e8tent allo1e% un%er its man%ate* in t#e e8posure
classes attractin" t#e #i"#est capital re&uirement* an% t#en continues ma5in" investments
in %escen%in" or%er until t#e ma8imum total investment limit is reac#e%7
0nstitutions ma6 rel6 on t#e follo1in" t#ir% parties to calculate an% report* in accor%ance
1it# t#e met#o%s set out in para"rap#s 4 an% +* a ris5 1ei"#t for t#e C04:
)a/ t#e %epositor6 institution or t#e %epositor6 financial institution of t#e C04 provi%e%
t#at t#e C04 e8clusivel6 invests in securities an% %eposits all securities at t#at
%epositor6 institution or t#e financial institutionE
)/ for C04s not covere% 6 point )a/* t#e C04 mana"ement compan6* provi%e% t#at t#e
C04 mana"ement compan6 meets t#e criteria set out in para"rap# 3)a/7
2#e correctness of t#e calculation referre% to in t#e first supara"rap# s#all e confirme%
6 an e8ternal au%itor7
,rticle 1-8
$&uit6 e8posures
17 2#e follo1in" e8posures s#all e consi%ere% e&uit6 e8posures:
)a/ non;%et e8posures conve6in" a suor%inate%* resi%ual claim on t#e assets or income
of t#e issuerE
)/ %et e8posures an% ot#er securities* partners#ips* %erivatives* or ot#er ve#icles* t#e
economic sustance of 1#ic# is similar to t#e e8posures specifie% in point )a/7
-7 $&uit6 e8posures s#all e assi"ne% a ris5 1ei"#t of 1.. O* unless t#e6 are re&uire% to e
%e%ucte% in accor%ance 1it# Part 21o* assi"ne% a -+. O ris5 1ei"#t in accor%ance 1it#
,rticle 4+)-/* assi"ne% a 1 -+. O ris5 1ei"#t in accor%ance 1it# ,rticle 84)3/ or treate%
as #i"# ris5 items in accor%ance 1it# ,rticle 1-37
37 0nvestments in e&uit6 or re"ulator6 capital instruments issue% 6 institutions s#all e
classifie% as e&uit6 claims* unless %e%ucte% from o1n fun%s or attractin" a -+. O ris5
1ei"#t un%er ,rticle B@)2/ or treate% as #i"# ris5 items in accor%ance 1it# ,rticle 1-37
,rticle 1-9
Ot#er items
17 2an"ile assets 1it#in t#e meanin" of ,rticle 4)1./ of Directive 8=/=3+/$$C s#all e
assi"ne% a ris5 1ei"#t of 1.. O7
-7 Prepa6ments an% accrue% income for 1#ic# an institution is unale to %etermine t#e
counterpart6 in accor%ance 1it# Directive 8=/=3+/$$C* s#all e assi"ne% a ris5 1ei"#t
of 1.. O7
37 Cas# items in t#e process of collection s#all e assi"ne% a -. O ris5 1ei"#t7 Cas# in #an%
an% e&uivalent cas# items s#all e assi"ne% a . O ris5 1ei"#t7
47 Gol% ullion #el% in o1n vaults or on an allocate% asis to t#e e8tent ac5e% 6 ullion
liailities s#all e assi"ne% a . O ris5 1ei"#t7
+7 0n t#e case of asset sale an% repurc#ase a"reements an% outri"#t for1ar% purc#ases* t#e
ris5 1ei"#t s#all e t#at assi"ne% to t#e assets in &uestion an% not to t#e counterparties to
t#e transactions7
=7 ?#ere an institution provi%es cre%it protection for a numer of e8posures un%er terms t#at
t#e nt# %efault amon" t#e e8posures s#all tri""er pa6ment an% t#at t#is cre%it event s#all
terminate t#e contract* an% 1#ere t#e pro%uct #as an e8ternal cre%it assessment from an
A$C,0* t#e ris5 1ei"#ts prescrie% in C#apter + s#all e assi"ne%7 0f t#e pro%uct is
not rate% 6 an A $C,0* t#e ris5 1ei"#ts of t#e e8posures inclu%e% in t#e as5et 1ill e
a""re"ate%* e8clu%in" n;1 e8posures* up to a ma8imum of 1 -+. O an% multiplie% 6 t#e
nominal amount of t#e protection provi%e% 6 t#e cre%it %erivative to otain t#e ris5
1ei"#te% asset amount7 2#e n;1 e8posures to e e8clu%e% from t#e a""re"ation s#all e
%etermine% on t#e asis t#at t#e6 s#all inclu%e t#ose e8posures eac# of 1#ic# pro%uces a
lo1er ris5;1ei"#te% e8posure amount t#an t#e ris5;1ei"#te% e8posure amount of an6 of
t#e e8posures inclu%e% in t#e a""re"ation7
>7 2#e e8posure value for leases s#all e t#e %iscounte% minimum lease pa6ments7
9inimum lease pa6ments are t#e pa6ments over t#e lease term t#at t#e lessee is or can e
re&uire% to ma5e an% an6 ar"ain option t#e e8ercise of 1#ic# is reasonal6 certain7 ,
part6 ot#er t#an t#e lessee ma6 e re&uire% to ma5e a pa6ment relate% to t#e resi%ual
value of a lease% propert6 an% t#at pa6ment oli"ation fulfils t#e set of con%itions in
,rticle 19> re"ar%in" t#e eli"iilit6 of protection provi%ers as 1ell as t#e re&uirements
for reco"nisin" ot#er t6pes of "uarantees provi%e% in ,rticles -.8 to -1.* t#at pa6ment
oli"ation ma6 e ta5en into account as unfun%e% cre%it protection un%er C#apter 47
2#ese e8posures s#all e assi"ne% to t#e relevant e8posure class in accor%ance 1it#
,rticle 1.>7 ?#en t#e e8posure is a resi%ual value of lease% assets* t#e ris5 1ei"#te%
e8posure amounts s#all e calculate% as follo1s: 1/t T 1.. O T residual value* 1#ere t is
t#e "reater of 1 an% t#e nearest numer of 1#ole 6ears of t#e lease remainin"7
?ECTION 3
RECO>NITION AN$ *APPIN> OF CRE$IT RI?B A??E??*ENT
S4D;S$C20OB 1
R$COGB020OB O3 $C,0S
,rticle 13.
2se of $redit assessents !# $C,0s
17 ,n e8ternal cre%it assessment ma6 e use% to %etermine t#e ris5 1ei"#t of an e8posure
un%er t#is C#apter onl6 if it #as een issue% 6 an A$C,0 or #as een en%orse% 6 an
A$C,0 in accor%ance 1it# Re"ulation )$C/ Bo 1.=./-..97
A
37 $D, s#all pulis# the list of ECA&s in a$$ordan$e *ith Arti$le 2(B) and 4A(C) of
)egulation (EC) Fo 4:?:D2::> on its *e!site3
?UB9?ECTION 2
*APPIN> OF ECAID? CRE$IT A??E??*ENT?
,rticle 131
9appin" of $C,0(s cre%it assessments
17 +he E"As Eoint Coittee s#all %evelop %raft implementin" stan%ar%s to specif6 for all
A$C,0s* 1it# 1#ic# of t#e cre%it &ualit6 steps set out in Section - t#e relevant cre%it
assessments of t#e A $C,0 correspon% )(mappin"(/7 2#ose %eterminations s#all e
o!ective an% consistent7
+he E"As Eoint Coittee s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to
t#e Commission 6 1 Eul# -.14 an% s#all sumit revise% %raft tec#nical stan%ar%s
1#ere necessar67
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in
,rticle 1+ of Re"ulation )$4/ Bo 1.93/-.1.7
-7 ?#en %eterminin" t#e mappin" of cre%it assessments* the E"AGs Eoint Coittee s#all
compl6 1it# t#e follo1in" re&uirements:
)a/ in or%er to %ifferentiate et1een t#e relative %e"rees of ris5 e8presse% 6 eac# cre%it
assessment* the E"AGs Eoint Coittee s#all consi%er &uantitative factors suc# as
t#e lon";term %efault rate associate% 1it# all items assi"ne% t#e same cre%it
assessment7 3or recentl6 estalis#e% $C,0s an% for t#ose t#at #ave compile% onl6 a
s#ort recor% of %efault %ata* the E"AGs Eoint Coittee s#all as5 t#e $C,0 1#at it
elieves to e t#e lon";term %efault rate associate% 1it# all items assi"ne% t#e same
cre%it assessmentE
)/ in or%er to %ifferentiate et1een t#e relative %e"rees of ris5 e8presse% 6 eac# cre%it
assessment* the E"AGs Eoint Coittee s#all consi%er &ualitative factors suc# as t#e
pool of issuers t#at t#e $C,0 covers* t#e ran"e of cre%it assessments t#at t#e $C,0
assi"ns* eac# cre%it assessment meanin" an% t#e $C,0(s %efinition of %efaultE
)c/ the E"AGs Eoint Coittee s#all compare %efault rates e8perience% for eac# cre%it
assessment of a particular $C,0 an% compare t#em 1it# a enc#mar5 uilt on t#e
asis of %efault rates e8perience% 6 ot#er $C,0s on a population of issuers t#at
present an e&uivalent level of cre%it ris5E
)%/ 1#ere t#e %efault rates e8perience% for t#e cre%it assessment of a particular $C,0 are
materiall6 an% s6stematicall6 #i"#er t#en t#e enc#mar5* the E"AGs Eoint
Coittee s#all assi"n a #i"#er cre%it &ualit6 step in t#e cre%it &ualit6 assessment
scale to t#e $C,0 cre%it assessmentE
)e/ 1#ere the E"AGs Eoint Coittee #as increase% t#e associate% ris5 1ei"#t for a
specific cre%it assessment of a particular $C,0* an% 1#ere %efault rates e8perience%
for t#at $C,0(s cre%it assessment are no lon"er materiall6 an% s6stematicall6 #i"#er
t#an t#e enc#mar5* the E"AGs Eoint Coittee a# restore t#e ori"inal cre%it
&ualit6 step in t#e cre%it &ualit6 assessment scale for t#e $C,0 cre%it assessment7
37 +he E"AGs Eoint Coittee s#all %evelop %raft implementin" tec#nical stan%ar%s to
specif6 t#e &uantitative factors referre% to in point )a/* t#e &ualitative factors referre% to
in point )/ an% t#e enc#mar5 referre% to in point )c/ of para"rap# -7
+he E"AGs Eoint Coittee s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to
t#e Commission 6 1 Eul# -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in
,rticle 1+ of Re"ulation )$4/ Bo 1.93/-.1.7
?UB9?ECTION 3
U?E OF CRE$IT A??E??*ENT? BA E-PORT CRE$IT A>ENCIE?
,rticle 13-
4se of cre%it assessments 6 $8port Cre%it ,"encies
17 3or t#e purpose of ,rticle 1.9* institutions ma6 use cre%it assessments of an $8port
Cre%it ,"enc6 that the institution has noinated* if eit#er of t#e follo1in" con%itions
is met:
)a/ it is a consensus ris5 score from $8port Cre%it ,"encies participatin" in t#e O$CD
M,rran"ement on Gui%elines for Officiall6 Supporte% $8port Cre%itsNE
)/ t#e $8port Cre%it ,"enc6 pulis#es its cre%it assessments* an% t#e $8port Cre%it
,"enc6 suscries to t#e O$CD a"ree% met#o%olo"6* an% t#e cre%it assessment is
associate% 1it# one of t#e ei"#t minimum e8port insurance premiums t#at t#e O$CD
a"ree% met#o%olo"6 estalis#es3 An institution a# revoke its noination of an
E5port Credit Agen$#3 An institution ust su!stantiate the revo$ation if there are
$on$rete indi$ations that the intention underl#ing the revo$ation is to redu$e the
$apital ade6ua$# re6uireents7
-7 $8posures for 1#ic# a cre%it assessment 6 an $8port Cre%it ,"enc6 is reco"nise% for
ris5 1ei"#tin" purposes s#all e assi"ne% a ris5 1ei"#t accor%in" to 2ale 97
2ale 9
9$0P . 1 - 3 4 + = >
Ris5 1ei"#t . O . O -. O +. O 1.. O 1.. O 1.. O 1+. O
?ECTION '
U?E OF THE ECAI CRE$IT A??E??*ENT? FOR THE $ETER*INATION
OF RI?B CEI>HT?
,rticle 133
General re&uirements
,n institution ma6 nominate one or more A$C,0s to e use% for t#e %etermination of ris5 1ei"#ts
to e assi"ne% to assets an% off;alance s#eet items3 An institution a# revoke its noination of
an ECA&3 An institution ust su!stantiate the revo$ation if there are $on$rete indi$ations that
the intention underl#ing the revo$ation is to redu$e the $apital ade6ua$# re6uireents7 Cre%it
assessments s#all not e use% selectivel67 An institution shall use soli$ited $redit assessents3
Ho*ever it a# use unsoli$ited $redit assessents if EBA has $onfired that unsoli$ited $redit
assessents of an ECA& do not differ in 6ualit# fro soli$ited $redit assessents of this ECA&3
EBA shall refuse or revoke this $onfiration in parti$ular if the ECA& has used an unsoli$ited
$redit assessent to put pressure on the rated entit# to pla$e an order for a $redit assessent or
other servi$es3 0n usin" cre%it assessment* institutions s#all compl6 1it# t#e
follo1in" re&uirements:
)a/ an institution 1#ic# %eci%es to use t#e cre%it assessments pro%uce% 6 an A $C,0 for a
certain class of items s#all use t#ose cre%it assessments consistentl6 for all e8posures
elon"in" to t#at classE
)/ an institution 1#ic# %eci%es to use t#e cre%it assessments pro%uce% 6 an A $C,0 s#all
use t#em in a continuous an% consistent 1a6 over timeE
)c/ an institution s#all onl6 use $C,0s cre%it assessments t#at ta5e into account all amounts
ot# in principal an% in interest o1e% to itE
)%/ 1#ere onl6 one cre%it assessment is availale from a nominate% $C,0 for a rate% item*
t#at cre%it assessment s#all e use% to %etermine t#e ris5 1ei"#t for t#at itemE
)e/ 1#ere t1o cre%it assessments are availale from nominate% $C,0s an% t#e t1o
correspon% to %ifferent ris5 1ei"#ts for a rate% item* t#e #i"#er ris5 1ei"#t s#all
e assi"ne%E
)f/ 1#ere more t#an t1o cre%it assessments are availale from nominate% $C,0s for a rate%
item* t#e t1o assessments "eneratin" t#e t1o lo1est ris5 1ei"#ts s#all e referre% to7 0f
t#e t1o lo1est ris5 1ei"#ts are %ifferent* t#e #i"#er ris5 1ei"#t s#all e assi"ne%7 0f t#e
t1o lo1est ris5 1ei"#ts are t#e same* t#at ris5 1ei"#t s#all e assi"ne%7
,rticle 134
0ssuer an% issue cre%it assessment
17 ?#ere a cre%it assessment e8ists for a specific issuin" pro"ramme or facilit6 to 1#ic# t#e
item constitutin" t#e e8posure elon"s* t#is cre%it assessment s#all e use% to %etermine
t#e ris5 1ei"#t to e assi"ne% to t#at item7
-7 ?#ere no %irectl6 applicale cre%it assessment e8ists for a certain item* ut a cre%it
assessment e8ists for a specific issuin" pro"ramme or facilit6 to 1#ic# t#e item
constitutin" t#e e8posure %oes not elon" or a "eneral cre%it assessment e8ists for t#e
issuer* t#en t#at cre%it assessment s#all e use% in eit#er of t#e follo1in" cases:
)a/ it pro%uces a #i"#er ris5 1ei"#t t#an 1oul% ot#er 1ise e t#e case an% t#e e8posure
in &uestion ran5s pari passu or !unior in all respects to t#e specific issuin" pro"ram or
facilit6 or to senior unsecure% e8posures of t#at issuer* as relevantE
)/ it pro%uces a lo1er ris5 1ei"#t an% t#e e8posure in &uestion ran5s pari passu or
senior in all respects to t#e specific issuin" pro"ramme or facilit6 or to senior
unsecure% e8posures of t#at issuer* as relevant7
0n all ot#er cases* t#e e8posure s#all e treate% as unrate%7
37 Para"rap# 1 an% - are not to prevent t#e application of ,rticle 1-47
47 Cre%it assessments for issuers 1it#in a corporate "roup cannot e use% as cre%it
assessment of anot#er issuer 1it#in t#e same corporate "roup7
,rticle 13+
Fon";term an% s#ort;term cre%it assessments
17 S#ort;term cre%it assessments ma6 onl6 e use% for s#ort;term asset an% off;alance
s#eet items constitutin" e8posures to institutions an% corporates7
-7 ,n6 s#ort;term cre%it assessment s#all onl6 appl6 to t#e item t#e s#ort;term cre%it
assessment refers to* an% it s#all not e use% to %erive ris5 1ei"#ts for an6 ot#er item*
e8cept in t#e follo1in" cases:
)a/ if a s#ort;term rate% facilit6 is assi"ne% a 1+. O ris5 1ei"#t* t#en all unrate%
unsecure% e8posures on t#at oli"or 1#et#er s#ort;term or lon";term s#all also e
assi"ne% a 1+. O ris5 1ei"#tE
)/ if a s#ort;term rate% facilit6 is assi"ne% a +. O ris5;1ei"#t* no unrate% s#ort;term
e8posure s#all e assi"ne% a ris5 1ei"#t lo1er t#an 1.. O7
Article 13"
Domestic an$ forei#n currency items
, cre%it assessment t#at refers to an item %enominate% in t#e oli"or(s %omestic currenc6 cannot e
use% to %erive a ris5 1ei"#t for anot#er e8posure on t#at same oli"or t#at is %enominate% in a
forei"n currenc67
?#en an e8posure arises t#rou"# an institution(s participation in a loan t#at #as een e8ten%e% 6 a
9ultilateral Development Dan5 1#ose preferre% cre%itor status is reco"nise% in t#e mar5et* t#e
cre%it assessment on t#e oli"ors( %omestic currenc6 item ma6 e use% for ris5 1ei"#tin" purposes7
C6pter 3
Internl Rtin5s Bse. Appro26
?ECTION 1
PER*I??ION BA CO*PETENT AUTHORITIE? TO U?E THE IRB APPROACH
,rticle 13>
Definitions
17 3or t#e purposes of t#is C#apter* t#e follo1in" %efinitions s#all appl6:
)1/ (ratin" s6stem( means all of t#e met#o%s* processes* controls* %ata collection an% 02
s6stems t#at support t#e assessment of cre%it ris5* t#e assi"nment of e8posures to
ratin" "ra%es or pools* an% t#e &uantification of %efault an% loss estimates t#at #ave
een %evelope% for a certain t6pe of e8posuresE
)-/ (t6pe of e8posures( means a "roup of #omo"eneousl6 mana"e% e8posures 1#ic# are
forme% 6 a certain t6pe of facilities an% 1#ic# ma6 e limite% to a sin"le entit6 or a
sin"le su;set of entities 1it#in a "roup provi%e% t#at t#e same t6pe of e8posures is
mana"e% %ifferentl6 in ot#er entities of t#e "roupE
)3/ (usiness unit( means an6 separate or"anisational or le"al entities* usiness lines*
"eo"rap#ical locationsE
A
)+/ Mlar"e Afinancial se$tor entit6N means an6 Afinancial se$tor entit6 1#ose total assets
$al$ulated on an in%ivi%ual Aor Aconsoli%ate% !asis* are "reater t#an or e&ual to
t#e $4R >. illion t#res#ol%* 1#ere t#e most recent au%ite% financial statement or
consoli%ate% finan$ial stateent s#all e use% in or%er to %etermine asset siLeE
1or the purposes of this arti$le, finan$ial se$tor entit# refers to those entities listed in
Arti$le B(>2) *here the entit# itself or at least one of its su!sidiaries is su!9e$t to
prudential regulation in the E2 or at least e6uivalent regulation and supervision !# the
$opetent authorities of the third $ountr#3
)=/ Munre"ulate% financial entit6N means an6 ot#er entit6 t#at is not a re"ulate% finan$ial
se$tor entit6 ut performs, as its ain !usiness, one or more of t#e activities liste% in
,nne8 0 of Directive Jinserte% 6 OPK or liste% in ,nne8 0 of Directive -..4/39/$CE
)>/ Moli"or "ra%eN means a ris5 cate"or6 1it#in t#e oli"or ratin" scale of a ratin"
s6stem* to 1#ic# oli"ors are assi"ne% on t#e asis of a specifie% an% %istinct set of
ratin" criteria* from 1#ic# estimates of PD are %erive%E
)8/ Mfacilit6 "ra%eN means a ris5 cate"or6 1it#in a ratin" s6stem(s facilit6 scale* to 1#ic#
e8posures are assi"ne% on t#e asis of a specifie% an% %istinct set of ratin" criteria
from 1#ic# o1n estimates of Foss Given Default are %erive%E
)9/ MservicerN means an entit6 t#at mana"es a pool of purc#ase% receivales or t#e
un%erl6in" cre%it e8posures on a %a6;to;%a6 asis7
A
23 1or the purposes of point B of paragraph 4, the Coission a# adopt, !# *a# of
ipleenting a$ts, and su!9e$t to the e5aination pro$edure referred to in
Arti$le BB0(2), a de$ision as to *hether a third $ountr# applies supervisor# and
regulator# arrangeents at least e6uivalent to those applied in the 2nion3 &n the
a!sen$e of su$h a de$ision, until 4 Eanuar# 2:4@, institutions a# $ontinue to appl# the
treatent set out in this paragraph to a third $ountr# *here the relevant $opetent
authorities had approved the third $ountr# as eligi!le for this treatent
!efore 4 Eanuar# 2:4B3
,rticle 138
Permission to use t#e 0RD ,pproac#
17 ?#ere t#e con%itions set out in t#is C#apter are met* t#e competent aut#orit6 s#all permit
institutions to calculate t#eir ris5;1ei"#te% e8posure amounts usin" t#e 0nternal Ratin"s
Dase% ,pproac# )#ereinafter referre% to as M0RD ,pproac#N/7
-7 .rior perission to t#e use t#e 0RD ,pproac#* inclu%in" o1n estimates of Foss Given
Default )#ereinafter referre% to as MFGDN/ an% conversion factors* s#all e re&uire% for
eac# e5posure $lass an% for eac# ratin" s6stem an% internal mo%el approac#es to e&uit6
e8posures an% for ea$h approac# to estimatin" FGDs an% conversion factors use%7
37 0nstitutions must otain t#e prior permission of t#e competent aut#orities for t#e follo1in":
)a/ aterial c#an"es to t#e ran"e of application of a ratin" s6stem or an internal mo%els
approac# to e&uit6 e8posures t#at t#e institution #as receive% permission to useE
)/ material c#an"es to a ratin" s6stem or an internal mo%els approac# to e&uit6
e8posures t#at t#e institution #as receive% permission to use7
2#e ran"e of application of a ratin" s6stem s#all comprise all e8posures of t#e relevant
t6pe of e8posure for 1#ic# t#at ratin" s6stem 1as %evelope%7
47 0nstitutions s#all notif6 t#e competent aut#orities of all c#an"es to ratin" s6stems an%
internal mo%els approac#es to e&uit6 e8posures7
+7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions for
assessing t#e materialit6 of t#e use of an e5isting rating s#ste for other additional
e5posures not alread# $overed !# that rating s#ste and c#an"es to ratin" s6stems or
internal mo%els approac#es to e&uit6 e8posures un%er t#e 0RD ,pproac# A7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 31 Decemer -.137
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 139
Competent aut#oritiesN assessment of an application to use an 0RD ,pproac#
17 2#e competent aut#orit6 s#all "rant permission pursuant to ,rticle 138 for an institution to
use t#e 0RD ,pproac#* inclu%in" to use o1n estimates of FGD an% conversion factors*
onl6 if t#e competent aut#orit6 is satisfie% t#at re&uirements lai% %o1n in t#is C#apter are
met* in particular t#ose lai% %o1n in Section =* an% t#at t#e s6stems of t#e institution for
t#e mana"ement an% ratin" of cre%it ris5 e8posures are soun% an% implemente% 1it#
inte"rit6 an%* in particular* t#at t#e institution #as %emonstrate% to t#e satisfaction of t#e
competent aut#orit6 t#at t#e follo1in" stan%ar%s are met:
)a/ t#e institution(s ratin" s6stems provi%e for a meanin"ful assessment of oli"or an%
transaction c#aracteristics* a meanin"ful %ifferentiation of ris5 an% accurate an%
consistent &uantitative estimates of ris5E
)/ internal ratin"s an% %efault an% loss estimates use% in t#e calculation of o1n fun%s
re&uirements an% associate% s6stems an% processes pla6 an essential role in t#e ris5
mana"ement an% %ecision;ma5in" process* an% in t#e cre%it approval* internal capital
allocation an% corporate "overnance functions of t#e institutionE
)c/ t#e institution #as a cre%it ris5 control unit responsile for its ratin" s6stems t#at is
appropriatel6 in%epen%ent an% free from un%ue influenceE
)%/ t#e institution collects an% stores all relevant %ata to provi%e effective support to its
cre%it ris5 measurement an% mana"ement processE
)e/ t#e institution %ocuments its ratin" s6stems an% t#e rationale for t#eir %esi"n an%
vali%ates its ratin" s6stemsE
)f/ t#e institution #as vali%ate% ea$h ratin" s#ste and ea$h internal odels approa$h
for e6uit# e5posures %urin" an appropriate time perio% prior to t#e permission to use
t#is ratin" s6stem or internal mo%els approac# to e&uit6 e8posures* #as assesse%
%urin" t#is time perio% 1#et#er the ratin" s#ste or internal mo%els approac#es for
e&uit6 e8posures are suite% to t#e ran"e of application of t#e ratin" s6stem or
internal odels approa$h for e6uit# e5posures* an% #as ma%e necessar6 c#an"es to
t#ese ratin" s6stems or internal mo%els approac#es for e&uit6 e8posures follo1in"
from its assessmentE
)"/ t#e institution #as calculate% un%er t#e 0RD ,pproac# t#e o1n fun%s re&uirements
resultin" from its ris5 parameters estimates an% is ale to sumit t#e reportin" as
re&uire% 6 ,rticle 9+7
(h) the institution has assigned and $ontinues *ith assigning ea$h e5posure in the
range of appli$ation of a rating s#ste to a rating grade or pool of this rating
s#ste% the institution has assigned and $ontinues *ith assigning ea$h e5posure in
the range of appli$ation of an approa$h for e6uit# e5posures to this internal
odels approa$h3
2#e re&uirements to use an 0RD ,pproac#* inclu%in" o1n estimates of FGD an%
conversion factors* appl6 also 1#ere an institution #as implemente% a ratin" s6stem* or
mo%el use% 1it#in a ratin" s6stem* t#at it #as purc#ase% from a t#ir%;part6 ven%or7
A$D, s#all %evelop re"ulator6 tec#nical stan%ar%s to specif6 t#e assessent
ethodolog# competent aut#orities s#all follo1 in assessin" t#e compliance of an
institution 1it# t#e re&uirements to use t#e 0RD ,pproac#7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 14.
Prior e8perience of usin" 0RD approac#es
17 ,n institution appl6in" to use t#e 0RD ,pproac# s#all #ave een usin" for t#e 0RD
e8posure classes in &uestion ratin" s6stems t#at 1ere roa%l6 in line 1it# t#e re&uirements
set out in Section = for internal ris5 measurement an% mana"ement purposes for at least
t#ree 6ears prior to its &ualification to use t#e 0RD ,pproac#7
-7 ,n institution appl6in" for t#e use of o1n estimates of FGDs an% conversion factors s#all
%emonstrate to t#e satisfaction of t#e competent aut#orities t#at it #as een estimatin" an%
emplo6in" o1n estimates of FGDs an% conversion factors in a manner t#at 1as roa%l6
consistent 1it# t#e re&uirements for use of o1n estimates of t#ose parameters set out in
Section = for at least t#ree 6ears prior to &ualification to use o1n estimates of FGDs an%
conversion factors7
37 ?#ere t#e institution e8ten%s t#e use of t#e 0RD approac# suse&uent to its initial
permission* t#e e8perience of t#e institution s#all e sufficient to satisf6 t#e re&uirements
of para"rap#s 4 an% 2 in respect of t#e a%%itional e8posures covere%7 0f t#e use of ratin"
s6stems is e8ten%e% to e8posures t#at are si"nificantl6 %ifferent to t#e scope of t#e e8istin"
covera"e* suc# t#at t#e e8istin" e8perience cannot e reasonal6 assume% to e sufficient
to meet t#e re&uirements of t#ese provisions in respect of t#e a%%itional e8posures* t#en t#e
re&uirements of para"rap#s 4 an% 2 s#all appl6 separatel6 for t#e a%%itional e8posures7
,rticle 141
9easures to e ta5en 1#ere t#e re&uirements of t#is C#apter cease to e met
?#ere an institution ceases to compl6 1it# t#e re&uirements lai% %o1n in t#is C#apter* it s#all
notif6 t#e competent aut#orit6 an% %o one of t#e follo1in":
)a/ present to t#e satisfa$tion of the competent aut#orit6 a plan for a timel6 return to
compliance and realise this plan *ithin a period agreed *ith the $opetent authorit#E
)/ %emonstrate to t#e satisfaction of t#e competent aut#orities t#at t#e effect of non;
compliance is immaterial7
,rticle 14-
9et#o%olo"6 to assi"n e8posure to e8posures classes
17 2#e met#o%olo"6 use% 6 t#e institution for assi"nin" e8posures to %ifferent e8posure
classes s#all e appropriate an% consistent over time7
-7 $ac# e8posure s#all e assi"ne% to one of t#e follo1in" e8posure classes:
)a/ e5posures to central "overnments an% central an5sE
)/ e5posures to on institutionsE
)c/ e5posures to corporatesE
)%/ retail e5posuresE
)e/ e&uit6 e5posuresE
)f/ ites representing securitisation positionsE
)"/ ot#er non cre%it;oli"ation assets
37 2#e follo1in" e8posures s#all e assi"ne% to t#e class lai% %o1n in point )a/ of
para"rap# -:
)a/ e8posures to re"ional "overnments* local aut#orities or pulic sector entities 1#ic#
are treate% as e8posures to central "overnments un%er ,rticle 11. an% Arti$le 444%
)/ e8posures to 9ultilateral Development Dan5s referre% to in ,rticle 11-(2)
($) e5posures to 0nternational Or"anisations 1#ic# attract a ris5 1ei"#t of . O un%er
,rticle 1137
47 2#e follo1in" e8posures s#all e assi"ne% to t#e class lai% %o1n in point )/ of
para"rap# -:
)a/ e8posures to re"ional "overnments an% local aut#orities 1#ic# are not treate% as
e8posures to central "overnments a$$ording to ,rticle 11.(2) and (B)E
)/ e8posures to Pulic Sector $ntities 1#ic# are not treate% as e8posures to $entral
governents a$$ording to ,rticle 444(B)%
)c/ e8posures to 9ultilateral Development Dan5s 1#ic# are not assi"ne% a . O ris5
1ei"#t un%er ,rticle 11-% and
(d) e5posures to finan$ial institutions *hi$h are treated as e5posures to institutions
a$$ording to Arti$le 44B(@)3
+7 2o e eli"ile for t#e retail e8posure class lai% %o1n in point )%/ of para"rap# -* e8posures
s#all meet t#e follo1in" criteria:
)a/ t#e6 s#all e to one of t#e follo1in":
)i/ a natural person or personsE
)ii/ to a small or me%ium siLe% enterprise* provi%e% in that case t#at t#e total
amount o1e% to t#e institution an% parent un%erta5in"s an% its susi%iaries*
inclu%in" an6 past %ue e8posure* 6 t#e oli"or client or "roup of connecte%
clients* ut e8clu%in" e5posures secure% on resi%ential propert6 collateral*
s#all not* to t#e 5no1le%"e of t#e institution* 1#ic# s#all #ave ta5en reasonale
steps to confirm t#e situation* e8cee% $4R 1 millionE
)/ t#e6 are treate% 6 t#e institution in its ris5 mana"ement consistentl6 over time an%
in a similar mannerE
)c/ t#e6 are not mana"e% !ust as in%ivi%uall6 as e8posures in t#e corporate
e8posure classE
)%/ t#e6 eac# represent one of a si"nificant numer of similarl6 mana"e% e8posures7
0n a%%ition to t#e e8posures liste% in t#e first su;para"rap#* t#e present value of retail
minimum lease pa6ments s#all e inclu%e% in t#e retail e8posure class7
=7 2#e follo1in" e8posures s#all e assi"ne% to t#e e&uit6 e8posure class lai% %o1n in
point )e/ of para"rap# -:
)a/ non;%et e8posures conve6in" a suor%inate%* resi%ual claim on t#e assets or income
of t#e issuerE
)/ %et e8posures an% ot#er securities* partners#ips* %erivatives* or ot#er ve#icles* t#e
economic sustance of 1#ic# is similar to t#e e8posures specifie% in point )a/7
>7 ,n6 cre%it oli"ation not assi"ne% to t#e e8posure classes lai% %o1n in points )a/* )/* )%/*
)e/ an% )f/ of para"rap# - s#all e assi"ne% to t#e corporate e8posure class referre% to in
point )c/ of t#at para"rap#7
87 ?it#in t#e corporate e8posure class lai% %o1n in point )c/ of para"rap# -* institutions s#all
separatel6 i%entif6 as specialise% len%in" e8posures* e8posures 1#ic# possess t#e
follo1in" c#aracteristics:
)a/ t#e e8posure is to an entit6 1#ic# 1as create% specificall6 to finance or operate
p#6sical assets or is an e$onoi$all# $opara!le e5posureE
)/ t#e contractual arran"ements "ive t#e len%er a sustantial %e"ree of control over t#e
assets an% t#e income t#at t#e6 "enerateE
)c/ t#e primar6 source of repa6ment of t#e oli"ation is t#e income "enerate% 6 t#e
assets ein" finance%* rat#er t#an t#e in%epen%ent capacit6 of a roa%er
commercial enterprise7
97 2#e resi%ual value of lease% properties s#all e assi"ne% to t#e e8posure class lai% %o1n in
point )"/ of para"rap# -* e8cept to t#e e8tent t#at resi%ual value is alrea%6 inclu%e% in t#e
lease e8posure lai% %o1n in ,rticle 1=-)4/7
4:3 +he e5posure fro providing prote$tion under an nth=to=default !asket $redit derivative
shall !e assigned to the sae $lass laid do*n in paragraph 2 to *hi$h the e5posures in
the !asket *ould !e assigned, e5$ept if the individual e5posures in the !asket *ould !e
assigned to various e5posure $lasses in *hi$h $ase the e5posure shall !e assigned to the
$orporates e5posure $lass laid do*n in point ($) of paragraph 23
,rticle 143
Con%itions for implementin" t#e 0RD approac# across
%ifferent classes of e8posure an% usiness units
17 0nstitutions an% an6 parent un%erta5in" an% its susi%iaries s#all implement t#e 0RD
,pproac# for all e8posures* unless t#e6 #ave receive% t#e permission of t#e competent
aut#orities to permanentl6 use t#e Stan%ar%ise% ,pproac# in accor%ance 1it# ,rticle 14+7
Su!ect to t#e prior permission of t#e competent aut#orities* implementation ma6 e
carrie% out se&uentiall6 across t#e %ifferent e8posure classes* referre% to in ,rticle 14-*
1it#in t#e same usiness unit* across %ifferent usiness units in t#e same "roup or for t#e
use of o1n estimates of FGDs or conversion factors for t#e calculation of ris5 1ei"#ts for
e8posures to corporates* institutions* an% central "overnments an% central an5s7
0n t#e case of t#e retail e8posure class referre% to in ,rticle 14-)+/* implementation ma6 e
carrie% out se&uentiall6 across t#e cate"ories of e8posures to 1#ic# t#e %ifferent
correlations in ,rticle 149 correspon%7
-7 Copetent authorities s#all %etermine t#e time perio% over 1#ic# an institution and an6
parent un%erta5in" an% its susi%iaries s#all e re&uire% to implement t#e 0RD approac# for
all e8posures7 2#is time perio% s#all e one t#at Acompetent authorities $onsider to e
appropriate on t#e asis of t#e nature an% scale of t#e a$tivities of the institutions* or an6
parent un%erta5in" an% its susi%iaries* an% t#e numer an% nature of ratin" s6stems to
e implemente%7
37 0nstitutions s#all carr6 out implementation of t#e 0RD approac# accor%in" to con%itions
%etermine% 6 t#e competent aut#orities7 2#e competent aut#orit6 s#all %esi"n t#ose
con%itions suc# t#at t#e6 ensure t#at t#e fle8iilit6 un%er para"rap# 1 is not use%
selectivel6 for t#e purposes of ac#ievin" re%uce% o1n fun%s re&uirements in respect of
t#ose e8posure classes or usiness units t#at are 6et to e inclu%e% in t#e 0RD ,pproac# or
in t#e use of o1n estimates of FGDs an% conversion factors7
47 0nstitutions t#at #ave e"un to use of t#e 0RD approac# onl6 after 1 <anuar6 -.13 or have
until this date !een re6uired !# the $opetent authorities to !e a!le to $al$ulate their
$apital re6uireents using the "tandardised approa$h s#all retain t#eir ailit6 to
calculate capital re&uirements usin" t#e Stan%ar%ise% ,pproac# for all t#eir e8posures
%urin" t#e implementation perio% until t#e competent aut#orities notif6 t#em t#at t#e6 are
satisfie% t#at t#e implementation of t#e 0RD approac# 1ill e complete% 1it#
reasonale certaint67
+7 ,n institution t#at is permitte% to use t#e 0RD ,pproac# for an6 e8posure class s#all Ause
t#e 0RD ,pproac# for t#e e&uit6 e8posure class laid do*n in paragraph 2 point (e) of
Arti$le 4B2, e8cept 1#ere t#at institution is permitte% to appl6 t#e Stan%ar%ise% ,pproac#
for e&uit6 e8posures pursuant to ,rticle 14+ and for the other non $redit=o!ligation assets
e5posure $lass laid do*n in paragraph 2 point (g) of Arti$le 4B23
=7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions accor%in"
to 1#ic# competent aut#orities s#all %etermine t#e appropriate nature and tiing of the
se6uential roll out of &)B a$ross e5posure $lasses referred to in paragraph C3
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 144
Con%itions to revert to t#e use of less sop#isticate% approac#es
17 ,n institution t#at uses t#e 0RD ,pproac# for a parti$ular e5posure $lass or t#pe of
e5posure s#all not stop usin" t#at approac# an% use instea% t#e Stan%ar%ise% ,pproac# for
t#e calculation of ris5;1ei"#te% e8posure amounts unless t#e follo1in" con%itions are met:
)a/ t#e institution #as %emonstrate% to t#e satisfaction of t#e competent aut#orit6 t#at t#e
use of t#e Stan%ar%ise% ,pproac# is not propose% in or%er to re%uce t#e o1n fun%s
re&uirement of t#e institution* is necessar6 on t#e asis of nature an% comple8it6 of
t#e institutionGs total e5posures of this t#pe an% 1oul% not #ave a material a%verse
impact on t#e solvenc6 of t#e institution or its ailit6 to mana"e ris5 effectivel6E
)/ t#e institution #as receive% t#e prior permission of t#e competent aut#orit67
-7 0nstitutions 1#ic# #ave otaine% permission un%er ,rticle 14=)9/ to use o1n estimates of
FGDs an% conversion factors* s#all not revert to t#e use of FGD values an% conversion
factors referre% to in ,rticle 14=)8/ unless t#e follo1in" con%itions are met:
)a/ t#e institution #as %emonstrate% to t#e satisfaction of t#e competent aut#orit6 t#at t#e
use of AFGDs an% conversion factors lai% %o1n in ,rticle 14=)8/ for a $ertain
e5posure $lass or t#pe of e5posure is not propose% in or%er to re%uce t#e o1n fun%s
re&uirement of t#e institution* is necessar6 on t#e asis of nature an% comple8it6 of
t#e institutionGs total e5posures of this t#pe an% 1oul% not #ave a material a%verse
impact on t#e solvenc6 of t#e institution or its ailit6 to mana"e ris5 effectivel6E
)/ t#e institution #as receive% t#e prior permission of t#e competent aut#orit67
37 2#e application of para"rap#s 1 an% - is su!ect to t#e con%itions for rollin" out t#e 0RD
approac# %etermine% 6 t#e competent aut#orities in accor%ance 1it# ,rticle 143 an% t#e
permission for permanent partial use referre% to in ,rticle 14+7
,rticle 14+
Con%itions for permanent partial use
17 ?#ere institutions #ave receive% t#e prior permission of t#e competent aut#orities*
institutions permitte% to use t#e 0RD ,pproac# in t#e calculation of ris5;1ei"#te% e8posure
amounts an% e8pecte% loss amounts for one or more e8posure classes A ma6 appl6 t#e
Stan%ar%ise% ,pproac# for t#e follo1in" e8posures:
)a/ t#e e8posure class lai% %o1n in 14-)2)(a/* 1#ere t#e numer of material
counterparties is limite% an% it 1oul% e un%ul6 ur%ensome for t#e institution to
implement a ratin" s6stem for t#ese counterpartiesE
)/ t#e e8posure class lai% %o1n in ,rticle 14-(2))/* 1#ere t#e numer of material
counterparties is limite% an% it 1oul% e un%ul6 ur%ensome for t#e institution to
implement a ratin" s6stem for t#ese counterpartiesE
)c/ e8posures in non;si"nificant usiness units as 1ell as e8posure classes or t#pes of
e5posures t#at are immaterial in terms of siLe an% perceive% ris5 profileE
)%/ e8posures to central "overnments and $entral !anks of t#e 9emer States an% t#eir
re"ional "overnments* local aut#orities A, a%ministrative o%ies and pu!li$ se$tor
entities provi%e%:
)i/ t#ere is no %ifference in ris5 et1een t#e e8posures to t#at central "overnment
an% $entral !ank and t#ose ot#er e8posures ecause of specific pulic
arran"ements* an%
)ii/ e8posures to t#e central "overnment and $entral !ank are assi"ne% a . O ris5
1ei"#t un%er ,rticle 1.9)2), Arti$le 4:>(B) or Arti$le 4:>(Ba/E
)e/ e8posures of an institution to a counterpart6 1#ic# is its parent un%erta5in"* its
susi%iar6 or a susi%iar6 of its parent un%erta5in" provi%e% t#at t#e counterpart6 is
an institution or a financial #ol%in" compan6* mi8e% financial #ol%in" compan6*
financial institution* asset mana"ement compan6 or ancillar6 services un%erta5in"
su!ect to appropriate pru%ential re&uirements or an un%erta5in" lin5e% 6 a
relations#ip 1it#in t#e meanin" of ,rticle 1-)1/ of Directive 83/349/$$CE
)f/ Ae8posures et1een institutions 1#ic# meet t#e re&uirements set out in
,rticle 1.8)>/E
)"/ e&uit6 e8posures to entities 1#ose cre%it oli"ations are assi"ne% a . O ris5 1ei"#t
un%er C#apter - inclu%in" t#ose pulicl6 sponsore% entities 1#ere a . O ris5 1ei"#t
can e applie%E
)#/ e&uit6 e8posures incurre% un%er le"islative pro"rammes to promote specifie% sectors
of t#e econom6 t#at provi%e si"nificant susi%ies for t#e investment to t#e institution
an% involve some form of "overnment oversi"#t an% restrictions on t#e e&uit6
investments 1#ere suc# e8posures ma6 in a""re"ate e e8clu%e% from t#e 0RD
approac# onl6 up to a limit of 1. O of o1n fun%sE
)i/ t#e e8posures i%entifie% in ,rticle 44B)B/ meetin" t#e con%itions specifie% t#ereinE
)!/ State an% State;reinsure% "uarantees referre% to in ,rticle -1.)-/7
2#e competent aut#orities s#all permit t#e application of Stan%ar%ise% ,pproac# for e&uit6
e8posures referre% to in points )"/ an% )#/ 1#ic# #ave een permitte% for t#is treatment in
ot#er 9emer States7 EBA shall pu!lish on its *e!site and regularl# update a list *ith
the e5posures re$ognised under points (g) and (h) of Arti$le 4B@(4) to !e treated
a$$ording to the standardised approa$h3
-7 3or t#e purposes of para"rap# 1* t#e e&uit6 e8posure class of an institution s#all e
material if t#eir a""re"ate value* e8clu%in" e&uit6 e8posures incurre% un%er le"islative
pro"rammes as referre% to in point )"/ of para"rap# 1* e8cee%s on avera"e over t#e
prece%in" 6ear 1. O of t#e o1n fun%s of t#e institution7 ?#ere t#e numer of t#ose e&uit6
e8posures is less t#an 1. in%ivi%ual #ol%in"s* t#at t#res#ol% s#all e + O of t#e o1n fun%s
of t#e institution7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to %etermine t#e con%itions of
application of points )a/* )/ an% )c/ of paragraph 43
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 31 Decemer 2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
A
B3 EBA shall issue guidelines on the appli$ation of Arti$le 4B@(4)(4)(d) in 2:4A,
re$oending liits in ters of a per$entage of total !alan$e sheet and or risk *eighted
assets to !e $al$ulated *ith the standardised approa$h3 +hose guidelines shall !e
adopted in a$$ordan$e *ith Arti$le 4? of )egulation (E2) Fo 4:>CD2:4:3
Section -
Calculation of ris5 1ei"#te% e8posure amounts
S4D;S$C20OB 1
2R$,29$B2 DH 2HP$ O3 $GPOS4R$ CLA""
,rticle 14=
2reatment 6 e8posure class
17 2#e ris5;1ei"#te% e8posure amounts for cre%it ris5 for e8posures elon"in" to one of t#e
e8posure classes referre% to in points )a/ to )e/ an% )"/ of 14-)-/ s#all* unless %e%ucte%
from o1n fun%s* e calculate% in accor%ance 1it# Su;section - e8cept 1#ere t#ose
e8posures are %e%ucte% from Common $&uit6 2ier 1 ,%%itional 2ier 1 items or
2ier - items7
-7 2#e ris5;1ei"#te% e8posure amounts for %ilution ris5 for purc#ase% receivales s#all e
calculate% accor%in" to ,rticle 1+37 ?#ere an institution #as full recourse to t#e seller of
purc#ase% receivales for %efault ris5 an% for %ilution ris5* At#e provisions of t#is ,rticle
an% ,rticles 14> an% 1+4)1/ to )4/ in relation to purc#ase% receivales s#all not appl6 an%
t#e e8posure s#all e treate% as a collateralise% e8posure7
37 2#e calculation of ris5;1ei"#te% e8posure amounts for cre%it ris5 an% %ilution ris5 s#all e
ase% on t#e relevant parameters associate% 1it# t#e e8posure in &uestion7 2#ese s#all
inclu%e proailit6 of %efault )#ereinafter referre% to as MPDN/* FGD* maturit6 )#ereinafter
referre% to as M9N/ an% e8posure value of t#e e8posure7 PD an% FGD ma6 e consi%ere%
separatel6 or !ointl6* in accor%ance 1it# Section 47
47 0nstitutions shall calculate ris5;1ei"#te% e8posure amounts for cre%it ris5 for all e8posures
elon"in" to t#e e8posure class (e&uit6( referre% to in point )e/ of ,rticle 14-)-/ in
accor%ance 1it# ,rticle 4@:3 &nstitutions a# use the approa$hes set out in Arti$le 4@:(C)
and (B/ 1#ere t#e6 #ave receive% t#e prior permission of t#e competent aut#orities7
Competent aut#orities s#all "rant permission for an institution to use t#e internal mo%els
approac# set out in ,rticle 1+.)4/ provi%e% t#e institution meets t#e re&uirements set out in
Su;section 4 of Section =7
+7 2#e calculation of ris5 1ei"#te% e8posure amounts for cre%it ris5 for specialise% len%in"
e8posures ma6 e calculate% in accor%ance 1it# ,rticle 148)@/7
=7 3or e8posures elon"in" to t#e e8posure classes referre% to in points )a/ to )%/ of
,rticle 14-)-/* institutions s#all provi%e t#eir o1n estimates of PDs in accor%ance 1it#
,rticle 138 an% Section =7
>7 3or e8posures elon"in" to t#e e8posure class referre% to in point )%/ of ,rticle 14-)-/*
institutions s#all provi%e o1n estimates of FGDs an% conversion factors in accor%ance
1it# ,rticle 138 an% Section =7
87 3or e8posures elon"in" to t#e e8posure classes referre% to in points )a/ to )c/ of
,rticle 14-)-/* institutions s#all appl6 t#e FGD values set out in ,rticle 1+>)1/* an% t#e
conversion factors set out in ,rticle 1=-)8/ )a/ to )%/* unless it #as een permitte% to use its
o1n estimates of FGDs an% conversion factors for t#ose e8posure classes in accor%ance
1it# para"rap# 97
97 3or all e8posures elon"in" to t#e e8posure classes referre% to in points )a/ to )c/ of
,rticle 14-)-/* t#e competent aut#orit6 s#all permit institutions to use o1n estimates
of FGDs an% conversion factors Ain accor%ance 1it# ,rticle 13A and "e$tion ?3
1.7 2#e ris5;1ei"#te% e8posure amounts for securitise% e8posures an% for e8posures elon"in"
to t#e e8posure class referre% to in point )f/ of ,rticle 14-)-/ s#all e calculate% in
accor%ance 1it# C#apter +7
,rticle 14>
2reatment of e8posures in t#e form of units or s#ares
in collective investment un%erta5in"s )C04s/
17 ?#ere e8posures in t#e form of units or s#ares in a collective investment un%erta5in"s
)C04s/ meet t#e criteria set out in ,rticle 1->)3/ an% t#e institution is a1are of all or parts
of t#e un%erl6in" e8posures of t#e C04* t#e institution s#all loo5 t#rou"# to t#ose
un%erl6in" e8posures in or%er to calculate ris5;1ei"#te% e8posure amounts an% e8pecte%
loss amounts in accor%ance 1it# t#e met#o%s set out in t#is C#apter7
?#ere an un%erl6in" e8posure of t#e C04 is itself anot#er e8posure in t#e form of units or
s#ares in anot#er C04* t#e first institution s#all also loo5 t#rou"# to t#e un%erl6in"
e8posures of t#e ot#er C047
-7 ?#ere t#e institution %oes not meet t#e con%itions for usin" t#e met#o%s set out in t#is
C#apter for all or parts of t#e un%erl6in" e8posures of t#e C04* ris5 1ei"#te% e8posure
amounts an% e8pecte% loss amounts s#all e calculate% in accor%ance 1it# t#e
follo1in" approac#es:
)a/ for e8posures elon"in" to t#e (e&uit6( e8posure class referre% to in ,rticle 14-)-/)e/*
institutions s#all appl6 t#e simple ris5;1ei"#t approac# set out in ,rticle 1+.)-/E
)/ for all ot#er un%erl6in" e8posures referre% to in para"rap# 1* institutions s#all appl6
t#e Stan%ar%ise% ,pproac# lai% %o1n in C#apter -* su!ect to t#e follo1in":
)i/ for e8posures su!ect to a specific ris5 1ei"#t for unrate% e8posures or su!ect
to t#e cre%it &ualit6 step 6iel%in" t#e #i"#est ris5 1ei"#t for a "iven e8posure
class* t#e ris5 1ei"#t s#all e multiplie% 6 a factor of t1o ut must not e
#i"#er t#an 1 -+. OE
)ii/ for all ot#er e8posures* t#e ris5 1ei"#t must e multiplie% 6 a factor of 1*1
an% s#all e su!ect to a minimum of + O7
?#ere* for t#e purposes of point )a/* t#e institution is unale to %ifferentiate et1een
private e&uit6* e8c#an"e;tra%e% an% ot#er e&uit6 e8posures* it s#all treat t#e e8posures
concerne% as ot#er e&uit6 e8posures7 ?#ere t#ose e8posures* ta5en to"et#er 1it# t#e
institution(s %irect e8posures in t#at e8posure class* are not material 1it#in t#e meanin" of
,rticle 14+)-/* ,rticle 14+)1/ ma6 e applie% su!ect to t#e permission of t#e
competent aut#orities7
37 ?#ere e8posures in t#e form of units or s#ares in a C04 %o not meet t#e criteria set out in
,rticle 1->)3/* or t#e institution is not a1are of all of t#e un%erl6in" e8posures of t#e C04
or of its un%erl6in" e8posures 1#ic# is itself an e8posure in t#e form of units or s#ares in a
C04* t#e institution s#all loo5 t#rou"# to t#ose un%erl6in" e8posures an% calculate ris5;
1ei"#te% e8posure amounts an% e8pecte% loss amounts in accor%ance 1it# t#e simple ris5;
1ei"#t approac# set out in ,rticle 1+.)-/7
?#ere t#e institution is unale to %ifferentiate et1een private e&uit6* e8c#an"e;tra%e% an%
ot#er e&uit6 e8posures* it s#all treat t#e e8posures concerne% as ot#er e&uit6 e8posures7 0t
s#all assi"n non e&uit6 e8posures to t#e ot#er e&uit6 class7
47 ,lternativel6 to t#e met#o% %escrie% in t#e para"rap# C, institutions ma6 calculate
t#emselves or ma6 rel6 on t#e follo1in" t#ir% parties to calculate an% report t#e avera"e
ris5 1ei"#te% e8posure amounts ase% on t#e C04(s un%erl6in" e8posures in accor%ance
1it# t#e approac#es referre% to in points )a/ an% )/ of para"rap# - for t#e follo1in":
)a/ t#e %epositor6 institution or financial institution of t#e C04 provi%e% t#at t#e C04
e8clusivel6 invests in securities an% %eposits all securities at t#is %epositor6
institution or financial institutionE
)/ for ot#er C04s* t#e C04 mana"ement compan6* provi%e% t#at t#e C04 mana"ement
compan6 meets t#e criteria set out in ,rticle 1->)3/)a/7
2#e correctness of t#e calculation s#all e confirme% 6 an e8ternal au%itor7
+7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions accor%in"
to 1#ic# competent aut#orities ma6 permit institutions to use ,rticle 14+)1/ un%er
point )/ of para"rap# -7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 31 Decemer -.137
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
Su;Section -
Calculation of ris5 1ei"#te% e8posure amounts for cre%it ris5
,rticle 148
Ris5 1ei"#te% e8posure amounts for e8posures to corporates*
institutions an% central "overnments an% central an5s
17 Su!ect to t#e application of t#e specific treatments lai% %o1n in para"rap#s -* 3 an% 4* t#e
ris5 1ei"#te% e8posure amounts for e8posures to corporates* institutions an% central
"overnments an% central an5s s#all e calculate% accor%in" to t#e follo1in" formulae:
5is1 ; wei#hte$
e,posure amount 5) e,posure value
1#ere t#e ris5 1ei"#t R? is %efine% as
)i/ if PD U .* R? s#all e .E
)ii/ if PD U 1* i7e7* for %efaulte% e8posures:
' 1#ere institutions appl6 t#e FGD values set out in ,rticle 1+>)1/* R? s#all e
.E
' 1#ere institutions use o1n estimates of FGDs* R? s#all e
5) ma8{.*1-7+ (7!D E7
8E
)}
E
1#ere t#e $8pecte% Foss Dest $stimate )#ereinafter referre% to as M$F
D$
N/ s#all e
t#e institution(s est estimate of e8pecte% loss for t#e %efaulte% e8posure accor%in" to
,rticle 1>>)1/)#/E
17 )iii/ if
PD ].OE1..O[
* i7e7* for an6 value ot#er t#an un%er )i/ or )ii/
5)

7!D 9

1
!(PD ) +
R G 0.999 LGD PD 1 V W X
(
M 2.5
)
b
12.5 1.06

_
1 5

_
1 17+ b
1#ere
,
,
B)8/ U t#e cumulative %istriution function for a stan%ar% normal ran%om variale
)i7e7 t#e proailit6 t#at a normal ran%om variale 1it# mean Lero an% variance of
one is less t#an or e&ual to 8/E
G )Y/ U%enotes t#e inverse cumulative %istriution function for a stan%ar% normal
ran%om variale )i7e7 t#e value 8 suc# t#at B)8/ L/
R U %enotes t#e coefficient of correlation* is %efine% as
1 e
+. PD
1 e
+. PD
_
5 .71-

1 e
+.
+ .7-4 1

1 e
+.
,
b U t#e maturit6 a%!ustment factor* 1#ic# is %efine% as
b (.7118+- .7.+4>8 ln(PD))
-
7@

-7 3or all e8posures to lar"e finan$ial se$tor entities, the $o=effi$ient of $orrelation of
paragraph 4(iii) is ultiplied !# 432@3 1or all e5posures to unre"ulate% financial entities*
t#e $oeffi$ients of correlation set out in para"rap# 1 (iii) and paragraph B, as relevant,
are ultiplied !# 432@3
37 2#e ris5 1ei"#te% e8posure amount for eac# e8posure 1#ic# meets t#e re&uirements set
out in ,rticle 198 an% -1- ma6 e a%!uste% accor%in" to t#e follo1in" formula:
5is1/wei#hte$ e,posure amount 5) e,posure value (.71+ + 1=. PD )
1#ere:
PD
pp
U PD of t#e protection provi%er7
R? s#all e calculate% usin" t#e relevant ris5 1ei"#t formula set out in point 1 for t#e
e8posure* t#e PD of t#e oli"or an% t#e FGD of a comparale %irect e8posure to t#e
protection provi%er7 2#e maturit6 factor )/ s#all e calculate% usin" t#e lo1er of t#e PD of
t#e protection provi%er an% t#e PD of t#e oli"or7
47 3or e8posures to companies 1#ere t#e total annual sales for t#e consoli%ate% "roup of
1#ic# t#e firm is a part is less t#an $4R +. million* institutions ma6 use t#e follo1in"
correlation formula in para"rap# 1 )iii/ for t#e calculation of ris5 1ei"#ts for corporate
e8posures7 0n t#is formula S is e8presse% as total annual sales in millions of $uros 1it#
$4R + million Z S Z $4R +. million7 Reporte% sales of less t#an $4R + million s#all e
treate% as if t#e6 1ere e&uivalent to $4R + million7 3or purc#ase% receivales t#e total
annual sales s#all e t#e 1ei"#te% avera"e 6 in%ivi%ual e8posures of t#e pool7
5

.71-

1
e
+. PD +
.7-4

1
1
e

.7.4

min{maS}*+.} +
_
1 e
+.

1 e
+.

,


4+
,
0nstitutions s#all sustitute total assets of t#e consoli%ate% "roup for total annual sales
1#en total annual sales are not a meanin"ful in%icator of firm siLe an% total assets are a
more meanin"ful in%icator t#an total annual sales7

+. PD
_
pp

+7 3or specialise% len%in" e8posures in respect of 1#ic# an institution is not ale to estimate
PDs or t#e institutions( PD estimates %o not meet t#e re&uirements set out in Section =* t#e
institution s#all assi"n ris5 1ei"#ts to t#ese e8posures accor%in" to 2ale 1* as follo1s:
2ale 1
Remainin" 9aturit6 Cate"or6 1 Cate"or6 - Cate"or6 3 Cate"or6 4 Cate"or6 +
Fess t#an -*+ 6ears +. O >. O 11+ O -+. O . O
$&ual or more t#an -*+ 6ears >. O 9. O 11+ O -+. O . O
0n assi"nin" ris5 1ei"#ts to specialise% len%in" e8posures institutions s#all ta5e into
account t#e follo1in" factors: financial stren"t#* political an% le"al environment*
transaction an%/or asset c#aracteristics* stren"t# of t#e sponsor an% %eveloper* inclu%in"
an6 pulic private partners#ip income stream* an% securit6 pac5a"e7
=7 3or t#eir purc#ase% corporate receivales institutions s#all compl6 1it# t#e re&uirements
set out in ,rticle 18.7 3or purc#ase% corporate receivales t#at compl6 in a%%ition 1it# t#e
con%itions set out in ,rticle 149)+/* an% 1#ere it 1oul% e un%ul6 ur%ensome for an
institution to use t#e ris5 &uantification stan%ar%s for corporate e8posures as set out in
Section = for t#ese receivales* t#e ris5 &uantification stan%ar%s for retail e8posures as set
out in Section = ma6 e use%7
>7 3or purc#ase% corporate receivales* refun%ale purc#ase %iscounts* collateral or partial
"uarantees t#at provi%e first;loss protection for %efault losses* %ilution losses* or ot#* ma6
e treate% as first;loss positions un%er t#e 0RD securitisation frame1or57
87 ?#ere an institution provi%es cre%it protection for a numer of e8posures un%er terms t#at
t#e nt# %efault amon" t#e e8posures s#all tri""er pa6ment an% t#at t#is cre%it event s#all
terminate t#e contract* if t#e pro%uct #as an e8ternal cre%it assessment from an A$C,0 t#e
ris5 1ei"#ts set out in C#apter + s#all e applie%7 0f t#e pro%uct is not rate% 6 an A $C,0*
t#e ris5 1ei"#ts of t#e e8posures inclu%e% in t#e as5et 1ill e a""re"ate%* e8clu%in" n;1
e8posures 1#ere t#e sum of t#e e8pecte% loss amount multiplie% 6 1-*+ an% t#e ris5
1ei"#te% e8posure amount s#all not e8cee% t#e nominal amount of t#e protection provi%e%
6 t#e cre%it %erivative multiplie% 6 1-*+7 2#e n;1 e8posures to e e8clu%e% from t#e
a""re"ation s#all e %etermine% on t#e asis t#at t#e6 s#all inclu%e t#ose e8posures eac# of
1#ic# pro%uces a lo1er ris5;1ei"#te% e8posure amount t#an t#e ris5;1ei"#te% e8posure
amount of an6 of t#e e8posures inclu%e% in t#e a""re"ation7 , 1 -+. O ris5 1ei"#t s#all
appl6 to positions in a as5et for 1#ic# an institution cannot %etermine t#e ris5;1ei"#t
un%er t#e 0RD approac#7
A$D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 ho* institutions s#all
ta5e into account t#e factors referre% to t#e secon% supara"rap# of para"rap# + 1#en
assi"nin" ris5 1ei"#ts to specialise% len%in" e8posures7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission
6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 149
Ris5 1ei"#te% e8posure amounts for retail e8posures
17 2#e ris5;1ei"#te% e8posure amounts for retail e8posures s#all e calculate% accor%in" to
t#e follo1in" formulae:
5is1 ; wei#hte$
e,posure amount 5) e,posure value
1#ere t#e ris5 1ei"#t R? is %efine% as follo1s:
)ii/ if PD U 1* i7e7* for %efaulte% e8posures* R? s#all e
5) ma8{.*1-7+ (7!D E7
8E
)}
;
1#ere $F
D$
s#all e t#e institution(s est estimate of e8pecte% loss for t#e %efaulte%
e8posure accor%in" to ,rticle 1>>)1/)#/E
)iii/ if
PD ].OE1..O[
* i7e7* for an6 possile value for PD ot#er t#an un%er )ii/

_
_
5)

7!D

9
1

!(PD )

+
5

!(.7999)

7!D

PD

1-7+

17.=

1 5
1 5

,
,
1#ere
B)8/ U t#e cumulative %istriution function for a stan%ar% normal ran%om variale
)i7e7 t#e proailit6 t#at a normal ran%om variale 1it# mean Lero an% variance of
one is less t#an or e&ual to 8/E
G )Y/ Ut#e inverse cumulative %istriution function for a stan%ar% normal ran%om
variale )i7e7 t#e value 8 suc# t#at B)8/ L/E
R U t#e coefficient of correlation %efine% as
1 e
3+ PD
1 e
3+ PD
_
5 .7.3

1 e
3+
+ .71= 1

1 e
3+
,
-7 2#e ris5 1ei"#te% e8posure amount for eac# e8posure to small an% me%ium siLe%
enterprise as %efine% in ,rticle 14-)+/ 1#ic# meets t#e re&uirements set out in ,rticles 198
an% -1- ma6 e calculate% accor%in" to ,rticle 148)3/7

37 3or retail e8posures secure% 6 immovale propert6 collateral a coefficient of correlation

R of .71+ s#all replace t#e fi"ure pro%uce% 6 t#e correlation formula in para"rap# 17
47 3or &ualif6in" revolvin" retail e8posures as %efine% in points )a/ to )e/* a coefficient of
correlation R of .7.4 s#all replace t#e fi"ure pro%uce% 6 t#e correlation formula in
para"rap# 17
$8posures s#all &ualif6 as &ualif6in" revolvin" retail e8posures if t#e6 meet t#e
follo1in" con%itions:
)a/ t#e e8posures are to in%ivi%ualsE
)/ t#e e8posures are revolvin"* unsecure%* an% to t#e e8tent t#e6 are not %ra1n
imme%iatel6 an% uncon%itionall6* cancellale 6 t#e institution7 0n t#is conte8t
revolvin" e8posures are %efine% as t#ose 1#ere customers( outstan%in" alances are
permitte% to fluctuate ase% on t#eir %ecisions to orro1 an% repa6* up to a limit
estalis#e% 6 t#e institution7 4n%ra1n commitments ma6 e consi%ere% as
uncon%itionall6 cancellale if t#e terms permit t#e institution to cancel t#em to t#e
full e8tent allo1ale un%er consumer protection an% relate% le"islationE
)c/ t#e ma8imum e8posure to a sin"le in%ivi%ual in t#e su;portfolio is $4R 1.. ...
or lessE
)%/ t#e use of t#e correlation of t#is para"rap# is limite% to portfolios t#at #ave e8#iite%
lo1 volatilit6 of loss rates* relative to t#eir avera"e level of loss rates* especiall6
1it#in t#e lo1 PD an%sE
)e/ t#e treatment as a &ualif6in" revolvin" retail e8posure s#all e consistent 1it# t#e
un%erl6in" ris5 c#aracteristics of t#e su;portfolio7
D6 1a6 of %ero"ation from point )/* t#e re&uirement to e unsecure% %oes not appl6 in
respect of collateralise% cre%it facilities lin5e% to a 1a"e account7 0n t#is case amounts
recovere% from t#e collateral s#all not e ta5en into account in t#e FGD estimate7
Competent aut#orities s#all revie1 t#e relative volatilit6 of loss rates across t#e &ualif6in"
revolvin" retail su;portfolios* as 1ell t#e a""re"ate &ualif6in" revolvin" retail portfolio*
an% s#all s#are information on t#e t6pical c#aracteristics of &ualif6in" revolvin" retail loss
rates across 9emer States7
+7 2o e eli"ile for t#e retail treatment* purc#ase% receivales s#all compl6 1it# t#e
re&uirements set out in ,rticle 18. an% t#e follo1in" con%itions:
)a/ 2#e institution #as purc#ase% t#e receivales from unrelate%* t#ir% part6 sellers* an%
its e8posure to t#e oli"or of t#e receivale %oes not inclu%e an6 e8posures t#at are
%irectl6 or in%irectl6 ori"inate% 6 t#e institution itselfE
)/ 2#e purc#ase% receivales s#all e "enerate% on an arm(s;len"t# asis et1een t#e
seller an% t#e oli"or7 ,s suc#* inter;compan6 accounts receivales an% receivales
su!ect to contra;accounts et1een firms t#at u6 an% sell to eac# ot#er
are ineli"ileE
)c/ 2#e purc#asin" institution #as a claim on all procee%s from t#e purc#ase%
receivales or a pro;rata interest in t#e procee%sE an%
)%/ 2#e portfolio of purc#ase% receivales is sufficientl6 %iversifie%7
=7 3or purc#ase% receivales* refun%ale purc#ase %iscounts* collateral or partial "uarantees
t#at provi%e first;loss protection for %efault losses* %ilution losses* or ot#* ma6 e treate%
as first;loss positions un%er t#e 0RD securitisation frame1or57
>7 3or #6ri% pools of purc#ase% retail receivales 1#ere purc#asin" institutions cannot
separate e8posures secure% 6 immovale propert6 collateral an% &ualif6in" revolvin"
retail e8posures from ot#er retail e8posures* t#e retail ris5 1ei"#t function pro%ucin" t#e
#i"#est capital re&uirements for t#ose e8posures s#all appl67
,rticle 1+.
Ris5 1ei"#te% e8posure amounts for e&uit6 e8posures
17 0nstitutions s#all %etermine t#eir ris5;1ei"#te% e8posure amounts for e&uit6 e8posures*
e8clu%in" t#ose %e%ucte% in accor%ance 1it# Part 21o or su!ect to a -+. O ris5 1ei"#t in
accor%ance 1it# ,rticle 4+* accor%in" to t#e Aapproac#es set out in para"rap#s )-/* )3/
an% )4/ of this Arti$le3 An institution a# appl6 different approa$hes to %ifferent e6uit#
portfolios 1#ere t#e institution itself uses %ifferent approac#es for internal risk
anageent purposes7 ?#ere an institution uses %ifferent approac#es* t#e c#oice of the
.( D L8( approa$h or the internal odels approa$h s#all e ma%e consistentl6,
in$luding over tie and *ith the approa$h used for the internal risk anageent of the
relevant e6uit# e5posure, an% s#all not e %etermine% 6 re"ulator6 aritra"e
consi%erations7
0nstitutions ma6 treat e&uit6 e8posures to ancillar6 services un%erta5in"s accor%in" to t#e
treatment of ot#er non cre%it; oli"ation assets7
-7 4n%er t#e Simple ris5 1ei"#t approac#* t#e ris5 1ei"#te% e8posure amount s#all e
calculate% accor%in" to t#e follo1in" formula:3
Ris5 1ei"#t )R?/ U 19. O for private e&uit6 e8posures in sufficientl6
%iversifie% portfolios7
Ris5 1ei"#t )R?/ U -9. O for e8c#an"e tra%e% e&uit6 e8posures7
Ris5 1ei"#t )R?/ U 3>. O for all ot#er e&uit6 e8posures7
Ris5;1ei"#te% e8posure amount U R? T e8posure value7
S#ort cas# positions an% %erivative instruments #el% in t#e non;tra%in" oo5 are permitte%
to offset lon" positions in t#e same in%ivi%ual stoc5s provi%e% t#at t#ese instruments #ave
een e8plicitl6 %esi"nate% as #e%"es of specific e&uit6 e8posures an% t#at t#e6 provi%e a
#e%"e for at least anot#er 6ear7 Ot#er s#ort positions are to e treate% as if t#e6 are lon"
positions 1it# t#e relevant ris5 1ei"#t assi"ne% to t#e asolute value of eac# position7 0n
t#e conte8t of maturit6 mismatc#e% positions* t#e met#o% is t#at for corporate e8posures as
set out in ,rticle 1+8)+/7
0nstitutions ma6 reco"nise unfun%e% cre%it protection otaine% on an e&uit6 e8posure in
accor%ance 1it# t#e met#o%s set out in C#apter B3
37 4n%er t#e PD/FGD approac#* ris5 1ei"#te% e8posure amounts s#all e calculate%
accor%in" to t#e formulas in ,rticle 148)1/7 0f institutions %o not #ave sufficient
information to use t#e %efinition of %efault set out in ,rticle 1>4* a scalin" factor of 1*+
s#all e assi"ne% to t#e ris5 1ei"#ts7
,t t#e in%ivi%ual e8posure level t#e sum of t#e e8pecte% loss amount multiplie% 6 1-*+
an% t#e ris5 1ei"#te% e8posure amount s#all not e8cee% t#e e8posure value multiplie%
6 1-*+7
0nstitutions ma6 reco"nise unfun%e% cre%it protection otaine% on an e&uit6 e8posure in
accor%ance 1it# t#e met#o%s set out in C#apter 0R7 2#is s#all e su!ect to an FGD
of 9. O on t#e e8posure to t#e provi%er of t#e #e%"e7 3or private e&uit6 e8posures in
sufficientl6 %iversifie% portfolios an FGD of =+ O ma6 e use%7 3or t#ese purposes 9
s#all e + 6ears7
47 4n%er t#e internal mo%els approac#* t#e ris5 1ei"#te% e8posure amount s#all e t#e
potential loss on t#e institutionNs e&uit6 e8posures as %erive% usin" internal value;at;ris5
mo%els su!ect to t#e 99t# percentile* one;taile% confi%ence interval of t#e %ifference
et1een &uarterl6 returns an% an appropriate ris5;free rate compute% over a lon";term
sample perio%* multiplie% 6 1-7+7 2#e ris5 1ei"#te% e8posure amounts at t#e e&uit6
portfolio level s#all not e less t#an t#e total of t#e sums of t#e follo1in":
)a/ t#e ris5 1ei"#te% e8posure amounts re&uire% un%er t#e PD/FGD ,pproac#E an%
)/ t#e correspon%in" e8pecte% loss amounts multiplie% 6 1-7+7
2#e amounts referre% to in point )a/ an% )/ s#all e calculate% on t#e asis of t#e PD
values set out in ,rticle 1=1)1/ an% t#e correspon%in" FGD values set out in
,rticle 1=1)-/7
0nstitutions ma6 reco"nise unfun%e% cre%it protection otaine% on an e&uit6 position7
6
,rticle 1+-
Ris5 1ei"#te% e8posure amounts for ot#er non cre%it;oli"ation assets
2#e ris5 1ei"#te% e8posure amounts for ot#er non cre%it;oli"ation assets s#all e calculate%
accor%in" to t#e follo1in" formula:
5is1/wei#hte$ e,posure amount 1..O e,posure value
*
e8cept for:
)a/ cas# in #an% an% e&uivalent cas# items as 1ell as "ol% ullion #el% in o1n vault or on an
allocate% asis to t#e e8tent ac5e% 6 ullion liailities* in 1#ic# case a . O ris5;1ei"#t
s#all e assi"ne%E
)/ 1#en t#e e8posure is a resi%ual value of lease% assets in 1#ic# case it s#all e calculate%
as follo1s:
1
1..O e,posure
value t
1#ere t is t#e "reater of 1 an% t#e nearest numer of 1#ole 6ears of t#e lease remainin"7
Su Section 3
Calculation Of Ris5 ?ei"#te% $8posure ,mounts 3or Dilution Ris5 Of Purc#ase% Receivales
,rticle 1+3
Ris5 1ei"#te% e8posure amounts for %ilution ris5 of purc#ase% receivales
17 0nstitutions s#all calculate t#e ris5 1ei"#te% e8posure amounts for %ilution ris5 of
purc#ase% corporate an% retail receivales s#all e calculate% accor%in" to t#e formula set
out in ,rticle 148)1/7
-7 0nstitutions s#all %etermine t#e input parameters PD an% FGD in accor%ance 1it#
section 47
37 0nstitutions s#all %etermine t#e e8posure value in accor%ance 1it# Section +7
47 3or t#e purposes of t#is ,rticle* t#e value of 9 is 1 6ear7
+7 2#e competent aut#orities s#all e8empt an institution from $al$ulating and re$ognising
ris5 1ei"#te% e8posure amounts for %ilution ris5 of a t#pe of e5posures $aused !#
purc#ase% corporate or retail receivales 1#ere t#e institution #as %emonstrate% to t#e
satisfaction of t#e competent aut#orit6 t#at %ilution ris5 for that institution is immaterial
for this t#pe of e5posures7
?ECTION 3
E-PECTE$ LO?? A*OUNT?
,rticle 1+4
2reatment 6 e8posure t6pe
17 2#e calculation of e8pecte% loss amounts s#all e ase% on t#e same input fi"ures of PD*
FGD an% t#e e8posure value for eac# e8posure as ein" use% for t#e calculation of ris5;
1ei"#te% e8posure amounts in accor%ance 1it# ,rticle 14=7 A
-7 2#e e8pecte% loss amounts for securitise% e8posures s#all e calculate% in accor%ance 1it#
C#apter +7
37 2#e e8pecte% loss amount for e8posures elon"in" to t#e (ot#er non cre%it oli"ations
assets( e8posure class referre% to in point )"/ of ,rticle 14-)-/ s#all e Lero7
47 2#e e8pecte% loss amounts for e8posures in t#e form of shares or units of a collective
investment un%erta5in" referre% to in ,rticle 14> s#all e calculate% in accor%ance 1it# t#e
met#o%s set out in t#is ,rticle7
+7 2#e e8pecte% loss (EL) and e5pe$ted loss amounts for e8posures to corporates*
institutions* central "overnments an% central an5s an% retail e8posures s#all e calculate%
accor%in" to t#e follo1in" formulae:
E5pe$ted loss (EL) N .( L8(
E5pe$ted loss aount N EL e5posure value3
3or %efaulte% e8posures )PD U 4:: J/ 1#ere institutions use o1n estimates of FGDs* $F
s#all e $F
D$
* t#e institution(s est estimate of e8pecte% loss for t#e %efaulte% e8posure
accor%in" to ,rticle 1>>)1/)#/7
3or e8posures su!ect to t#e treatment set out in ,rticle 148)3/* $F s#all e . J3
=7 2#e $F values for specialise% len%in" e8posures 1#ere institutions use t#e met#o%s set out
in ,rticle 148)@/ for assi"nin" ris5 1ei"#ts s#all e assi"ne% accor%in" to 2ale -7
2ale -
Remainin" 9aturit6 Cate"or6 1 Cate"or6 - Cate"or6 3 Cate"or6 4 Cate"or6 +
Fess t#an -*+ 6ears . O .*4 O -*8 O 8 O +. O
$&ual to or more t#an
-*+ 6ears
.*4 O .*8 O -*8 O 8 O +. O
>7 2#e e8pecte% loss amounts for e&uit6 e8posures 1#ere t#e ris5 1ei"#te% e8posure amounts
are calculate% accor%in" to simple ris5 1ei"#t approac# s#all e calculate% accor%in" to
t#e follo1in" formula:
E,pecte$ loss amount E7 e,posure value
2#e $F values s#all e t#e follo1in":
$8pecte% loss )$F/ U .*8 O for private e&uit6 e8posures in sufficientl6 %iversifie%
portfolios
$8pecte% loss )$F/ U .*8 O for e8c#an"e tra%e% e&uit6 e8posures
$8pecte% loss )$F/ U -*4 O for all ot#er e&uit6 e8posures7
87 2#e e5pe$ted loss and e8pecte% loss amounts for e&uit6 e8posures 1#ere t#e ris5 1ei"#te%
e8posure amounts are calculate% accor%in" to t#e PD/FGD approac# s#all e calculate%
accor%in" to t#e follo1in" formulae:
E,pecte$ loss (E7) PD 7!D
E,pecte$ loss amount E7 e,posure value
97 2#e e8pecte% loss amounts for e&uit6 e8posures 1#ere t#e ris5 1ei"#te% e8posure amounts
are calculate% accor%in" to t#e internal mo%els approac# s#all e <ero7
1.7 2#e e8pecte% loss amounts for %ilution ris5 of purc#ase% receivales s#all e calculate%
accor%in" to t#e follo1in" formula:
E,pecte$ loss (E7) PD 7!D
E,pecte$ loss amount E7 e,posure value
A
Article 1
Treatment of e,pecte$ loss amounts
0nstitutions s#all sutract t#e e8pecte% loss amounts calculate% in accor%ance 1it# ,rticle 1+4 )@/,
(?/ an% )4:/ from t#e "eneral an% specific cre%it ris5 a%!ustments and additional value ad9ustents
in a$$ordan$e *ith Arti$les C4 and 4:@ and other o*n funds redu$tions relate% to t#ese
e8posures7 Discounts on alance s#eet e8posures purc#ase% 1#en in %efault accor%in" to ,rticle
1=-)1/ s#all e treate% in t#e same manner as specific cre%it ris5 a%!ustments Specific cre%it ris5
a%!ustments on e8posures in %efault s#all not e use% to cover e8pecte% loss aounts on ot#er
e8posures7 $8pecte% loss amounts for securitise% e8posures an% "eneral an% specific cre%it ris5
a%!ustments relate% to t#ese e8posures s#all not e inclu%e% in t#is calculation7
S$C20OB 4
PD* FGD ,BD 9,24R02H
S4D;S$C20OB 1
$GPOS4R$S 2O CORPOR,2$S* 0BS202420OBS ,BD C$B2R,F GOR$RB9$B2S ,BD
C$B2R,F D,B:S
,rticle 1+=
Proailit6 of %efault )PD/
17 2#e PD of an e8posure to a corporate or an institution s#all e at least .*.3 O7
-7 3or purc#ase% corporate receivales in respect of 1#ic# an institution is not ale to
estimate PDs or institution(s PD estimates %o not meet t#e re&uirements set out in Section
=* t#e PDs for t#ese e8posures s#all e %etermine% accor%in" to t#e follo1in" met#o%s:
)a/ for senior claims on purc#ase% corporate receivales PD s#all e t#e institutions
estimate of $F %ivi%e% 6 FGD for t#ese receivalesE
)/ for suor%inate% claims on purc#ase% corporate receivales PD s#all e t#e
institution(s estimate of $FE
)c/ an institution t#at #as receive% t#e permission of t#e competent aut#orit6 to use o1n
FGD estimates for corporate e8posures pursuant to ,rticle 138 an% that can
%ecompose its $F estimates for purc#ase% corporate receivales into PDs an% FGDs
in a manner t#at t#e competent aut#orit6 consi%ers to e reliale* ma6 use the PD
estimate t#at results from t#is %ecomposition7
37 2#e PD of oli"ors in %efault s#all e 1.. O7
47 0nstitutions ma6 ta5e into account unfun%e% cre%it protection in t#e PD in accor%ance 1it#
t#e provisions of C#apter 47 3or %ilution ris5* in a%%ition to t#e protection provi%ers
referre% to in ,rticle 19>)1/)"/ t#e seller of t#e purc#ase% receivales is eli"ile if t#e
follo1in" con%itions are met:
)a/ t#e corporate entit6 #as a cre%it assessment 6 an $C,0 1#ic# #as een %etermine%
6 $D, to e associate% 1it# cre%it &ualit6 step 3 or aove un%er t#e rules for t#e
ris5 1ei"#tin" of e8posures to corporates un%er C#apter -E
)/ t#e corporate entit6* in t#e case of institutions calculatin" ris5;1ei"#te% e8posure
amounts an% e8pecte% loss amounts un%er t#e 0RD ,pproac#* %oes not #ave a cre%it
assessment 6 a reco"nise% $C,0 an% is internall6 rate% as #avin" a PD e&uivalent to
t#at associate% 1it# t#e cre%it assessments of $C,0s %etermine% 6 $D, to e
associate% 1it# cre%it &ualit6 step 3 or aove un%er t#e rules for t#e ris5 1ei"#tin" of
e8posures to $orporates un%er C#apter -7
+7 0nstitutions usin" o1n FGD estimates ma6 reco"nise unfun%e% cre%it protection 6
a%!ustin" PDs su!ect to ,rticle 1+>)3/7
A3or %ilution ris5 of purc#ase% corporate receivales* PD s#all e set e&ual to t#e $F
estimate of t#e institution for %ilution ris57 ,n institution t#at #as receive% permission from
t#e competent aut#orit6 pursuant to ,rticle 138 to use o1n FGD estimates for corporate
e8posures t#at can %ecompose its $F estimates for %ilution ris5 of purc#ase% corporate
receivales into PDs an% FGDs in a manner t#at t#e competent aut#orit6 consi%ers to e
reliale* ma6 use t#e PD estimate t#at results from t#is %ecomposition7 0nstitutions ma6
reco"nise unfun%e% cre%it protection in t#e PD in accor%ance 1it# t#e provisions of
C#apter 47 3or %ilution ris5* in a%%ition to t#e protection provi%ers referre% to in ,rticle
19>)1/)"/* t#e seller of t#e purc#ase% receivales is eli"ile provi%e% t#at t#e con%itions set
out in para"rap# 4 are met7
>7 D6 %ero"ation to ,rticle 19>)1/)"/* t#e corporate entities t#at meet t#e con%itions set out in
para"rap# 4 are eli"ile
,n institution t#at #as receive% t#e permission of t#e competent aut#orit6 pursuant to
,rticle 138 to use o1n FGD estimates for %ilution ris5 of purc#ase% corporate receivales*
ma6 reco"nise unfun%e% cre%it protection 6 a%!ustin" PDs su!ect to ,rticle 1+>)3/7
Article 1%
7oss !iven Default :7!D;
17 0nstitutions s#all use t#e follo1in" FGD values A:
)a/ senior e8posures 1it#out eli"ile collateral: 4+ OE
)/ suor%inate% e8posures 1it#out eli"ile collateral: >+ OE
)c/ institutions ma6 reco"nise fun%e% an% unfun%e% cre%it protection in t#e FGD in
accor%ance 1it# C#apter 4E
)%/ covere% on%s as %efine% in ,rticle 1-4 ma6 e assi"ne% an FGD value of 11*-+ OE
)e/ for senior purc#ase% corporate receivales e8posures 1#ere an institution is not a!le
to estiate .(s or the institution(s PD estimates %o not meet t#e re&uirements set out
in Section =: 4+ OE
)f/ for suor%inate% purc#ase% corporate receivales e8posures 1#ere an institution is
not ale to estimate PDs or t#e institution(s PD estimates %o not meet t#e
re&uirements set out in Section =: 1.. OE
)"/ 3or %ilution ris5 of purc#ase% corporate receivales: >+ O7
-7 3or %ilution an% %efault ris5 if an institution #as receive% permission from t#e competent
aut#orit6 to use o1n FGD estimates for corporate e8posures pursuant to ,rticle 138 an% it
can %ecompose its $F estimates for purc#ase% corporate receivales into PDs an% FGDs in
a manner t#e competent aut#orit6 consi%ers to e reliale* t#e FGD estimate for purc#ase%
corporate receivales ma6 e use%7
37 0f an institution #as receive% t#e permission of t#e competent aut#orit6 to use o1n FGD
estimates for e8posures to corporates* institutions* central "overnments an% central an5s
pursuant to ,rticle 138* unfun%e% cre%it protection ma6 e reco"nise% 6 a%!ustin" PD or
FGD su!ect to re&uirements as specifie% in Section = an% permission of t#e competent
aut#orities7 ,n institution s#all not assi"n "uarantee% e8posures an a%!uste% PD or FGD
suc# t#at t#e a%!uste% ris5 1ei"#t 1oul% e lo1er t#an t#at of a comparale* %irect
e8posure to t#e "uarantor7
47 3or t#e purposes of t#e un%erta5in"s referre% to in ,rticle 148)3/* t#e FGD of a
comparale %irect e8posure to t#e protection provi%er s#all eit#er e t#e FGD associate%
1it# an un#e%"e% facilit6 to t#e "uarantor or t#e un#e%"e% facilit6 of t#e oli"or*
%epen%in" upon 1#et#er in t#e event ot# t#e "uarantor an% oli"or %efault %urin" t#e life
of t#e #e%"e% transaction* availale evi%ence an% t#e structure of t#e "uarantee in%icate
t#at t#e amount recovere% 1oul% %epen% on t#e financial con%ition of t#e "uarantor or
oli"or* respectivel67
Article 1&
-aturity
17 0nstitutions t#at #ave not receive% permission to use o1n FGDs an% conversion factor for
e8posures to corporates* institutions or central "overnments an% central an5s s#all assi"n
to e8posures arisin" from repurc#ase transactions or securities or commo%ities len%in" or
orro1in" transactions a maturit6 value )9/ of .7+ 6ears an% to all ot#er e8posures an 9
of -*+ 6ears7
,lternativel6* as part of t#e permission referre% to in ,rticle 138* t#e competent aut#orities
s#all %eci%e on 1#et#er t#e institution s#all use maturit6 )9/ for eac# e8posure as set out
un%er para"rap# -7
-7 0nstitutions t#at #ave receive% t#e permission of t#e competent aut#orit6 to use o1n FGDs
an% o1n conversion factors for e8posures to corporates* institutions or central "overnments
an% central an5s pursuant to ,rticle 138 s#all calculate 9 for eac# of t#ese e8posures as
set out in )a/ to )e/ an% su!ect to para"rap#s 3 to +7 A9 s#all e no "reater t#an + 6ears
e5$ept in the $ases spe$ified in Arti$le C0B (4) *here M as spe$ified there shall !e used':
)a/ for an instrument su!ect to a cas# flo1 sc#e%ule* 9 s#all e calculate% accor%in" to
t#e follo1in" formula:

t 2+

- ma8
'
1* min
'
t
*+
;;

2+
t

1#ere C3
t
%enotes t#e cas# flo1s )principal* interest pa6ments an% fees/
contractuall6 pa6ale 6 t#e oli"or in perio% tE
)/ for %erivatives su!ect to a master nettin" a"reement* 9 s#all e t#e 1ei"#te%
avera"e remainin" maturit6 of t#e e8posure* 1#ere 9 s#all e at least 1 6ear* an%
t#e notional amount of eac# e8posure s#all e use% for 1ei"#tin" t#e maturit6E
)c/ for e8posures arisin" from full6 or nearl6;full6 collateralise% %erivative instruments
)liste% in ,nne8 00/ transactions an% full6 or nearl6;full6 collateralise% mar"in
len%in" transactions 1#ic# are su!ect to a master nettin" a"reement* 9 s#all e t#e
1ei"#te% avera"e remainin" maturit6 of t#e transactions 1#ere 9 s#all e at least
1. %a6sE

t
)%/ for repurc#ase transactions or securities or commo%ities len%in" or orro1in"
transactions 1#ic# are su!ect to a master nettin" a"reement* 9 s#all e t#e
1ei"#te% avera"e remainin" maturit6 of t#e transactions 1#ere 9 s#all e at least +
%a6s7 2#e notional amount of eac# transaction s#all e use% for 1ei"#tin" t#e
maturit6E
)e/ an institution t#at #as receive% t#e permission of t#e competent aut#orit6 pursuant to
,rticle 138 to use o1n PD estimates for purc#ase% corporate receivales* for %ra1n
amounts 9 s#all e&ual t#e purc#ase% receivales e8posure 1ei"#te% avera"e
maturit6* 1#ere 9 s#all e at least 9. %a6s7 2#is same value of 9 s#all also e use%
for un%ra1n amounts un%er a committe% purc#ase facilit6 provi%e% t#e facilit6
contains effective covenants* earl6 amortisation tri""ers* or ot#er features t#at
protect t#e purc#asin" institution a"ainst a si"nificant %eterioration in t#e &ualit6 of
t#e future receivales it is re&uire% to purc#ase over t#e facilit6(s term7 ,sent suc#
effective protections* 9 for un%ra1n amounts s#all e calculate% as t#e sum of t#e
lon"est;%ate% potential receivale un%er t#e purc#ase a"reement an% t#e remainin"
maturit6 of t#e purc#ase facilit6* 1#ere 9 s#all e at least 9. %a6sE
)f/ for an6 ot#er instrument t#an t#ose mentione% in t#is point or 1#en an institution is
not in a position to calculate 9 as set out in )a/* 9 s#all e t#e ma8imum remainin"
time )in 6ears/ t#at t#e oli"or is permitte% to ta5e to full6 %isc#ar"e its contractual
oli"ations* 1#ere 9 s#all e at least 1 6earE
)"/ for institutions usin" t#e 0nternal 9o%el 9et#o% set out in Section = of C#apter = to
calculate t#e e8posure values* 9 s#all e calculate% for e8posures to 1#ic# t#e6
appl6 t#is met#o% an% for 1#ic# t#e maturit6 of t#e lon"est;%ate% contract containe%
in t#e nettin" set is "reater t#an one 6ear accor%in" to t#e follo1in" formula:

EffectiveEE
t
k
t
1
$f
t
k
s
t
k
+

EE
tk
t
k
$f
tk
(1 s
tk
)

1 1

- min
'

EffectiveEE
1
t
t
1

$f
t
1

s
t
1
*+
;

1
1#ere:
s
1
U a %umm6 variale 1#ose value at future perio% t
5
is e&ual to . if t
5
[ 1 6ear
an% to 1 if t
5
Z 1
EE
1
U t#e e8pecte% e8posure at t#e future perio% t
5
E
EffectiveEE
1
U t#e effective e8pecte% e8posure at t#e future perio% t
5
E
$f
1
U t#e ris5;free %iscount factor for future time perio% t
5
E
t
1
t
1
t
1 1
)#/ an institution t#at uses an internal mo%el to calculate a one;si%e% cre%it valuation
a%!ustment )CR,/ ma6 use* su!ect to t#e permission of t#e competent aut#orities*
t#e effective cre%it %uration estimate% 6 t#e internal mo%el as 97
t
t
t
t
Su!ect to para"rap# - * for nettin" sets in 1#ic# all contracts #ave an ori"inal
maturit6 of less t#an one 6ear t#e formula in point )a/ s#all appl6E
)i/ for institutions usin" t#e 0nternal 9o%el 9et#o% set out in Section = of C#apter =* to
calculate t#e e8posure values an% #avin" an internal mo%el permission for specific
ris5 associate% 1it# tra%e% %et positions in accor%ance 1it# Part 2#ree* 2itle 0R*
C#apter +* 9 s#all e set to 1 in t#e formula lai% out in ,rticle 148)1/* provi%e% t#at
an institution can %emonstrate to t#e competent aut#orities t#at its internal mo%el for
Specific ris5 associate% 1it# tra%e% %et positions applie% in ,rticle 3>3 contains
effects of ratin" mi"rationsE
)!/ for t#e purposes of ,rticle 148)3/* 9 s#all e t#e effective maturit6 of t#e cre%it
protection ut at least 1 6ear7
37 ?#ere t#e %ocumentation re&uires %ail6 re;mar"inin" an% %ail6 revaluation an% inclu%es
provisions t#at allo1 for t#e prompt li&ui%ation or set off of collateral in t#e event of
%efault or failure to remar"in* 9 s#all e at least one;%a6 for:
)a/ full6 or nearl6;full6 collateralise% %erivative instruments liste% in ,nne8 00E
)/ full6 or nearl6;full6 collateralise% mar"in len%in" transactionsE
)c/ repurc#ase transactions* securities or commo%ities len%in" or orro1in"
transactions7
0n a%%ition* for &ualif6in" s#ort;term e8posures 1#ic# are not part of t#e institution(s
on"oin" financin" of t#e oli"or* 9 s#all e at least one;%a67 Qualif6in" s#ort term
e8posures s#all inclu%e t#e follo1in":
)a/ e8posures to institutions arisin" from settlement of forei"n e8c#an"e oli"ationsE
)/ self;li&ui%atin" s#ort;term tra%e financin" transactions $onne$ted to the e5$hange
of goods or servi$es 1it# a resi%ual maturit6 of up to one 6ear as defined in Arti$le
B (@@a)
)c/ e8posures arisin" from settlement of securities purc#ases an% sales 1it#in t#e usual
%eliver6 perio% or t1o usiness %a6sE
)%/ e8posures arisin" from cas# settlements 6 1ire transfer an% settlements of
electronic pa6ment transactions an% prepai% cost* inclu%in" over%rafts arisin" from
faile% transactions t#at %o not e8cee% a s#ort* fi8e% a"ree% numer of usiness %a6s7
47 3or e8posures to corporates situate% in t#e 4nion an% #avin" consoli%ate% sales an%
consoli%ate% assets of less t#an $4R +.. million* institutions ma6 c#oose to consistentl6
set 9 as set out in para"rap# 1 instea% of appl6in" para"rap# -7 0nstitutions ma6 replace
$4R +.. million total assets 1it# $4R 1... million total assets for corporates 1#ic#
primaril6 o1n an% let non;speculative resi%ential propert67
+7 9aturit6 mismatc#es s#all e treate% as specifie% in C#apter 47
S4D;S$C20OB -
R$2,0F $GPOS4R$S
,rticle 1+9
Proailit6 of %efault
17 PD of an e8posure s#all e at least .7.3 O7
-7 2#e PD of oli"ors or* 1#ere an oli"ation approac# is use%* of e8posures in %efault s#all
e 1.. O7
37 3or %ilution ris5 of purc#ase% receivales PD s#all e set e&ual to $F estimates for %ilution
ris57 0f an institution can %ecompose its $F estimates for %ilution ris5 of purc#ase%
receivales into PDs an% FGDs in a manner t#e competent aut#orities consi%er to e
reliale* t#e PD estimate ma6 e use%7
47 4nfun%e% cre%it protection ma6 e ta5en into account 6 a%!ustin" PDs su!ect to ,rticle
1=.)-/7 3or %ilution ris5* in a%%ition to t#e protection provi%ers referre% to in ,rticle
19>)1/)"/ * t#e seller of t#e purc#ase% receivales is eli"ile if t#e con%itions set out in
,rticle 1+=)4/ are met7
,rticle 1=.
Foss Given Default )FGD/
17 0nstitutions s#all provi%e o1n estimates of FGDs su!ect to re&uirements as specifie% in
Section = an% permission of t#e competent aut#orities "rante% in accor%ance 1it# ,rticle
1387 3or %ilution ris5 of purc#ase% receivales* an FGD value of >+ O s#all e use%7 0f an
institution can %ecompose its $F estimates for %ilution ris5 of purc#ase% receivales into
PDs an% FGDs in a reliale manner* t#e institution ma6 use its o1n FGD estimate7
-7 4nfun%e% cre%it protection ma6 e reco"nise% as eli"ile 6 a%!ustin" PD or FGD
estimates su!ect to re&uirements as specifie% in ,rticle 1>9)1/)-/ an% )3/ an% permission
of t#e competent aut#orities eit#er in support of an in%ivi%ual e8posure or a pool of
e8posures7 ,n institution s#all not assi"n "uarantee% e8posures an a%!uste% PD or FGD
suc# t#at t#e a%!uste% ris5 1ei"#t 1oul% e lo1er t#an t#at of a comparale* %irect
e8posure to t#e "uarantor7
37 3or t#e purposes of ,rticle 149)-/* t#e FGD of a comparale %irect e8posure to t#e
protection provi%er referred to in arti$le 4BA(C) s#all eit#er e t#e FGD associate% 1it# an
un#e%"e% facilit6 to t#e "uarantor or t#e un#e%"e% facilit6 of t#e oli"or* %epen%in" upon
1#et#er* in t#e event ot# t#e "uarantor an% oli"or %efault %urin" t#e life of t#e #e%"e%
transaction* availale evi%ence an% t#e structure of t#e "uarantee in%icate t#at t#e amount
recovere% 1oul% %epen% on t#e financial con%ition of t#e "uarantor or oli"or*
respectivel67
47 2#e e8posure 1ei"#te% avera"e FGD for all retail e8posures secure% 6 resi%ential
propert6 an% not enefitin" from "uarantees from central "overnments s#all not e lo1er
t#an 1.O
2#e e8posure 1ei"#te% avera"e FGD for all retail e8posures secure% 6 commercial
immovale propert6 an% not enefitin" from "uarantees from central "overnments s#all
not e lo1er t#an 1+O3
@3 Based on the data $olle$ted under Arti$le >? and taking into a$$ount for*ard=looking
propert# arket developents and an# other relevant indi$ators, the $opetent
authorities shall periodi$all#, and at least annuall#, assess *hether the iniu L8(
values in paragraph B are appropriate for e5posures se$ured !# residential or
$oer$ial iova!le propert# lo$ated in their territor#3 Copetent authorities a#,
*here appropriate on the !asis of finan$ial sta!ilit# $onsiderations, set higher iniu
values of e5posure *eighted average L8( for e5posures se$ured !# propert# in their
territor#3
Copetent authorities shall notif# EBA of an# $hanges to the iniu L8( values that
the# ake in a$$ordan$e *ith the first su!paragraph and EBA shall pu!lish these L8(
values3
EBA shall develop regulator# te$hni$al standards to spe$if# the $onditions that
$opetent authorities shall take into a$$ount *hen deterining higher iniu L8(
values3
EBA shall su!it those draft te$hni$al standards to the Coission !# C4 (e$e!er
2:4B3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards in
a$$ordan$e *ith the pro$edure laid do*n in Arti$les 4: to 4B of )egulation (E2) Fo
4:>CD2:4:3
?3 +he institutions of one Me!er "tate shall appl# the higher iniu L8( values that
have !een deterined !# the $opetent authorities of another Me!er "tate to
e5posures se$ured !# propert# lo$ated in that Me!er "tate3
S4D;S$C20OB 3
$Q402H $GPOS4R$S S4D<$C2 2O PD/FGD 9$2COD
Article 1"1
Equity e,posures sub4ect to the PD<7!D metho$
17 PDs s#all e %etermine% accor%in" to t#e met#o%s for corporate e8posures7
2#e follo1in" minimum PDs s#all appl6:
)a/ .7.9 O for e8c#an"e tra%e% e&uit6 e8posures 1#ere t#e investment is part of a lon";
term customer relations#ipE
)/ .7.9 O for non;e8c#an"e tra%e% e&uit6 e8posures 1#ere t#e returns on t#e
investment are ase% on re"ular an% perio%ic cas# flo1s not %erive% from capital
"ainsE
)c/ .74. O for e8c#an"e tra%e% e&uit6 e8posures inclu%in" ot#er s#ort positions as set
out in ,rticle 1+.)-/E
)%/ 17-+ O for all ot#er e&uit6 e8posures inclu%in" ot#er s#ort positions as set out in
,rticle 1+.)-/7
-7 Private e&uit6 e8posures in sufficientl6 %iversifie% portfolios ma6 e assi"ne% an FGD of
=+ O7 ,ll ot#er suc# e8posures s#all e assi"ne% an FGD of 9. O7
37 9 assi"ne% to all e8posures s#all e + 6ears7
S$C20OB +
$GPOS4R$ R,F4$
,rticle 1=-
$8posures to corporates* institutions* central "overnments an% central an5s an% retail e8posures
17 4nless note% ot#er1ise* t#e e8posure value of on;alance s#eet e8posures s#all e t#e
accountin" value measure% 1it#out ta5in" into account an6 cre%it ris5 a%!ustments ma%e7
2#is rule also applies to assets purc#ase% at a price %ifferent t#an t#e amount o1e%7
3or purc#ase% assets* t#e %ifference et1een t#e amount o1e% an% t#e accountin" value
remainin" after specific cre%it ris5 a%!ustments #ave een applie% t#at #as een recor%e%
on t#e alance;s#eet of t#e institutions 1#en purc#asin" t#e asset is %enote% %iscount if t#e
amount o1e% is lar"er* an% premium if it is smaller7
-7 ?#ere institutions use 9aster nettin" a"reements in relation to repurc#ase transactions or
securities or commo%ities len%in" or orro1in" transactions* t#e e8posure value s#all e
calculate% in accor%ance 1it# C#apter B or ?3
37 3or on;alance s#eet nettin" of loans an% %eposits* institutions s#all appl6 for t#e
calculation of t#e e8posure value t#e met#o%s set out in C#apter 47
47 2#e e8posure value for leases s#all e t#e %iscounte% minimum lease pa6ments7 9inimum
lease pa6ments s#all comprise t#e pa6ments over t#e lease term t#at t#e lessee is or can e
re&uire% to ma5e an% an6 ar"ain option )i7e7 option t#e e8ercise of 1#ic# is reasonal6
certain/7 0f a part6 ot#er t#an t#e lessee ma6 e re&uire% to ma5e a pa6ment relate% to t#e
resi%ual value of a lease% asset an% t#is pa6ment oli"ation fulfils t#e set of con%itions in
,rticle 19> re"ar%in" t#e eli"iilit6 of protection provi%ers as 1ell as t#e re&uirements for
reco"nisin" ot#er t6pes of "uarantees provi%e% in ,rticle -.8* t#e pa6ment oli"ation ma6
e ta5en into account as unfun%e% cre%it protection in accor%ance 1it# C#apter 47
+7 0n t#e case of an6 item liste% in ,nne8 00* t#e e8posure value s#all e %etermine% 6 t#e
met#o%s set out in C#apter = an% s#all not ta5e into account an6 cre%it ris5 a%!ustment
ma%e7
=7 2#e e8posure value for t#e calculation of ris5 1ei"#te% e8posure amounts of purc#ase%
receivales s#all e t#e value accor%in" to para"rap# 1 minus t#e o1n fun%s re&uirements
for %ilution ris5 prior to cre%it ris5 miti"ation7
>7 ?#ere an e8posure ta5es t#e form of securities or commo%ities sol%* poste% or lent un%er
repurc#ase transactions or securities or commo%ities len%in" or orro1in" transactions*
lon" settlement transactions an% mar"in len%in" transactions* t#e e8posure value s#all e
t#e value of t#e securities or commo%ities %etermine% in accor%ance 1it# ,rticle 947
?#ere t#e 3inancial Collateral Compre#ensive 9et#o% as set out un%er ,rticle -18 is
use%* t#e e8posure value s#all e increase% 6 t#e volatilit6 a%!ustment appropriate to suc#
securities or commo%ities* as set out t#erein7 2#e e8posure value of repurc#ase
transactions* securities or commo%ities len%in" or orro1in" transactions* lon" settlement
transactions an% mar"in len%in" transactions ma6 e %etermine% eit#er in accor%ance 1it#
C#apter = or ,rticle -1+)-/7
87 2#e e8posure value for t#e follo1in" items s#all e calculate% as t#e committe% ut
un%ra1n amount multiplie% 6 a conversion factor7 0nstitutions s#all use t#e follo1in"
conversion factors in accor%ance 1it# ,rticle 14=)8/ for e5posures to $orporates,
institutions, $entral governents and $entral !anks:
)a/ for cre%it lines t#at are uncon%itionall6 cancellale at an6 time 6 t#e institution
1it#out prior notice* or t#at effectivel6 provi%e for automatic cancellation %ue to
%eterioration in a orro1er(s cre%it 1ort#iness* a conversion factor of . O s#all
appl67 2o appl6 a conversion factor of . O* institutions s#all activel6 monitor t#e
financial con%ition of t#e oli"or* an% t#eir internal control s6stems s#all enale
t#em to imme%iatel6 %etect %eterioration in t#e cre%it &ualit6 of t#e oli"or7
4n%ra1n cre%it lines ma6 e consi%ere% as uncon%itionall6 cancellale if t#e terms
permit t#e institution to cancel t#em to t#e full e8tent allo1ale un%er consumer
protection an% relate% le"islationE
)/ for s#ort;term letters of cre%it arisin" from t#e movement of "oo%s* a conversion
factor of -. O s#all appl6 for ot# t#e issuin" an% confirmin" institutionsE
)c/ for un%ra1n purc#ase commitments for revolvin" purc#ase% receivales t#at are ale
to e uncon%itionall6 cancelle% or t#at effectivel6 provi%e for automatic cancellation
at an6 time 6 t#e institution 1it#out prior notice* a conversion factor of
. O s#all appl67 2o appl6 a conversion factor of . O* institutions s#all activel6
monitor t#e financial con%ition of t#e oli"or* an% t#eir internal control s6stems
s#all enale t#em to imme%iatel6 %etect a %eterioration in t#e cre%it &ualit6 of t#e
oli"orE
)%/ for ot#er cre%it lines* note issuance facilities )B03s/* an% revolvin" un%er1ritin"
facilities )R43s/* a conversion factor of >+ O s#all appl6E
)e/ institutions 1#ic# meet t#e re&uirements for t#e use of o1n estimates of conversion
factors as specifie% in Section = ma6 use t#eir o1n estimates of conversion factors
across %ifferent pro%uct t6pes as mentione% in points )a/ to )%/* su!ect to permission
of t#e competent aut#orities7
97 ?#ere a commitment refers to t#e e8tension of anot#er commitment* t#e lo1er of t#e t1o
conversion factors associate% 1it# t#e in%ivi%ual commitment s#all e use%7
1.7 3or all off;alance s#eet items ot#er t#an t#ose mentione% in points 1 to 8* t#e e8posure
value s#all e t#e follo1in" percenta"e of its value:
)a/ 1.. O if it is a full ris5 itemE
)/ +. O if it is a me%ium;ris5 itemE
)c/ -. O if it is a me%ium/lo1;ris5 itemE
)%/ . O if it is a lo1;ris5 item7
3or t#e purposes of t#is para"rap# t#e off;alance s#eet items s#all e assi"ne% to ris5
cate"ories as in%icate% in ,nne8 07
,rticle 1=3
$&uit6 e8posures
17 2#e e8posure value of e&uit6 e8posures s#all e t#e accountin" value remainin" after
specific cre%it ris5 a%!ustment #ave een applie%7
-7 2#e e8posure value of off;alance s#eet e&uit6 e8posures s#all e its nominal value after
re%ucin" its nominal value 6 specific cre%it ris5 a%!ustments for t#is e8posure7
,rticle 1=4
Ot#er non cre%it;oli"ation assets
2#e e8posure value of ot#er non cre%it;oli"ation assets s#all e t#e accountin" value remainin"
after specific cre%it ris5 a%!ustment #ave een applie%
S$C20OB =
R$Q40R$9$B2S 3OR 2C$ 0RD ,PPRO,CC
S4D;S$C20OB 1
R,20BG SHS2$9S
,rticle 1=+
General principles
17 ?#ere an institution uses multiple ratin" s6stems* t#e rationale for assi"nin" an oli"or or
a transaction to a ratin" s6stem s#all e %ocumente% an% applie% in a manner t#at
appropriatel6 reflects t#e level of ris57
-7 ,ssi"nment criteria an% processes s#all e perio%icall6 revie1e% to %etermine 1#et#er
t#e6 remain appropriate for t#e current portfolio an% e8ternal con%itions7
37 ?#ere an institution uses %irect estimates of ris5 parameters for individual o!ligors or
e5posures t#ese ma6 e seen as estiates assigned to "ra%es on a continuous ratin" scale7
,rticle 1==
Structure of ratin" s6stems
17 2#e structure of ratin" s6stems for e8posures to corporates* institutions an% central
"overnments an% central an5s s#all compl6 1it# t#e follo1in" re&uirements:3
)a/ a ratin" s6stem s#all ta5e into account oli"or an% transaction ris5 c#aracteristicsE
)/ a ratin" s6stem s#all #ave an oli"or ratin" scale 1#ic# reflects e8clusivel6
&uantification of t#e ris5 of oli"or %efault7 2#e oli"or ratin" scale s#all #ave a
minimum of > "ra%es for non;%efaulte% oli"ors an% one for %efaulte% oli"orsE
)c/ an institution s#all %ocument t#e relations#ip et1een oli"or "ra%es in terms of t#e
level of %efault ris5 eac# "ra%e implies an% t#e criteria use% to %istin"uis# t#at level
of %efault ris5E
)%/ institutions 1it# portfolios concentrate% in a particular mar5et se"ment an% ran"e of
%efault ris5 s#all #ave enou"# oli"or "ra%es 1it#in t#at ran"e to avoi% un%ue
concentrations of oli"ors in a particular "ra%e7 Si"nificant concentrations 1it#in a
sin"le "ra%e s#all e supporte% 6 convincin" empirical evi%ence t#at t#e oli"or
"ra%e covers a reasonal6 narro1 PD an% an% t#at t#e %efault ris5 pose% 6 all
oli"ors in t#e "ra%e falls 1it#in t#at an%E
)e/ to e permitte% !# the $opetent authorit# to use o*n estiates of L8(s for o1n
fun%s re&uirement calculation A* a ratin" s6stem s#all incorporate a %istinct facilit6
ratin" scale 1#ic# e8clusivel6 reflects FGD relate% transaction c#aracteristics7 2#e
facilit6 "ra%e %efinition s#all inclu%e ot# a %escription of #o1 e8posures are
assi"ne% to t#e "ra%e an% of t#e criteria use% to %istin"uis# t#e level of ris5 across
"ra%esE
)f/ si"nificant concentrations 1it#in a sin"le facilit6 "ra%e s#all e supporte% 6
convincin" empirical evi%ence t#at t#e facilit6 "ra%e covers a reasonal6 narro1
FGD an%* respectivel6* an% t#at t#e ris5 pose% 6 all e8posures in t#e "ra%e falls
1it#in t#at an%7
-7 0nstitutions usin" t#e met#o%s set out in 4BA)+/ for assi"nin" ris5 1ei"#ts for specialise%
len%in" e8posures are e8empt from t#e re&uirement to #ave an oli"or ratin" scale 1#ic#
reflects e8clusivel6 &uantification of t#e ris5 of oli"or %efault for t#ese e8posures7 2#ese
institutions s#all #ave for t#ese e8posures at least 4 "ra%es for non;%efaulte% oli"ors an%
at least one "ra%e for %efaulte% oli"ors7
37 2#e structure of ratin" s6stems for retail e8posures s#all compl6 1it# t#e follo1in"
re&uirements:
)a/ ratin" s6stems s#all reflect ot# oli"or an% transaction ris5* an% s#all capture all
relevant oli"or an% transaction c#aracteristicsE
)/ t#e level of ris5 %ifferentiation s#all ensure t#at t#e numer of e8posures in a "iven
"ra%e or pool is sufficient to allo1 for meanin"ful &uantification an% vali%ation of
t#e loss c#aracteristics at t#e "ra%e or pool level7 2#e %istriution of e8posures an%
oli"ors across "ra%es or pools s#all e suc# as to avoi% e8cessive concentrationsE
)c/ t#e process of assi"nin" e8posures to "ra%es or pools s#all provi%e for a meanin"ful
%ifferentiation of ris5* for a "roupin" of sufficientl6 #omo"enous e8posures* an%
s#all allo1 for accurate an% consistent estimation of loss c#aracteristics at "ra%e or
pool level7 3or purc#ase% receivales t#e "roupin" s#all reflect t#e seller(s
un%er1ritin" practices an% t#e #etero"eneit6 of its customersE
47 0nstitutions s#all consi%er t#e follo1in" ris5 %rivers 1#en assi"nin" e8posures to "ra%es or
pools7
)a/ oli"or ris5 c#aracteristicsE
)/ transaction ris5 c#aracteristics* inclu%in" pro%uct or collateral t6pes or ot#7
0nstitutions s#all e8plicitl6 a%%ress cases 1#ere several e8posures enefit from t#e
same collateralE
)c/ %elin&uenc6* e8cept 1#ere an institution %emonstrates to t#e satisfaction of its
competent aut#orit6 t#at %elin&uenc6 is not a material %river of ris5 for t#e
e8posure7
,rticle 1=>
,ssi"nment to "ra%es or pools
17 ,n institution s#all #ave specific %efinitions* processes an% criteria for assi"nin" e8posures
to "ra%es or pools 1it#in a ratin" s6stem t#at compl6 1it# t#e follo1in" re&uirements:
)a/ t#e "ra%e or pool %efinitions an% criteria s#all e sufficientl6 %etaile% to allo1 t#ose
c#ar"e% 1it# assi"nin" ratin"s to consistentl6 assi"n oli"ors or facilities posin"
similar ris5 to t#e same "ra%e or pool7 2#is consistenc6 s#all e8ist across lines of
usiness* %epartments an% "eo"rap#ic locationsE
)/ t#e %ocumentation of t#e ratin" process s#all allo1 t#ir% parties to un%erstan% t#e
assi"nments of e8posures to "ra%es or pools* to replicate "ra%e an% pool assi"nments
an% to evaluate t#e appropriateness of t#e assi"nments to a "ra%e or a poolE
)c/ t#e criteria s#all also e consistent 1it# t#e institution(s internal len%in" stan%ar%s
an% its policies for #an%lin" troule% oli"ors an% facilities7
-7 ,n institution s#all ta5e all relevant information into account in assi"nin" oli"ors an%
facilities to "ra%es or pools7 0nformation s#all e current an% s#all enale t#e institution to
forecast t#e future performance of t#e e8posure7 2#e less information an institution #as* t#e
more conservative s#all e its assi"nments of e8posures to oli"or an% facilit6 "ra%es or
pools7 0f an institution uses an e8ternal ratin" as a primar6 factor %eterminin" an internal
ratin" assi"nment* t#e institution s#all ensure t#at it consi%ers ot#er relevant information7
,rticle 1=8
,ssi"nment of e8posures
17 3or e8posures to corporates* institutions an% central "overnments an% central an5s* and
for e6uit# e5posures *here an institution uses the .(DL8( approa$h set out in Arti$le
4@:(C), assi"nment of e8posures s#all e carrie% out in accor%ance 1it# t#e follo1in"
criteria:
)a/ eac# oli"or s#all e assi"ne% to an oli"or "ra%e as part of t#e cre%it approval
processE
)/ for t#ose e5posures for *hi$h an institution has receive% t#e permission of t#e
competent aut#orit6 to use o1n estimates of FGDs an% conversion factors pursuant
to ,rticle 138* eac# e8posure s#all also e assi"ne% to a facilit6 "ra%e as part of t#e
cre%it approval processE
)c/ institutions usin" t#e met#o%s set out in ,rticle 148)+/ for assi"nin" ris5 1ei"#ts for
specialise% len%in" e8posures s#all assi"n eac# of t#ese e8posures to a "ra%e in
accor%ance 1it# ,rticle 1==)-/E
)%/ eac# separate le"al entit6 to 1#ic# t#e institution is e8pose% s#all e separatel6
rate%7 ,n institution s#all #ave appropriate policies re"ar%in" t#e treatment of
in%ivi%ual oli"or clients an% "roups of connecte% clientsE
)e/ separate e8posures to t#e same oli"or s#all e assi"ne% to t#e same oli"or "ra%e*
irrespective of an6 %ifferences in t#e nature of eac# specific transaction7 Co1ever*
1#ere separate e8posures are allo1e% to result in multiple "ra%es for t#e same
oli"or* t#e follo1in" s#all appl6:
)i/ countr6 transfer ris5* t#is ein" %epen%ent on 1#et#er t#e e8posures are
%enominate% in local or forei"n currenc6E
)ii/ At#e treatment of associate% "uarantees to an e8posure ma6 e reflecte% in an
a%!uste% assi"nment to an oli"or "ra%eE
)iii/ Aconsumer protection* an5 secrec6 or ot#er le"islation pro#iit t#e e8c#an"e
of client %ata7
-7 3or retail e8posures* eac# e8posure s#all e assi"ne% to a "ra%e or a pool as part of t#e
cre%it approval process7
37 3or "ra%e an% pool assi"nments institutions s#all %ocument t#e situations in 1#ic# #uman
!u%"ement ma6 overri%e t#e inputs or outputs of t#e assi"nment process an% t#e personnel
responsile for approvin" t#ese overri%es7 0nstitutions s#all %ocument t#ese overri%es an%
note %o1n t#e personnel responsile7 0nstitutions s#all anal6se t#e performance of t#e
e8posures 1#ose assi"nments #ave een overri%%en7 2#is anal6sis s#all inclu%e an
assessment of t#e performance of e8posures 1#ose ratin" #as een overri%%en 6 a
particular person* accountin" for all t#e responsile personnel7
,rticle 1=9
0nte"rit6 of assi"nment process
17 3or e8posures to corporates* institutions an% central "overnments an% central an5s* and
for e6uit# e5posures *here an institution uses the .(DL8( approa$h set out in Arti$le
4@:(C), t#e assi"nment process s#all meet t#e follo1in" re&uirements of inte"rit6:
)a/ ,ssi"nments an% perio%ic revie1s of assi"nments s#all e complete% or approve%
6 an in%epen%ent part6 t#at %oes not %irectl6 enefit from %ecisions to e8ten% t#e
cre%itE
)/ 0nstitutions s#all revie* assi"nments at least annuall6 and ad9ust the assignent
*here the result of the revie* does not 9ustif# $arr#ing for*ard the $urrent
assignent7 Ci"# ris5 oli"ors an% prolem e8posures s#all e su!ect to more
fre&uent revie17 0nstitutions s#all un%erta5e a ne1 assi"nment if material
information on t#e oli"or or e8posure ecomes availaleE
)c/ ,n institution s#all #ave an effective process to otain an% up%ate relevant
information on oli"or c#aracteristics t#at affect PDs* an% on transaction
c#aracteristics t#at affect FGDs or conversion factors7
-7 3or retail e8posures* an institution s#all at least annuall6 revie* oli"or an% facilit6
assi"nments and ad9ust the assignent *here the result of the revie* does not 9ustif#
$arr#ing for*ard the $urrent assignent, or revie1 t#e loss c#aracteristics an%
%elin&uenc6 status of eac# i%entifie% ris5 pool* 1#ic#ever applicale7 ,n institution s#all
also at least annuall6 revie1 in a representative sample t#e status of in%ivi%ual e8posures
1it#in eac# pool as a means of ensurin" t#at e8posures continue to e assi"ne% to t#e
correct pool, and ad9ust the assignent *here the result of the revie* does not 9ustif#
$arr#ing for*ard the $urrent assignent7
37 $D, s#all %evelop re"ulator6 tec#nical stan%ar%s for the ethodologies of the $opetent
authorities to assess t#e inte"rit6 of t#e assi"nment process an% t#e re"ular an%
in%epen%ent assessment of ris5s7
$D, s#all sumit t#e %raft re"ulator6 tec#nical stan%ar%s referre% to in t#e first su;
para"rap# to t#e Commission 6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 1>.
4se of mo%els
0f an institution uses statistical mo%els an% ot#er mec#anical met#o%s to assi"n e8posures to
oli"ors or facilities "ra%es or pools* t#e follo1in" re&uirements s#all e met:
)a/ t#e mo%el s#all #ave "oo% pre%ictive po1er an% capital re&uirements s#all not e %istorte%
as a result of its use7 2#e input variales s#all form a reasonale an% effective asis for t#e
resultin" pre%ictions7 2#e mo%el s#all not #ave material iasesE
)/ t#e institution s#all #ave in place a process for vettin" %ata inputs into t#e mo%el* 1#ic#
inclu%es an assessment of t#e accurac6* completeness an% appropriateness of t#e %ataE
)c/ t#e %ata use% to uil% t#e mo%el s#all e representative of t#e population of t#e institution(s
actual oli"ors or e8posuresE
)%/ t#e institution s#all #ave a re"ular c6cle of mo%el vali%ation t#at inclu%es monitorin" of
mo%el performance an% stailit6E revie1 of mo%el specificationE an% testin" of mo%el
outputs a"ainst outcomesE
)e/ t#e institution s#all complement t#e statistical mo%el 6 #uman !u%"ement an% #uman
oversi"#t to revie1 mo%el;ase% assi"nments an% to ensure t#at t#e mo%els are use%
appropriatel67 Revie1 proce%ures s#all aim at fin%in" an% limitin" errors associate% 1it#
mo%el 1ea5nesses7 Cuman !u%"ements s#all ta5e into account all relevant information not
consi%ere% 6 t#e mo%el7 2#e institution s#all %ocument #o1 #uman !u%"ement an% mo%el
results are to e comine%7
,rticle 1>1
Documentation of ratin" s6stems
17 2#e institutions s#all %ocument t#e %esi"n an% operational %etails of its ratin" s6stems7 2#e
%ocumentation s#all provi%e evi%ence of compliance 1it# t#e re&uirements in t#is Section*
an% a%%ress topics inclu%in" portfolio %ifferentiation* ratin" criteria* responsiilities of
parties t#at rate oli"ors an% e8posures* fre&uenc6 of assi"nment revie1s* an%
mana"ement oversi"#t of t#e ratin" process7
-7 2#e institution s#all %ocument t#e rationale for an% anal6sis supportin" its c#oice of ratin"
criteria7 ,n institution s#all %ocument all ma!or c#an"es in t#e ris5 ratin" process* an% suc#
%ocumentation s#all support i%entification of c#an"es ma%e to t#e ris5 ratin" process
suse&uent to t#e last revie1 6 t#e competent aut#orities7 2#e or"anisation of ratin"
assi"nment inclu%in" t#e ratin" assi"nment process an% t#e internal control structure s#all
also e %ocumente%7
37 2#e institutions s#all %ocument t#e specific %efinitions of %efault an% loss use% internall6
an% ensure consistenc6 1it# t#e %efinitions set out in t#is Re"ulation7
47 ?#ere t#e institution emplo6s statistical mo%els in t#e ratin" process* t#e institution s#all
%ocument t#eir met#o%olo"ies7 2#is material s#all:
)a/ provi%e a %etaile% outline of t#e t#eor6* assumptions an% mat#ematical an%
empirical asis of t#e assi"nment of estimates to "ra%es* in%ivi%ual oli"ors*
e8posures* or pools* an% t#e %ata source)s/ use% to estimate t#e mo%elE
)/ estalis# a ri"orous statistical process inclu%in" out;of;time an% out;of;sample
performance tests for vali%atin" t#e mo%elE
)c/ in%icate an6 circumstances un%er 1#ic# t#e mo%el %oes not 1or5 effectivel67
+7 ,n institution s#all %emonstrate to t#e satisfaction of t#e competent aut#orit6 t#at t#e
re&uirements of t#is ,rticle are met* 1#ere an institution #as otaine% a ratin" s6stem* or
mo%el use% 1it#in a ratin" s6stem* from a t#ir%;part6 ven%or an% t#at ven%or refuses or
restricts t#e access of t#e institution to information pertainin" to t#e met#o%olo"6 of t#at
ratin" s6stem or mo%el* or un%erl6in" %ata use% to %evelop t#at met#o%olo"6 or mo%el* on
t#e asis t#at suc# information is proprietar67
,rticle 1>-
Data maintenance
17 0nstitutions s#all collect an% store %ata on aspects of t#eir internal ratin"s as re&uire% un%er
Part $i"#t7
-7 3or e8posures to corporates* institutions an% central "overnments an% central an5s, and
for e6uit# e5posures *here an institution uses the .(DL8( approa$h set out in Arti$le
4@:(C)* institutions s#all collect an% store:
)a/ complete ratin" #istories on oli"ors an% reco"nise% "uarantorsE
)/ t#e %ates t#e ratin"s 1ere assi"ne%E
)c/ t#e 5e6 %ata an% met#o%olo"6 use% to %erive t#e ratin"E
)%/ t#e person responsile for t#e ratin" assi"nmentE
)e/ t#e i%entit6 of oli"ors an% e8posures t#at %efaulte%E
)f/ t#e %ate an% circumstances of suc# %efaultsE
)"/ %ata on t#e PDs an% realise% %efault rates associate% 1it# ratin" "ra%es an% ratin"s
mi"ration7
37 0nstitutions not usin" o1n estimates of FGDs an% conversion factors s#all collect an% store
%ata on comparisons of realise% FGDs to t#e values as set out in ,rticle 1+>)1/ an%
realise% conversion factors to t#e values as set out in ,rticle 1=-)8/7
47 0nstitutions usin" o1n estimates of FGDs an% conversion factors s#all collect an% store:
)a/ complete #istories of %ata on t#e facilit6 ratin"s an% FGD an% conversion factor
estimates associate% 1it# eac# ratin" scaleE
)/ t#e %ates t#e ratin"s 1ere assi"ne% an% t#e estimates 1ere %oneE
)c/ t#e 5e6 %ata an% met#o%olo"6 use% to %erive t#e facilit6 ratin"s an% FGD an%
conversion factor estimatesE
)%/ t#e person 1#o assi"ne% t#e facilit6 ratin" an% t#e person 1#o provi%e% FGD an%
conversion factor estimatesE
)e/ %ata on t#e estimate% an% realise% FGDs an% conversion factors associate% 1it# eac#
%efaulte% e8posureE
)f/ %ata on t#e FGD of t#e e8posure efore an% after evaluation of t#e effects of a
"uarantee/or cre%it %erivative* for t#ose institutions t#at reflect t#e cre%it ris5
miti"atin" effects of "uarantees or cre%it %erivatives t#rou"# FGDE
)"/ %ata on t#e components of loss for eac# %efaulte% e8posure7
+7 3or retail e8posures* institutions s#all collect an% store:
)a/ %ata use% in t#e process of allocatin" e8posures to "ra%es or poolsE
)/ %ata on t#e estimate% PDs* FGDs an% conversion factors associate% 1it# "ra%es or
pools of e8posuresE
)c/ t#e i%entit6 of oli"ors an% e8posures t#at %efaulte%E
)%/ for %efaulte% e8posures* %ata on t#e "ra%es or pools to 1#ic# t#e e8posure 1as
assi"ne% over t#e 6ear prior to %efault an% t#e realise% outcomes on FGD an%
conversion factorE
)e/ %ata on loss rates for &ualif6in" revolvin" retail e8posures7
,rticle 1>3
Stress tests use% in assessment of capital a%e&uac6
17 ,n institution s#all #ave in place soun% stress testin" processes for use in t#e assessment of
its capital a%e&uac67 Stress testin" s#all involve i%entif6in" possile events or future
c#an"es in economic con%itions t#at coul% #ave unfavourale effects on an institution(s
cre%it e8posures an% assessment of t#e institution(s ailit6 to 1it#stan% suc# c#an"es7
-7 ,n institution s#all re"ularl6 perform a cre%it ris5 stress test to assess t#e effect of certain
specific con%itions on its total capital re&uirements for cre%it ris57 2#e test s#all e one
c#osen 6 t#e institution* su!ect to supervisor6 revie17 2#e test to e emplo6e% s#all e
meanin"ful an% consi%er t#e effects of severe* ut plausile* recession scenarios7 ,n
institution s#all assess mi"ration in its ratin"s un%er t#e stress test scenarios7 Stresse%
portfolios s#all contain t#e vast ma!orit6 of an institution(s total e8posure7
37 0nstitutions usin" t#e treatment set out in ,rticle 148)3/ s#all consi%er as part of t#eir stress
testin" frame1or5 t#e impact of a %eterioration in t#e cre%it &ualit6 of protection provi%ers*
in particular t#e impact of protection provi%ers fallin" outsi%e t#e eli"iilit6 criteria7
A
S4D;S$C20OB -
R0S: Q4,B2030C,20OB
,rticle 1>4
Default of an oli"or
17 A default shall !e $onsidered to have o$$urred 1it# re"ar% to a particular oli"or 1#en
eit#er or !oth of t#e follo1in" have ta5en place:
)a/ t#e institution consi%ers t#at t#e oli"or is unli5el6 to pa6 its cre%it oli"ations to t#e
institution* t#e parent un%erta5in" or an6 of its susi%iaries in full* 1it#out recourse
6 t#e institution to actions suc# as realisin" securit6E
)/ t#e oli"or is past %ue more t#an 9. %a6s on an6 material cre%it oli"ation to t#e
institution* t#e parent un%erta5in" or an6 of its susi%iaries7 Copetent Authorities
a# repla$e the >: da#s *ith 4A: da#s for e5posures se$ured !# residential or
"ME $oer$ial real estate in the retail e5posure $lass, as *ell as e5posures to
pu!li$ se$tor entities (."Es)3 +he 4A: da#s shall not appl# for the purposes of
Arti$le 4223
&n the $ase of retail e5posures, institutions a# appl# the definition of default laid do*n
in points (a) and (!) at the level of an individual $redit fa$ilit# rather than in relation to
the total o!ligations of a !orro*er3
4a3 +he follo*ing shall appl# for the purposes of point (!) of paragraph 4'
(a) for over%rafts* %a6s past %ue commence once an oli"or #as reac#e% an a%vise%
limit* #as een a%vise% a limit smaller t#an current outstan%in"s* or #as %ra1n cre%it
1it#out aut#orisation an% t#e un%erl6in" amount is material%
(!) for t#e purposes of point (a), an a%vise% limit comprises an6 cre%it limit %etermine%
6 t#e institution an% aout 1#ic# t#e oli"or #as een informe% 6 t#e institution%
($) %a6s past %ue for cre%it car%s commence on t#e minimum pa6ment %ue %ate7
(d) aterialit# of a $redit o!ligation past %ue s#all e assessed against a t#res#ol%*
%efine% 6 t#e competent aut#orities7 2#is t#res#ol% s#all reflect a level of ris5 t#at
t#e competent aut#orit6 consi%ers to e reasonale A%
(e) institutions s#all #ave %ocumente% policies in respect of t#e countin" of %a6s past
%ue* in particular in respect of t#e re;a"ein" of t#e facilities an% t#e "rantin" of
e8tensions* amen%ments or %eferrals* rene1als* an% nettin" of e8istin" accounts7
2#ese policies s#all e applie% consistentl6 over time* an% s#all e in line 1it# t#e
internal ris5 mana"ement an% %ecision processes of t#e institution7
-7 3or t#e purpose of point )a/ of t#e para"rap# 1* elements to e ta5en as in%ications of
unli5eliness to pa6 s#all inclu%e the follo*ing:
)a/ t#e institution puts t#e cre%it oli"ation on non;accrue% statusE
)/ t#e institution reco"nises a specific cre%it a%!ustment resultin" from a si"nificant
perceive% %ecline in cre%it &ualit6 suse&uent to t#e institution ta5in" on t#e
e8posureE
)c/ t#e institution sells t#e cre%it oli"ation at a material cre%it;relate% economic lossE
)%/ t#e institution consents to a %istresse% restructurin" of t#e cre%it oli"ation 1#ere
t#is is li5el6 to result in a %iminis#e% financial oli"ation cause% 6 t#e material
for"iveness* or postponement* of principal* interest or* 1#ere relevant fees7 2#is
inclu%es* in t#e case of e&uit6 e8posures assesse% un%er a PD/FGD ,pproac#*
%istresse% restructurin" of t#e e&uit6 itselfE
)e/ t#e institution #as file% for t#e oli"or(s an5ruptc6 or a similar or%er in respect of
an oli"or(s cre%it oli"ation to t#e institution* t#e parent un%erta5in" or an6 of its
susi%iariesE
)f/ t#e oli"or #as sou"#t or #as een place% in an5ruptc6 or similar protection 1#ere
t#is 1oul% avoi% or %ela6 repa6ment of a cre%it oli"ation to t#e institution* t#e
parent un%erta5in" or an6 of its susi%iaries7
37 0nstitutions t#at use e8ternal %ata t#at is not itself consistent 1it# t#e definition of %efault
lai% %o1n in para"rap# 1* s#all ma5e appropriate a%!ustments to ac#ieve roa% e&uivalence
1it# t#e %efinition of %efault7
47 0f t#e institution consi%ers t#at a previousl6 %efaulte% e8posure is suc# t#at no tri""er of
%efault continues to appl6* t#e institution s#all rate t#e oli"or or facilit6 as t#e6 1oul% for
a non;%efaulte% e8posure7 S#oul% t#e %efinition of %efault suse&uentl6 e tri""ere%*
anot#er %efault 1oul% e %eeme% to #ave occurre%7
+7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions accor%in"
to 1#ic# a competent aut#orit6 s#all set t#e t#res#ol% referre% to in para"rap# 1 a, point d3
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
=7 $D, s#all issue "ui%elines on t#e application of t#is ,rticle7 2#ose "ui%elines s#all e
a%opte% in accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 1>+
Overall re&uirements for estimation
17 0n &uantif6in" t#e ris5 parameters to e associate% 1it# ratin" "ra%es or pools* institutions
s#all appl6 t#e follo1in" re&uirements:
)a/ an institution(s o1n estimates of t#e ris5 parameters PD* FGD* conversion factor an%
$F s#all incorporate all relevant %ata* information an% met#o%s7 2#e estimates s#all
e %erive% usin" ot# #istorical e8perience an% empirical evi%ence* an% not ase%
purel6 on !u%"emental consi%erations7 2#e estimates s#all e plausile an% intuitive
an% s#all e ase% on t#e material %rivers of t#e respective ris5 parameters7 2#e less
%ata an institution #as* t#e more conservative it s#all e in its estimationE
)/ an institution s#all e ale to provi%e a rea5%o1n of its loss e8perience in terms of
%efault fre&uenc6* FGD* conversion factor* or loss 1#ere $F estimates are use%* 6
t#e factors it sees as t#e %rivers of t#e respective ris5 parameters7 2#e institution(s
estimates s#all e representative of lon" run e8perienceE
)c/ an6 c#an"es in len%in" practice or t#e process for pursuin" recoveries over t#e
oservation perio%s referre% to in ,rticles 1>=)1/)#/* 40?)-/)e /* 400(4)(9), 400(2),
40A)-/ an% 40A)3/ s#all e ta5en into account7 ,n institution(s estimates s#all reflect
t#e implications of tec#nical a%vances an% ne1 %ata an% ot#er information* as it
ecomes availale7 0nstitutions s#all revie1 t#eir estimates 1#en ne1 information
comes to li"#t ut at least on an annual asisE
)%/ t#e population of e8posures represente% in t#e %ata use% for estimation* t#e len%in"
stan%ar%s use% 1#en t#e %ata 1as "enerate% an% ot#er relevant c#aracteristics s#all
e comparale 1it# t#ose of t#e institution(s e8posures an% stan%ar%s7 2#e economic
or mar5et con%itions t#at un%erlie t#e %ata s#all e relevant to current an%
foreseeale con%itions7 2#e numer of e8posures in t#e sample an% t#e %ata perio%
use% for &uantification s#all e sufficient to provi%e t#e institution 1it# confi%ence
in t#e accurac6 an% roustness of its estimatesE
)e/ for purc#ase% receivales t#e estimates s#all reflect all relevant information
availale to t#e purc#asin" institution re"ar%in" t#e &ualit6 of t#e un%erl6in"
receivales* inclu%in" %ata for similar pools provi%e% 6 t#e seller* 6 t#e
purc#asin" institution* or 6 e8ternal sources7 2#e purc#asin" institution s#all
evaluate an6 %ata relie% upon 1#ic# is provi%e% 6 t#e sellerE
)f/ an institution s#all a%% to its estimates a mar"in of conservatism t#at is relate% to t#e
e8pecte% ran"e of estimation errors7 ?#ere met#o%s an% %ata are consi%ere% to e
less satisfactor6 A* t#e e8pecte% ran"e of errors is lar"er* t#e mar"in of conservatism
s#all e lar"er7
?#ere institutions use %ifferent estimates for t#e calculation of ris5 1ei"#ts an% for
internal purposes* it s#all e %ocumente% an% e reasonale7 0f institutions can %emonstrate
to t#eir competent aut#orities t#at for %ata t#at #ave een collecte% prior to 1 <anuar6 -..>
appropriate a%!ustments #ave een ma%e to ac#ieve roa% e&uivalence 1it# t#e definition
of %efault lai% %o1n in ,rticle 1>4 or *ith loss* competent aut#orities ma6 permit t#e
institutions some fle8iilit6 in t#e application of t#e re&uire% stan%ar%s for %ata7
-7 ?#ere an institution uses %ata t#at is poole% across institutions it s#all meet t#e follo1in"
re&uirements :
)a/ t#e ratin" s6stems an% criteria of ot#er institutions in t#e pool are similar 1it# its
o1nE
)/ t#e pool is representative of t#e portfolio for 1#ic# t#e poole% %ata is use%E
)c/ t#e poole% %ata is use% consistentl6 over time 6 t#e institution for its estimatesE
)%/ t#e institution s#all remain responsile for t#e inte"rit6 of its ratin" s6stemsE
)e/ t#e institution s#all maintain sufficient in;#ouse un%erstan%in" of its ratin" s6stems*
inclu%in" t#e ailit6 to effectivel6 monitor an% au%it t#e ratin" process7
,rticle 1>=
Re&uirements specific to PD estimation
17 A0n &uantif6in" t#e ris5 parameters to e associate% 1it# ratin" "ra%es or pools*
institutions s#all appl6 t#e follo1in" re&uirements specific to PD estimation to e8posures
to corporates* institutions an% central "overnments an% central an5s and for e6uit#
e5posures *here an institution uses the .(DL8( approa$h set out in Arti$le 4@:(C):
)a/ institutions s#all estimate PDs 6 oli"or "ra%e from lon" run avera"es of one;6ear
%efault rates7 PD estimates for oli"ors t#at are #i"#l6 levera"e% or for oli"ors
1#ose assets are pre%ominantl6 tra%e% assets s#all reflect t#e performance of t#e
un%erl6in" assets ase% on perio%s of stresse% volatilitiesE
)/ for purc#ase% corporate receivales institutions ma6 estimate t#e EL 6 oli"or
"ra%e from lon" run avera"es of one;6ear realise% %efault ratesE
)c/ if an institution %erives lon" run avera"e estimates of PDs an% FGDs for purc#ase%
corporate receivales from an estimate of $F* an% an appropriate estimate of PD or
FGD* t#e process for estimatin" total losses s#all meet t#e overall stan%ar%s for
estimation of PD an% FGD set out in t#is part* an% t#e outcome s#all e consistent
1it# t#e concept of FGD as set out in ,rticle 1>>)1/)a/E
)%/ institutions s#all use PD estimation tec#ni&ues onl6 1it# supportin" anal6sis7
0nstitutions s#all reco"nise t#e importance of !u%"mental consi%erations in
cominin" results of tec#ni&ues an% in ma5in" a%!ustments for limitations of
tec#ni&ues an% informationE
)e/ to t#e e8tent t#at an institution uses %ata on internal %efault e8perience for t#e
estimation of PDs* t#e estimates s#all e reflective of un%er1ritin" stan%ar%s an% of
an6 %ifferences in t#e ratin" s6stem t#at "enerate% t#e %ata an% t#e current ratin"
s6stem7 ?#ere un%er1ritin" stan%ar%s or ratin" s6stems #ave c#an"e%* t#e
institution s#all a%% a "reater mar"in of conservatism in its estimate of PDE
)f/ to t#e e8tent t#at an institution associates or maps its internal "ra%es to t#e scale
use% 6 an $C,0 or similar or"anisations an% t#en attriutes t#e %efault rate
oserve% for t#e e8ternal or"anisation(s "ra%es to t#e institution(s "ra%es* mappin"s
s#all e ase% on a comparison of internal ratin" criteria to t#e criteria use% 6 t#e
e8ternal or"anisation an% on a comparison of t#e internal an% e8ternal ratin"s of an6
common oli"ors7 Diases or inconsistencies in t#e mappin" approac# or un%erl6in"
%ata s#all e avoi%e%7 2#e criteria of t#e e8ternal or"anisation un%erl6in" t#e %ata
use% for &uantification s#all e oriente% to %efault ris5 onl6 an% not reflect
transaction c#aracteristics7 2#e anal6sis un%erta5en 6 t#e institution s#all inclu%e a
comparison of t#e %efault %efinitions use%* su!ect to t#e re&uirements in ,rticle
1>47 2#e institution s#all %ocument t#e asis for t#e mappin"E
)"/ to t#e e8tent t#at an institution uses statistical %efault pre%iction mo%els it is allo1e%
to estimate PDs as t#e simple avera"e of %efault;proailit6 estimates for in%ivi%ual
oli"ors in a "iven "ra%e7 2#e institution(s use of %efault proailit6 mo%els for t#is
purpose s#all meet t#e stan%ar%s specifie% in ,rticle 40:E
)#/ irrespective of 1#et#er an institution is usin" e8ternal* internal* or poole% %ata
sources* or a comination of t#e t#ree* for its PD estimation* t#e len"t# of t#e
un%erl6in" #istorical oservation perio% use% s#all e at least five 6ears for at least
one source7 0f t#e availale oservation perio% spans a lon"er perio% for an6 source*
an% t#is %ata is relevant* t#is lon"er perio% s#all e use%7 2#is point also applies to
t#e PD/FGD ,pproac# to e&uit67 Su!ect to t#e permission of competent aut#orities*
institutions 1#ic# #ave not receive% t#e permission of t#e competent aut#orit6
pursuant to ,rticle 138 to use o1n estimates of FGDs or conversion factors ma6
use* 1#en t#e6 implement t#e 0RD ,pproac#* relevant %ata coverin" a perio% of t1o
6ears7 2#e perio% to e covere% s#all increase 6 one 6ear eac# 6ear until relevant
%ata cover a perio% of five 6ears7
-7 3or retail e8posures* t#e follo1in" re&uirements s#all appl6:
)a/ institutions s#all estimate PDs 6 oli"or "ra%e or pool from lon" run avera"es of
one;6ear %efault ratesE
)/ PD estimates ma6 also e %erive% from an estiate of total losses an% appropriate
estimates of FGDsE
)c/ institutions s#all re"ar% internal %ata for assi"nin" e8posures to "ra%es or pools as
t#e primar6 source of information for estimatin" loss c#aracteristics7 0nstitutions
ma6 use e8ternal %ata )inclu%in" poole% %ata/ or statistical mo%els for &uantification
provi%e% At#e follo1in" strong links !oth e5ist:
)i/ !et*een t#e institution(s process of assi"nin" e8posures to "ra%es or pools an%
t#e process use% 6 t#e e8ternal %ata sourceE and
)ii/ !et*een t#e institution(s internal ris5 profile an% t#e composition of t#e
e8ternal %ataE
)%/ if an institution %erives lon" run avera"e estimates of PD an% FGD for retail from an
estimate of total losses an% an appropriate estimate of PD or FGD* t#e process for
estimatin" total losses s#all meet t#e overall stan%ar%s for estimation of PD an%
FGD set out in t#is part* an% t#e outcome s#all e consistent 1it# t#e concept of
FGD as set out in point )a/ of ,rticle 1>>)1/E
)e/ irrespective of 1#et#er an institution is usin" e8ternal* internal or poole% %ata
sources or a comination of t#e t#ree* for t#eir estimation of loss c#aracteristics* t#e
len"t# of t#e un%erl6in" #istorical oservation perio% use% s#all e at least five 6ears
for at least one source7 0f t#e availale oservation spans a lon"er perio% for an6
source* an% t#ese %ata are relevant* t#is lon"er perio% s#all e use%7 ,n institution
nee% not "ive e&ual importance to #istoric %ata if more recent %ata is a etter
pre%ictor of loss rates7 Su!ect to t#e permission of t#e competent aut#orities*
institutions ma6 use* 1#en t#e6 implement t#e 0RD ,pproac#* relevant %ata
coverin" a perio% of t1o 6ears7 2#e perio% to e covere% s#all increase 6 one 6ear
eac# 6ear until relevant %ata cover a perio% of five 6earsE
)f/ institutions s#all i%entif6 an% anal6se e8pecte% c#an"es of ris5 parameters over t#e
life of cre%it e8posures )seasonin" effects/7
3or purc#ase% retail receivales* institutions ma6 use e8ternal an% internal reference %ata7
0nstitutions s#all use all relevant %ata sources as points of comparison7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e con%itions accor%in" to 1#ic# competent aut#orities ma6 "rant t#e permissions
referre% to in point )#/ of para"rap# 1 an% point )e/ of para"rap# -E
)/ t#e ethodologies accor%in" to 1#ic# competent aut#orities s#all assess t#e
met#o%olo"6 of an institution for estimatin" PD pursuant to ,rticle 1387
$D, s#all sumit t#e %raft re"ulator6 tec#nical stan%ar%s referre% to in t#e first su;para"rap# to
t#e Commission 6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to in t#e
first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of Re"ulation
)$4/ Bo 1.93/-.1.7
,rticle 1>>
Re&uirements specific to o1n;FGD estimates
17 0n &uantif6in" t#e ris5 parameters to e associate% 1it# ratin" "ra%es or pools* institutions
s#all appl6 t#e follo1in" re&uirements specific to o1n;FGD estimates:
)a/ institutions s#all estimate FGDs 6 facilit6 "ra%e or pool on t#e asis of t#e avera"e
realise% FGDs 6 facilit6 "ra%e or pool usin" all oserve% %efaults 1it#in t#e %ata
sources )%efault 1ei"#te% avera"e/E
)/ institutions s#all use FGD estimates t#at are appropriate for an economic %o1nturn if
t#ose are more conservative t#an t#e lon";run avera"e7 2o t#e e8tent a ratin" s6stem
is e8pecte% to %eliver realise% FGDs at a constant level 6 "ra%e or pool over time*
institutions s#all ma5e a%!ustments to t#eir estimates of ris5 parameters 6 "ra%e or
pool to limit t#e capital impact of an economic %o1nturnE
)c/ an institution s#all consi%er t#e e8tent of an6 %epen%ence et1een t#e ris5 of t#e
oli"or 1it# t#at of t#e collateral or collateral provi%er7 Cases 1#ere t#ere is a
si"nificant %e"ree of %epen%ence s#all e a%%resse% in a conservative mannerE
)%/ currenc6 mismatc#es et1een t#e un%erl6in" oli"ation an% t#e collateral s#all e
treate% conservativel6 in t#e institution(s assessment of FGDE
)e/ to t#e e8tent t#at FGD estimates ta5e into account t#e e8istence of collateral* t#ese
estimates s#all not solel6 e ase% on t#e collateral(s estimate% mar5et value7 FGD
estimates s#all ta5e into account t#e effect of t#e potential inailit6 of institutions to
e8pe%itiousl6 "ain control of t#eir collateral an% li&ui%ate itE
)f/ to t#e e8tent t#at FGD estimates ta5e into account t#e e8istence of collateral*
institutions s#all estalis# internal re&uirements for collateral mana"ement* le"al
certaint6 an% ris5 mana"ement t#at are "enerall6 consistent 1it# t#ose set out in
C#apter 4* Section 3E
)"/ to t#e e8tent t#at an institution reco"nises collateral for %eterminin" t#e e8posure
value for counterpart6 cre%it ris5 accor%in" to C#apter =* Section + or =* an6 amount
e8pecte% to e recovere% from t#e collateral s#all not e ta5en into account in t#e
FGD estimatesE
)#/ for t#e specific case of e8posures alrea%6 in %efault* t#e institution s#all use t#e sum
of its est estimate of e8pecte% loss for eac# e8posure "iven current economic
circumstances an% e8posure status an% its estiate of the in$rease of loss rate
$aused !# possi!le a%%itional une8pecte% losses %urin" t#e recover6 perio%, i3e3
!et*een date of default and final li6uidation of the e5posureE
)i/ to t#e e8tent t#at unpai% late fees #ave een capitalise% in t#e institution(s income
statement* t#e6 s#all e a%%e% to t#e institution(s measure of e8posure an% lossE
)!/ for e8posures to corporates* institutions an% central "overnments an% central an5s*
estimates of FGD s#all e ase% on %ata over a minimum of five 6ears* increasin"
6 one 6ear eac# 6ear after implementation until a minimum of seven 6ears is
reac#e%* for at least one %ata source7 0f t#e availale oservation perio% spans a
lon"er perio% for an6 source* an% t#e %ata is relevant* t#is lon"er perio% s#all e
use%7
-7 3or retail e8posures* institutions ma6 %o t#e follo1in":
)a/ %erive FGD estimates from realise% losses an% appropriate estimates of PDsE
)/ reflect future %ra1in"s eit#er in t#eir conversion factors or in t#eir FGD estimatesE
)c/ 3or purc#ase% retail receivales use e8ternal an% internal reference %ata to estimate
FGDs7
3or retail e8posures* estimates of FGD s#all e ase% on %ata over a minimum of five
6ears7 ,n institution nee%s not "ive e&ual importance to #istoric %ata if more recent %ata is
a etter pre%ictor of loss rates7 Su!ect to t#e permission of t#e competent aut#orities*
institutions ma6 use* 1#en t#e6 implement t#e 0RD ,pproac#* relevant %ata coverin" a
perio% of t1o 6ears7 2#e perio% to e covere% s#all increase 6 one 6ear eac# 6ear until
relevant %ata cover a perio% of five 6ears7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e nature* severit6 an% %uration of an economic %o1nturn referre% to in para"rap#
1E
)/ t#e con%itions accor%in" to 1#ic# a competent aut#orit6 ma6 permit an% institution
pursuant to para"rap# 3 to use relevant %ata coverin" a perio% of t1o 6ears 1#en t#e
institution implements t#e 0RD approac#7
$D, s#all sumit t#e %raft re"ulator6 tec#nical stan%ar%s referre% to in t#e first
supara"rap# to t#e Commission 6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 1>8
Re&uirements specific to o1n;conversion factor estimates
17 0n &uantif6in" t#e ris5 parameters to e associate% 1it# ratin" "ra%es or pools* institutions
s#all appl6 t#e follo1in" re&uirements specific to o1n;conversion factor estimates:
)a/ institutions s#all estimate conversion factors 6 facilit6 "ra%e or pool on t#e asis of
t#e avera"e realise% conversion factors 6 facilit6 "ra%e or pool usin" t#e %efault
1ei"#te% avera"e resultin" from all oserve% %efaults 1it#in t#e %ata sourcesE
)/ institutions s#all use conversion factor estimates t#at are appropriate for an
economic %o1nturn if t#ose are more conservative t#an t#e lon";run avera"e7 2o t#e
e8tent a ratin" s6stem is e8pecte% to %eliver realise% conversion factors at a constant
level 6 "ra%e or pool over time* institutions s#all ma5e a%!ustments to t#eir
estimates of ris5 parameters 6 "ra%e or pool to limit t#e capital impact of an
economic %o1nturnE
)c/ institutions( estimates of conversion factors s#all reflect t#e possiilit6 of a%%itional
%ra1in"s 6 t#e oli"or up to an% after t#e time a %efault event is tri""ere%7 2#e
conversion factor estimate s#all incorporate a lar"er mar"in of conservatism 1#ere a
stron"er positive correlation can reasonal6 e e8pecte% et1een t#e %efault
fre&uenc6 an% t#e ma"nitu%e of conversion factorE
)%/ in arrivin" at estimates of conversion factors institutions s#all consi%er t#eir specific
policies an% strate"ies a%opte% in respect of account monitorin" an% pa6ment
processin"7 0nstitutions s#all also consi%er t#eir ailit6 an% 1illin"ness to prevent
furt#er %ra1in"s in circumstances s#ort of pa6ment %efault* suc# as covenant
violations or ot#er tec#nical %efault eventsE
)e/ institutions s#all #ave a%e&uate s6stems an% proce%ures in place to monitor facilit6
amounts* current outstan%in"s a"ainst committe% lines an% c#an"es in outstan%in"s
per oli"or an% per "ra%e7 2#e institution s#all e ale to monitor outstan%in"
alances on a %ail6 asisE
)f/ if institutions use %ifferent estimates of conversion factors for t#e calculation of ris5
1ei"#te% e8posure amounts an% internal purposes it s#all e %ocumente% an% e
reasonale7
-7 3or e8posures to corporates* institutions an% central "overnments an% central an5s*
estimates of conversion factors s#all e ase% on %ata over a minimum of five 6ears*
increasin" 6 one 6ear eac# 6ear after implementation until a minimum of seven 6ears is
reac#e%* for at least one %ata source7 0f t#e availale oservation perio% spans a lon"er
perio% for an6 source* an% t#e %ata is relevant* t#is lon"er perio% s#all e use%7
37 3or retail e8posures* institutions ma6 reflect future %ra1in"s eit#er in t#eir conversion
factors or in t#eir FGD estimates7
3or retail e8posures* estimates of conversion factors s#all e ase% on %ata over a
minimum of five 6ears7 As an e5eption to paragraph 4(a), an institution nee% not "ive
e&ual importance to #istoric %ata A if more recent %ata is a etter pre%ictor of %ra1 %o1ns7
Su!ect to t#e permission of competent aut#orities* institutions ma6 use* 1#en t#e6
implement t#e 0RD ,pproac#* relevant %ata coverin" a perio% of t1o 6ears7 2#e perio% to
e covere% s#all increase 6 one 6ear eac# 6ear until relevant %ata cover a perio% of five
6ears7
47 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e nature* severit6 an% %uration of an economic %o1nturn referre% to in para"rap#
1E
)/ con%itions accor%in" to 1#ic# a competent aut#orit6 ma6 permit an% institution to
use relevant %ata coverin" a perio% of t1o 6ears at t#e time an institution first
implements t#e 0RD approac#7
$D, s#all sumit t#e %raft re"ulator6 tec#nical stan%ar%s referre% to in t#e first
supara"rap# to t#e Commission 6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 1>9
Re&uirements for assessin" t#e effect of "uarantees an% cre%it %erivatives for e8posures to
corporates* institutions an% central "overnments an% central an5s 1#ere o1n estimates of FGD are
use% an% retail e8posures
17 2#e follo1in" re&uirements s#all appl6 in relation to eli"ile "uarantors an% "uarantees:
)a/ institutions s#all #ave clearl6 specifie% criteria for t#e t6pes of "uarantors t#e6
reco"nise for t#e calculation of ris5 1ei"#te% e8posure amountsE
)/ for reco"nise% "uarantors t#e same rules as for oli"ors as set out in ,rticles 1=>*
1=8 an% 1=9 s#all appl6E
)c/ t#e "uarantee s#all e evi%ence% in 1ritin"* non;cancellale on t#e part of t#e
"uarantor* in force until t#e oli"ation is satisfie% in full )to t#e e8tent of t#e amount
an% tenor of t#e "uarantee/ an% le"all6 enforceale a"ainst t#e "uarantor in a
!uris%iction 1#ere t#e "uarantor #as assets to attac# an% enforce a !u%"ement7
Con%itional "uarantees prescriin" con%itions un%er 1#ic# t#e "uarantor ma6 not e
oli"e% to perform ma6 e reco"nise% su!ect to permission of t#e competent
aut#orities7 2#e assi"nment criteria s#all a%e&uatel6 a%%ress an6 potential re%uction
in t#e ris5 miti"ation effect7
-7 ,n institution s#all #ave clearl6 specifie% criteria for a%!ustin" "ra%es* pools or FGD
estimates* an%* in t#e case of retail an% eli"ile purc#ase% receivales* t#e process of
allocatin" e8posures to "ra%es or pools* to reflect t#e impact of "uarantees for t#e
calculation of ris5 1ei"#te% e8posure amounts7 2#ese criteria s#all compl6 1it# t#e
re&uirements set out in ,rticles 1=> to 1=97
2#e criteria s#all e plausile an% intuitive7 2#e6 s#all a%%ress t#e "uarantor(s ailit6 an%
1illin"ness to perform un%er t#e "uarantee* t#e li5el6 timin" of an6 pa6ments from t#e
"uarantor* t#e %e"ree to 1#ic# t#e "uarantor(s ailit6 to perform un%er t#e "uarantee is
correlate% 1it# t#e oli"or(s ailit6 to repa6* an% t#e e8tent to 1#ic# resi%ual ris5 to t#e
oli"or remains7
37 2#e re&uirements for "uarantees in t#is ,rticle s#all appl6 also for sin"le;name cre%it
%erivatives7 0n relation to a mismatc# et1een t#e un%erl6in" oli"ation an% t#e reference
oli"ation of t#e cre%it %erivative or t#e oli"ation use% for %eterminin" 1#et#er a cre%it
event #as occurre%* t#e re&uirements set out un%er ,rticle -11)-/ s#all appl67 3or retail
e8posures an% eli"ile purc#ase% receivales* t#is para"rap# applies to t#e process of
allocatin" e8posures to "ra%es or pools7
2#e criteria s#all a%%ress t#e pa6out structure of t#e cre%it %erivative an% conservativel6
assess t#e impact t#is #as on t#e level an% timin" of recoveries7 2#e institution s#all
consi%er t#e e8tent to 1#ic# ot#er forms of resi%ual ris5 remain7
47 2#e re&uirements set out in para"rap#s 1 to 3 s#all not appl6 for "uarantees provi%e% 6
institutions* central "overnments an% central an5s* an% corporate entities 1#ic# meet t#e
re&uirements lai% %o1n in ,rticle 19>)1/)"/ if t#e institution #as receive% permission to
appl6 t#e Stan%ar%ise% ,pproac# for e8posures to suc# entities pursuant to ,rticle 4BC and
14+7 0n t#is case t#e re&uirements of C#apter 4 s#all appl67
+7 3or retail "uarantees* t#e re&uirements set out in para"rap#s 1 to 3 also appl6 to t#e
assi"nment of e8posures to "ra%es or pools* an% t#e estimation of PD7
=7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions accor%in"
to 1#ic# competent aut#orities ma6 permit con%itional "uarantees to e reco"nise%7
$D, s#all sumit t#e %raft re"ulator6 tec#nical stan%ar%s referre% to in t#e first su;
para"rap# to t#e Commission 6 31 Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 18.
Re&uirements for purc#ase% receivales
17 0n &uantif6in" t#e ris5 parameters to e associate% 1it# ratin" "ra%es or pools for
purc#ase% receivales* institutions s#all ensure t#e con%itions lai% %o1n in para"rap#s - to
= are met7
-7 2#e structure of t#e facilit6 s#all ensure t#at un%er all foreseeale circumstances t#e
institution #as effective o1ners#ip an% control of all cas# remittances from t#e receivales7
?#en t#e oli"or ma5es pa6ments %irectl6 to a seller or servicer* t#e institution s#all
verif6 re"ularl6 t#at pa6ments are for1ar%e% completel6 an% 1it#in t#e contractuall6
a"ree% terms7 0nstitutions s#all #ave proce%ures to ensure t#at o1ners#ip over t#e
receivales an% cas# receipts is protecte% a"ainst an5ruptc6 sta6s or le"al c#allen"es t#at
coul% materiall6 %ela6 t#e len%er(s ailit6 to li&ui%ate or assi"n t#e receivales or retain
control over cas# receipts7
37 2#e institution s#all monitor ot# t#e &ualit6 of t#e purc#ase% receivales an% t#e financial
con%ition of t#e seller an% servicer7 2#e follo1in" s#all appl6:
)a/ t#e institution s#all assess t#e correlation amon" t#e &ualit6 of t#e purc#ase%
receivales an% t#e financial con%ition of ot# t#e seller an% servicer* an% #ave in
place internal policies an% proce%ures t#at provi%e a%e&uate safe"uar%s to protect
a"ainst an6 contin"encies* inclu%in" t#e assi"nment of an internal ris5 ratin" for
eac# seller an% servicerE
)/ t#e institution s#all #ave clear an% effective policies an% proce%ures for %eterminin"
seller an% servicer eli"iilit67 2#e institution or its a"ent s#all con%uct perio%ic
revie1s of sellers an% servicers in or%er to verif6 t#e accurac6 of reports from t#e
seller or servicer* %etect frau% or operational 1ea5nesses* an% verif6 t#e &ualit6 of
t#e seller(s cre%it policies an% servicer(s collection policies an% proce%ures7 2#e
fin%in"s of t#ese revie1s s#all e %ocumente%E
)c/ t#e institution s#all assess t#e c#aracteristics of t#e purc#ase% receivales pools*
inclu%in" over;a%vancesE #istor6 of t#e seller(s arrears* a% %ets* an% a% %et
allo1ancesE pa6ment terms* an% potential contra accountsE
)%/ t#e institution s#all #ave effective policies an% proce%ures for monitorin" on an
a""re"ate asis sin"le;oli"or concentrations ot# 1it#in an% across purc#ase%
receivales poolsE
)e/ t#e institution s#all ensure t#at it receives from t#e servicer timel6 an% sufficientl6
%etaile% reports of receivales a"ein"s an% %ilutions to ensure compliance 1it# t#e
institution(s eli"iilit6 criteria an% a%vancin" policies "overnin" purc#ase%
receivales* an% provi%e an effective means 1it# 1#ic# to monitor an% confirm t#e
seller(s terms of sale an% %ilution7
47 2#e institution s#all #ave s6stems an% proce%ures for %etectin" %eteriorations in t#e seller(s
financial con%ition an% purc#ase% receivales &ualit6 at an earl6 sta"e* an% for a%%ressin"
emer"in" prolems pro;activel67 0n particular* t#e institution s#all #ave clear an% effective
policies* proce%ures* an% information s6stems to monitor covenant violations* an% clear
an% effective policies an% proce%ures for initiatin" le"al actions an% %ealin" 1it# prolem
purc#ase% receivales7
+7 2#e institution s#all #ave clear an% effective policies an% proce%ures "overnin" t#e control
of purc#ase% receivales* cre%it* an% cas#7 0n particular* 1ritten internal policies s#all
specif6 all material elements of t#e receivales purc#ase pro"ramme* inclu%in" t#e
a%vancin" rates* eli"ile collateral* necessar6 %ocumentation* concentration limits* an% t#e
1a6 cas# receipts are to e #an%le%7 2#ese elements s#all ta5e appropriate account of all
relevant an% material factors* inclu%in" t#e seller an% servicer(s financial con%ition* ris5
concentrations* an% tren%s in t#e &ualit6 of t#e purc#ase% receivales an% t#e seller(s
customer ase* an% internal s6stems s#all ensure t#at fun%s are a%vance% onl6 a"ainst
specifie% supportin" collateral an% %ocumentation7
=7 2#e institution s#all #ave an effective internal process for assessin" compliance 1it# all
internal policies an% proce%ures7 2#e process s#all inclu%e re"ular au%its of all critical
p#ases of t#e institution(s receivales purc#ase pro"ramme* verification of t#e separation of
%uties et1een firstl6 t#e assessment of t#e seller an% servicer an% t#e assessment of t#e
oli"or an% secon%l6 et1een t#e assessment of t#e seller an% servicer an% t#e fiel% au%it
of t#e seller an% servicer* an% evaluations of ac5 office operations* 1it# particular focus
on &ualifications* e8perience* staffin" levels* an% supportin" automation s6stems7
S4D;S$C20OB 3
R,F0D,20OB O3 0B2$RB,F $S209,2$S
,rticle 181
Rali%ation of internal estimates
0nstitutions s#all vali%ate t#eir internal estimates su!ect to t#e follo1in" re&uirements:
)a/ institutions s#all #ave roust s6stems in place to vali%ate t#e accurac6 an% consistenc6 of
ratin" s6stems* processes* an% t#e estimation of all relevant ris5 parameters7 2#e internal
vali%ation process s#all enale t#e institution to assess t#e performance of internal ratin"
an% ris5 estimation s6stems consistentl6 an% meanin"full6E
)/ institutions s#all re"ularl6 compare realise% %efault rates 1it# estimate% PDs for eac#
"ra%e an%* 1#ere realise% %efault rates are outsi%e t#e e8pecte% ran"e for t#at "ra%e*
institutions s#all specificall6 anal6se t#e reasons for t#e %eviation7 0nstitutions usin" o1n
estimates of FGDs an% conversion factors s#all also perform analo"ous anal6sis for t#ese
estimates7 Suc# comparisons s#all ma5e use of #istorical %ata t#at cover as lon" a perio% as
possile7 2#e institution s#all %ocument t#e met#o%s an% %ata use% in suc# comparisons7
2#is anal6sis an% %ocumentation s#all e up%ate% at least annuall6E
)c/ institutions s#all also use ot#er &uantitative vali%ation tools an% comparisons 1it# relevant
e8ternal %ata sources7 2#e anal6sis s#all e ase% on %ata t#at are appropriate to t#e
portfolio* are up%ate% re"ularl6* an% cover a relevant oservation perio%7 0nstitutions(
internal assessments of t#e performance of t#eir ratin" s6stems s#all e ase% on as lon" a
perio% as possileE
)%/ t#e met#o%s an% %ata use% for &uantitative vali%ation s#all e consistent t#rou"# time7
C#an"es in estimation an% vali%ation met#o%s an% %ata )ot# %ata sources an% perio%s
covere%/ s#all e %ocumente%E
)e/ institutions s#all #ave soun% internal stan%ar%s for situations 1#ere %eviations in realise%
PDs* FGDs* conversion factors an% total losses* 1#ere $F is use%* from e8pectations*
ecome si"nificant enou"# to call t#e vali%it6 of t#e estimates into &uestion7 2#ese
stan%ar%s s#all ta5e account of usiness c6cles an% similar s6stematic variailit6 in %efault
e8perience7 ?#ere realise% values continue to e #i"#er t#an e8pecte% values* institutions
s#all revise estimates up1ar% to reflect t#eir %efault an% loss e8perienceE
S4D;S$C20OB 4
R$Q40R$9$B2S 3OR $Q402H $GPOS4R$S 4BD$R 2C$ 0B2$RB,F 9OD$FS ,PPRO,CC
,rticle 18-
O1n fun%s re&uirement an% ris5 &uantification
3or t#e purpose of calculatin" o1n fun%s re&uirements institutions s#all meet t#e follo1in"
stan%ar%s:
)a/ t#e estimate of potential loss s#all e roust to a%verse mar5et movements relevant to t#e
lon";term ris5 profile of t#e institution(s specific #ol%in"s7 2#e %ata use% to represent
return %istriutions s#all reflect t#e lon"est sample perio% for 1#ic# %ata is availale an%
meanin"ful in representin" t#e ris5 profile of t#e institution(s specific e&uit6 e8posures7
2#e %ata use% s#all e sufficient to provi%e conservative* statisticall6 reliale an% roust
loss estimates t#at are not ase% purel6 on su!ective or !u%"mental consi%erations7 2#e
s#oc5 emplo6e% s#all provi%e a conservative estimate of potential losses over a relevant
lon";term mar5et or usiness c6cle7 2#e institution s#all comine empirical anal6sis of
availale %ata 1it# a%!ustments ase% on a variet6 of factors in or%er to attain mo%el
outputs t#at ac#ieve appropriate realism an% conservatism7 0n constructin" Ralue at Ris5
)RaR/ mo%els estimatin" potential &uarterl6 losses* institutions ma6 use &uarterl6 %ata or
convert s#orter #oriLon perio% %ata to a &uarterl6 e&uivalent usin" an anal6ticall6
appropriate met#o% supporte% 6 empirical evi%ence an% t#rou"# a 1ell;%evelope% an%
%ocumente% t#ou"#t process an% anal6sis7 Suc# an approac# s#all e applie%
conservativel6 an% consistentl6 over time7 ?#ere onl6 limite% relevant %ata is availale t#e
institution s#all a%% appropriate mar"ins of conservatismE
)/ t#e mo%els use% s#all capture a%e&uatel6 all of t#e material ris5s emo%ie% in e&uit6
returns inclu%in" ot# t#e "eneral mar5et ris5 an% specific ris5 e8posure of t#e institution(s
e&uit6 portfolio7 2#e internal mo%els s#all a%e&uatel6 e8plain #istorical price variation*
capture ot# t#e ma"nitu%e an% c#an"es in t#e composition of potential concentrations*
an% e roust to a%verse mar5et environments7 2#e population of ris5 e8posures
represente% in t#e %ata use% for estimation s#all e closel6 matc#e% to or at least
comparale 1it# t#ose of t#e institution(s e&uit6 e8posuresE
)c/ t#e internal mo%el s#all e appropriate for t#e ris5 profile an% comple8it6 of an institution(s
e&uit6 portfolio7 ?#ere an institution #as material #ol%in"s 1it# values t#at are #i"#l6
non;linear in nature t#e internal mo%els s#all e %esi"ne% to capture appropriatel6 t#e ris5s
associate% 1it# suc# instrumentsE
)%/ mappin" of in%ivi%ual positions to pro8ies* mar5et in%ices* an% ris5 factors s#all e
plausile* intuitive* an% conceptuall6 soun%E
)e/ institutions s#all %emonstrate t#rou"# empirical anal6ses t#e appropriateness of ris5
factors* inclu%in" t#eir ailit6 to cover ot# "eneral an% specific ris5E
)f/ t#e estimates of t#e return volatilit6 of e&uit6 e8posures s#all incorporate relevant an%
availale %ata* information* an% met#o%s7 0n%epen%entl6 revie1e% internal %ata or %ata
from e8ternal sources inclu%in" poole% %ata s#all e use%E
)"/ a ri"orous an% compre#ensive stress;testin" pro"ramme s#all e in place7
,rticle 183
Ris5 mana"ement process an% controls
?it# re"ar% to t#e %evelopment an% use of internal mo%els for o1n fun%s re&uirement purposes*
institutions s#all estalis# policies* proce%ures* an% controls to ensure t#e inte"rit6 of t#e mo%el an%
mo%ellin" process7 2#ese policies* proce%ures* an% controls s#all inclu%e t#e follo1in":
)a/ full inte"ration of t#e internal mo%el into t#e overall mana"ement information s6stems of
t#e institution an% in t#e mana"ement of t#e non;tra%in" oo5 e&uit6 portfolio7 0nternal
mo%els s#all e full6 inte"rate% into t#e institution(s ris5 mana"ement infrastructure if t#e6
are particularl6 use% in measurin" an% assessin" e&uit6 portfolio performance inclu%in" t#e
ris5;a%!uste% performance* allocatin" economic capital to e&uit6 e8posures an% evaluatin"
overall capital a%e&uac6 an% t#e investment mana"ement processE
)/ estalis#e% mana"ement s6stems* proce%ures* an% control functions for ensurin" t#e
perio%ic an% in%epen%ent revie1 of all elements of t#e internal mo%ellin" process*
inclu%in" approval of mo%el revisions* vettin" of mo%el inputs* an% revie1 of mo%el
results* suc# as %irect verification of ris5 computations7 2#ese revie1s s#all assess t#e
accurac6* completeness* an% appropriateness of mo%el inputs an% results an% focus on ot#
fin%in" an% limitin" potential errors associate% 1it# 5no1n 1ea5nesses an% i%entif6in"
un5no1n mo%el 1ea5nesses7 Suc# revie1s ma6 e con%ucte% 6 an internal in%epen%ent
unit* or 6 an in%epen%ent e8ternal t#ir% part6E
)c/ a%e&uate s6stems an% proce%ures for monitorin" investment limits an% t#e ris5 e8posures
of e&uit6 e8posuresE
)%/ t#e units responsile for t#e %esi"n an% application of t#e mo%el s#all e functionall6
in%epen%ent from t#e units responsile for mana"in" in%ivi%ual investmentsE
)e/ parties responsile for an6 aspect of t#e mo%ellin" process s#all e a%e&uatel6 &ualifie%7
9ana"ement s#all allocate sufficient s5ille% an% competent resources to t#e mo%ellin"
function7
,rticle 184
Rali%ation an% %ocumentation
0nstitutions s#all #ave roust s6stems in place to vali%ate t#e accurac6 an% consistenc6 of t#eir
internal mo%els an% mo%ellin" processes7 ,ll material elements of t#e internal mo%els an% t#e
mo%ellin" process an% vali%ation s#all e %ocumente%7
2#e vali%ation an% %ocumentation of institutions( internal mo%els an% mo%ellin" processes s#all e
su!ect to t#e follo1in" re&uirements:
)a/ institutions s#all use t#e internal vali%ation process to assess t#e performance of its internal
mo%els an% processes in a consistent an% meanin"ful 1a6E
)/ t#e met#o%s an% %ata use% for &uantitative vali%ation s#all e consistent t#rou"# time7
C#an"es in estimation an% vali%ation met#o%s an% %ata ot# %ata sources an% perio%s
covere% s#all e %ocumente%E
)c/ institutions s#all re"ularl6 compare actual e&uit6 returns compute% usin" realise% an%
unrealise% "ains an% losses 1it# mo%elle% estimates7 Suc# comparisons s#all ma5e use of
#istorical %ata t#at cover as lon" a perio% as possile7 2#e institution s#all %ocument t#e
met#o%s an% %ata use% in suc# comparisons7 2#is anal6sis an% %ocumentation s#all e
up%ate% at least annuall6E
)%/ institutions s#all ma5e use of ot#er &uantitative vali%ation tools an% comparisons 1it#
e8ternal %ata sources7 2#e anal6sis s#all e ase% on %ata t#at are appropriate to t#e
portfolio* are up%ate% re"ularl6* an% cover a relevant oservation perio%7 0nstitutions(
internal assessments of t#e performance of t#eir mo%els s#all e ase% on as lon" a perio%
as possileE
)e/ institutions s#all #ave soun% internal stan%ar%s for a%%ressin" situations 1#ere comparison
of actual e&uit6 returns 1it# t#e mo%els estimates calls t#e vali%it6 of t#e estimates or of
t#e mo%els as suc# into &uestion7 2#ese stan%ar%s s#all ta5e account of usiness c6cles an%
similar s6stematic variailit6 in e&uit6 returns7 ,ll a%!ustments ma%e to internal mo%els in
response to mo%el revie1s s#all e %ocumente% an% consistent 1it# t#e institution(s mo%el
revie1 stan%ar%sE
)f/ t#e internal mo%el an% t#e mo%ellin" process s#all e %ocumente%* inclu%in" t#e
responsiilities of parties involve% in t#e mo%ellin"* an% t#e mo%el approval an% mo%el
revie1 processes7
S4D;S$C20OB +
0B2$RB,F GOR$RB,BC$ ,BD OR$RS0GC2
Article 1&
2orporate !overnance
17 ,ll material aspects of t#e ratin" an% estimation processes s#all e approve% 6 t#e
institution(s mana"ement o%6 or a %esi"nate% committee t#ereof an% senior mana"ement7
2#ese parties s#all possess a "eneral un%erstan%in" of t#e ratin" s6stems of t#e institution
an% %etaile% compre#ension of its associate% mana"ement reports7
-7 Senior mana"ement s#all e su!ect to t#e follo1in" re&uirements:
)a/ t#e6 s#all provi%e notice to t#e mana"ement o%6 or a %esi"nate% committee t#ereof
of material c#an"es or e8ceptions from estalis#e% policies t#at 1ill materiall6
impact t#e operations of t#e institution(s ratin" s6stemsE
)/ t#e6 s#all #ave a "oo% un%erstan%in" of t#e ratin" s6stems %esi"ns an% operationsE
)c/ t#e6 s#all ensure* on an on"oin" asis t#at t#e ratin" s6stems are operatin" properl6E
Senior mana"ement s#all e re"ularl6 informe% 6 t#e cre%it ris5 control units aout t#e
performance of t#e ratin" process* areas nee%in" improvement* an% t#e status of efforts to
improve previousl6 i%entifie% %eficiencies7
37 0nternal ratin"s;ase% anal6sis of t#e institution(s cre%it ris5 profile s#all e an essential
part of t#e mana"ement reportin" to t#ese parties7 Reportin" s#all inclu%e at least ris5
profile 6 "ra%e* mi"ration across "ra%es* estimation of t#e relevant parameters per "ra%e*
an% comparison of realise% %efault rates* an% to t#e e8tent t#at o1n estimates are use% of
realise% FGDs an% realise% conversion factors a"ainst e8pectations an% stress;test results7
Reportin" fre&uencies s#all %epen% on t#e si"nificance an% t6pe of information an% t#e
level of t#e recipient7
A
,rticle 18=
Cre%it ris5 control
17 2#e cre%it ris5 control unit s#all e in%epen%ent from t#e personnel an% mana"ement
functions responsile for ori"inatin" or rene1in" e8posures an% report %irectl6 to senior
mana"ement7 2#e unit s#all e responsile for t#e %esi"n or selection* implementation*
oversi"#t an% performance of t#e ratin" s6stems7 0t s#all re"ularl6 pro%uce an% anal6se
reports on t#e output of t#e ratin" s6stems7
-7 2#e areas of responsiilit6 for t#e cre%it ris5 control unit or units s#all inclu%e:
)a/ testin" an% monitorin" "ra%es an% poolsE
)/ pro%uction an% anal6sis of summar6 reports from t#e institution(s ratin" s6stemsE
)c/ implementin" proce%ures to verif6 t#at "ra%e an% pool %efinitions are consistentl6
applie% across %epartments an% "eo"rap#ic areasE
)%/ revie1in" an% %ocumentin" an6 c#an"es to t#e ratin" process* inclu%in" t#e reasons
for t#e c#an"esE
)e/ revie1in" t#e ratin" criteria to evaluate if t#e6 remain pre%ictive of ris57 C#an"es to
t#e ratin" process* criteria or in%ivi%ual ratin" parameters s#all e %ocumente% an%
retaine%E
)f/ active participation in t#e %esi"n or selection* implementation an% vali%ation of
mo%els use% in t#e ratin" processE
)"/ oversi"#t an% supervision of mo%els use% in t#e ratin" processE
)#/ on"oin" revie1 an% alterations to mo%els use% in t#e ratin" process7
37 0nstitutions usin" poole% %ata accor%in" to ,rticles 1>+)-/ Ama6 outsource t#e follo1in"
tas5s:
)a/ pro%uction of information relevant to testin" an% monitorin" "ra%es an% poolsE
)/ pro%uction of summar6 reports from t#e institution(s ratin" s6stemsE
)c/ pro%uction of information relevant to revie1 of t#e ratin" criteria to evaluate if t#e6
remain pre%ictive of ris5E
)%/ %ocumentation of c#an"es to t#e ratin" process* criteria or in%ivi%ual ratin"
parametersE
)e/ pro%uction of information relevant to on"oin" revie1 an% alterations to mo%els use%
in t#e ratin" process7
47 0nstitutions ma5in" use of para"rap# 3 s#all ensure t#at t#e competent aut#orities #ave
access to all relevant information from t#e t#ir% part6 t#at is necessar6 for e8aminin"
compliance 1it# t#e re&uirements an% t#at t#e competent aut#orities ma6 perform on;site
e8aminations to t#e same e8tent as 1it#in t#e institution7
,rticle 18>
0nternal ,u%it
0nternal au%it or anot#er comparale in%epen%ent au%itin" unit s#all revie1 at least annuall6 t#e
institution(s ratin" s6stems an% its operations* inclu%in" t#e operations of t#e cre%it function an% t#e
estimation of PDs* FGDs* $Fs an% conversion factors7 ,reas of revie1 s#all inclu%e a%#erence to
all applicale re&uirements7
C6pter '
Cre.it risE 0iti5tion
S$C20OB 1
D$30B020OBS ,BD G$B$R,F R$Q40R$9$B2S
,rticle 188
Definitions
3or t#e purposes of t#is C#apter* t#e follo1in" %efinitions s#all appl6:
)1/ Mlen%in" institutionN means t#e institution 1#ic# #as t#e e8posure in &uestionE
)-/ Msecure% len%in" transactionN means an6 transaction "ivin" rise to an e8posure secure% 6
collateral 1#ic# %oes not inclu%e a provision conferrin" upon t#e institution t#e ri"#t to
receive mar"in at least %ail6E
)3/ Mcapital mar5et;%riven transactionN means an6 transaction "ivin" rise to an e8posure
secure% 6 collateral 1#ic# inclu%es a provision conferrin" upon t#e institution t#e ri"#t to
receive mar"in at least %ail6E
)4/ (un%erl6in" collective investment un%erta5in"( means a collective investment un%erta5in"
in t#e s#ares or units of 1#ic# anot#er collective investment un%erta5in" #as investe%7
,rticle 189
Principles for reco"nisin" t#e effect of cre%it ris5 miti"ation tec#ni&ues
17 Bo e8posure in respect of 1#ic# an institution otains cre%it ris5 miti"ation s#all pro%uce a
#i"#er ris5;1ei"#te% e8posure amount or e8pecte% loss amount t#an an ot#er1ise i%entical
e8posure in respect of 1#ic# an institution #as no cre%it ris5 miti"ation7
-7 ?#ere t#e ris5;1ei"#te% e8posure amount alrea%6 ta5es account of cre%it protection un%er
C#apter - or C#apter 3* as relevant* institutions s#all not ta5e into account t#at cre%it
protection in t#e calculations un%er t#is C#apter7
37 ?#ere t#e provisions in Sections - an% 3 are met* institutions ma6 mo%if6 t#e calculation
of ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise% ,pproac# an% t#e calculation of
ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts un%er t#e 0RD ,pproac# in
accor%ance 1it# t#e provisions of Sections 4* + an% =7
47 0nstitutions s#all treat cas#* securities or commo%ities purc#ase%* orro1e% or receive%
un%er a repurc#ase transaction or securities or commo%ities len%in" or orro1in"
transaction as collateral7
+7 ?#ere an institution calculatin" ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise%
,pproac# #as more t#an one form of cre%it ris5 miti"ation coverin" a sin"le e8posure it
s#all %o ot# of t#e follo1in":
)a/ su%ivi%e t#e e8posure into parts covere% 6 eac# t6pe of cre%it ris5 miti"ation toolE
)/ calculate t#e ris5;1ei"#te% e8posure amount for eac# part otaine% in point )a/
separatel6 in accor%ance 1it# t#e provisions of C#apter - an% t#is C#apter7
=7 ?#en an institution calculatin" ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise%
,pproac# covers a sin"le e8posure 1it# cre%it protection provi%e% 6 a sin"le protection
provi%er an% t#at protection #as %ifferin" maturities* it s#all %o ot# of t#e follo1in":
)a/ su%ivi%e t#e e8posure into parts covere% 6 eac# cre%it ris5 miti"ation toolE
)/ calculate t#e ris5;1ei"#te% e8posure amount for eac# part otaine% in point )a/
separatel6 in accor%ance 1it# t#e provisions of C#apter - an% t#is C#apter7
,rticle 19.
Principles "overnin" t#e eli"iilit6 of cre%it ris5 miti"ation tec#ni&ues
17 2#e tec#ni&ue use% Ato provi%e t#e cre%it protection to"et#er 1it# t#e actions an% steps
ta5en an% proce%ures an% policies implemente% 6 the len%in" institution s#all e suc# as
to result in cre%it protection arran"ements 1#ic# are le"all6 effective an% enforceale in all
relevant !uris%ictions7
+he lending institution shall provide, upon re6uest of the $opetent authorit#, the ost
re$ent version of the independent, *ritten and reasoned legal opinion or opinions that it
used to esta!lish *hether its $redit prote$tion arrangeent or arrangeents eet the
$ondition laid do*n in the first su!paragraph
-7 2#e len%in" institution s#all ta5e all appropriate steps to ensure t#e effectiveness of t#e
cre%it protection arran"ement an% to a%%ress t#e ris5s relate% to t#at arran"ement7
37 &nstitutions a# re$ognise fun%e% cre%it protection in the $al$ulation of the effe$t of
cre%it ris5 miti"ation *here the assets are eligi!le a$$ording to Arti$les 4>C to 4>?, as
appli$a!le3
)a/ t#e6 are inclu%e% in t#e list of eli"ile assets set out in ,rticles 193 to 19=* as
applicaleE
)/ t#e6 are sufficientl6 li&ui% an% t#eir value over time sufficientl6 stale to provi%e
appropriate certaint6 as to t#e cre%it protection ac#ieve% #avin" re"ar% to t#e
approac# use% to calculate ris5;1ei"#te% e8posure amounts an% to t#e %e"ree of
reco"nition allo1e%7
47 &nstitutions a# re$ognise fun%e% cre%it protection *here t#e len%in" institution has t#e
ri"#t to li&ui%ate or retain* in a timel6 manner* t#e assets from 1#ic# t#e protection %erives
in t#e event of t#e %efault* insolvenc6 or an5ruptc6 \ or ot#er cre%it event set out in t#e
transaction %ocumentation \ of t#e oli"or an%* 1#ere applicale* of t#e custo%ian
#ol%in" t#e collateral7 2#e %e"ree of correlation et1een t#e value of t#e assets relie% upon
for protection an% t#e cre%it &ualit6 of t#e oli"or s#all not e too #i"#7
+7 0n t#e case of unfun%e% cre%it protection* a protection provi%er s#all &ualif6 as an eli"ile
protection provi%er onl6 1#ere At#e protection provi%er is inclu%e% in t#e list of eli"ile
protection provi%ers set out in Arti$les 4>0 or 4>A, as appli$a!le3
A
=7 0n t#e case of unfun%e% cre%it protection* a protection a"reement s#all &ualif6 as an
eli"ile protection a"reement onl6 1#ere it meets ot# t#e follo1in" con%itions:
)a/ it is inclu%e% in t#e list of eli"ile protection a"reements set out in ,rticles 4>Aa and
4>>(4)E
)/ it is le"all6 effective an% enforceale in t#e relevant !uris%ictions* to provi%e
appropriate certaint6 as to t#e cre%it protection ac#ieve% #avin" re"ar% to t#e
approac# use% to calculate ris5;1ei"#te% e8posure amounts an% to t#e %e"ree of
reco"nition allo1e%7
($) the prote$tion provider eets the $riteria laid do*n in paragraph @3
>7 Cre%it protection s#all compl6 1it# t#e re&uirements set out in Section 3, as appli$a!le3
87 ,n institution s#all e ale to %emonstrate to competent aut#orities t#at it #as a%e&uate ris5
mana"ement processes to control t#ose ris5s to 1#ic# it ma6 e e8pose% as a result of
carr6in" out cre%it ris5 miti"ation practices7
97 Bot1it#stan%in" t#e presence of cre%it ris5 miti"ation ta5en into account for t#e purposes
of calculatin" ris5;1ei"#te% e8posure amounts an%* 1#ere relevant* e8pecte% loss amounts*
institutions s#all continue to un%erta5e a full cre%it ris5 assessment of t#e un%erl6in"
e8posure an% e in a position to %emonstrate t#e fulfilment of t#is re&uirement to t#e
competent aut#orities7 0n t#e case of repurc#ase transactions and securities lending or
commo%ities len%in" or orro1in" transactions t#e un%erl6in" e8posure s#all* for t#e
purposes of t#is para"rap# onl6* e %eeme% to e t#e net amount of t#e e8posure7
1.7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
A1#at constitutes sufficientl6 li&ui% assets an% 1#en can asset values e consi%ere% as
sufficientl6 stale for t#e purpose of para"rap# 3E
A
$D, s#all %evelop t#ose %raft re"ulator6 tec#nical stan%ar%s for sumission to t#e
Commission 6 31 Decemer -.137
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
S$C20OB -
$F0G0DF$ 3OR9S O3 CR$D02 R0S: 9020G,20OB
S4D;S$C20OB 1
34BD$D CR$D02 PRO2$C20OB
,rticle 191
On;alance s#eet nettin"
,n institution ma6 use on;alance s#eet nettin" of mutual claims et1een itself an% its counterpart6
as an eli"ile form of cre%it ris5 miti"ation7
?it#out pre!u%ice to ,rticle 19-* eli"iilit6 is limite% to reciprocal cas# alances et1een t#e
institution an% t#e counterpart67 0nstitutions ma6 mo%if6 ris5;1ei"#te% e8posure amounts an%* as
relevant* e8pecte% loss amounts onl6 for loans an% %eposits t#at t#e6 #ave receive% t#emselves an%
t#at are su!ect to an on;alance s#eet nettin" a"reement7
A9aster nettin" a"reements coverin" repurc#ase transactions or securities or commo%ities len%in"
or orro1in" transactions or ot#er capital mar5et;%riven transactions
0nstitutions a%optin" t#e 3inancial Collateral Compre#ensive 9et#o% set out in ,rticle -18 ma6
ta5e into account t#e effects of ilateral nettin" contracts coverin" repurc#ase transactions*
securities or commo%ities len%in" or orro1in" transactions* or ot#er capital mar5et;%riven
transactions 1it# a counterpart67 ?it#out pre!u%ice to ,rticle -93* t#e collateral ta5en an%
securities or commo%ities orro1e% 1it#in suc# a"reements or transactions s#all compl6 1it# t#e
eli"iilit6 re&uirements for collateral set out in ,rticles 193 an% 1947
,rticle 193
$li"iilit6 of collateral un%er all approac#es an% met#o%s
17 0nstitutions ma6 use t#e follo1in" items as eli"ile collateral un%er all approac#es an%
met#o%s:
)a/ cas# on %eposit 1it#* or cas# assimilate% instruments #el% 6* t#e len%in" institutionE
)/ %et securities issue% 6 central "overnments or central an5s* 1#ic# securities #ave
a cre%it assessment 6 an $C,0 or e8port cre%it a"enc6 reco"nise% as eli"ile for t#e
purposes of C#apter - 1#ic# #as een %etermine% 6 $D, to e associate% 1it#
cre%it &ualit6 step 4 or aove un%er t#e rules for t#e ris5 1ei"#tin" of e8posures to
central "overnments an% central an5s un%er C#apter -E
)c/ %et securities issue% 6 institutions* 1#ic# securities #ave a cre%it assessment 6 an
A$C,0 1#ic# #as een %etermine% 6 $D, to e associate% 1it# cre%it &ualit6 step
3 or aove un%er t#e rules for t#e ris5 1ei"#tin" of e8posures to institutions un%er
C#apter -E
)%/ %et securities issue% 6 ot#er entities 1#ic# securities #ave a cre%it assessment 6
an A$C,0 1#ic# #as een %etermine% 6 $D, to e associate% 1it# cre%it &ualit6
step 3 or aove un%er t#e rules for t#e ris5 1ei"#tin" of e8posures to corporates
un%er C#apter -E
)e/ %et securities 1it# a s#ort;term cre%it assessment 6 an A $C,0 1#ic# #as een
%etermine% 6 $D, to e associate% 1it# cre%it &ualit6 step 3 or aove un%er t#e
rules for t#e ris5 1ei"#tin" of s#ort term e8posures un%er C#apter -E
)f/ e&uities or convertile on%s t#at are inclu%e% in a main in%e8E
)"/ "ol%E
)#/ securitisation positions t#at are not re;securitisation positions* 1#ic# #ave an
e8ternal cre%it assessment 6 an A $C,0 1#ic# #as een %etermine% 6 $D, to e
associate% 1it# cre%it &ualit6 step 3 or aove un%er t#e rules for t#e ris5 1ei"#tin"
of securitisation e8posures un%er t#e approac# specifie% in C#apter +* Section 3*
Su;section 37
-7 3or t#e purposes of point )/ of para"rap# 1* M%et securities issue% 6 central "overnments
or central an5sN s#all inclu%e all t#e follo1in":
)a/ %et securities issue% 6 re"ional "overnments or local aut#orities* e8posures to
1#ic# are treate% as e8posures to t#e central "overnment in 1#ose !uris%iction t#e6
are estalis#e% un%er ,rticle 11.)-/E
)/ %et securities issue% 6 pulic sector entities 1#ic# are treate% as e8posures to
central "overnments in accor%ance 1it# ,rticle 111)4/E
)c/ %et securities issue% 6 multilateral %evelopment an5s to 1#ic# a . O ris5 1ei"#t
is assi"ne% un%er ,rticle 11-)-/E
)%/ %et securities issue% 6 international or"anisations 1#ic# are assi"ne% a . O ris5
1ei"#t un%er ,rticle 1137
37 3or t#e purposes of point )c/ of para"rap# 1* M%et securities issue% 6 institutionsN s#all
inclu%e all t#e follo1in":
)a/ %et securities issue% 6 re"ional "overnments or local aut#orities ot#er t#an t#ose
de!t se$urities referred to in point (a) of paragraph 2E
)/ %et securities issue% 6 pulic sector entities* e8posures to 1#ic# are treate%
accor%in" to ,rticle 111)1/ an% A)-/E
)c/ %et securities issue% 6 multilateral %evelopment an5s ot#er t#an t#ose to 1#ic# a
. O ris5 1ei"#t is assi"ne% un%er ,rticle 11-)-/7
47 ,n institution ma6 use %et securities t#at are issue% 6 ot#er institutions an% t#at %o not
#ave a cre%it assessment 6 an A $C,0 as eli"ile collateral 1#ere t#ose %et securities
fulfil all t#e follo1in" criteria:
)a/ t#e6 are liste% on a reco"nise% e8c#an"eE
)/ t#e6 &ualif6 as senior %etE
)c/ all ot#er rate% issues 6 t#e issuin" institution of t#e same seniorit6 #ave a cre%it
assessment 6 an A $C,0 1#ic# #as een %etermine% 6 t#e $D, to e associate%
1it# cre%it &ualit6 step 3 or aove un%er t#e rules for t#e ris5 1ei"#tin" of
e8posures to institutions or s#ort term e8posures un%er C#apter -E
)%/ t#e len%in" institution #as no information to su""est t#at t#e issue 1oul% !ustif6 a
cre%it assessment elo1 t#at in%icate% in )c/E
)e/ t#e mar5et li&ui%it6 of t#e instrument is sufficient for t#ese purposes7
+7 0nstitutions ma6 use units or s#ares in collective investment un%erta5in"s as eli"ile
collateral 1#ere all t#e follo1in" con%itions are satisfie%:
)a/ t#e units or s#ares #ave a %ail6 pulic price &uoteE
)/ t#e collective investment un%erta5in"s are limite% to investin" in instruments t#at
are eli"ile for reco"nition un%er para"rap#s 1 an% -7
($) the $olle$tive investent undertakings eet the $onditions laid do*n in Arti$le
420(C)3
?#ere a C04 invests in s#ares or units of anot#er C04* con%itions lai% %o1n in points )a/
to )$/ of t#e first supara"rap# s#all appl6 e&uall6 to an6 suc# un%erl6in" C047
2#e use 6 a collective investment un%erta5in" of %erivative instruments to #e%"e
permitte% investments s#all not prevent units or s#ares in t#at un%erta5in" from ein"
eli"ile as collateral7
=7 3or t#e purposes of para"rap# +* 1#ere a collective investment un%erta5in" (7the original
C&27) or an6 of its un%erl6in" collective investment un%erta5in"s are not limite% to
investin" in instruments t#at are eli"ile un%er para"rap#s 1 an% 4* institutions ma6 use
units or s#ares in t#at C04 as collateral to an amount e&ual to t#e value of t#e eli"ile
assets #el% 6 t#at C04 un%er t#e assumption t#at t#at C04 or an6 of its un%erl6in"
collective investment un%erta5in"s #ave investe% in non;eli"ile assets to t#e ma8imum
e8tent allo1e% un%er t#eir respective man%ates7
;here an# underl#ing $olle$tive investent undertaking has underl#ing $olle$tive
investent undertakings of its o*n, institutions a# use units or shares in the original
C&2 as eligi!le $ollateral provided that the# appl# the ethodolog# laid do*n in the first
su!paragraph
?#ere non;eli"ile assets can #ave a ne"ative value %ue to liailities or contin"ent
liailities resultin" from o1ners#ip* institutions s#all %o ot# of t#e follo1in":
)a/ calculate t#e total value of t#e non;eli"ile assetsE
)/ 1#ere t#e amount otaine% un%er point )a/ is ne"ative* sutract the a!solute value
of t#at amount from t#e total value of t#e eli"ile assets7
>7 ?it# re"ar% to points )/ to )e/ of para"rap# 1* 1#ere a securit6 #as t1o cre%it assessments
6 A$C,0s* institutions s#all appl6 t#e less favourale assessment7 ?#ere a securit6 #as
more t#an t1o cre%it assessments 6 A $C,0s* institutions s#all appl6 t#e t1o most
favourale assessments7 ?#ere t#e t1o most favourale cre%it assessments are %ifferent*
institutions s#all appl6 t#e less favourale of t#e t1o7
A
1.7 $S9, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e main in%ices Areferred to in point (f) of paragraph 4, in point (a) of Arti$le
4>B(4), in Arti$le 24>(4) and (B), and in point (e) of Arti$le 2>C(2)E
)/ t#e reco"nise% e8c#an"es referre% to in point )a/ of para"rap# 4 an% of ,rticle
194)1/* in ,rticle -19)1/ an% )4/* in point )e/ of ,rticle -93)-/* in point )5/ of ,rticle
389)-/* in point )%/ of ,rticle 4.4)3/* in point )c/ of ,rticle 41+)1/* an% in point 1> of
,nne8 0R* Part 37 in a$$ordan$e *ith the $onditions laid do*n Arti$le B (B0)3
$S9, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission 6 31
Decemer -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle
1+ of Re"ulation )$4/ Bo 1.9+/-.1.7
,rticle 194
,%%itional eli"iilit6 of collateral un%er t#e 3inancial Collateral Compre#ensive 9et#o%
17 0n a%%ition to t#e collateral estalis#e% in ,rticle 193* 1#ere an institution uses t#e
3inancial Collateral Compre#ensive 9et#o% set out in ,rticle -18* t#at institution ma6 use
t#e follo1in" items as eli"ile collateral:
)a/ e&uities or convertile on%s not inclu%e% in a main in%e8 ut tra%e% on a
reco"nise% e8c#an"eE
)/ units or s#ares in collective investment un%erta5in"s 1#ere ot# t#e follo1in"
con%itions are met:
)i/ t#e units or s#ares #ave a %ail6 pulic price &uoteE
)ii/ t#e collective investment un%erta5in" is limite% to investin" in instruments t#at
are eli"ile for reco"nition un%er ,rticle 193)1/ an% )B/ an% t#e items
mentione% in point )a/ of t#is supara"rap#7
0n t#e case a C04 invests in units or s#ares of anot#er C04* con%itions )a/ an% )/ of t#is
para"rap# e&uall6 appl6 to an6 suc# un%erl6in" C047
2#e use 6 a collective investment un%erta5in" of %erivative instruments to #e%"e
permitte% investments s#all not prevent units or s#ares in t#at un%erta5in" from ein"
eli"ile as collateral7
-7 ?#ere t#e collective investment un%erta5in" or an6 un%erl6in" collective investment
un%erta5in" are not limite% to investin" in instruments t#at are eli"ile for reco"nition
un%er ,rticle 193)1/ an% )B/ an% t#e items mentione% in point )a/ of para"rap# 1*
institutions ma6 use units or s#ares in t#at C04 as collateral to an amount e&ual to t#e
value of t#e eli"ile assets #el% 6 t#at C04 un%er t#e assumption t#at t#at C04 or an6 of
its un%erl6in" collective investment un%erta5in"s #ave investe% in non;eli"ile assets to
t#e ma8imum e8tent allo1e% un%er t#eir respective man%ates7
?#ere non;eli"ile assets can #ave a ne"ative value %ue to liailities or contin"ent
liailities resultin" from o1ners#ip* institutions s#all %o ot# of t#e follo1in":
)a/ calculate t#e total value of t#e non;eli"ile assetsE
)/ 1#ere t#e amount otaine% un%er point )a/ is ne"ative* sutract the a!solute value
of t#at amount from t#e total value of t#e eli"ile assets7
,rticle 19+
,%%itional eli"iilit6 for collateral un%er t#e 0RD ,pproac#
17 0n a%%ition to t#e collateral referred to in ,rticles 193 an% 194* institutions t#at calculate
ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts un%er t#e 0RD ,pproac# ma6
also use t#e follo1in" forms of collateral:
)a/ immovale propert6 collateral in accor%ance 1it# para"rap#s - to =E
)/ receivales in accor%ance 1it# para"rap# >E
)c/ ot#er p#6sical collateral in accor%ance 1it# para"rap#s 8 an% 1.E
)%/ leasin" in accor%ance 1it# para"rap# 97
-7 4nless ot#er1ise specifie% un%er ,rticle 119)-/* institutions ma6 use as eli"ile collateral
resi%ential propert6 1#ic# is or 1ill e occupie% or let 6 t#e o1ner* or t#e eneficial
o1ner in t#e case of personal investment companies* an% commercial immovale propert6*
inclu%in" offices an% ot#er commercial premises* 1#ere ot# t#e follo1in" con%itions are
met:
)a/ t#e value of t#e propert6 %oes not materiall6 %epen% upon t#e cre%it &ualit6 of t#e
oli"or7 0nstitutions ma6 e8clu%e situations 1#ere purel6 macro;economic factors
affect ot# t#e value of t#e propert6 an% t#e performance of t#e orro1er from t#eir
%etermination of t#e materialit6 of suc# %epen%enceE
)/ t#e ris5 of t#e orro1er %oes not materiall6 %epen% upon t#e performance of t#e
un%erl6in" propert6 or pro!ect* ut on t#e un%erl6in" capacit6 of t#e orro1er to
repa6 t#e %et from ot#er sources* an% as a conse&uence t#e repa6ment of t#e
facilit6 %oes not materiall6 %epen% on an6 cas# flo1 "enerate% 6 t#e un%erl6in"
propert6 servin" as collateral7
A
+7 0nstitutions ma6 %ero"ate from point )/ of para"rap# - for e8posures secure% 6
resi%ential propert6 situate% 1it#in t#e territor6 of a 9emer State* 1#ere t#e competent
aut#orit6 of t#at 9emer State #as pulis#e% evi%ence s#o1in" t#at a 1ell;%evelope% an%
lon";estalis#e% resi%ential propert6 mar5et is present in t#at territor6 1it# loss rates t#at
%o not e8cee% an6 of t#e follo1in" limits:
)a/ losses stemmin" from loans collateralise% 6 resi%ential propert6 up to 8. O of t#e
mar5et value or 8. O of t#e mort"a"e;len%in";value* unless ot#er1ise provi%e%
un%er ,rticle 119)-/* %o not e8cee% .73 O of t#e outstan%in" loans collateralise% 6
resi%ential propert6 in an6 "iven 6earE
)/ overall losses stemmin" from loans collateralise% 6 resi%ential propert6 %o not
e8cee% .7+ O of t#e outstan%in" loans collateralise% 6 resi%ential propert6 in an6
"iven 6ear7
;here either of the $onditions in points (a) and (!) of the first su!paragraph is not et
in a given #ear, institutions shall not use the treatent spe$ified in that su!paragraph
until !oth $onditions are satisfied in a su!se6uent #ear3
=7 0nstitutions ma6 %ero"ate from point )/ of para"rap# - for commercial immovale
propert6 situate% 1it#in t#e territor6 of a 9emer State* 1#ere t#e competent aut#orit6 of
t#at 9emer State #as pulis#e% evi%ence s#o1in" t#at a 1ell;%evelope% an% lon";
estalis#e% commercial propert6 mar5et is present in t#at territor6 1it# loss rates t#at do
not e5$eed an# of t#e follo1in" liits'
)a/ losses stemmin" from loans collateralise% 6 commercial immovale propert6 up to
+. O of t#e mar5et value or =. O of t#e mort"a"e;len%in";value %o not e8cee% .73
O of t#e outstan%in" loans collateralise% 6 commercial immovale propert6 in an6
"iven 6earE
)/ overall losses stemmin" from loans collateralise% 6 commercial immovale
propert6 %o not e8cee% .7+ O of t#e outstan%in" loans collateralise% 6 commercial
immovale propert6 in an6 "iven 6ear7
?#ere eit#er of t#e con%itions in points )a/ an% )/ of t#e first supara"rap# is not met in a
"iven 6ear* institutions s#all not use t#e treatment specifie% in t#at supara"rap# until ot#
A con%itions are satisfie% in a suse&uent 6ear7
>7 0nstitutions ma6 use as eli"ile collateral amounts receivale lin5e% to a commercial
transaction or transactions 1it# an ori"inal maturit6 of less t#an or e&ual to one 6ear7
$li"ile receivales %o not inclu%e t#ose associate% 1it# securitisations* su;participations
or cre%it %erivatives or amounts o1e% 6 affiliate% parties7
87 Competent aut#orities s#all permit an institution to use as eli"ile collateral p#6sical
collateral of a t6pe ot#er t#an t#ose in%icate% in para"rap#s - to = 1#ere all t#e follo1in"
con%itions are met:
)a/ t#ere are li&ui% mar5ets* evi%ence% 6 fre&uent transactions taking into a$$ount the
asset t#pe* for t#e %isposal of t#e collateral in an e8pe%itious an% economicall6
efficient manner7 0nstitutions s#all carr6 out t#e assessment of t#is con%ition
perio%icall6 an% 1#ere information in%icates material c#an"es in t#e mar5etE
)/ t#ere are 1ell;estalis#e%* pulicl6 availale mar5et prices for t#e collateral7
0nstitutions ma6 consi%er mar5et prices as 1ell;estalis#e% 1#ere t#e6 come from
reliale sources of information suc# as pulic in%ices an% reflect t#e price of t#e
transactions un%er normal con%itions7 0nstitutions ma6 consi%er mar5et prices as
pulicl6 availale* 1#ere t#ese prices are %isclose%* easil6 accessile* an% otainale
re"ularl6 an% 1it#out an6 un%ue a%ministrative or financial ur%enE
)c/ t#e institution anal6ses t#e mar5et prices* time an% costs re&uire% to realise t#e
collateral an% t#e realise% procee%s from t#e collateralE
)%/ t#e institution %emonstrates t#at t#e realise% procee%s from t#e collateral are not
elo1 >.O of t#e collateral value in more t#an 1.O of all li&ui%ations for a "iven
t6pe of collateral7 ?#ere t#ere is material volatilit6 in t#e mar5et prices* the
institution deonstrates to t#e satisfaction of t#e competent aut#orities t#at its
valuation of t#e collateral is sufficientl6 conservative7
0nstitutions s#all %ocument t#e fulfilment of t#e con%itions specifie% in points )a/ to )%/ of
t#e first supara"rap# an% t#ose specifie% in ,rticle -.+7
A
97 Su!ect to t#e provisions of ,rticle --+)-/* 1#ere t#e re&uirements set out in ,rticle -.=
are met* e8posures arisin" from transactions 1#ere6 an institution leases propert6 to a
t#ir% part6 ma6 e treate% in t#e same manner as loans collateralise% 6 t#e t6pe of
propert6 lease%7
1.7 $D, s#all dis$lose a list of t6pes of p#6sical $ollateral for 1#ic# institutions $an assue
that t#e con%itions referre% to in points )a/ an% )/ of para"rap# 8 are met A7
,rticle 19=
Ot#er fun%e% cre%it protection
0nstitutions ma6 use t#e follo1in" ot#er fun%e% cre%it protection as eli"ile collateral:
)a/ cas# on %eposit 1it#* or cas# assimilate% instruments #el% 6* a t#ir% part6 institution in a
non;custo%ial arran"ement an% ple%"e% to t#e len%in" institutionE
)/ life insurance policies ple%"e% to t#e len%in" institutionE
)c/ instruments issue% 6 t#ir% part6 institutions 1#ic# 1ill e repurc#ase% 6 t#at institution
on re&uest7
S4D;S$C20OB -
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,rticle 19>
$li"iilit6 of protection provi%ers un%er all approac#es
17 0nstitutions ma6 use t#e follo1in" parties as eli"ile provi%ers of unfun%e% cre%it
protection:
)a/ central "overnments an% central an5sE
)/ re"ional "overnments or local aut#oritiesE
)c/ multilateral %evelopment an5sE
)%/ international or"anisations e8posures to 1#ic# a . O ris5 1ei"#t un%er ,rticle 11- is
assi"ne%E
)e/ pulic sector entities* claims on 1#ic# are treate% in accor%ance 1it# ,rticle 111E
)f/ institutions and finan$ial institutions for *hi$h e5posures to the finan$ial
institution are treated as e5posures to institutions a$$ording to Arti$le 44B(@)E
)"/ ot#er corporate entities* inclu%in" parent* susi%iar6 an% affiliate corporate entities of
t#e institution* 1#ere eit#er of t#e follo1in" con%itions is met:
)i/ t#ose ot#er corporate entities #ave a cre%it assessment 6 an ECA&
)ii/ in t#e case of institutions calculatin" ris5;1ei"#te% e8posure amounts an%
e8pecte% loss amounts un%er t#e 0RD ,pproac#* t#ose ot#er corporate entities
%o not #ave a cre%it assessment 6 a reco"nise% $C,0 an% are internall6 rate%
!# the institution3
(h) $entral $ounterparties
-7 ?#ere institutions calculate ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts
un%er t#e 0RD ,pproac#* to e eli"ile as a provi%er of unfun%e% cre%it protection a
"uarantor s#all e internall6 rate% 6 t#e institution in accor%ance 1it# t#e provisions of
Section = of C#apter 37
A
Competent aut#orities s#all pulis# an% maintain t#e list of t#ose ot#er eli"ile provi%ers
of unfun%e% cre%it protection under point (f) of paragraph 4* or t#e "ui%in" criteria for
i%entif6in" suc# eli"ile provi%ers of unfun%e% cre%it protection* to"et#er 1it# a
%escription of t#e applicale pru%ential re&uirements* an% s#are t#eir list 1it# ot#er
competent aut#orities in accor%ance 1it# ,rticle 11- of Directive Jinserte% 6 OPK7
,rticle 198
$li"iilit6 of protection provi%ers un%er t#e 0RD ,pproac# 1#ic# &ualif6 for t#e treatment set out
in ,rticle 4BA(C/
,n institution ma6 use institutions* insurance an% reinsurance un%erta5in"s an% e8port cre%it
a"encies as eli"ile provi%ers of unfun%e% cre%it protection 1#ic# &ualif6 for t#e treatment set out
in ,rticle 148) AC/ 1#ere t#e6 meet all t#e follo1in" con%itions:
)a/ t#e6 #ave sufficient e8pertise in provi%in" unfun%e% cre%it protectionE
)/ t#e6 are re"ulate% in a manner e&uivalent to t#e rules lai% %o1n in t#is Re"ulation* or #a%*
at t#e time t#e cre%it protection 1as provi%e%* a cre%it assessment 6 a reco"nise% $C,0
1#ic# #a% een %etermine% 6 $D, to e associate% 1it# cre%it &ualit6 step 3* or aove* in
accor%ance 1it# t#e rules for t#e ris5 1ei"#tin" of e8posures to corporates set out in
C#apter -E
)c/ t#e6 #a%* at t#e time t#e cre%it protection 1as provi%e%* or for an6 perio% of time
t#ereafter* an internal ratin" 1it# a PD e&uivalent to or lo1er t#an t#at associate% 1it#
cre%it &ualit6 step - or aove in accor%ance 1it# t#e rules for t#e ris5 1ei"#tin" of
e8posures to corporates set out in C#apter -E
)%/ t#e6 #ave an internal ratin" 1it# a PD e&uivalent to or lo1er t#an t#at associate% 1it#
cre%it &ualit6 step 3 or aove in accor%ance 1it# t#e rules for t#e ris5 1ei"#tin" of
e8posures to corporates set out in C#apter -7
3or t#e purpose of t#is ,rticle* cre%it protection provi%e% 6 e8port cre%it a"encies s#all not enefit
from an6 e8plicit central "overnment counter;"uarantee7
Arti$le 4>Aa
Eligi!ilit# of guarantees as unfunded $redit prote$tion
&nstitutions a# use guarantees as eligi!le unfunded $redit prote$tion3
S4D;S$C20OB 3
2HP$S O3 A D$R0R,20R$S
,rticle 199
Eligi!le t#pes of cre%it %erivatives
17 0nstitutions ma6 use t#e follo1in" t6pes of cre%it %erivatives* an% instruments t#at ma6 e
compose% of suc# cre%it %erivatives or t#at are economicall6 effectivel6 similar* as eli"ile
cre%it protection:
)a/ cre%it %efault s1apsE
)/ total return s1apsE
)c/ cre%it lin5e% notes to t#e e8tent of t#eir cas# fun%in"7
?#ere an institution u6s cre%it protection t#rou"# a total return s1ap an% recor%s t#e net
pa6ments receive% on t#e s1ap as net income* ut %oes not recor% t#e offsettin"
%eterioration in t#e value of t#e asset t#at is protecte% eit#er t#rou"# re%uctions in fair
value or 6 an a%%ition to reserves* t#at cre%it protection %oes not &ualif6 as eli"ile cre%it
protection7
-7 ?#ere an institution con%ucts an internal #e%"e usin" a cre%it %erivative* in or%er for t#e
cre%it protection to &ualif6 as eli"ile cre%it protection for t#e purposes of t#is C#apter* t#e
cre%it ris5 transferre% to t#e tra%in" oo5 s#all e transferre% out to a t#ir% part6 or parties7
?#ere an internal #e%"e #as een con%ucte% in accor%ance 1it# t#e first supara"rap# an%
t#e re&uirements in this Chapter #ave een met* institutions s#all appl6 t#e rules set out in
Sections 4 to = for t#e calculation of ris5;1ei"#te% e8posure amounts an% e8pecte% loss
amounts 1#ere t#e6 ac&uire unfun%e% cre%it protection7
S$C20OB 3
R$Q40R$9$B2S
S4D;S$C20OB 1
34BD$D CR$D02 PRO2$C20OB
,rticle -..
Re&uirements for on;alance s#eet nettin" a"reements )ot#er t#an master nettin" a"reements
coverin" repurc#ase transactions* securities or commo%ities len%in" or orro1in" transactions or
ot#er capital mar5et;%riven transactions/
On;alance s#eet nettin" a"reements* ot#er t#an master nettin" a"reements coverin" repurc#ase
transactions* securities or commo%ities len%in" or orro1in" transactions or ot#er capital mar5et;
%riven transactions* s#all &ualif6 as an eli"ile form of cre%it ris5 miti"ation 1#ere all t#e follo1in"
con%itions are met:
)a/ t#ose a"reements are le"all6 effective an% enforceale in all relevant !uris%ictions*
inclu%in" in t#e event of t#e insolvenc6 or an5ruptc6 of a counterpart6E
)/ institutions are ale to %etermine at an6 time t#e assets an% liailities t#at are su!ect to
t#ose a"reementsE
)c/ institutions monitor an% control t#e ris5s associate% 1it# t#e termination of t#e cre%it
protection on an on"oin" asisE
)%/ institutions monitor an% control t#e relevant e8posures on a net asis an% %o so on an
on"oin" asis7
,rticle -.1
Re&uirements for master nettin" a"reements coverin" repurc#ase transactions or securities or
commo%ities len%in" or orro1in" transactions or ot#er capital mar5et %riven transactions
9aster nettin" a"reements coverin" repurc#ase transactions* securities or commo%ities len%in" or
orro1in" transactions or ot#er capital mar5et %riven transactions s#all &ualif6 as an eli"ile form
of cre%it ris5 miti"ation 1#ere t#e collateral provi%e% un%er t#ose a"reements meets all t#e
re&uirements laid do*n in ,rticle -.-)2) to (B/ an% 1#ere all t#e follo1in" con%itions are met:
)a/ t#e6 are le"all6 effective an% enforceale in all relevant !uris%ictions* inclu%in" in t#e
event of t#e an5ruptc6 or insolvenc6 of t#e counterpart6E
)/ t#e6 "ive t#e non;%efaultin" part6 t#e ri"#t to terminate an% close;out in a timel6 manner
all transactions un%er t#e a"reement upon t#e event of %efault* inclu%in" in t#e event of t#e
an5ruptc6 or insolvenc6 of t#e counterpart6E
)c/ t#e6 provi%e4% for t#e nettin" of "ains an% losses on transactions close% out un%er an
a"reement so t#at a sin"le net amount is o1e% 6 one part6 to t#e ot#er7
,rticle -.-
Re&uirements for financial collateral
17 4n%er all approac#es an% met#o%s* financial collateral an% "ol% s#all &ualif6 as eli"ile
collateral 1#ere all t#e re&uirements lai% %o1n in para"rap#s - to 4 are met7
-7 2#e cre%it &ualit6 of t#e oli"or an% t#e value of t#e collateral s#all not #ave a material
positive correlation3 "hould the value of the $ollateral !e redu$ed signifi$antl#, this shall
not alone ipl# a signifi$ant deterioration of the $redit 6ualit# of the o!ligor3 "hould the
$redit 6ualit# of the o!ligor !e$oe $riti$al, this shall not alone ipl# a signifi$ant
redu$tion in the value of the $ollateral7
Securities issue% 6 t#e oli"or* or an6 relate% "roup entit6* s#all not &ualif6 as eli"ile
collateral7 2#is not1it#stan%in"* t#e oli"or(s o1n issues of covere% on%s fallin" 1it#in
t#e terms of ,rticle 1-4 &ualif6 as eli"ile collateral 1#en t#e6 are poste% as collateral for
a repurc#ase transa$tion* provi%e% t#at t#e6 compl6 1it# t#e con%ition set out in t#e first
supara"rap#7
37 0nstitutions s#all fulfil an6 contractual an% statutor6 re&uirements in respect of* an% ta5e all
steps necessar6 to ensure* t#e enforceailit6 of t#e collateral arran"ements un%er t#e la1
applicale to t#eir interest in t#e collateral7
0nstitutions s#all #ave con%ucte% sufficient le"al revie1 confirmin" t#e enforceailit6 of
t#e collateral arran"ements in all relevant !uris%ictions7 2#e6 s#all re;con%uct suc# revie1
as necessar6 to ensure continuin" enforceailit67
47 0nstitutions s#all fulfil all t#e follo1in" operational re&uirements:
)a/ t#e6 s#all properl6 %ocument t#e collateral arran"ements an% #ave in place clear an%
roust proce%ures for t#e timel6 li&ui%ation of collateralE
)/ t#e6 s#all use roust proce%ures an% processes to control ris5s arisin" from t#e use of
collateral* inclu%in" ris5s of faile% or re%uce% cre%it protection* valuation ris5s* ris5s
associate% 1it# t#e termination of t#e cre%it protection* concentration ris5 arisin"
from t#e use of collateral an% t#e interaction 1it# t#e institution(s overall ris5 profileE
)c/ t#e6 s#all #ave in place %ocumente% policies an% practices concernin" t#e t6pes an%
amounts of collateral accepte%E
)%/ t#e6 s#all calculate t#e mar5et value of t#e collateral* an% revalue it accor%in"l6* at
least once ever6 si8 mont#s an% 1#enever t#e6 #ave reason to elieve t#at a
si"nificant %ecrease in t#e mar5et value of t#e collateral #as occurre%E
)e/ 1#ere t#e collateral is #el% 6 a t#ir% part6* t#e6 s#all ta5e reasonale steps to ensure
t#at t#e t#ir% part6 se"re"ates t#e collateral from its o1n assetsE
)f/ t#e6 s#all ensure t#at t#e6 %evote sufficient resources to t#e or%erl6 operation of
mar"in a"reements 1it# O2C %erivatives an% securities;financin" counterparties* as
measure% 6 t#e timeliness an% accurac6 of t#eir out"oin" argin calls an% response
time to incomin" argin callsE
)"/ t#e6 s#all #ave in place collateral mana"ement policies to control* monitor an% report
t#e follo1in":
)i/ t#e ris5s to 1#ic# mar"in a"reements e8pose t#emE
)ii/ t#e concentration ris5 to particular t6pes of collateral assetsE
)iii/ t#e reuse of collateral inclu%in" t#e potential li&ui%it6 s#ortfalls resultin" from
t#e reuse of collateral receive% from counterpartiesE
)iv/ t#e surren%er of ri"#ts on collateral poste% to counterparties7
+7 0n a%%ition to eeting all t#e re&uirements set out in para"rap#s 2 to 4* for financial
collateral to &ualif6 as eli"ile collateral un%er t#e 3inancial Collateral Simple 9et#o% t#e
resi%ual maturit6 of t#e protection s#all e at least as lon" as t#e resi%ual maturit6 of t#e
e8posure7
,rticle -.3
Re&uirements for immovale propert6 collateral
17 0mmovale propert6 s#all &ualif6 as eli"ile collateral onl6 1#ere all t#e re&uirements lai%
%o1n in para"rap#s - to + are met7
-7 2#e follo1in" re&uirements on le"al certainl6 s#all e met:
)a/ a mort"a"e or c#ar"e is enforceale in all !uris%ictions 1#ic# are relevant at t#e time
of t#e conclusion of t#e cre%it a"reement an% s#all e properl6 file% on a timel6
asisE
)/ all le"al re&uirements for estalis#in" t#e ple%"e #ave een fulfille%E
)c/ t#e protection a"reement an% t#e le"al process un%erpinnin" it enale t#e institution
to realise t#e value of t#e protection 1it#in a reasonale timeframe7
37 2#e follo1in" re&uirements on monitorin" of propert6 values an% on propert6 valuation
s#all e met:
)a/ institutions monitor t#e value of t#e propert6 on a fre&uent asis an% at a minimum
once ever6 6ear for commercial immovale propert6 an% once ever6 t#ree 6ears for
resi%ential real estate7 0nstitutions carr6 out more fre&uent monitorin" 1#ere t#e
mar5et is su!ect to si"nificant c#an"es in con%itionsE
)/ t#e propert6 valuation is revie1e% 1#en information availale to institutions
in%icates t#at t#e value of t#e propert6 ma6 #ave %ecline% materiall6 relative to
"eneral mar5et prices an% t#at revie1 is carrie% out 6 a valuer 1#o possesses t#e
necessar6 &ualifications* ailit6 an% e8perience to e8ecute a valuation an% 1#o is
in%epen%ent from t#e cre%it %ecision process7 3or loans e8cee%in" $4R 3 million or
+ O of t#e o1n fun%s of an institution* t#e propert6 valuation s#all e revie1e% 6
suc# valuer at least ever6 t#ree 6ears7
0nstitutions ma6 use statistical met#o%s to monitor t#e value of t#e propert6 an% to i%entif6
propert6 t#at nee%s revaluation7
47 0nstitutions s#all clearl6 %ocument t#e t6pes of resi%ential an% commercial immovale
propert6 t#e6 accept an% t#eir len%in" policies in t#is re"ar%7
+7 0nstitutions s#all #ave in place proce%ures to monitor t#at t#e propert6 ta5en as cre%it
protection is a%e&uatel6 insure% a"ainst t#e ris5 of %ama"e7
,rticle -.4
Re&uirements for receivales
17 Receivales s#all &ualif6 as eli"ile collateral 1#ere all t#e re&uirements lai% %o1n in
para"rap#s - an% 3 are met7
-7 2#e follo1in" re&uirements on le"al certaint6 s#all e met:
)a/ t#e le"al mec#anism 6 1#ic# t#e collateral is provi%e% to a len%in" institution s#all
e roust an% effective an% ensure t#at t#at institution #as clear ri"#ts over t#e
$ollateral in$luding the right to the procee%s fro the sale of the $ollateralE
)/ institutions s#all ta5e all steps necessar6 to fulfil local re&uirements in respect of t#e
enforceailit6 of securit6 interest7 Fen%in" institutions s#all #ave a first priorit6
claim over t#e collateral alt#ou"# suc# claims ma6 still e su!ect to t#e claims of
preferential cre%itors provi%e% for in le"islative provisionsE
)c/ institutions s#all #ave con%ucte% sufficient le"al revie1 confirmin" t#e enforceailit6
of t#e collateral arran"ements in all relevant !uris%ictionsE
)%/ institutions s#all properl6 %ocument t#eir collateral arran"ements an% s#all #ave in
place clear an% roust proce%ures for t#e timel6 collection of collateralE
)e/ institutions s#all #ave in place proce%ures t#at ensure t#at an6 le"al con%itions
re&uire% for %eclarin" t#e %efault of a orro1er an% timel6 collection of collateral are
oserve%E
)f/ in t#e event of a orro1er(s financial %istress or %efault* institutions s#all #ave le"al
aut#orit6 to sell or assi"n t#e receivales to ot#er parties 1it#out consent of t#e
receivales oli"ors7
37 2#e follo1in" re&uirements on ris5 mana"ement s#all e met:
)a/ an institution s#all #ave in place a soun% process for %eterminin" t#e cre%it ris5
associate% 1it# t#e receivales7 Suc# a process s#all inclu%e anal6ses of a orro1er(s
usiness an% in%ustr6 an% t#e t6pes of customers 1it# 1#om t#at orro1er %oes
usiness7 ?#ere the institution relies on its orro1ers to ascertain t#e cre%it ris5 of
t#e customers* t#e institution s#all revie1 t#e !orro*ers7 cre%it practices to ascertain
t#eir soun%ness an% cre%iilit6E
)/ t#e differen$e et1een t#e amount of t#e e8posure an% t#e value of t#e receivales
s#all reflect all appropriate factors* inclu%in" t#e cost of collection* concentration
1it#in t#e receivales pool ple%"e% 6 an in%ivi%ual orro1er* an% potential
concentration ris5 1it#in t#e institution(s total e8posures e6on% t#at controlle% 6
t#e institution(s "eneral met#o%olo"67 0nstitutions s#all maintain a continuous
monitorin" process appropriate to t#e receivales7 2#e6 s#all also revie1* on a
re"ular asis* compliance 1it# loan covenants* environmental restrictions* an% ot#er
le"al re&uirementsE
)c/ receivales ple%"e% 6 a orro1er s#all e %iversifie% an% not e un%ul6 correlate%
1it# t#at orro1er7 ?#ere t#ere is material positive correlation* institutions s#all
ta5e into account t#e atten%ant ris5s in t#e settin" of mar"ins for t#e collateral pool
as a 1#oleE
)%/ institutions s#all not use receivales from affiliates of a orro1er* inclu%in"
susi%iaries an% emplo6ees* as eli"ile cre%it protectionE
)e/ institution s#all #ave in place a %ocumente% process for collectin" receivale
pa6ments in %istresse% situations7 0nstitutions s#all #ave in place t#e re&uisite
facilities for collection even 1#en t#e6 normall6 rel6 on t#eir orro1ers for
collections7
,rticle -.+
Re&uirements for ot#er p#6sical collateral
P#6sical collateral ot#er t#an immovale propert6 collateral s#all &ualif6 as eli"ile collateral un%er
t#e 0RD ,pproac# 1#ere all t#e follo1in" con%itions are met:
)a/ t#e collateral arran"ement un%er 1#ic# t#e p#6sical collateral is provi%e% to an institution
s#all e le"all6 effective an% enforceale in all relevant !uris%ictions an% s#all enale t#at
institution to realise t#e value of t#e collateral 1it#in a reasonale timeframeE
)/ 1it# t#e sole e8ception of permissile first priorit# claims referre% to in ,rticle -.4)-/)/*
onl6 first liens on* or c#ar"es over* collateral s#all &ualif6 as eli"ile collateral an% an
institution s#all #ave priorit6 over all ot#er len%ers to t#e realise% procee%s of t#e
collateralE
)c/ institutions s#all monitor t#e value of t#e collateral on a fre&uent asis an% at least once
ever6 6ear7 0nstitutions s#all carr6 out more fre&uent monitorin" 1#ere t#e mar5et is
su!ect to si"nificant c#an"es in con%itionsE
)%/ t#e loan a"reement s#all inclu%e %etaile% %escriptions of t#e collateral as 1ell as %etaile%
specifications of t#e manner an% fre&uenc6 of revaluationE
)e/ institutions s#all clearl6 %ocument in internal cre%it policies an% proce%ures availale for
e8amination t#e t6pes of p#6sical collateral t#e6 accept an% t#e policies an% practices t#e6
#ave in place in respect of t#e appropriate amount of eac# t6pe of collateral relative to t#e
e8posure amount E
)f/ institutions( cre%it policies 1it# re"ar% to t#e transaction structure s#all a%%ress the
follo*ing'
(i) appropriate collateral re&uirements relative to t#e e8posure amount%
(ii) t#e ailit6 to li&ui%ate t#e collateral rea%il6%
(iii) t#e ailit6 to estalis# o!ectivel6 a price or mar5et value%
(iv) t#e fre&uenc6 1it# 1#ic# t#e value can rea%il6 e otaine%* inclu%in" a professional
appraisal or valuation%
(v) t#e volatilit6 or a pro86 of t#e volatilit6 of t#e value of t#e collateral3
)"/ *hen $ondu$ting valuation an% revaluation, institutions s#all ta5e full6 into account an6
%eterioration or osolescence of t#e collateral, pa#ing particular attention to t#e effects of
t#e passa"e of time on fas#ion; or %ate;sensitive collateralE
)#/ institutions s#all #ave t#e ri"#t to p#6sicall6 inspect t#e collateral7 2#e6 s#all also #ave in
place policies an% proce%ures a%%ressin" t#eir e8ercise of t#e ri"#t to p#6sical inspectionE
)i/ t#e collateral ta5en as protection s#all e a%e&uatel6 insure% a"ainst t#e ris5 of %ama"e
an% institutions s#all #ave in place proce%ures to monitor t#is7
,rticle -.=
Re&uirements for treatin" lease e8posures as collateralise%
0nstitutions s#all treat e8posures arisin" from leasin" transactions as collateralise% 6 t#e t6pe of
propert6 lease%* 1#ere all t#e follo1in" con%itions are met:
)a/ t#e con%itions set out in ,rticles -.3 or -.+* as appropriate* for t#e t6pe of propert6 lease%
to &ualif6 as eli"ile collateral are metE
)/ t#e lessor #as in place roust ris5 mana"ement 1it# respect to t#e use to 1#ic# t#e lease%
asset is put* its location* its a"e an% t#e planne% %uration of its use* inclu%in" appropriate
monitorin" of t#e value of t#e securit6E
)c/ t#e lessor #as le"al o1ners#ip of t#e asset an% is ale to e8ercise its ri"#ts as o1ner in a
timel6 fas#ionE
)%/ 1#ere t#is #as not alrea%6 een ascertaine% in calculatin" t#e FGD level* t#e %ifference
et1een t#e value of t#e unamortise% amount an% t#e mar5et value of t#e securit6 is not so
lar"e as to overstate t#e cre%it ris5 miti"ation attriute% to t#e lease% assets7
,rticle -.>
Re&uirements for ot#er fun%e% cre%it protection
17 Cash on %eposit 1it#* or cas# assimilate% instruments #el% 6* a t#ir% part6 institution
shall !e eligi!le for the treatent set out in Arti$le 220(4), *here all t#e follo1in"
con%itions are met:
)a/ t#e orro1er(s claim a"ainst t#e t#ir% part6 institution is openl6 ple%"e% or assi"ne%
to t#e len%in" institution an% suc# ple%"e or assi"nment is le"all6 effective an%
enforceale in all relevant !uris%ictions and is un$onditional and irrevo$a!leE
)/ t#e t#ir% part6 institution is notifie% of t#e ple%"e or assi"nmentE
)c/ as a result of t#e notification* t#e t#ir% part6 institution is ale to ma5e pa6ments
solel6 to t#e len%in" institution or to ot#er parties onl6 1it# t#e len%in" institution(s
prior consentE
A
-7 Fife insurance policies ple%"e% to t#e len%in" institution s#all &ualif6 as eli"ile collateral
1#ere all t#e follo1in" con%itions are met:
)a/ t#e life insurance polic6 is openl6 ple%"e% or assi"ne% to t#e len%in" institutionE
)/ t#e compan6 provi%in" t#e life insurance is notifie% of t#e ple%"e or assi"nment an%,
as a result of the notifi$ation, ma6 not pa6 amounts pa6ale un%er t#e contract
1it#out t#e prior consent of t#e len%in" institutionE
)c/ t#e len%in" institution #as t#e ri"#t to cancel t#e polic6 an% receive t#e surren%er
value in t#e event of t#e %efault of t#e orro1erE
)%/ t#e len%in" institution is informe% of an6 non;pa6ments un%er t#e polic6 6 t#e
polic6;#ol%erE
)e/ t#e cre%it protection is provi%e% for t#e maturit6 of t#e loan7 ?#ere t#is is not
possile ecause t#e insurance relations#ip en%s efore t#e loan relations#ip e8pires*
t#e institution s#all ensure t#at t#e amount %erivin" from t#e insurance contract
serves t#e institution as securit6 until t#e en% of t#e %uration of t#e cre%it a"reementE
)f/ t#e ple%"e or assi"nment is le"all6 effective an% enforceale in all !uris%ictions
1#ic# are relevant at t#e time of t#e conclusion of t#e cre%it a"reementE
)"/ t#e surren%er value is %eclare% 6 t#e compan6 provi%in" t#e life insurance an% is
non;re%ucileE
)#/ t#e surren%er value is to e pai% 6 t#e compan6 provi%in" t#e life insurance in a
timel6 manner upon re&uestE
)i/ t#e surren%er value s#all not e re&ueste% 1it#out t#e prior consent of t#e institutionE
)!/ t#e compan6 provi%in" t#e life insurance is su!ect to Directive -..9/138/$C of t#e
$uropean Parliament an% of t#e Council or is su!ect to supervision 6 a competent
aut#orit6 of a t#ir% countr6 1#ic# applies supervisor6 an% re"ulator6 arran"ements at
least e&uivalent to t#ose applie% in t#e 4nion7
S4D;S$C20OB -
4B34BD$D CR$D02 PRO2$C20OB ,BD CR$D02 F0B:$D BO2$S
,rticle -.8
Re&uirements common to "uarantees an% cre%it %erivatives
17 Su!ect to ,rticle -.9)1/* cre%it protection %erivin" from a "uarantee or cre%it %erivative
s#all &ualif6 as eli"ile unfun%e% cre%it protection 1#ere all t#e follo1in" con%itions are
met:
)a/ t#e cre%it protection is %irectE
)/ t#e e8tent of t#e cre%it protection is clearl6 %efine% and in$ontroverti!leE
)c/ t#e cre%it protection contract %oes not contain an6 clause* t#e fulfilment of 1#ic# is
outsi%e t#e %irect control of t#e len%er* t#at:
)i/ 1oul% allo1 t#e protection provi%er to cancel t#e protection unilaterall6E
)ii/ 1oul% increase t#e effective cost of protection as a result of %eterioratin" cre%it
&ualit6 of t#e protecte% e8posureE
)iii/ coul% prevent t#e protection provi%er from ein" oli"e% to pa6 out in a timel6
manner in t#e event t#at t#e ori"inal oli"or fails to ma5e an6 pa6ments %ue* or
1#en t#e leasin" contract #as e8pire% for t#e purposes of reco"nisin"
"uarantee% resi%ual value un%er ,rticles 1-9)>/ an% 1=-)4/E
)iv/ coul% allo1 t#e maturit6 of t#e cre%it protection to e re%uce% 6 t#e protection
provi%erE
)%/ is le"all6 effective an% enforceale in all !uris%ictions 1#ic# are relevant at t#e time
of t#e conclusion of t#e cre%it a"reement7
-7 ,n institution s#all %emonstrate to competent aut#orities t#at it #as in place s6stems to
mana"e potential concentration of ris5 arisin" from its use of "uarantees an% cre%it
%erivatives7 ,n institution s#all e ale to %emonstrate to t#e satisfaction of t#e competent
aut#orities #o1 its strate"6 in respect of its use of cre%it %erivatives an% "uarantees
interacts 1it# its mana"ement of its overall ris5 profile7
37 An institution s#all fulfil an6 contractual an% statutor6 re&uirements in respect of* an% ta5e
all steps necessar6 to ensure* t#e enforceailit6 of its unfun%e% cre%it protection un%er t#e
la1 applicale to its interest in t#e cre%it protection7
0nstitutions s#all #ave con%ucte% sufficient le"al revie1 confirmin" t#e enforceailit6 of
t#e unfun%e% cre%it protection in all relevant !uris%ictions7 2#e6 s#all repeat suc# revie1 as
necessar6 to ensure continuin" enforceailit67
,rticle -.9
Soverei"n an% ot#er pulic sector counter;"uarantees
17 0nstitutions ma6 treat t#e e5posures referred to in para"rap# - as protecte% 6 a "uarantee
provi%e% 6 t#e entities liste% in t#at para"rap#* provi%e% all t#e follo1in" con%itions are
satisfie%:
)a/ t#e counter;"uarantee covers all cre%it ris5 elements of t#e claimE
)/ ot# t#e ori"inal "uarantee an% t#e counter;"uarantee meet t#e re&uirements for
"uarantees set out in ,rticles -.8 an% -1.)1/* e8cept t#at t#e counter;"uarantee nee%
not e %irectE
)c/ t#e cover is roust an% not#in" in t#e #istorical evi%ence su""ests t#at t#e covera"e
of t#e counter;"uarantee is less t#an effectivel6 e&uivalent to t#at of a %irect
"uarantee 6 t#e entit6 in &uestion7
-7 2#e treatment lai% %o1n in para"rap# 1 s#all appl6 to e8posures protecte% 6 a "uarantee
1#ic# is counter;"uarantee% 6 an6 of t#e follo1in" entities:
)a/ a central "overnment or central an5E
)/ a re"ional "overnment or local aut#orit6E
)c/ a pulic sector entit6* claims on 1#ic# are treate% as claims on t#e central
"overnment in accor%ance 1it# ,rticle 111)4/E
)%/ a multilateral %evelopment an5 or an international or"anisation* to 1#ic# a . O ris5
1ei"#t is assi"ne% un%er or 6 virtue of Arti$les 442(2) and 44C respe$tivel#E
)e/ a pulic sector entit6* claims on 1#ic# are treate% in accor%ance 1it# ,rticle 111)1/
an% 111)-/7
37 0nstitutions s#all appl6 t#e treatment set out in para"rap# 1 also to an e8posure 1#ic# is not
counter;"uarantee% 6 an6 entit6 liste% in para"rap# - 1#ere t#at e8posure(s counter;
"uarantee is in turn %irectl6 "uarantee% 6 one of t#ose entities an% t#e con%itions liste% in
para"rap# 1 are satisfie%7
,rticle -1.
,%%itional re&uirements for "uarantees
17 Guarantees s#all &ualif6 as eli"ile unfun%e% cre%it protection 1#ere all t#e con%itions in
,rticle -.8 an% all t#e follo1in" con%itions are met:
)a/ on t#e &ualif6in" %efault of or non;pa6ment 6 t#e counterpart6* t#e len%in"
institution #as t#e ri"#t to pursue* in a timel6 manner* t#e "uarantor for an6 monies
%ue un%er t#e claim in respect of 1#ic# t#e protection is provi%e% an% t#e pa6ment
6 t#e "uarantor s#all not e su!ect to t#e len%in" institution first #avin" to pursue
t#e oli"orE
0n t#e case of unfun%e% cre%it protection coverin" resi%ential mort"a"e loans* t#e
re&uirements in ,rticle -.8)1/)c/)iii/ an% in t#e first supara"rap# #ave onl6 to e satisfie%
1it#in -4 mont#sE
)/ t#e "uarantee is an e8plicitl6 %ocumente% oli"ation assume% 6 t#e "uarantorE
)c/ eit#er of t#e follo1in" con%itions is met:
)i/ t#e "uarantee covers all t6pes of pa6ments t#e oli"or is e8pecte% to ma5e in
respect of t#e claimE
)ii/ 1#ere certain t6pes of pa6ment are e8clu%e% from t#e "uarantee* t#e len%in"
institution #as a%!uste% t#e value of t#e "uarantee to reflect t#e limite%
covera"e7
-7 0n t#e case of "uarantees provi%e% in t#e conte8t of mutual "uarantee sc#emes or provi%e%
6 or counter;"uarantee% 6 entities listed in ,rticle -.9)2/* t#e re&uirements in point )a/
of para"rap# 1 s#all e consi%ere% to e satisfie% 1#ere eit#er of t#e follo1in" con%itions
is met:
)a/ t#e len%in" institution #as t#e ri"#t to otain in a timel6 manner a provisional
pa6ment 6 t#e "uarantor t#at meets ot# t#e follo1in" con%itions:
)i/ it represents a roust estimate of t#e amount of t#e loss* inclu%in" losses
resultin" from t#e non;pa6ment of interest an% ot#er t6pes of pa6ment 1#ic#
t#e orro1er is oli"e% to ma5e* t#at t#e len%in" institution is li5el6 to incurE
)ii/ it is proportional to t#e covera"e of t#e "uaranteeE
)/ t#e len%in" institution can %emonstrate to t#e satisfaction of t#e competent
aut#orities t#at t#e effects of t#e "uarantee* 1#ic# s#all also cover losses resultin"
from t#e non;pa6ment of interest an% ot#er t6pes of pa6ments 1#ic# t#e orro1er is
oli"e% to ma5e* !ustif6 suc# treatment7
,rticle -11
,%%itional re&uirements for cre%it %erivatives
17 Cre%it %erivative s#all &ualif6 as eli"ile unfun%e% cre%it protection 1#ere all t#e
con%itions in ,rticle -.8 an% all t#e follo1in" con%itions are met:
)a/ t#e cre%it events specifie% in t#e cre%it %erivative contract inclu%e:
)i/ t#e failure to pa6 t#e amounts %ue un%er t#e terms of t#e un%erl6in" oli"ation
t#at are in effect at t#e time of suc# failure* 1it# a "race perio% t#at is e6ual to
or s#orter t#an t#e "race perio% in t#e un%erl6in" oli"ationE
)ii/ t#e an5ruptc6* insolvenc6 or inailit6 of t#e oli"or to pa6 its %ets* or its
failure or a%mission in 1ritin" of its inailit6 "enerall6 to pa6 its %ets as t#e6
ecome %ue* an% analo"ous eventsE
)iii/ t#e restructurin" of t#e un%erl6in" oli"ation involvin" for"iveness or
postponement of principal* interest or fees t#at results in a cre%it loss eventE
)/ 1#ere cre%it %erivatives allo1 for cas# settlement:
)i/ institutions #ave in place a roust valuation process in or%er to estimate loss
relial6E
)ii/ t#ere is a clearl6 specifie% perio% for otainin" post;cre%it;event valuations of
t#e un%erl6in" oli"ationE
)c/ 1#ere t#e protection purc#aser(s ri"#t an% ailit6 to transfer t#e un%erl6in"
oli"ation to t#e protection provi%er is re&uire% for settlement* t#e terms of t#e
un%erl6in" oli"ation provi%e t#at an6 re&uire% consent to suc# transfer s#all not e
unreasonal6 1it##el%E
)%/ t#e i%entit6 of t#e parties responsile for %eterminin" 1#et#er a cre%it event #as
occurre% is clearl6 %efine%E
)e/ t#e %etermination of t#e cre%it event is not t#e sole responsiilit6 of t#e protection
provi%erE
)f/ t#e protection u6er #as t#e ri"#t or ailit6 to inform t#e protection provi%er of t#e
occurrence of a cre%it event7
?#ere t#e cre%it events %o not inclu%e restructurin" of t#e un%erl6in" oli"ation as
%escrie% in point )a/)iii/* t#e cre%it protection ma6 nonet#eless e eli"ile su!ect to a
re%uction in t#e value as specifie% in ,rticle --8)-/E
-7 , mismatc# et1een t#e un%erl6in" oli"ation an% t#e reference oli"ation un%er t#e
cre%it %erivative Aor et1een t#e un%erl6in" oli"ation an% t#e oli"ation use% for
purposes of %eterminin" 1#et#er a cre%it event #as occurre% is permissile onl6 1#ere
ot# t#e follo1in" con%itions are met:
)a/ t#e reference oli"ation or t#e oli"ation use% for the purpose of %eterminin"
1#et#er a cre%it event #as occurre%* as t#e case ma6 e* ran5s Lpari passu7 1it# or is
!unior to t#e un%erl6in" oli"ationE
)/ t#e un%erl6in" oli"ation an% t#e reference oli"ation or t#e oli"ation use% for the
purpose of %eterminin" 1#et#er a cre%it event #as occurre%* as t#e case ma6 e*
s#are t#e same oli"or an% le"all6 enforceale cross;%efault or cross;acceleration
clauses are in place7
,rticle -1-
Re&uirements to &ualif6 for t#e treatment set out in ,rticle 148)C/
17 2o e eli"ile for t#e treatment set out in ,rticle 148)C/* cre%it protection %erivin" from a
"uarantee or cre%it %erivative s#all meet t#e follo1in" con%itions:
)a/ t#e un%erl6in" oli"ation is to one of t#e follo1in" e8posures:
)i/ a corporate e8posure as %efine% in ,rticle 14-* e8clu%in" insurance an%
reinsurance un%erta5in"sE
)ii/ an e8posure to a re"ional "overnment* local aut#orit6 or pulic sector entit6
1#ic# is not treate% as an e8posure to a central "overnment or a central an5
accor%in" to ,rticle 14-E
)iii/ an e8posure to a small or me%ium siLe% enterprise* classifie% as a retail
e8posure accor%in" to ,rticle 14-)+/E
)/ t#e un%erl6in" oli"ors are not memers of t#e same "roup as t#e protection
provi%erE
)c/ t#e e8posure is #e%"e% 6 one of t#e follo1in" instruments:
)i/ sin"le;name unfun%e% cre%it %erivatives or sin"le;name "uaranteesE
)ii/ first;to;%efault as5et pro%uctsE
)iii/ nt#;to;%efault as5et pro%uctsE
)%/ t#e cre%it protection meets t#e re&uirements set out in ,rticles -.8* -1. an% -11, as
appli$a!leE
)e/ t#e ris5 1ei"#t t#at is associate% 1it# t#e e8posure prior to t#e application of t#e
treatment in ,rticle 148)C/* %oes not alrea%6 factor in an6 aspect of t#e cre%it
protectionE
)f/ an institution #as t#e ri"#t an% e8pectation to receive pa6ment from t#e protection
provi%er 1it#out #avin" to ta5e le"al action in or%er to pursue t#e counterpart6 for
pa6ment7 2o t#e e8tent possile* t#e institution s#all ta5e steps to satisf6 itself t#at
t#e protection provi%er is 1illin" to pa6 promptl6 s#oul% a cre%it event occurE
)"/ t#e purc#ase% cre%it protection asors all cre%it losses incurre% on t#e #e%"e%
portion of an e8posure t#at arise %ue to t#e occurrence of cre%it events outline% in t#e
contractE
)#/ 1#ere t#e pa6out structure of t#e cre%it protection provi%es for p#6sical settlement*
t#ere is le"al certaint6 1it# respect to t#e %eliverailit6 of a loan* on%* or contin"ent
liailit6E
)i/ 1#ere an institution inten%s to %eliver an oli"ation ot#er t#an t#e un%erl6in"
e8posure* it s#all ensure t#at t#e %eliverale oli"ation is sufficientl6 li&ui% so t#at
t#e institution 1oul% #ave t#e ailit6 to purc#ase it for %eliver6 in accor%ance 1it#
t#e contractE
)!/ t#e terms an% con%itions of cre%it protection arran"ements are le"all6 confirme% in
1ritin" 6 ot# t#e protection provi%er an% t#e institutionE
)5/ institutions #ave in place a process to %etect e8cessive correlation et1een t#e
cre%it1ort#iness of a protection provi%er an% t#e oli"or of t#e un%erl6in" e8posure
%ue to t#eir performance ein" %epen%ent on common factors e6on% t#e s6stematic
ris5 factorE
)l/ in t#e case of protection a"ainst %ilution ris5* t#e seller of purc#ase% receivales is
not a memer of t#e same "roup as t#e protection provi%er7
-7 3or t#e purpose of point )c/)ii/ of para"rap# 1* institutions s#all appl6 t#e treatment set out
in ,rticle 148)C/ to t#e asset 1it#in t#e as5et 1it# t#e lo1est ris5;1ei"#te% e8posure
amount7
37 3or t#e purpose of point )c/)iii/ of para"rap# 1* t#e protection otaine% is onl6 eli"ile for
consi%eration un%er t#is frame1or5 1#ere eli"ile )n;1/t# %efault protection #as also een
otaine% or 1#ere )n;1/ of t#e assets 1it#in t#e as5et #as or #ave alrea%6 %efaulte%7
?#ere t#is is t#e case* institutions s#all appl6 t#e treatment set out in ,rticle 148)C/ to t#e
asset 1it#in t#e as5et 1it# t#e lo1est ris5;1ei"#te% e8posure amount7
S$C20OB 4
C,FC4F,20BG 2C$ $33$C2S O3 CR$D02 R0S: 9020G,20OB
S4D;S$C20OB 1
34BD$D CR$D02 PRO2$C20OB
,rticle -13
Cre%it lin5e% notes
0nvestments in cre%it lin5e% notes issue% 6 t#e len%in" institution ma6 e treate% as cas# collateral
for t#e purpose of calculatin" t#e effect of fun%e% cre%it protection in accor%ance 1it# t#is Su;
section* provi%e% t#at t#e cre%it %efault s1ap eme%%e% in t#e cre%it lin5e% note &ualifies as eli"ile
unfun%e% cre%it protection7 1or the purpose of deterining, *hether the $redit default s*ap
e!edded in a $redit linked note 6ualifies as eligi!le unfunded $redit prote$tion, the institution
a# $onsider the $ondition in Arti$le 4>:(?), point ($) to !e et3
,rticle -14
On;alance s#eet nettin"
Foans to an% %eposits 1it# t#e len%in" institution su!ect to on;alance s#eet nettin" are to e
treate% !# that institution as cas# collateral for t#e purpose of calculatin" t#e effect of fun%e% cre%it
protection for t#ose loans an% %eposits of t#e len%in" institution su!ect to on;alance s#eet nettin"
1#ic# are %enominate% in t#e same currenc67
,rticle -1+
4sin" t#e Supervisor6 Rolatilit6 ,%!ustments ,pproac# or t#e O1n $stimates Rolatilit6
,%!ustments ,pproac# for master nettin" a"reements
17 ?#en institutions calculate t#e Mfull6 a%!uste% e8posure valueN )$
T
/ for t#e e8posures
su!ect to an eli"ile master nettin" a"reement coverin" repurc#ase transactions or
securities or commo%ities len%in" or orro1in" transactions or ot#er capital mar5et;%riven
transactions* t#e6 s#all calculate t#e volatilit6 a%!ustments t#at t#e6 nee% to appl6 eit#er 6
usin" t#e Supervisor6 Rolatilit6 ,%!ustments ,pproac# or t#e O1n $stimates Rolatilit6
,%!ustments ,pproac# )(O1n $stimates ,pproac#(/ as set out in ,rticles -18 to --1 for
t#e 3inancial Collateral Compre#ensive 9et#o%7
2#e use of t#e O1n $stimates ,pproac# s#all e su!ect to t#e same con%itions an%
re&uirements as appl6 un%er t#e 3inancial Collateral Compre#ensive 9et#o%7
-7 3or t#e purpose of calculatin" $
T
* t#e Ainstitutions s#all '
(a) calculate t#e net position in eac# "roup of securities or in eac# t6pe of commo%it6 6
sutractin" t#e amount in point )ii/ from t#e amount in point )i/:
)i/ t#e total value of a "roup of securities or of commo%ities of t#e same t6pe lent*
sol% or provi%e% un%er t#e master nettin" a"reementE
)ii/ t#e total value of a "roup of securities or of commo%ities of t#e same t6pe
orro1e%* purc#ase% or receive% un%er t#e aster netting a"reementE
)/ Acalculate t#e net position in eac# currenc6* ot#er t#an t#e settlement currenc6 of
t#e master nettin" a"reement* 6 sutractin" t#e amount in point )ii/ from t#e amount
in point )i/:
)i/ t#e sum of t#e total value of securities %enominate% in t#at currenc6 lent* sol%
or provi%e% un%er t#e master nettin" a"reement an% t#e amount of cas# in t#at
currenc6 lent or transferre% un%er that a"reementE
)ii/ t#e sum of t#e total value of securities %enominate% in t#at currenc6 orro1e%*
purc#ase% or receive% un%er t#e aster netting a"reement an% t#e amount of
cas# in t#at currenc6 orro1e% or receive% un%er that a"reementE
)c/ Aappl6 t#e volatilit6 a%!ustment appropriate to a "iven "roup of securities or to a
cas# position to t#e asolute value of t#e positive or ne"ative net position in t#e
securities in t#at "roupE
)%/ Aappl6 t#e forei"n e8c#an"e ris5 )f8/ volatilit6 a%!ustment to t#e net positive or
ne"ative position in eac# currenc6 ot#er t#an t#e settlement currenc6 of t#e master
nettin" a"reement7
37 0nstitutions s#all calculate $
T
accor%in" to t#e follo1in" formula:
E
T

ma8

'
.*

E
i

2
i
+

sec
4 =
sec
+

f,
f,

=
1 ;

i i , 4 1

_
E
4
E
1
1#ere:
E
i
U t#e e8posure value for eac# separate e8posure i un%er t#e a"reement t#at 1oul%
appl6 in t#e asence of t#e cre%it protection* 1#ere institutions calculate ris5;1ei"#te%
e8posure amounts un%er t#e Stan%ar%ise% ,pproac# or 1#ere t#e6 calculate t#e ris5;
1ei"#te% e8posure amounts an% e8pecte% loss amounts un%er t#e 0RD ,pproac#E
2
i
U t#e value of securities in eac# "roup or commo%ities of t#e same t6pe orro1e%*
purc#ase% or receive% or t#e cas# orro1e% or receive% in respect of eac# e8posure 0E
sec
4
U t#e net position )positive or ne"ative/ in a "iven "roup of securities !E
f,
1
U t#e net position )positive or ne"ative/ in a "iven currenc6 5 ot#er t#an t#e
settlement currenc6 of t#e a"reement as calculate% un%er point )/ of para"rap# -E
sec
4 U t#e volatilit6 a%!ustment appropriate to a particular "roup of securities !E
f,
1
U t#e forei"n e8c#an"e volatilit6 a%!ustment for currenc6 57
E
E
=
=
47 3or t#e purpose of calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts
for repurc#ase transactions or securities or commo%ities len%in" or orro1in" transactions
or ot#er capital mar5et;%riven transactions covere% 6 master nettin" a"reements*
institutions s#all use $
T
as calculate% un%er para"rap# 3 as t#e e8posure value of t#e
e8posure to t#e counterpart6 arisin" from t#e transactions su!ect to t#e master nettin"
a"reement for t#e purposes of ,rticle 1.8 un%er t#e Stan%ar%ise% ,pproac# or C#apter 3
un%er t#e 0RD ,pproac#7
+7 3or t#e purposes of para"rap#s - an% 3* ("roup of securitiesN means securities 1#ic# are
issue% 6 t#e same entit6* #ave t#e same issue %ate* t#e same maturit6* are su!ect to t#e
same terms an% con%itions* an% are su!ect to t#e same li&ui%ation perio%s as in%icate% in
,rticles -19 an% --.* as applicale7
,rticle -1=
4sin" t#e 0nternal 9o%els ,pproac# for 9aster nettin" a"reements
17 Su!ect to permission of competent aut#orities* institutions ma6* as an alternative to usin"
t#e Supervisor6 Rolatilit6 ,%!ustments ,pproac# or t#e O1n $stimates ,pproac# in
calculatin" t#e full6 a%!uste% e8posure value )$
T
/ resultin" from t#e application of an
eli"ile master nettin" a"reement coverin" repurc#ase transactions* securities or
commo%ities len%in" or orro1in" transactions* or ot#er capital mar5et %riven transactions
ot#er t#an %erivative transactions* use an internal mo%els approac# 1#ic# ta5es into
account correlation effects et1een securit6 positions su!ect to t#e master nettin"
a"reement as 1ell as t#e li&ui%it6 of t#e instruments concerne%7
-7 Su!ect to t#e permission of t#e competent aut#orities* institutions ma6 also use t#eir
internal mo%els for mar"in len%in" transactions* 1#ere t#e transactions are covere% un%er a
ilateral master nettin" a"reement t#at meets t#e re&uirements set out in C#apter =* Section
>7
37 ,n institution ma6 c#oose to use an internal mo%els approac# in%epen%entl6 of t#e c#oice
it #as ma%e et1een t#e Stan%ar%ise% ,pproac# an% t#e 0RD ,pproac# for t#e calculation
of ris5;1ei"#te% e8posure amounts7 Co1ever* 1#ere an institution see5s to use an internal
mo%els approac#* it s#all %o so for all counterparties an% securities* e8clu%in" immaterial
portfolios 1#ere it ma6 use t#e Supervisor6 Rolatilit6 ,%!ustments ,pproac# or t#e O1n
$stimates ,pproac# as lai% %o1n in ,rticle -1+7
0nstitutions t#at #ave receive% permission for an internal ris5;mana"ement mo%el un%er
2itle 0R* C#apter + ma6 use t#e internal mo%els approac#7 ?#ere an institution #as not
receive% suc# permission* it ma6 still appl6 for permission to t#e competent aut#orities to
use an internal mo%els approac# for t#e purposes of t#is ,rticle7
47 Competent aut#orities s#all permit an institution to use an internal mo%els approac# onl6
1#ere t#e6 are satisfie% t#at t#e institution(s s6stem for mana"in" t#e ris5s arisin" from t#e
transactions covere% 6 t#e master nettin" a"reement is conceptuall6 soun% an%
implemente% 1it# inte"rit6 an% 1#ere t#e follo1in" &ualitative stan%ar%s are met:
)a/ t#e internal ris5;measurement mo%el use% for calculatin" t#e potential price volatilit6
for t#e transactions is closel6 inte"rate% into t#e %ail6 ris5;mana"ement process of
t#e institution an% serves as t#e asis for reportin" ris5 e8posures to t#e senior
mana"ement of t#e institutionE
)/ t#e institution #as a ris5 control unit t#at meets all t#e follo1in" re&uirements:
)i/ it is in%epen%ent from usiness tra%in" units an% reports %irectl6 to senior
mana"ementE
)ii/ it is responsile for %esi"nin" an% implementin" t#e institution(s ris5;
mana"ement s6stemE
)iii/ it pro%uces an% anal6ses %ail6 reports on t#e output of t#e ris5;measurement
mo%el an% on t#e appropriate measures to e ta5en in terms of position limitsE
)c/ t#e %ail6 reports pro%uce% 6 t#e ris5;control unit are revie1e% 6 a level of
mana"ement 1it# sufficient aut#orit6 to enforce re%uctions of positions ta5en an% of
overall ris5 e8posureE
)%/ t#e institution #as sufficient staff s5ille% in t#e use of sop#isticate% mo%els in t#e ris5
control unitE
)e/ t#e institution #as estalis#e% proce%ures for monitorin" an% ensurin" compliance
1it# a %ocumente% set of internal policies an% controls concernin" t#e overall
operation of t#e ris5;measurement s6stemE
)f/ t#e institution(s mo%els #ave a proven trac5 recor% of reasonale accurac6 in
measurin" ris5s %emonstrate% t#rou"# t#e ac5;testin" of its output usin" at least one
6ear of %ataE
)"/ t#e institution fre&uentl6 con%ucts a ri"orous pro"ramme of stress testin" an% t#e
results of t#ese tests are revie1e% 6 senior mana"ement an% reflecte% in t#e policies
an% limits it setsE
)#/ t#e institution con%ucts* as part of its re"ular internal au%itin" process* an
in%epen%ent revie1 of its ris5;measurement s6stem7 2#is revie1 s#all inclu%e ot#
t#e activities of t#e usiness tra%in" units an% of t#e in%epen%ent ris5;control unitE
)i/ at least once a 6ear* t#e institution con%ucts a revie1 of its ris5;mana"ement s6stemE
)!/ t#e internal mo%el meets t#e re&uirements set out in ,rticle -8=)8/ an% )9/ an% in
,rticle -887
+7 An institutionGs internal ris5;measurement mo%el s#all capture a sufficient numer of ris5
factors in or%er to capture all material price ris5s7
,n institution ma6 use empirical correlations 1it#in ris5 cate"ories an% across ris5
cate"ories 1#ere its s6stem for measurin" correlations is soun% an% implemente% 1it#
inte"rit67
=7 0nstitutions usin" t#e internal mo%els approac# s#all calculate $
T
accor%in" to t#e
follo1in" formula:
*

_

E ma8
'
.*

E
i

2
i
+ potential chan#e in value
;

i i ,

1#ere:
E
i
U t#e e8posure value for eac# separate e8posure i un%er t#e a"reement t#at 1oul%
appl6 in t#e asence of t#e cre%it protection* 1#ere institutions calculate t#e ris5;1ei"#te%
e8posure amounts un%er t#e Stan%ar%ise% ,pproac# or 1#ere t#e6 calculate ris5;1ei"#te%
e8posure amounts an% e8pecte% loss amounts un%er t#e 0RD ,pproac#E
2
i
> t#e value of t#e securities orro1e%* purc#ase% or receive% or t#e cas# orro1e% or
receive% in respect of eac# suc# e8posure i7
?#en calculatin" ris5;1ei"#te% e8posure amounts usin" internal mo%els* institutions s#all
use t#e previous usiness %a6(s mo%el output7
>7 2#e calculation of t#e potential c#an"e in value referre% to in para"rap# = s#all e su!ect
to all t#e follo1in" stan%ar%s:
)a/ it s#all e carrie% out at least %ail6E
)/ it s#all e ase% on a 99t# percentile* one;taile% confi%ence intervalE
)c/ it s#all e ase% on a +;%a6 e&uivalent li&ui%ation perio%* e8cept in t#e case of
transactions ot#er t#an securities repurc#ase transactions or securities len%in" or
orro1in" transactions 1#ere a 1.;%a6 e&uivalent li&ui%ation perio% s#all e use%E
)%/ it s#all e ase% on an effective #istorical oservation perio% of at least one 6ear
e8cept 1#ere a s#orter oservation perio% is !ustifie% 6 a si"nificant upsur"e in
price volatilit6E
)e/ t#e %ata set use% in t#e calculation s#all e up%ate% ever6 t#ree mont#s7
?#ere an institution #as a repurc#ase transaction* a securities or commo%ities len%in" or
orro1in" transaction an% mar"in len%in" or similar transaction or nettin" set 1#ic# meets
t#e criteria set out in ,rticle ->9)-/ an% )3/* t#e minimum #ol%in" perio% s#all e rou"#t
in line 1it# t#e mar"in perio% of ris5 t#at 1oul% appl6 un%er t#ose paragraphs* in
comination 1it# ,rticle ->9)4/7
87 3or t#e purpose of calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts
for repurc#ase transactions or securities or commo%ities len%in" or orro1in" transactions
or ot#er capital mar5et;%riven transactions covere% 6 master nettin" a"reements*
institutions s#all use $
T
as calculate% un%er para"rap# = as t#e e8posure value of t#e
e8posure to t#e counterpart6 arisin" from t#e transactions su!ect to t#e master nettin"
a"reement for t#e purposes of ,rticle 1.8 un%er t#e Stan%ar%ise% ,pproac# or C#apter 3
un%er t#e 0RD ,pproac#7
97 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ 1#at $onstitutes an immaterial portfolio for t#e purpose of para"rap# 3E
)/ t#e criteria for %eterminin" 1#et#er an internal mo%el is soun% an% implemente%
1it# inte"rit6 for t#e purpose of para"rap#s 4 an% + and aster netting agreeents3
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
December 2:4@3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle -1>
3inancial Collateral Simple 9et#o%
17 0nstitutions ma6 use t#e 3inancial Collateral Simple 9et#o% onl6 1#ere t#e6 calculate
ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise% ,pproac#7 0nstitution s#all not use
ot# t#e 3inancial Collateral Simple 9et#o% an% t#e 3inancial Collateral Compre#ensive
9et#o%* e8cept for t#e purposes of ,rticles 143)1/ an% 14+)1/7 0nstitutions s#all not use
t#is e8ception selectivel6 1it# t#e purpose of ac#ievin" re%uce% o1n fun%s re&uirements
or 1it# t#e purpose of con%uctin" re"ulator6 aritra"e7
-7 4n%er t#e 3inancial Collateral Simple 9et#o% institutions s#all assi"n to eli"ile financial
collateral a value e&ual to its mar5et value as %etermine% in accor%ance 1it# point )%/ of
,rticle -.-)4/7
37 0nstitutions s#all assi"n to t#ose portions of e8posure values t#at are collateralise% 6 t#e
mar5et value of eli"ile collateral t#e ris5 1ei"#t t#at t#e6 1oul% assi"n un%er C#apter -
1#ere t#e len%in" institution #a% a %irect e8posure to t#e collateral instrument7 3or t#is
purpose* t#e e8posure value of an off;alance s#eet item liste% in ,nne8 0 s#all e e&ual to
1.. O of t#e item(s value rat#er t#an t#e e8posure value in%icate% in ,rticle 1.=)1/7
2#e ris5 1ei"#t of t#e collateralise% portion s#all e at least -. O e8cept as specifie% in
para"rap#s 4 to =7 0nstitutions s#all appl6 to t#e remain%er of t#e e8posure value t#e ris5
1ei"#t t#at t#e6 1oul% assi"n to an unsecure% e8posure to t#e counterpart6 un%er C#apter
-7
47 0nstitutions s#all assi"n a ris5 1ei"#t of . O to t#e collateralise% portion of t#e e8posure
arisin" from repurc#ase transaction an% securities len%in" or orro1in" transactions 1#ic#
fulfil t#e criteria in ,rticle ---7 ?#ere t#e counterpart6 to t#e transaction is not a core
mar5et participant* institutions s#all assi"n a ris5 1ei"#t of 1. O7
+7 0nstitutions s#all assi"n a ris5 1ei"#t of . O* to t#e e8tent of t#e collateralisation* to t#e
e8posure values %etermine% un%er C#apter = for t#e %erivative instruments liste% in ,nne8
00 an% su!ect to %ail6 mar5in";to;mar5et* collateralise% 6 cas# or cas#;assimilate%
instruments 1#ere t#ere is no currenc6 mismatc#7
0nstitutions s#all assi"n a ris5 1ei"#t of 1. O* to t#e e8tent of t#e collateralisation* to t#e
e8posure values of suc# transactions collateralise% 6 %et securities issue% 6 central
"overnments or central an5s 1#ic# are assi"ne% a . O ris5 1ei"#t un%er C#apter -7
=7 3or transactions ot#er t#an t#ose referre% to in para"rap#s 4 an% +* institutions ma6 assi"n
a . O ris5 1ei"#t 1#ere t#e e8posure an% t#e collateral are %enominate% in t#e same
currenc6* an% eit#er of t#e follo1in" con%itions is met:
)a/ t#e collateral is cas# on %eposit or a cas# assimilate% instrumentE
)/ t#e collateral is in t#e form of %et securities issue% 6 central "overnments or
central an5s eli"ile for a . O ris5 1ei"#t un%er ,rticle 1.9* an% its mar5et value
#as een %iscounte% 6 -. O7
>7 3or t#e purpose of para"rap#s + an% = %et securities issue% 6 central "overnments or
central an5s s#all inclu%e:
)a/ %et securities issue% 6 re"ional "overnments or local aut#orities e8posures to
1#ic# are treate% as e8posures to t#e central "overnment in 1#ose !uris%iction t#e6
are estalis#e% un%er ,rticle 11.E
)/ %et securities issue% 6 multilateral %evelopment an5s to 1#ic# a . O ris5 1ei"#t
is assi"ne% un%er or 6 virtue of ,rticle 11-)-/E
)c/ %et securities issue% 6 international or"anisations 1#ic# are assi"ne% a . O ris5
1ei"#t un%er ,rticle 1137
(d) de!t se$urities issued !# pu!li$ se$tor entities *hi$h are treated as e5posures to
$entral governents in a$$ordan$e *ith Arti$le 444(B)3
,rticle -18
3inancial Collateral Compre#ensive 9et#o%
17 0n or%er to ta5e account of price volatilit6* institutions s#all appl6 volatilit6 a%!ustments to
t#e mar5et value of collateral* as set out in ,rticles -19 to ---* 1#en valuin" financial
collateral for t#e purposes of t#e 3inancial Collateral Compre#ensive 9et#o%7
?#ere collateral is %enominate% in a currenc6 t#at %iffers from t#e currenc6 in 1#ic# t#e
un%erl6in" e8posure is %enominate%* institutions s#all a%% an a%!ustment reflectin"
currenc6 volatilit6 to t#e volatilit6 a%!ustment appropriate to t#e collateral as set out in
,rticles -19 to ---7
0n t#e case of O2C %erivatives transactions covere% 6 nettin" a"reements reco"nise% 6
t#e competent aut#orities un%er C#apter =* institutions s#all appl6 a volatilit6 a%!ustment
reflectin" currenc6 volatilit6 1#en t#ere is a mismatc# et1een t#e collateral currenc6 an%
t#e settlement currenc67 $ven 1#ere multiple currencies are involve% in t#e transactions
covere% 6 t#e nettin" a"reement* institutions s#all appl6 a sin"le volatilit6 a%!ustment7
-7 0nstitutions s#all calculate t#e volatilit6;a%!uste% value of t#e collateral )C
R,
/ t#e6 nee% to
ta5e into account as follo1s:
2
?A
2 (1
=
=
f,
)
1#ere:
2 U t#e value of t#e collateralE
=
2
U t#e volatilit6 a%!ustment appropriate to t#e collateral* as calculate% un%er ,rticles
-19 an% ---E
=
f,
U t#e volatilit6 a%!ustment appropriate to currenc6 mismatc#* as calculate% un%er
,rticles -19 an% ---7
2
0nstitutions s#all use t#e formula in t#is para"rap# 1#en calculatin" t#e volatilit6;a%!uste%
value of t#e collateral for all transactions e8cept for t#ose transactions su!ect to
reco"nise% master nettin" a"reements to 1#ic# t#e provisions set out in ,rticles -1+ an%
-1= appl67
37 0nstitutions s#all calculate t#e volatilit6;a%!uste% value of t#e e8posure )$
R,
/ t#e6 nee% to
ta5e into account as follo1s:
E
?A
E (1 + =
E
)
1#ere:
E U t#e e8posure value as 1oul% e %etermine% un%er C#apter - or C#apter 3 as
appropriate 1#ere t#e e8posure 1as not collateralise%E
=
E
U t#e volatilit6 a%!ustment appropriate to t#e e8posure* as calculate% un%er ,rticles
-19 an% ---7
0n t#e case of O2C %erivative transactions institutions s#all calculate $
R,
as follo1s:
E
?A
E
7
47 3or t#e purpose of calculatin" $ in para"rap# 3* t#e follo1in" s#all appl6:
)a/ for institutions calculatin" ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise%
,pproac#* t#e e8posure value of an off;alance s#eet item liste% in ,nne8 0 s#all e
1.. O of t#at item(s value rat#er t#an t#e e8posure value in%icate% in ,rticle 1.=)1/E
)/ for institutions calculatin" ris5;1ei"#te% e8posure amounts un%er t#e 0RD ,pproac#*
t#e6 s#all calculate t#e e8posure value of t#e items liste% in ,rticle 1=-)8/ to )1./ 6
usin" a conversion factor of 1.. O rat#er t#an t#e conversion factors or percenta"es
in%icate% in t#ose para"rap#s7
+7 0nstitutions s#all calculate t#e full6 a%!uste% value of t#e e8posure (EO)* ta5in" into
account ot# volatilit6 an% t#e ris5;miti"atin" effects of collateral as follo1s:
E ma8{.* E
?A
2
?A-
}
1#ere:
EMA N the volatilit# ad9usted value of the e5posure as $al$ulated in paragraph C%
CR,9 U CR, furt#er a%!uste% for an6 maturit6 mismatc# in accor%ance 1it# t#e
provisions of Section +E
6
T
=7 0nstitutions ma6 calculate volatilit6 a%!ustments eit#er 6 usin" t#e Supervisor6 Rolatilit6
,%!ustments ,pproac# referre% to in ,rticle -19 or t#e O1n $stimates ,pproac# referre%
to in ,rticle --.7
,n institution ma6 c#oose to use t#e Supervisor6 Rolatilit6 ,%!ustments ,pproac# or t#e
O1n $stimates ,pproac# in%epen%entl6 of t#e c#oice it #as ma%e et1een t#e
Stan%ar%ise% ,pproac# an% t#e 0RD ,pproac# for t#e calculation of ris5;1ei"#te%
e8posure amounts7
Co1ever* 1#ere an institution uses t#e O1n $stimates ,pproac#* it s#all %o so for t#e full
ran"e of instrument t6pes* e8clu%in" immaterial portfolios 1#ere it ma6 use t#e
Supervisor6 Rolatilit6 ,%!ustments ,pproac#7
>7 ?#ere t#e collateral consists of a numer of eli"ile items* institutions s#all calculate t#e
volatilit6 a%!ustment (H) as follo1s:
=

a
i
=
i
i
1#ere:
a
i
U t#e proportion of t#e value of an eli"ile item i in t#e total value of collateralE
=i U t#e volatilit6 a%!ustment applicale to eli"ile item i7
,rticle -19
Supervisor6 volatilit6 a%!ustment un%er t#e 3inancial Collateral Compre#ensive 9et#o%
17 2#e volatilit6 a%!ustments to e applie% 6 institutions un%er t#e Supervisor6 Rolatilit6
,%!ustments ,pproac#* assumin" %ail6 revaluation* s#all e t#ose set out in 2ales 1 to 4
of t#is para"rap#7
ROF,20F02H ,D<4S29$B2S
2ale 1
Cre%it &ualit6 step
1it# 1#ic# t#e
cre%it assessment of
t#e %et securit6 is
associate%
Resi%ual
9aturit6
Rolatilit6 a%!ustments for %et
securities issue% 6 entities
%escrie% in AArti$le 4>C(4))/
Rolatilit6 a%!ustments for %et
securities issue% 6 entities
%escrie% in AArti$le 4>C(4) )c/
an% )%/
Rolatilit6 a%!ustments for
securitisation positions an%
meetin" t#e criteria in AArti$le
4>C(4) )#/
-.;%a6
li&ui%ati
on
perio% )
O/
1.;%a6
li&ui%ati
on
perio% )
O/
+;%a6
li&ui%ati
on
perio% )
O/
-.;%a6
li&ui%ati
on
perio% )
O/
1.;%a6
li&ui%ati
on
perio% )
O/
+;%a6
li&ui%ati
on
perio% )
O/
-.;%a6
li&ui%ati
on
perio% )
O/
1.;%a6
li&ui%ati
on
perio% )
O/
+;%a6
li&ui%ati
on
perio% )
O/
1 Z 1 6ear .7>.> .7+ .73+4 17414 1 .7>.> -78-9 - 17414
[1 Z + 6ears -78-8 - 17414 +7=+> 4 -78-8 117314 8 +7=+>
[ + 6ears +7=+> 4 -78-8 117314 8 +7=+> --7=-8 1= 117313
-;3 Z 1 6ear 17414 1 .7>.> -78-8 - 17414 +7=+> 4 -78-8
[1 Z + 6ears 47-43 3 -71-1 8748+ = 47-43 1=79>1 1- 8748+
[ + 6ears 8748+ = 47-43 1=79>1 1- 8748+ 33794- -4 1=79>.
4 Z 1 6ear -17-13 1+ 1.7=.> B/, B/, B/, B/, B/, B/,
[1 Z + 6ears -17-13 1+ 1.7=.> B/, B/, B/, B/, B/, B/,
[ + 6ears -17-13 1+ 1.7=.> B/, B/, B/, B/, B/, B/,
P
+a!le 2
Credit 6ualit# step *ith
*hi$h the $redit
assessent of a short
ter de!t se$urit# is
asso$iated
Molatilit# ad9ustents for de!t
se$urities issued !# entities des$ri!ed
in Arti$le 4>C(4)(!) *ith short=ter
$redit assessents
Molatilit# ad9ustents for de!t
se$urities issued !# entities des$ri!ed
in Arti$le 4>C(4) ($) and (d) *ith
short=ter $redit assessents
Molatilit# ad9ustents for
se$uritisation positions and eeting
the $riteria in Arti$le 4>C(4)(h)
2:=da#
li6uidatio
n period (
J)
4:=da#
li6uidatio
n period (
J)
@=da#
li6uidatio
n period (
J)
2:=da#
li6uidatio
n period (
J)
4:=da#
li6uidatio
n period (
J)
@=da#
li6uidatio
n period (
J)
2:=da#
li6uidatio
n period
(J)
4:=da#
li6uidatio
n period
(J)
@=da#
li6uidatio
n period
(J)
4 :30:0 :3@ :3C@B 43B4B 4 :30:0 23A2> 2 43B4B
2=C 43B4B 4 :30:0 23A2A 2 43B4B @3?@0 B 23A2A
2ale 3
Ot#er collateral or e8posure t6pes
-.;%a6
li&ui%ation perio%
) O/
1.;%a6
li&ui%ation perio%
) O/
+;%a6
li&ui%ation
perio% ) O/
9ain 0n%e8 $&uities* 9ain 0n%e8
Convertile Don%s
-17-13 1+ 1.7=.>
Ot#er $&uities or Convertile
Don%s liste% on a reco"nise%
e8c#an"e
3+73++ -+ 1>7=>8
Cas# . . .
Gol% -17-13 1+ 1.7=.>
2ale 4
Rolatilit6 a%!ustment for currenc6 mismatc#
-.;%a6 li&ui%ation perio% ) O/ 1.;%a6 li&ui%ation perio% ) O/ +;%a6 li&ui%ation perio% )O/
117314 8 +7=+>
-7 2#e calculation of volatilit6 a%!ustments in accor%ance 1it# para"rap# 1 s#all e su!ect to
t#e follo1in" con%itions:
)a/ for secure% len%in" transactions t#e li&ui%ation perio% s#all e -. usiness %a6sE
)/ for repurc#ase transactions* e8cept insofar as suc# transactions involve t#e transfer of
commo%ities or "uarantee% ri"#ts relatin" to title to commo%ities* an% securities
len%in" or orro1in" transactions t#e li&ui%ation perio% s#all e + usiness %a6sE
)c/ for ot#er capital mar5et %riven transactions* t#e li&ui%ation perio% s#all e 1.
usiness %a6s7
?#ere an institution #as a transaction or nettin" set 1#ic# meets t#e criteria set out in of
,rticle ->9)-/ an% )3/* t#e minimum #ol%in" perio% s#all e rou"#t in line 1it# t#e
mar"in perio% of ris5 t#at 1oul% appl6 un%er t#ose para"rap#s7
37 0n 2ales 1 to 4 of para"rap# 1 an% in para"rap#s 4 to =* t#e cre%it &ualit6 step 1it# 1#ic#
a cre%it assessment of t#e %et securit6 is associate% is t#e cre%it &ualit6 step 1it# 1#ic#
t#e cre%it assessment is %etermine% 6 $D, to e associate% un%er C#apter -7
3or t#e purpose of %eterminin" t#e cre%it &ualit6 step 1it# 1#ic# a cre%it assessment of t#e
%et securit6 is associate% referre% to in t#e first supara"rap#* ,rticle 193)>/ also applies7
47 3or non;eli"ile securities or for commo%ities lent or sol% un%er repurc#ase transactions or
securities or commo%ities len%in" or orro1in" transactions* t#e volatilit6 a%!ustment is
t#e same as for non;main in%e8 e&uities liste% on a reco"nise% e8c#an"e7
+7 3or eli"ile units in collective investment un%erta5in"s t#e volatilit6 a%!ustment is t#e
1ei"#te% avera"e volatilit6 a%!ustments t#at 1oul% appl6* #avin" re"ar% to t#e li&ui%ation
perio% of t#e transaction as specifie% in para"rap# -* to t#e assets in 1#ic# t#e fun% #as
investe%7
?#ere t#e assets in 1#ic# t#e fun% #as investe% are not 5no1n to t#e institution* t#e
volatilit6 a%!ustment is t#e #i"#est volatilit6 a%!ustment t#at 1oul% appl6 to an6 of t#e
assets in 1#ic# t#e fun% #as t#e ri"#t to invest7
=7 3or unrate% %et securities issue% 6 institutions an% satisf6in" t#e eli"iilit6 criteria in
,rticle 193)4/ t#e volatilit6 a%!ustments is t#e same as for securities issue% 6 institutions
or corporates 1it# an e8ternal cre%it assessment associate% 1it# cre%it &ualit6 steps - or 37
,rticle --.
O1n estimates of volatilit6 a%!ustments un%er t#e 3inancial Collateral Compre#ensive 9et#o%3
17 2#e competent aut#orities s#all permit institutions to use t#eir o1n volatilit6 estimates for
calculatin" t#e volatilit6 a%!ustments to e applie% to collateral an% e8posures 1#ere t#ose
institutions compl6 1it# t#e re&uirements set out in para"rap#s - an% 37 0nstitutions 1#ic#
#ave otaine% permission to use t#eir o1n volatilit6 estimates s#all not revert to t#e use of
ot#er met#o%s e8cept for %emonstrate% "oo% cause an% su!ect to t#e permission of t#e
competent aut#orities7
3or %et securities t#at #ave a cre%it assessment from an $C,0 e&uivalent to investment
"ra%e or etter* institutions ma6 calculate a volatilit6 estimate for eac# cate"or6 of
securit67
3or %et securities t#at #ave a cre%it assessment from an $C,0 e&uivalent to elo1
investment "ra%e* an% for ot#er eli"ile collateral* institutions s#all calculate t#e volatilit6
a%!ustments for eac# in%ivi%ual item7
0nstitutions usin" t#e O1n $stimates ,pproac# s#all estimate volatilit6 of t#e collateral or
forei"n e8c#an"e mismatc# 1it#out ta5in" into account an6 correlations et1een t#e
unsecure% e8posure* collateral or e8c#an"e rates7
0n %eterminin" relevant cate"ories* institutions s#all ta5e into account t#e t6pe of issuer of
t#e securit6* t#e e8ternal cre%it assessment of t#e securities* t#eir resi%ual maturit6* an%
t#eir mo%ifie% %uration7 Rolatilit6 estimates s#all e representative of t#e securities
inclu%e% in t#e cate"or6 6 t#e institution7
-7 2#e calculation of t#e volatilit6 a%!ustments s#all e su!ect to all t#e follo1in" criteria:
)a/ institutions s#all ase t#e calculation on a 99t# percentile* one;taile% confi%ence
intervalE
)/ institutions s#all ase t#e calculation on t#e follo1in" li&ui%ation perio%s:
)i/ -. usiness %a6s for secure% len%in" transactionsE
)ii/ + usiness %a6s for repurc#ase transaction* e8cept insofar as suc# transactions
involve t#e transfer of commo%ities or "uarantee% ri"#ts relatin" to title to
commo%ities an% securities len%in" or orro1in" transactionsE
)iii/ 1. usiness %a6s for ot#er capital mar5et %riven transactionsE
)c/ institutions ma6 use volatilit6 a%!ustment numers calculate% accor%in" to s#orter or
lon"er li&ui%ation perio%s* scale% up or %o1n to t#e li&ui%ation perio% set out in point
)/ for t#e t6pe of transaction in &uestion* usin" t#e s&uare root of time formula:
T
-
=
-
=
9

T
9
1#ere:
T
-
U t#e relevant li&ui%ation perio%E
=
-
U t#e volatilit6 a%!ustment ase% on t#e li&ui%ation perio% 2
9
E
=
9
U t#e volatilit6 a%!ustment ase% on t#e li&ui%ation perio% 2
B
7
)%/ institutions s#all ta5e into account t#e illi&ui%it6 of lo1er;&ualit6 assets7 2#e6 s#all
a%!ust t#e li&ui%ation perio% up1ar%s in cases 1#ere t#ere is %out concernin" t#e
li&ui%it6 of t#e collateral7 2#e6 s#all also i%entif6 1#ere #istorical %ata ma6
un%erstate potential volatilit67 Suc# cases s#all e %ealt 1it# 6 means of a stress
scenarioE
)e/ t#e len"t# of t#e #istorical oservation perio% institutions use for calculatin" volatilit6
a%!ustments s#all e at least one 6ear7 3or institutions t#at use a 1ei"#tin" sc#eme or
ot#er met#o%s for t#e #istorical oservation perio%* t#e len"t# of t#e effective
oservation perio% s#all e at least one 6ear7 2#e competent aut#orities ma6 also
re&uire an institution to calculate its volatilit6 a%!ustments usin" a s#orter oservation
perio% 1#ere* in t#e competent aut#orities( !u%"ement* t#is is !ustifie% 6 a si"nificant
upsur"e in price volatilit6E
)f/ institutions s#all up%ate t#eir %ata sets an% calculate volatilit6 a%!ustments at least
once ever6 t#ree mont#s7 2#e6 s#all also reassess t#eir %ata sets 1#enever mar5et
prices are su!ect to material c#an"es7
37 2#e estimation of volatilit6 a%!ustments s#all meet all t#e follo1in" &ualitative criteria:
)a/ an institutions s#all use t#e volatilit6 estimates in t#e %a6;to;%a6 ris5 mana"ement
process inclu%in" in relation to its internal e8posure limitsE
)/ 1#ere t#e li&ui%ation perio% use% 6 an institution in its %a6;to;%a6 ris5 mana"ement
process is lon"er t#an t#at set out in t#is "e$tion for t#e t6pe of transaction in
&uestion* t#at institution s#all scale up its volatilit6 a%!ustments in accor%ance 1it#
t#e s&uare root of time formula set out in point )c/ of para"rap# -E
)c/ an institution s#all #ave in place estalis#e% proce%ures for monitorin" an% ensurin"
compliance 1it# a %ocumente% set of policies an% controls for t#e operation of its
s6stem for t#e estimation of volatilit6 a%!ustments an% for t#e inte"ration of suc#
estimations into its ris5 mana"ement processE
)%/ an in%epen%ent revie1 of t#e institution(s s6stem for t#e estimation of volatilit6
a%!ustments s#all e carrie% out re"ularl6 1it#in t#e institution(s o1n internal
au%itin" process7 , revie1 of t#e overall s6stem for t#e estimation of volatilit6
a%!ustments an% for t#e inte"ration of t#ose a%!ustments into t#e institution(s ris5
mana"ement process s#all ta5e place at least once a 6ear7 2#e su!ect of t#at revie1
s#all inclu%e at least t#e follo1in":
)i/ t#e inte"ration of estimate% volatilit6 a%!ustments into %ail6 ris5 mana"ementE
)ii/ t#e vali%ation of an6 si"nificant c#an"e in t#e process for t#e estimation of
volatilit6 a%!ustmentsE
)iii/ t#e verification of t#e consistenc6* timeliness an% reliailit6 of %ata sources
use% to run t#e s6stem for t#e estimation of volatilit6 a%!ustments* inclu%in"
t#e in%epen%ence of suc# %ata sourcesE
)iv/ t#e accurac6 an% appropriateness of t#e volatilit6 assumptions7
,rticle --1
Scalin" up of volatilit6 a%!ustment un%er t#e 3inancial Collateral Compre#ensive met#o%
2#e volatilit6 a%!ustments set out in ,rticle -19 are t#e volatilit6 a%!ustments an institution s#all
appl6 1#ere t#ere is %ail6 revaluation7 Similarl6* 1#ere an institution uses its o1n estimates of t#e
volatilit6 a%!ustments in accor%ance 1it# ,rticle --.* it s#all calculate t#em in t#e first instance on
t#e asis of %ail6 revaluation7 ?#ere t#e fre&uenc6 of revaluation is less t#an %ail6* institutions
s#all appl6 lar"er volatilit6 a%!ustments7 0nstitutions s#all calculate t#em 6 scalin" up t#e %ail6
revaluation volatilit6 a%!ustments* usin" t#e follo1in" s&uare;root;of;time formula:
= =
9
5
+ (T
-
1)
-
-
1#ere:
= U t#e volatilit6 a%!ustment to e applie%E
=
-
U t#e volatilit6 a%!ustment 1#ere t#ere is %ail6 revaluationE
9
5
U t#e actual numer of usiness %a6s et1een revaluationsE
T
-
U t#e li&ui%ation perio% for t#e t6pe of transaction in &uestion7
T
,rticle ---
Con%itions for appl6in" a .O volatilit6 a%!ustment un%er t#e 3inancial Collateral Compre#ensive
met#o%
17 0n relation to repurc#ase transactions an% securities len%in" or orro1in" transactions*
1#ere an institution uses t#e Supervisor6 Rolatilit6 ,%!ustments ,pproac# un%er ,rticle
-19 or t#e O1n $stimates ,pproac# un%er ,rticle --. an% 1#ere t#e con%itions set out in
points )a/ to )#/ of para"rap# - are satisfie%* institutions ma6* instea% of appl6in" t#e
volatilit6 a%!ustments calculate% un%er ,rticles -19 to --1* appl6 a . O volatilit6
a%!ustment7 0nstitutions usin" t#e internal mo%els approac# set out in ,rticle -1= s#all not
use t#e treatment lai% %o1n in t#is ,rticle7
-7 0nstitutions ma6 appl6 a .O volatilit6 a%!ustment 1#ere all t#e follo1in" con%itions are
met:
)a/ ot# t#e e8posure an% t#e collateral are cas# or %et securities issue% 6 central
"overnments or central an5s 1it#in t#e meanin" of ,rticle 193)1/)/ an% eli"ile
for a . O ris5 1ei"#t un%er C#apter -E
)/ ot# t#e e8posure an% t#e collateral are %enominate% in t#e same currenc6E
)c/ eit#er t#e maturit6 of t#e transaction is no more t#an one %a6 or ot# t#e e8posure
an% t#e collateral are su!ect to %ail6 mar5in";to;mar5et or %ail6 re;mar"inin"E
)%/ t#e time et1een t#e last mar5in";to;mar5et efore a failure to re;mar"in 6 t#e
counterpart6 an% t#e li&ui%ation of t#e collateral is no more t#an four usiness %a6sE
)e/ t#e transaction is settle% in a settlement s6stem proven for t#at t6pe of transactionE
)f/ t#e %ocumentation coverin" t#e a"reement or transaction is stan%ar% mar5et
%ocumentation for repurc#ase transactions or securities len%in" or orro1in"
transactions in t#e securities concerne%E
)"/ t#e transaction is "overne% 6 %ocumentation specif6in" t#at 1#ere t#e counterpart6
fails to satisf6 an oli"ation to %eliver cas# or securities or to %eliver mar"in or
ot#er1ise %efaults* t#en t#e transaction is imme%iatel6 terminaleE
)#/ t#e counterpart6 is consi%ere% a core mar5et participant 6 t#e competent aut#orities7
37 2#e core mar5et participants referre% to in point )#/ of para"rap# - s#all inclu%e t#e
follo1in" entities:
)a/ t#e entities mentione% in ,rticle 193)1/)/ e8posures to 1#ic# are assi"ne% a . O
ris5 1ei"#t un%er C#apter -E
)/ institutionsE
)c/ ot#er financial un%erta5in"s A e8posures to 1#ic# are assi"ne% a -. O ris5 1ei"#t
un%er t#e Stan%ar%ise% ,pproac# or 1#ic#* in t#e case of institutions calculatin"
ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts un%er t#e 0RD
,pproac#* %o not #ave a cre%it assessment 6 a reco"nise% $C,0 an% are internall6
rate% !# the institution3
)%/ re"ulate% collective investment un%erta5in"s t#at are su!ect to capital or levera"e
re&uirementsE
)e/ re"ulate% pension fun%sE
)f/ reco"nise% clearin" or"anisations7
,rticle --3
Calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts un%er t#e 3inancial
Collateral Compre#ensive met#o%
17 4n%er t#e Stan%ar%ise% ,pproac#* institutions s#all use $
T
as calculate% un%er ,rticle
-18)+/ as t#e e8posure value for t#e purposes of ,rticle 1.87 0n t#e case of off;alance
s#eet items liste% in ,nne8 0* institutions s#all use $
T
as t#e value to 1#ic# t#e percenta"es
in%icate% in ,rticle 1.=)1/ s#all e applie% to arrive at t#e e8posure value7
-7 4n%er t#e 0RD ,pproac#* institutions s#all use t#e effective FGD )FGD
T
/ as t#e FGD for
t#e purposes of C#apter 37 0nstitutions s#all calculate FGD
T
as follo1s:
7!D
T
7!D
E
E
1#ere:
7!D U t#e FGD t#at 1oul% appl6 to t#e e8posure un%er C#apter 3 1#ere t#e
e8posure 1as not collateralise%E
E U t#e e8posure value as %escrie% un%er ,rticle 24A(C)E
E
@
U t#e full6 a%!uste% e8posure value as calculate% un%er ,rticle 24A(@)7
T
,rticle --4
Raluation principles for ot#er eli"ile collateral un%er t#e 0RD ,pproac#
17 3or immovale propert6 collateral* t#e collateral s#all e value% 6 an in%epen%ent valuer
at or less t#an t#e mar5et value7 ,n institution s#all re&uire t#e in%epen%ent valuer to
%ocument t#e mar5et value in a transparent an% clear manner7
0n t#ose 9emer States t#at #ave lai% %o1n ri"orous criteria for t#e assessment of t#e
mort"a"e len%in" value in statutor6 or re"ulator6 provisions t#e propert6 ma6 instea% e
value% 6 an in%epen%ent valuer at or less t#an t#e mort"a"e len%in" value7 &nstitutions
shall re6uire the in%epen%ent valuer not to ta5e into account speculative elements in t#e
assessment of t#e mort"a"e len%in" value an% to %ocument t#at value in a transparent an%
clear manner7
2#e value of t#e collateral s#all e t#e mar5et value or mort"a"e len%in" value re%uce% as
appropriate to reflect t#e results of t#e monitorin" re&uire% un%er ,rticle -.3)3/ an% to
ta5e account of an6 prior claims on t#e propert67
-7 3or receivales* t#e value of receivales s#all e t#e amount receivale7
37 0nstitutions s#all value p#6sical collateral ot#er t#an immovale propert6 at its mar5et
value3 1or the purposes of this Arti$le, the arket value is t#e estimate% amount for
1#ic# t#e propert6 1oul% e8c#an"e on t#e %ate of valuation et1een a 1illin" u6er an% a
1illin" seller in an arm(s;len"t# transaction7
,rticle --+
Calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts for ot#er eli"ile collateral
un%er t#e 0RD ,pproac#
17 0nstitutions s#all use FGD
T
calculate% in accor%ance 1it# t#is para"rap# an% para"rap# -
as t#e FGD for t#e purposes of C#apter 37
?#ere t#e ratio of t#e value of t#e collateral (C) to t#e e8posure value (E) is elo1 t#e
re&uire% minimum collateralisation level of t#e e8posure )C
T
/ as lai% %o1n in 2ale @,
FGD
T
s#all e t#e FGD lai% %o1n in C#apter 3 for uncollateralise% e8posures to t#e
counterpart67 3or t#is purpose* institutions s#all calculate t#e e8posure value of t#e items
liste% in ,rticles 1=-)8/ to )1./ 6 usin" a conversion factor or percenta"e of 1.. O rat#er
t#an t#e conversion factors or percenta"es in%icate% in t#ose points7
?#ere t#e ratio of t#e value of t#e collateral to t#e e8posure value e8cee%s a secon%*
#i"#er t#res#ol% level of C
TT
as lai% %o1n in 2ale +* FGD
T
s#all e t#at prescrie% in
2ale +7
?#ere t#e re&uire% level of collateralisation C
TT
is not ac#ieve% in respect of t#e e8posure
as a 1#ole* institutions s#all consi%er t#e e8posure to e t1o e8posures \ one
correspon%in" to t#e part in respect of 1#ic# t#e re&uire% level of collateralisation C
TT
is
ac#ieve% an% one correspon%in" to t#e remain%er7
-7 2#e applicale FGD
T
an% re&uire% collateralisation levels for t#e secure% parts of
e8posures are set out in 2ale + of t#is para"rap#7
2ale +
9inimum FGD for secure% parts of e8posures
FGDT for
senior
e5posure
FGDT for
suor%inate%
e5posures
Re&uire% minimum
collateralisation
level of t#e
e8posure )CT/
Re&uire% minimum
collateralisation
level of t#e
e8posure )C
TT
/
Receivales 3+ O =+ O . O 1-+ O
Resi%ential real
estate/commercial
real estate
3+ O =+ O 3. O 14. O
Ot#er collateral 4. O >. O 3. O 14. O
37 ,s an alternative to t#e treatment in para"rap#s 1 an% -* an% su!ect to ,rticle 119)-/*
institutions ma6 assi"n a +. O ris5 1ei"#t to t#e part of t#e e8posure t#at is* 1it#in t#e
limits set out in ,rticles 1-.)-/)%/ an% 1-1)-/)%/ respectivel6* full6 collateralise% 6
resi%ential propert6 or commercial immovale propert6 situate% 1it#in t#e territor6 of a
9emer State 1#ere all t#e con%itions in ,rticle 19+)=/ are met7
,rticle --=
Calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts in t#e case of mi8e% pools
of collateral
17 ,n institution s#all calculate t#e value of FGD
T
t#at it s#all use as t#e FGD for t#e
purposes of C#apter 3 in accor%ance 1it# para"rap#s - an% 3 1#ere ot# t#e follo1in"
con%itions are met:
)a/ t#e institution uses t#e 0RD ,pproac# to calculate ris5;1ei"#te% e8posure amounts
an% e8pecte% loss amountsE
)/ an e8posure is collateralise% 6 ot# financial collateral an% ot#er eli"ile collateral7
-7 0nstitutions s#all e re&uire% to su%ivi%e t#e volatilit6;a%!uste% value of t#e e8posure*
otaine% 6 appl6in" t#e volatilit6 a%!ustment as set out in ,rticle -18)+/ to t#e value of
t#e e8posure* into parts so as to otain a part covere% 6 eli"ile financial collateral* a part
covere% 6 receivales* a part covere% 6 commercial immovale propert6 collateral or
resi%ential propert6 collateral* a part covere% 6 ot#er eli"ile collateral* an% t#e unsecure%
part* as relevant7
37 0nstitutions s#all calculate FGD
T
for eac# part of t#e e8posure otaine% in para"rap# -
separatel6 in accor%ance 1it# t#e relevant provisions of t#is C#apter7
,rticle -->
Ot#er fun%e% cre%it protection
17 ?#ere t#e con%itions set out in ,rticle -.>)1/ are met* %eposits 1it# t#ir% part6 institutions
ma6 e treate% as a "uarantee 6 t#e t#ir% part6 institution7
-7 ?#ere t#e con%itions set out in ,rticle -.>)-/ are met* institutions s#all su!ect t#e portion
of t#e e8posure collateralise% 6 t#e current surren%er value of life insurance policies
ple%"e% to t#e len%in" institution to t#e follo1in" treatment:
)a/ 1#ere t#e e8posure is su!ect to t#e Stan%ar%ise% ,pproac#* it s#all e ris5;1ei"#te%
6 usin" t#e ris5 1ei"#ts specifie% in para"rap# 3E
)/ 1#ere t#e e8posure is su!ect to t#e 0RD ,pproac# ut not su!ect to t#e institutionNs
o1n estimates of FGD* it s#all e assi"ne% an FGD of 4. O7
0n case of a currenc6 mismatc#* institutions s#all re%uce t#e current surren%er value in
accor%ance 1it# ,rticle --8)3/* t#e value of t#e cre%it protection ein" t#e current
surren%er value of t#e life insurance polic67
37 3or purposes of point )a/ of para"rap# -* institutions s#all assi"n t#e follo1in" ris5 1ei"#ts
on t#e asis of t#e ris5 1ei"#t assi"ne% to a senior unsecure% e8posure to t#e un%erta5in"
provi%in" t#e life insurance:
)a/ a ris5 1ei"#t of -. O* 1#ere t#e senior unsecure% e8posure to t#e compan6
provi%in" t#e life insurance is assi"ne% a ris5 1ei"#t of -. OE
)/ a ris5 1ei"#t of 3+ O* 1#ere t#e senior unsecure% e8posure to t#e compan6
provi%in" t#e life insurance is assi"ne% a ris5 1ei"#t of +. OE
)c/ a ris5 1ei"#t of >. O* 1#ere t#e senior unsecure% e8posure to t#e compan6
provi%in" t#e life insurance is assi"ne% a ris5 1ei"#t of 1.. OE
)%/ a ris5 1ei"#t of 1+. O* 1#ere t#e senior unsecure% e8posure to t#e compan6
provi%in" t#e life insurance is assi"ne% a ris5 1ei"#t of 1+. O7
47 &nstitutions ma6 treat instruments repurc#ase% on re&uest t#at are eli"ile un%er ,rticle
19=)c/ as a "uarantee 6 t#e issuin" institution7 2#e value of t#e eli"ile cre%it protection
s#all e t#e follo1in":
)a/ 1#ere t#e instrument 1ill e repurc#ase% at its face value* t#e value of t#e protection
s#all e t#at amountE
)/ 1#ere t#e instrument 1ill e repurc#ase% at mar5et price* t#e value of t#e protection
s#all e t#e value of t#e instrument value% in t#e same 1a6 as t#e %et securities that
eet the $onditions of ,rticle 193)4/7
S4D;S$C20OB -
4B34BD$D CR$D02 PRO2$C20OB
,rticle --8
Raluation
17 3or t#e purpose of calculatin" t#e effects of unfun%e% cre%it protection in accor%ance 1it#
t#is Su;section* t#e value of unfun%e% cre%it protection )G/ s#all e t#e amount t#at t#e
protection provi%er #as un%erta5en to pa6 in t#e event of t#e %efault or non;pa6ment of t#e
orro1er or on t#e occurrence of ot#er specifie% cre%it events7
-7 0n t#e case of cre%it %erivatives 1#ic# %o not inclu%e as a cre%it event restructurin" of t#e
un%erl6in" oli"ation involvin" for"iveness or postponement of principal* interest or fees
t#at result in a cre%it loss event t#e follo1in" s#all appl6:
)a/ 1#ere t#e amount t#at t#e protection provi%er #as un%erta5en to pa6 is not #i"#er
t#an t#e e8posure value* institutions s#all re%uce t#e value of t#e cre%it protection
calculate% un%er para"rap# 1 6 4. OE
)/ 1#ere t#e amount t#at t#e protection provi%er #as un%erta5en to pa6 is #i"#er t#an
t#e e8posure value* t#e value of t#e cre%it protection s#all e no #i"#er t#an =. O of
t#e e8posure value7
37 ?#ere unfun%e% cre%it protection is %enominate% in a currenc6 %ifferent from t#at in
1#ic# t#e e8posure is %enominate%* institutions s#all re%uce t#e value of t#e cre%it
protection 6 t#e application of a volatilit6 a%!ustment as follo1s:
!
T
! (1 =
1#ere:
!
@
U t#e amount of cre%it protection a%!uste% for forei"n e8c#an"e ris5*
! U t#e nominal amount of t#e cre%it protectionE
=
f,
U t#e volatilit6 a%!ustment for an6 currenc6 mismatc# et1een t#e cre%it protection
an% t#e un%erl6in" oli"ation %etermine% in accor%ance 1it# para"rap# 47
?#ere t#ere is no currenc6 mismatc# =
f,
is e&ual to Lero7
47 0nstitutions s#all ase t#e volatilit6 a%!ustments for an6 currenc6 mismatc# on a 1.
usiness %a6 li&ui%ation perio%* assumin" %ail6 revaluation* an% ma6 calculate t#em ase%
on t#e Supervisor6 Rolatilit6 ,%!ustments approac# or t#e O1n $stimates ,pproac# as set
out in ,rticles -19 an% --. respectivel67 0nstitutions s#all scale up t#e volatilit6
a%!ustments in accor%ance 1it# ,rticle --17
)
f,
,rticle --9
Calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts in case of partial protection
an% tranc#in"
?#ere an institution transfers a part of t#e ris5 of a loan in one or more tranc#es* t#e rules set out in
C#apter + s#all appl67 0nstitutions ma6 consi%er materialit6 t#res#ol%s on pa6ments elo1 1#ic# no
pa6ment s#all e ma%e in t#e event of loss to e e&uivalent to retaine% first loss positions an% to
"ive rise to a tranc#e% transfer of ris57
,rticle -3.
Calculatin" ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise% ,pproac#
17 3or t#e purposes of ,rticle 1.8)3/ institutions s#all calculate t#e ris5;1ei"#te% e8posure
amounts in accor%ance 1it# t#e follo1in" formula:
ma8{.* E !
A
} r + !
A
#
1#ere:
$ U t#e e8posure value accor%in" to ,rticle 1.=E for t#is purpose* t#e e8posure value of
an off;alance s#eet item liste% in ,nne8 0 s#all e 1.. O of its value rat#er t#an t#e
e8posure value in%icate% in ,rticle 1.=)1/E
G, U t#e amount of cre%it ris5 protection as calculate% un%er ,rticle --8)3/ )GT/ furt#er
a%!uste% for an6 maturit6 mismatc# as lai% %o1n in Section +E
r U t#e ris5 1ei"#t of e8posures to t#e oli"or as specifie% un%er C#apter -E
" U t#e ris5 1ei"#t of e8posures to t#e protection provi%er as specifie% un%er C#apter -7
-7 ?#ere t#e protecte% amount )G,/ is less t#an t#e e8posure )$/* institutions ma6 appl6 t#e
formula specifie% in para"rap# 1 onl6 1#ere t#e protecte% an% unprotecte% parts of t#e
e8posure are of e&ual seniorit67
37 0nstitutions ma6 e8ten% t#e treatment provi%e% for in ,rticle 1.9)4/ an% )+/ to e8posures or
parts of e8posures "uarantee% 6 t#e central "overnment or central an5* 1#ere t#e
"uarantee is %enominate% in t#e %omestic currenc6 of t#e orro1er an% t#e e8posure is
fun%e% in t#at currenc67
,rticle -31
Calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts un%er t#e 0RD ,pproac#
17 3or t#e covere% portion of t#e e8posure value )$/* ase% on t#e a%!uste% value of t#e cre%it
protection G
,
* t#e PD for t#e purposes of Section B of C#apter 3 ma6 e t#e PD of t#e
protection provi%er* or a PD et1een t#at of t#e orro1er an% t#at of t#e "uarantor 1#ere a
full sustitution is %eeme% not to e 1arrante%7 0n t#e case of suor%inate% e8posures an%
non;suor%inate% unfun%e% protection* t#e FGD to e applie% 6 institutions for t#e
purposes of Section B of C#apter 3 ma6 e t#at associate% 1it# senior claims7
-7 3or an6 uncovere% portion of t#e e8posure value )$/ t#e PD s#all e t#at of t#e orro1er
an% t#e FGD s#all e t#at of t#e un%erl6in" e8posure7
37 1or the purposes of this Arti$le, G
,
is t#e value of G
T
as calculate% un%er ,rticle --8)3/
furt#er a%!uste% for an6 maturit6 mismatc# as lai% %o1n in Section +7 $ is t#e e8posure
value accor%in" to Section A@ of C#apter 37 3or t#is purpose* institutions s#all calculate
t#e e8posure value of t#e items liste% in ,rticle 1=-)8/ to )1./ 6 usin" a conversion factor
or percenta"e of 1.. O rat#er t#an t#e conversion factors or percenta"es in%icate% in t#ose
paragraphs7
S$C20OB +
9,24R02H 90S9,2CC$S
,rticle -3-
9aturit6 mismatc#
17 3or t#e purpose of calculatin" ris5;1ei"#te% e8posure amounts* a maturit6 mismatc#
occurs 1#en t#e resi%ual maturit6 of t#e cre%it protection is less t#an t#at of t#e protecte%
e8posure7 ?#ere protection #as a resi%ual maturit6 of less t#an t#ree mont#s an% t#e
maturit6 of t#e protection is less t#an t#e maturit6 of t#e un%erl6in" e8posure t#at
protection %oes not &ualif6 as eli"ile cre%it protection7
-7 ?#ere t#ere is a maturit6 mismatc# t#e cre%it protection s#all not &ualif6 as eli"ile 1#ere
eit#er of t#e follo1in" con%itions is met:
)a/ t#e ori"inal maturit6 of t#e protection is less t#an 1 6earE
)/ t#e e8posure is a s#ort term e8posure specifie% 6 t#e competent aut#orities as ein"
su!ect to a one;%a6 floor rat#er t#an a one;6ear floor in respect of t#e maturit6 value
)9/ un%er ,rticle 1+8)3/7
,rticle -33
9aturit6 of cre%it protection
17 Su!ect to a ma8imum of + 6ears* t#e effective maturit6 of t#e un%erl6in" s#all e t#e
lon"est possile remainin" time efore t#e oli"or is sc#e%ule% to fulfil its oli"ations7
Su!ect to para"rap# -* t#e maturit6 of t#e cre%it protection s#all e t#e time to t#e earliest
%ate at 1#ic# t#e protection ma6 terminate or e terminate%7
-7 ?#ere t#ere is an option to terminate t#e protection 1#ic# is at t#e %iscretion of t#e
protection seller* institutions s#all ta5e t#e maturit6 of t#e protection to e t#e time to t#e
earliest %ate at 1#ic# t#at option ma6 e e8ercise%7 ?#ere t#ere is an option to terminate
t#e protection 1#ic# is at t#e %iscretion of t#e protection u6er an% t#e terms of t#e
arran"ement at ori"ination of t#e protection contain a positive incentive for t#e institution
to call t#e transaction efore contractual maturit6* an institution s#all ta5e t#e maturit6 of
t#e protection to e t#e time to t#e earliest %ate at 1#ic# t#at option ma6 e e8ercise%E
ot#er1ise t#e institution ma6 consi%er t#at suc# an option %oes not affect t#e maturit6 of
t#e protection7
37 ?#ere a cre%it %erivative is not prevente% from terminatin" prior to e8piration of an6 "race
perio% re&uire% for a %efault on t#e un%erl6in" oli"ation to occur as a result of a failure to
pa6 institutions s#all re%uce t#e maturit6 of t#e protection 6 t#e len"t# of t#e "race
perio%7
Article 234
?aluation of protection
17 3or transactions su!ect to fun%e% cre%it protection un%er t#e 3inancial Collateral Simple
9et#o%* 1#ere t#ere is a mismatc# et1een t#e maturit6 of t#e e8posure an% t#e maturit6
of t#e protection* t#e collateral %oes not &ualif6 as eli"ile fun%e% cre%it protection7
-7 3or transactions su!ect to fun%e% cre%it protection un%er t#e 3inancial Collateral
Compre#ensive 9et#o%* institutions s#all reflect t#e maturit6 of t#e cre%it protection an%
of t#e e8posure in t#e a%!uste% value of t#e collateral accor%in" to t#e follo1in" formula:
2
?A-
2
?A

t t
T
T t
T
1#ere:
2
?A
U t#e volatilit6 a%!uste% value of t#e collateral as specifie% in ,rticle -18)-/ or t#e
amount of t#e e8posure* 1#ic#ever is lo*erE
t U t#e numer of 6ears remainin" to t#e maturit6 %ate of t#e cre%it protection
calculate% in accor%ance 1it# ,rticle -33* or t#e value of 2* 1#ic#ever is lo1erE
T U t#e numer of 6ears remainin" to t#e maturit6 %ate of t#e e8posure calculate% in
accor%ance 1it# ,rticle -33* or + 6ears* 1#ic#ever is lo1erE
t
@
U .7-+7
0nstitutions s#all use C
R,9
as C
R,
furt#er a%!uste% for maturit6 mismatc# in t#e formula
for t#e calculation of t#e full6 a%!uste% value of t#e e8posure )$
T
/ set out in ,rticle -18)+/7
37 3or transactions su!ect to unfun%e% cre%it protection* institutions s#all reflect t#e maturit6
of t#e cre%it protection an% of t#e e8posure in t#e a%!uste% value of t#e cre%it protection
accor%in" to t#e follo1in" formula:
!

!
T

t t
A
T t
T
1#ere:
8
A
N 8
O
ad9usted for an# aturit# isat$h%
!@ U t#e amount of t#e protection a%!uste% for an6 currenc6 mismatc#E
6
T
t > is t#e numer of 6ears remainin" to t#e maturit6 %ate of t#e cre%it protection
calculate% in accor%ance 1it# ,rticle -33* or t#e value of 2* 1#ic#ever is lo1erE
T U is t#e numer of 6ears remainin" to t#e maturit6 %ate of t#e e8posure calculate% in
accor%ance 1it# ,rticle -33* or + 6ears* 1#ic#ever is lo1erE
t@ U .7-+7
0nstitutions s#all use G
,
as t#e value of t#e protection for t#e purposes of ,rticles --8 to
-317
S$C20OB =
D,S:$2 CR9 2$CCB0Q4$S
,rticle -3+
3irst;to;%efault cre%it %erivatives
?#ere an institution otains cre%it protection for a numer of e8posures un%er terms t#at t#e first
%efault amon" t#e e8posures s#all tri""er pa6ment an% t#at t#is cre%it event s#all terminate t#e
contract* t#e institution ma6 mo%if6 t#e calculation of t#e ris5;1ei"#te% e8posure amount an%* as
relevant* t#e e8pecte% loss amount of t#e e8posure 1#ic# 1oul%* in t#e asence of t#e cre%it
protection* pro%uce t#e lo1est risk *eighted e5posure aount in accor%ance 1it# t#is C#apter A3
)a/ for institutions using the "tandardised Approa$h, the ris5;1ei"#te% e8posure amount
shall !e the one $al$ulated un%er t#e Stan%ar%ise% ,pproac#E
)/ for institutions using the &)B Approa$h, the ris5;1ei"#te% e8posure amount shall !e the
su of the risk=*eighted e5posure aount $al$ulated un%er t#e 0RD ,pproac# and 1-7+
times t#e e8pecte% loss amount7
+he treatent li. out in this Arti$le applies onl# *here the e5posure value is less than or e6ual
to the value of the $redit prote$tion3
,rticle -3=
Bt#;to;%efault cre%it %erivatives
?#ere t#e nt# %efault amon" t#e e8posures tri""ers pa6ment un%er t#e cre%it protection* t#e
institution purc#asin" t#e protection ma6 onl6 reco"nise t#e protection for t#e calculation of ris5;
1ei"#te% e8posure amounts an%* as relevant* e8pecte% loss amounts 1#ere protection #as also een
otaine% for %efaults 1 to n;1 or 1#en n;1 %efaults #ave alrea%6 occurre%7 0n suc# cases* t#e
institution ma6 mo%if6 t#e calculation of t#e ris5;1ei"#te% e8posure amount an%* as relevant* t#e
e8pecte% loss amount of t#e e8posure 1#ic# 1oul%* in t#e asence of t#e cre%it protection* pro%uce
t#e n;t# lo1est risk=*eighted e5posure aount in a$$ordan$e *ith this Chapter3 &nstitutions shall
$al$ulate the nth lo*est aount as spe$ified in points )a/ an% )/ in ,rticle -3+7
+he treatent laid out in this Arti$le applies onl# *here the e5posure value is less than or e6ual
to the value of the $redit prote$tion3
,ll e8posures in t#e as5et s#all meet t#e re&uirements lai% %o1n in ,rticle A199)-/ an%
A-11)1/)%/7
C6pter 7
?e2uritistion
S$C20OB 1
D$30B020OBS
Article 23%
Definitions
3or t#e purposes of t#is C#apter* t#e follo1in" %efinitions s#all appl6:
)1/ Me8cess sprea%N means finance c#ar"e collections an% ot#er fee income receive% in respect
of t#e securitise% e8posures net of costs an% e8pensesE
)-/ Mclean;up call optionN means a contractual option for t#e ori"inator to repurc#ase or
e8tin"uis# t#e securitisation positions efore all of t#e un%erl6in" e8posures #ave een
repai%* 1#en t#e amount of outstan%in" e8posures falls elo1 a specifie% levelE
)3/ Mli&ui%it6 facilit6N means t#e securitisation position arisin" from a contractual a"reement to
provi%e fun%in" to ensure timeliness of cas# flo1s to investorsE
)4/ M:
0RD
N means 8 O of t#e ris5;1ei"#te% e8posure amounts t#at 1oul% e calculate% un%er
C#apter 3 in respect of t#e securitise% e8posures* #a% t#e6 not een securitise%* plus t#e
amount of e8pecte% losses associate% 1it# t#ose e8posures calculate% un%er that ChapterE
)+/ Mratin"s ase% met#o%N means t#e met#o% of calculatin" ris5;1ei"#te% e8posure amounts
for securitisation positions in accor%ance 1it# ,rticle -+=E
)=/ Msupervisor6 formula met#o%N means t#e met#o% of calculatin" ris5;1ei"#te% e8posure
amounts for securitisation positions in accor%ance 1it# ,rticle -+>E
)>/ Munrate% positionN means a securitisation position 1#ic# %oes not #ave an eli"ile cre%it
assessment 6 an A$C,0 as %efine% in Section 4E
)8/ Mrate% positionN means a securitisation position 1#ic# #as an eli"ile cre%it assessment 6
an A $C,0 as %efine% in Section 4E
)9/ Masset;ac5e% commercial paper ),DCP/ pro"rammeN means a pro"ramme of
securitisations t#e securities issue% 6 1#ic# pre%ominantl6 ta5e t#e form of commercial
paper 1it# an ori"inal maturit6 of one 6ear or lessE
)1./ Mtra%itional securitisationN means a securitisation involvin" t#e economic transfer of t#e
e8posures ein" securitise%7 2#is s#all e accomplis#e% 6 t#e transfer of o1ners#ip of t#e
securitise% e8posures from t#e ori"inator institution to an "".E or t#rou"# su;
participation !# an "".E7 2#e securities issue% %o not represent pa6ment oli"ations of
t#e ori"inator institutionE
)11/ Ms6nt#etic securitisationN means a securitisation 1#ere t#e transfer of ris5 is ac#ieve% 6
t#e use of cre%it %erivatives or "uarantees* an% t#e e8posures ein" securitise% remain
e8posures of t#e ori"inator institutionE
)1-/ Mrevolvin" e8posureN means an e8posure 1#ere6 customers( outstan%in" alances are
permitte% to fluctuate ase% on t#eir %ecisions to orro1 an% repa6* up to an a"ree% limitE
:42a) Lrevolving se$uritisationL eans a se$uritisation *here the se$uritisation stru$ture itself
revolves (i3e3 e5posures are added or reoved to the pool of e5posures) and the
underl#ing e5posures a# or a# not revolveG%
)13/ (earl6 amortisation provision( means a contractual clause in a securitisations of revolvin"
e8posures or a revolving se$uritisation 1#ic# re&uires* on t#e occurrence of %efine%
events* investors( positions to e re%eeme% efore t#e ori"inall6 state% maturit6 of t#e
securities issue%E
)14/ (first loss tranc#e( means t#e most suor%inate% tranc#e in a securitisation t#at is t#e first
tran$he to !ear losses incurre% on t#e securitise% e8posures an% t#ere6 provi%es
protection to t#e secon% loss an%* 1#ere relevant* #i"#er ran5in" tranc#es7
S$C20OB -
R$COGB020OB O3 S0GB030C,B2 R0S: 2R,BS3$R
Article 23&
Tra$itional securitisation
17 2#e ori"inator institution of a tra%itional securitisation ma6 e8clu%e securitise% e8posures
from t#e calculation of ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts if
eit#er of t#e follo1in" con%itions is fulfille%:
)a/ si"nificant cre%it ris5 associate% 1it# t#e securitise% e8posures is consi%ere% to #ave
een transferre% to t#ir% partiesE
)/ t#e ori"inator institution applies a 1-+. O ris5 1ei"#t to all securitisation positions it
#ol%s in t#is securitisation or %e%ucts t#ese securitisation positions from Common
$&uit6 2ier 1 items in accor%ance 1it# ,rticle 33)1/)5/7
-7 Si"nificant cre%it ris5 s#all e consi%ere% to #ave een transferre% in t#e follo1in" cases:
)a/ t#e ris5;1ei"#te% e8posure amounts of t#e meLLanine securitisation positions #el% 6
t#e ori"inator institution in t#is securitisation %o not e8cee% +. O of t#e ris5
1ei"#te% e8posure amounts of all meLLanine securitisation positions e8istin" in t#is
securitisationE
)/ 1#ere t#ere are no meLLanine securitisation positions in a "iven securitisation an%
t#e ori"inator can %emonstrate t#at t#e e8posure value of t#e securitisation positions
t#at 1oul% e su!ect to %e%uction from Coon E6uit# +ier 4 or a 1-+. O ris5
1ei"#t e8cee%s a reasone% estimate of t#e e8pecte% loss on t#e securitise% e8posures
6 a sustantial mar"in* t#e ori"inator institution %oes not #ol% more t#an -. O of
t#e e8posure values of t#e securitisation positions t#at 1oul% e su!ect to %e%uction
from Coon E6uit# +ier 4 or a 1-+. O ris5 1ei"#t7
?#ere t#e possile re%uction in ris5 1ei"#te% e8posure amounts* 1#ic# t#e ori"inator
institution 1oul% ac#ieve 6 t#is securitisation is not !ustifie% 6 a commensurate transfer
of cre%it ris5 to t#ir% parties* competent authorities ma6 %eci%e on a case;6;case asis
t#at si"nificant cre%it ris5 s#all not e consi%ere% to #ave een transferre% to t#ir% parties7
37 3or t#e purposes of para"rap# -* meLLanine securitisation positions mean securitisation
positions to 1#ic# a ris5 1ei"#t lo1er t#an 1-+. O applies an% t#at are more !unior t#an
t#e most senior position in t#is securitisation an% more !unior t#an an6 securitisation
position in t#is securitisation to 1#ic# eit#er of t#e follo1in" is assi"ne% in accor%ance
1it# Section 4:
)a/ in t#e case of a securitisation position su!ect to Section 3* Su;section 3 a cre%it
&ualit6 step 1E
)/ in t#e case of a securitisation position su!ect to points Section 3* Su;section 4 a
cre%it &ualit6 step 1 or -7
47 ,s an alternative to para"rap#s - an% 3* competent aut#orities s#all "rant permission to
ori"inator institutions to consi%er si"nificant cre%it ris5 as #avin" een transferre% 1#ere
t#e ori"inator institution is ale to %emonstrate* in ever6 case of a securitisation* t#at t#e
re%uction of o1n fun%s re&uirements 1#ic# t#e ori"inator ac#ieves 6 t#e securitisation is
!ustifie% 6 a commensurate transfer of cre%it ris5 to t#ir% parties7
Permission s#all e "rante% onl6 1#ere t#e institution meets all of t#e follo1in"
con%itions:
)a/ t#e institution #as appropriatel6 ris5;sensitive policies an% met#o%olo"ies in place to
assess t#e transfer of ris5E
)/ t#e institution #as also reco"nise% t#e transfer of cre%it ris5 to t#ir% parties in eac#
case for purposes of t#e institutionNs internal ris5 mana"ement an% its internal capital
allocation7
+7 0n a%%ition to t#e re&uirements set out in para"rap#s 1 to 4* as applicale* all t#e follo1in"
con%itions s#all e met:
)a/ t#e securitisation %ocumentation reflects t#e economic sustance of t#e transactionE
)/ t#e securitise% e8posures are put e6on% t#e reac# of t#e ori"inator institution an% its
cre%itors* inclu%in" in an5ruptc6 an% receivers#ip7 2#is s#all e supporte% 6 t#e
opinion of &ualifie% le"al counselE
)c/ t#e securities issue% %o not represent pa6ment oli"ations of t#e ori"inator
institutionE
)%/ t#e ori"inator institution %oes not maintain effective or in%irect control over t#e
transferre% e8posures7 ,n ori"inator s#all e consi%ere% to #ave maintaine% effective
control over t#e transferre% e8posures if it #as t#e ri"#t to repurc#ase from t#e
transferee t#e previousl6 transferre% e8posures in or%er to realise t#eir enefits or if it
is oli"ate% to re;assume transferre% ris57 2#e ori"inator institution(s retention of
servicin" ri"#ts or oli"ations in respect of t#e e8posures s#all not of itself constitute
in%irect control of t#e e8posuresE
)e/ t#e securitisation %ocumentation meets all t#e follo1in" con%itions:
)i/ it %oes not contain clauses t#at ot#er t#an in t#e case of earl6 amortisation
provisions* re&uire positions in t#e securitisation to e improve% 6 t#e
ori"inator institution inclu%in" ut not limite% to alterin" t#e un%erl6in" cre%it
e8posures or increasin" t#e 6iel% pa6ale to investors in response to a
%eterioration in t#e cre%it &ualit6 of t#e securitise% e8posuresE
)ii/ it %oes not contain clauses t#at increase t#e 6iel% pa6ale to #ol%ers of
positions in t#e securitisation in response to a %eterioration in t#e cre%it &ualit6
of t#e un%erl6in" poolE
)iii/ it ma5es it clear* 1#ere applicale* t#at an6 purc#ase or repurc#ase of
securitisation positions 6 t#e ori"inator or sponsor e6on% its contractual
oli"ations is e5$eptional and ma6 onl6 e ma%e at arms( len"t#s con%itionsE
)f/ 1#ere t#ere is a clean;up call option* t#at option s#all also meet t#e follo1in"
con%itions:
)i/ it is e8ercisale at t#e %iscretion of t#e ori"inator institutionE
)ii/ it ma6 onl6 e e8ercise% 1#en 1. O or less of t#e ori"inal value of t#e
e8posures securitise% remains unamortise%E
)iii/ it is not structure% to avoi% allocatin" losses to cre%it en#ancement positions or
ot#er positions #el% 6 investors an% is not ot#er1ise structure% to provi%e
cre%it en#ancement7
=7 2#e competent aut#orities s#all 5eep $D, informe% aout t#e specific cases* referre% to in
para"rap# -* 1#ere t#e possile re%uction in ris5;1ei"#te% e8posure amounts is not
!ustifie% 6 a commensurate transfer of cre%it ris5 to t#ir% parties* an% t#e use institutions
ma5e of para"rap# 47 $D, s#all monitor t#e ran"e of practices in t#is area an% s#all* in
accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo7 1.93/-.1.* issue "ui%elines7 EBA
shall revie* Me!er "tates ipleentation of these guidelines and provide advi$e to the
Coission !# C4 (e$e!er 2:40 on *hether a !inding te$hni$al standard is re6uired3
,rticle -39
S6nt#etic securitisation
17 ,n ori"inator institution of a s6nt#etic securitisation ma6 calculate ris5;1ei"#te% e8posure
amounts* an%* as relevant* e8pecte% loss amounts* for t#e securitise% e8posures in
accor%ance 1it# ,rticle -44* if eit#er of t#e follo1in" is met:
)a/ si"nificant cre%it ris5 is consi%ere% to #ave een transferre% to t#ir% parties eit#er
t#rou"# fun%e% or unfun%e% cre%it protectionE
)/ t#e ori"inator institution applies a 1-+. O ris5 1ei"#t to all securitisation positions it
#ol%s in t#is securitisation or %e%ucts t#ese securitisation positions from Common
$&uit6 2ier 1 items in accor%ance 1it# ,rticle 33)1/)5/7
-7 Si"nificant cre%it ris5 s#all e consi%ere% to #ave een transferre% if eit#er of t#e follo1in"
con%itions is met:
)a/ t#e ris5;1ei"#te% e8posure amounts of t#e meLLanine securitisation positions 1#ic#
are #el% 6 t#e ori"inator institution in t#is securitisation %o not e8cee% +. O of t#e
ris5 1ei"#te% e8posure amounts of all meLLanine securitisation positions e8istin" in
t#is securitisationE
)/ 1#ere t#ere are no meLLanine securitisation positions in a "iven securitisation an%
t#e ori"inator can %emonstrate t#at t#e e8posure value of t#e securitisation positions
t#at 1oul% e su!ect to %e%uction from Coon E6uit# +ier 4 or a 1-+. O ris5
1ei"#t e8cee%s a reasone% estimate of t#e e8pecte% loss on t#e securitise% e8posures
6 a sustantial mar"in* t#e ori"inator institution %oes not #ol% more t#an -. O of
t#e e8posure values of t#e securitisation positions t#at 1oul% e su!ect to %e%uction
from Coon E6uit# +ier 4 or a 1-+. O ris5 1ei"#tE
)c/ 1#ere t#e possile re%uction in ris5 1ei"#te% e8posure amounts* 1#ic# t#e
ori"inator institution 1oul% ac#ieve 6 t#is securitisation* is not !ustifie% 6 a
commensurate transfer of cre%it ris5 to t#ir% parties* competent aut#orit6 ma6 %eci%e
on a case; 6;case asis t#at si"nificant cre%it ris5 s#all not e consi%ere% to #ave
een transferre% to t#ir% parties7
37 3or t#e purposes of para"rap# -* meLLanine securitisation positions means securitisation
positions to 1#ic# a ris5 1ei"#t lo1er t#an 1-+. O applies an% t#at are more !unior t#an
t#e most senior position in t#is securitisation an% more !unior t#an an6 securitisation
positions in t#is securitisation to 1#ic# eit#er of t#e follo1in" is assi"ne% in accor%ance
1it# Section 4:
)a/ in t#e case of a securitisation position su!ect to Section 3* Su;section 3 a cre%it
&ualit6 step 1E
)/ in t#e case of a securitisation position su!ect to Section 3* Su;section 4 a cre%it
&ualit6 step 1 or -7
47 ,s an alternative to para"rap#s - an% 3* competent aut#orities s#all "rant permission to
ori"inator institutions to consi%er si"nificant cre%it ris5 as #avin" een transferre% 1#ere
t#e ori"inator institution is ale to %emonstrate* in ever6 case of a securitisation* t#at t#e
re%uction of o1n fun%s re&uirements 1#ic# t#e ori"inator ac#ieves 6 t#e securitisation is
!ustifie% 6 a commensurate transfer of cre%it ris5 to t#ir% parties7
Permission s#all e "rante% onl6 1#ere t#e institution meets all of t#e follo1in"
con%itions:
)a/ t#e institution #as appropriatel6 ris5;sensitive policies an% met#o%olo"ies in place to
assess t#e transfer of ris5E
)/ t#e institution #as also reco"nise% t#e transfer of cre%it ris5 to t#ir% parties in eac#
case for purposes of t#e institutionNs internal ris5 mana"ement an% its internal capital
allocation7
+7 0n a%%ition to t#e re&uirements set out in para"rap#s 1 to 4* as applicale* t#e transfer s#all
compl6 1it# t#e follo1in" con%itions:
)a/ t#e securitisation %ocumentation reflects t#e economic sustance of t#e transactionE
)/ t#e cre%it protection 6 1#ic# t#e cre%it ris5 is transferre% complies 1it# ,rticle
-4-)-/E
)c/ t#e instruments use% to transfer cre%it ris5 %o not contain terms or con%itions t#at:
)i/ impose si"nificant materialit6 t#res#ol%s elo1 1#ic# cre%it protection is
%eeme% not to e tri""ere% if a cre%it event occursE
)ii/ allo1 for t#e termination of t#e protection %ue to %eterioration of t#e cre%it
&ualit6 of t#e un%erl6in" e8posuresE
)iii/ ot#er t#an in t#e case of earl6 amortisation provisions* re&uire positions in t#e
securitisation to e improve% 6 t#e ori"inator institutionE
)iv/ increase t#e institution(s cost of cre%it protection or t#e 6iel% pa6ale to #ol%ers
of positions in t#e securitisation in response to a %eterioration in t#e cre%it
&ualit6 of t#e un%erl6in" poolE
)%/ an opinion is otaine% from &ualifie% le"al counsel confirmin" t#e enforceailit6 of
t#e cre%it protection in all relevant !uris%ictionsE
)e/ t#e securitisation %ocumentation s#all ma5e clear* 1#ere applicale* t#at an6
purc#ase or repurc#ase of securitisation positions 6 t#e ori"inator or sponsor
e6on% its contractual oli"ations ma6 onl6 e ma%e at arms( len"t#s con%itionsE
)f/ 1#ere t#ere is a clean;up call option* t#at option meets all t#e follo1in" con%itions:
)i/ it is e8ercisale at t#e %iscretion of t#e ori"inator institutionE
)ii/ it ma6 onl6 e e8ercise% 1#en 1. O or less of t#e ori"inal value of t#e
e8posures securitise% remains unamortise%E
)iii/ it is not structure% to avoi% allocatin" losses to cre%it en#ancement positions or
ot#er positions #el% 6 investors an% is not ot#er1ise structure% to provi%e
cre%it en#ancement7
=7 2#e competent aut#orities s#all 5eep $D, informe% aout t#e specific cases* referre% to in
para"rap# -* 1#ere t#e possile re%uction in ris5;1ei"#te% e8posure amounts is not
!ustifie% 6 a commensurate transfer of cre%it ris5 to t#ir% parties* an% t#e use institutions
ma5e of para"rap# 47 2#e EBA s#all monitor t#e ran"e of practices in t#is area an% s#all*
in accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo7 1.93/-.1.* issue "ui%elines7 EBA
shall revie* Me!er "tates7 ipleentation of these guidelines and provide advi$e to
the Coission !# C4st (e$e!er 2:40 on *hether a !inding te$hni$al standard is
re6uired3
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,rticle -4.
Calculation of ris5;1ei"#te% e8posure amounts
17 ?#ere an ori"inator institution #as transferre% si"nificant cre%it ris5 associate% 1it#
securitise% e8posures in accor%ance 1it# Section -* t#at institution ma6:
)a/ in t#e case of a tra%itional securitisation* e8clu%e from its calculation of ris5;
1ei"#te% e8posure amounts* an%* as relevant* e8pecte% loss amounts* t#e e8posures
1#ic# it #as securitise%E
)/ in t#e case of a s6nt#etic securitisation* calculate ris5;1ei"#te% e8posure amounts*
an%* as relevant* e8pecte% loss amounts* in respect of t#e securitise% e8posures in
accor%ance 1it# ,rticles -44 an% -4+7
-7 ?#ere t#e ori"inator institution #as %eci%e% to appl6 para"rap# 1* it s#all calculate t#e
ris5;1ei"#te% e8posure amounts prescrie% in t#is C#apter for t#e positions t#at it ma6
#ol% in t#e securitisation7
?#ere t#e ori"inator institution #as not transferre% si"nificant cre%it ris5 or #as %eci%e%
not to appl6 para"rap# 1* it nee% not calculate ris5;1ei"#te% e8posure amounts for an6
positions it ma6 #ave in t#e securitisation in &uestion ut s#all continue inclu%in" t#e
securitise% e8posures in its calculation of ris5;1ei"#te% e8posure amounts as if t#e6 #a%
not een securitise%7
37 ?#ere t#ere is an e8posure to %ifferent tranc#es in a securitisation* t#e e8posure to eac#
tranc#e s#all e consi%ere% a separate securitisation position7 2#e provi%ers of cre%it
protection to securitisation positions s#all e consi%ere% to #ol% positions in t#e
securitisation7 Securitisation positions s#all inclu%e e8posures to a securitisation arisin"
from interest rate or currenc6 %erivative contracts7
47 4nless a securitisation position is %e%ucte% from Common $&uit6 2ier 1 items pursuant to
,rticle 33)1/)5/* t#e ris5;1ei"#te% e8posure amount s#all e inclu%e% in t#e institution(s
total of ris5;1ei"#te% e8posure amounts for t#e purposes of ,rticle 8>)3/7
+7 2#e ris5;1ei"#te% e8posure amount of a securitisation position s#all e calculate% 6
appl6in" to t#e e8posure value of t#e position* calculate% as set out in ,rticle -41* t#e
relevant total ris5 1ei"#t7
=7 2#e total ris5 1ei"#t s#all e %etermine% as t#e sum of t#e ris5 1ei"#t set out in t#is
C#apter an% an6 a%%itional ris5 1ei"#t in accor%ance 1it# ,rticle 39=7
Article 241
E,posure value
17 2#e e8posure value s#all e calculate% as follo1s:
)a/ 1#ere an institution calculates ris5;1ei"#te% e8posure amounts un%er Su;section 3*
t#e e8posure value of an on;alance s#eet securitisation position s#all e its
accountin" value remainin" after specific cre%it ris5 a%!ustments treated in
a$$ordan$e *ith Arti$le 4:@ #ave een applie%E
)/ 1#ere an institution calculates ris5;1ei"#te% e8posure amounts un%er Su;section 4*
t#e e8posure value of an on;alance s#eet securitisation position s#all e t#e
accountin" value measure% 1it#out ta5in" into account an6 cre%it ris5 a%!ustments
treated in a$$ordan$e *ith Arti$le 4:@ ma%eE
)c/ 1#ere an institution calculates ris5;1ei"#te% e8posure amounts un%er Su;section 3*
t#e e8posure value of an off;alance s#eet securitisation position s#all e its nominal
value* less an6 specific cre%it ris5 a%!ustment of t#at securitisation position*
multiplie% 6 a conversion factor as prescrie% in t#is C#apter7 2#e conversion factor
s#all e 1.. O unless ot#er1ise specifie%E
)%/ 1#ere an institution calculates ris5;1ei"#te% e8posure amounts un%er Su;section 4*
t#e e8posure value of an off;alance s#eet securitisation position s#all e its nominal
value multiplie% 6 a conversion factor as prescrie% in t#is C#apter7 2#e conversion
factor s#all e 1.. O unless ot#er1ise specifie%E
)e/ 2#e e8posure value for t#e counterpart6 cre%it ris5 of a %erivative instrument liste%
in ,nne8 00* s#all e %etermine% in accor%ance 1it# C#apter =7
-7 ?#ere an institution #as t1o or more overlappin" positions in a securitisation* it s#all* to
t#e e8tent t#at t#e6 overlap inclu%e in its calculation of ris5;1ei"#te% e8posure amounts
onl6 t#e position or portion of a position pro%ucin" t#e #i"#er ris5;1ei"#te% e8posure
amounts7 2#e institution ma6 also reco"nise suc# overlap et1een specific ris5 o1n fun%s
re&uirements for positions in t#e tra%in" oo5 an% o1n fun%s re&uirements for
securitisation positions in t#e non;tra%in" oo5* provi%e% t#at t#e institution is ale to
calculate an% compare t#e o1n fun%s re&uirements for t#e relevant positions7 3or t#e
purpose of t#is para"rap#* overlappin" occurs 1#en t#e positions* 1#oll6 or partiall6*
represent an e8posure to t#e same ris5 suc# t#at* to t#e e8tent of t#e overlap* t#ere is a
sin"le e8posure7
37 ?#ere ,rticle -=3)c/ applies to positions in t#e ,DCP* t#e institution ma6* use t#e ris5;
1ei"#t assi"ne% to a li&ui%it6 facilit6 in or%er to calculate t#e ris5;1ei"#te% e8posure
amount for t#e ,DCP provi%e% t#at 1.. O of t#e ,DCP issue% 6 t#e pro"ramme is
covere% 6 t#is or ot#er li&ui%it6 facilities an% all of t#ose li&ui%it6 facilities ran5 pari
passu 1it# t#e ,DCP so t#at t#e6 form overlappin" positions7
2#e institution s#all notif6 to t#e competent aut#orities t#e use it ma5es of t#is treatment7
,rticle -4-
Reco"nition of cre%it ris5 miti"ation for securitisation positions
17 ,n institution ma6 reco"nise fun%e% or unfun%e% cre%it protection otaine% in respect of a
securitisation position in accor%ance 1it# C#apter 4 an% su!ect to t#e re&uirements lai%
%o1n in t#is C#apter an% in C#apter 47
$li"ile fun%e% cre%it protection is limite% to financial collateral 1#ic# is eli"ile for t#e
calculation of ris5;1ei"#te% e8posure amounts un%er C#apter - as lai% %o1n un%er
C#apter 4 an% reco"nition is su!ect to compliance 1it# t#e relevant re&uirements as lai%
%o1n un%er C#apter 47
-7 $li"ile unfun%e% cre%it protection an% unfun%e% cre%it protection provi%ers are limite% to
t#ose 1#ic# are eli"ile un%er C#apter 4 an% reco"nition is su!ect to compliance 1it# t#e
relevant re&uirements lai% %o1n un%er t#at C#apter 47
37 D6 %ero"ation from para"rap# -* t#e eli"ile provi%ers of unfun%e% cre%it protection liste%
in ,rticle 19> paragraph 4 (a) to (h) e5$ept for 6ualif#ing $entral $ounterparties s#all
#ave a cre%it assessment 6 a reco"nise% $C,0 1#ic# #as een %etermine% to e
associate% 1it# cre%it &ualit6 step 3 or aove un%er ,rticle 131 an% s#all #ave een
associate% 1it# cre%it &ualit6 step - or aove at t#e time t#e cre%it protection 1as first
reco"nise%7 0nstitutions t#at #ave a permission to appl6 t#e 0RD approac# to a %irect
e8posure to t#e protection provi%er ma6 assess eli"iilit6 accor%in" to t#e first sentence
ase% on t#e e&uivalence of t#e PD for t#e protection provi%er to t#e PD associate% 1it#
t#e cre%it &ualit6 steps referre% to in Arti$le 4C43
47 D6 %ero"ation from para"rap# -* SSP$s are eli"ile protection provi%ers 1#ere t#e6 o1n
assets t#at &ualif6 as eli"ile financial collateral an% to 1#ic# t#ere are no ri"#ts or
contin"ent ri"#ts prece%in" or ran5in" pari passu to t#e contin"ent ri"#ts of t#e institution
receivin" unfun%e% cre%it protection an% all re&uirements for t#e reco"nition of financial
collateral in C#apter 4 are fulfille%7 0n t#ose cases* G, )t#e amount of t#e protection
a%!uste% for an6 currenc6 mismatc# an% maturit6 mismatc# in accor%ance 1it# t#e
provisions of C#apter 4/ s#all e limite% to t#e volatilit6 a%!uste% mar5et value of t#ose
assets an% " )t#e ris5 1ei"#t of e8posures to t#e protection provi%er as specifie% un%er t#e
Stan%ar%ise% ,pproac#/ s#all e %etermine% as t#e 1ei"#te%;avera"e ris5 1ei"#t t#at
1oul% appl6 to t#ose assets as financial collateral un%er t#e Stan%ar%ise% ,pproac#7
,rticle -43
0mplicit support
17 , sponsor institution* or an ori"inator institution 1#ic# in respect of a securitisation #as
ma%e use of ,rticle -4.)1/ an% )-/ in t#e calculation of ris5;1ei"#te% e8posure amounts or
#as sol% instruments from its tra%in" oo5 to t#e effect t#at it is no lon"er re&uire% to #ol%
o1n fun%s for t#e ris5s of t#ose instruments s#all not* 1it# a vie1 to re%ucin" potential or
actual losses to investors* provi%e support to t#e securitisation e6on% its contractual
oli"ations7 , transaction s#all not e consi%ere% to provi%e support if it is e8ecute% at
arm(s len"t# con%itions an% ta5en into account in t#e assessment of si"nificant ris5
transfer7 ,n6 suc# transaction s#all e* re"ar%less of 1#et#er it provi%es support* notifie%
to t#e competent aut#orities an% su!ect to t#e institution(s cre%it revie1 an% approval
process7 2#e institution s#all* 1#en assessin" 1#et#er t#e transaction is not structure% to
provi%e support* a%e&uatel6 consi%er at least all t#e follo1in":
)a/ t#e price of t#e repurc#aseE
)/ t#e institution7s capital an% li&ui%it6 position efore an% after repurc#aseE
)c/ t#e performance of t#e securitise% e8posuresE
)%/ t#e performance of t#e securitisation positionsE
(e) the ipa$t of support on the losses e5pe$ted to !e in$urred !# the originator
relative to investors3
-7 $D, s#all issue* in accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo 1.93/-.1.*
"ui%elines on 1#at constitutes arm(s len"t# con%itions an% 1#en a transaction is not
structure% to provi%e support7
37 0f an ori"inator institution or a sponsor institution fails to compl6 1it# para"rap# 1 in
respect of a securitisation t#is institution s#all at a minimum #ol% o1n fun%s a"ainst all of
t#e securitise% e8posures as if t#e6 #a% not een securitise%7
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,rticle -44
General treatment
0n calculatin" ris5;1ei"#te% e8posure amounts for t#e securitise% e8posures* 1#ere t#e con%itions
in ,rticle -39 are met* t#e ori"inator institution of a s6nt#etic securitisation s#all* su!ect to ,rticle
-4+* use t#e relevant calculation met#o%olo"ies set out in t#is Section an% not t#ose set out in
C#apter -7 3or institutions calculatin" ris5;1ei"#te% e8posure amounts an% e8pecte% loss amounts
un%er C#apter 3* t#e e8pecte% loss amount in respect of suc# e8posures s#all e Lero7
2#e re&uirements set out in t#e first supara"rap# appl6 to t#e entire pool of e8posures inclu%e% in
t#e securitisation7 Su!ect to ,rticle -4+* t#e ori"inator institution s#all calculate ris5;1ei"#te%
e8posure amounts in respect of all tranc#es in t#e securitisation in accor%ance 1it# t#e provisions of
t#is Section inclu%in" t#ose for 1#ic# t#e institution reco"nises cre%it ris5 miti"ation in accor%ance
1it# ,rticle -4-* in 1#ic# case t#e ris5;1ei"#t to e applie% to t#at position ma6 e mo%ifie% in
accor%ance 1it# C#apter 4* su!ect to t#e re&uirements lai% %o1n in t#is C#apter7
,rticle -4+
2reatment of maturit6 mismatc#es in s6nt#etic securitisations
3or t#e purposes of calculatin" ris5;1ei"#te% e8posure amounts in accor%ance 1it# ,rticle -44* an6
maturit6 mismatc# et1een t#e cre%it protection *hi$h $onstitutes a tran$he and by which the
transfer of risk is ac#ieve% an% t#e securitise% e8posures s#all e ta5en into consi%eration as
follo1s:
)a/ t#e maturit6 of t#e securitise% e8posures s#all e ta5en to e t#e lon"est maturit6 of an6 of
t#ose e8posures su!ect to a ma8imum of five 6ears7 2#e maturit6 of t#e cre%it protection
s#all e %etermine% in accor%ance 1it# C#apter 4E
)/ an ori"inator institution s#all i"nore an6 maturit6 mismatc# in calculatin" ris5;1ei"#te%
e8posure amounts for tranc#es appearin" pursuant to t#is Section 1it# a ris5 1ei"#tin" of
1-+. O7 3or all ot#er tranc#es* t#e maturit6 mismatc# treatment set out in C#apter 4 s#all
e applie% in accor%ance 1it# t#e follo1in" formula:
5)
T
5)
t t + 5)

T t
SP
T t
T Ass
T t
T
T
1#ere:
R?T U ris5;1ei"#te% e8posure amounts for t#e purposes of ,rticle 8>(C))a/E
R?
,ss
U ris5;1ei"#te% e8posure amounts for e8posures if t#e6 #a% not een
securitise%* calculate% on a pro;rata asisE
R?
SP
U ris5;1ei"#te% e8posure amounts calculate% un%er ,rticle -44 if t#ere 1as no
maturit6 mismatc#E
2 U maturit6 of t#e un%erl6in" e8posures e8presse% in 6earsE
t U maturit6 of cre%it protection7 e8presse% in 6earsE
t
T
U .7-+7
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,PPRO,CC
,rticle -4=
Ris5;1ei"#ts
Su!ect to ,rticle -4>* t#e institution s#all calculate t#e ris5;1ei"#te% e8posure amount of a rate%
securitisation or re;securitisation position 6 appl6in" t#e relevant ris5 1ei"#t to t#e e8posure
value7
2#e relevant ris5 1ei"#t s#all e t#e ris5 1ei"#t as lai% %o1n in 2ale 1* 1it# 1#ic# t#e cre%it
assessment of t#e position is associate% in accor%ance 1it# Section 47
2ale 1
Cre%it Qualit6 Step 1 - 3 4 )onl6 for
cre%it
assessments
ot#er t#an
s#ort;term
cre%it
assessments
/
all ot#er
cre%it
&ualit6 steps
Securitisation positions -.O +.O 1..O 3+.O 1-+.O
Re;securitisation positions 4.O 1..O --+O =+.O 1-+.O
Su!ect to ,rticles -4> to -+.* t#e ris5;1ei"#te% e8posure amount of an unrate% securitisation
position s#all e calculate% 6 appl6in" a ris5 1ei"#t of 1-+. O7
,rticle -4>
Ori"inator an% sponsor institutions
3or an ori"inator institution or sponsor institution* t#e ris5;1ei"#te% e8posure amounts calculate% in
respect of its securitisation positions in an6 one securitisation ma6 e limite% to t#e ris5;1ei"#te%
e8posure amounts 1#ic# 1oul% currentl6 e calculate% for t#e securitise% e8posures #a% t#e6 not
een securitise% su!ect to t#e presume% application of a 1+. O ris5 1ei"#t to t#e follo1in":
)a/ all items currentl6 in %efaultE
)/ all items associate% 1it# particularl6 #i"# ris5 in accor%ance 1it# ,rticle 1-3 amon"st t#e
securitise% e8posures7
,rticle -48
2reatment of unrate% positions
17 3or t#e purpose of calculatin" t#e ris5;1ei"#te% e8posure amount of an unrate%
securitisation position an institution ma6 appl6 t#e 1ei"#te%;avera"e ris5 1ei"#t t#at
1oul% e applie% to t#e securitise% e8posures un%er C#apter - 6 an institution #ol%in" t#e
e8posures* multiplie% 6 t#e concentration ratio referre% to in para"rap# -7 3or t#is
purpose* t#e institution s#all 5no1 t#e composition of t#e pool of securitise% e8posures
securitise% at all times7
-7 2#e concentration ratio s#all e e&ual to t#e sum of t#e nominal amounts of all t#e tranc#es
%ivi%e% 6 t#e sum of t#e nominal amounts of t#e tranc#es !unior to or pari passu 1it# t#e
tranc#e in 1#ic# t#e position is #el% inclu%in" t#at tranc#e itself7 2#e resultin" ris5 1ei"#t
s#all not e #i"#er t#an 1-+. O or lo1er t#an an6 ris5 1ei"#t applicale to a rate% more
senior tranc#e7 ?#ere t#e institution is unale to %etermine t#e ris5 1ei"#ts t#at 1oul% e
applie% to t#e securitise% e8posures un%er C#apter -* it s#all appl6 a ris5 1ei"#t of 1-+. O
to t#e position7
,rticle -49
2reatment of securitisation positions in a secon% loss tranc#e or etter in an ,DCP pro"ramme
Su!ect to t#e availailit6 of a more favourale treatment for unrate% li&ui%it6 facilities un%er
,rticle -+. an institution ma6 appl6 to securitisation positions meetin" t#e follo1in" con%itions a
ris5 1ei"#t t#at is t#e "reater of 1.. O or t#e #i"#est of t#e ris5 1ei"#ts t#at 1oul% e applie% to
an6 of t#e securitise% e8posures un%er C#apter - 6 an institution #ol%in" t#e e8posures:
)a/ t#e securitisation position s#all e in a tranc#e 1#ic# is economicall6 in a secon% loss
position or etter in t#e securitisation an% t#e first loss tranc#e s#all provi%e meanin"ful
cre%it en#ancement to t#e secon% loss tranc#eE
)/ t#e &ualit6 of t#e securitisation position s#all e e&uivalent to $redit 6ualit# step C under
the "tandardised approa$h or etterE
)c/ t#e securitisation position s#all e #el% 6 an institution 1#ic# %oes not #ol% a position in
t#e first loss tranc#e7
Article 2*
Treatment of unrate$ liqui$ity facilities
17 0nstitutions ma6 appl6 a conversion factor of +. O to t#e nominal amount of an unrate%
li&ui%it6 facilit6 in or%er to %etermine its e8posure value 1#en t#e follo1in" con%itions are
met:
)a/ t#e li&ui%it6 facilit6 %ocumentation s#all clearl6 i%entif6 an% limit t#e circumstances
un%er 1#ic# t#e facilit6 ma6 e %ra1nE
)/ it s#all not e possile for t#e facilit6 to e %ra1n so as to provi%e cre%it support 6
coverin" losses alrea%6 incurre% at t#e time of %ra1 an% in particular not so as to
provi%e li&ui%it6 in respect of e8posures in %efault at t#e time of %ra1 or so as to
ac&uire assets at more t#an fair valueE
)c/ t#e facilit6 s#all not e use% to provi%e permanent or re"ular fun%in" for t#e
securitisationE
)%/ repa6ment of %ra1s on t#e facilit6 s#all not e suor%inate% to t#e claims of
investors ot#er t#an to claims arisin" in respect of interest rate or currenc6 %erivative
contracts* fees or ot#er suc# pa6ments* nor e su!ect to 1aiver or %eferralE
)e/ it s#all not e possile for t#e facilit6 to e %ra1n after all applicale cre%it
en#ancements from 1#ic# t#e li&ui%it6 facilit6 1oul% enefit are e8#auste%E
)f/ t#e facilit6 s#all inclu%e a provision t#at results in an automatic re%uction in t#e
amount t#at can e %ra1n 6 t#e amount of e8posures t#at are in %efault* 1#ere
M%efaultN #as t#e meanin" "iven to it un%er C#apter 3* or 1#ere t#e pool of
securitise% e8posures consists of rate% instruments* t#at terminates t#e facilit6 if t#e
avera"e &ualit6 of t#e pool falls elo1 investment "ra%e7
2#e ris5 1ei"#t to e applie% s#all e t#e #i"#est ris5 1ei"#t t#at 1oul% e applie% to an6
of t#e securitise% e8posures un%er C#apter - 6 an institution #ol%in" t#e e8posures7
-7 2o %etermine t#e e8posure value of cas# a%vance facilities* a conversion factor of . O ma6
e applie% to t#e nominal amount of a li&ui%it6 facilit6 t#at is uncon%itionall6 cancellale
provi%e% t#at t#e con%itions set out in para"rap# 1 are satisfie% an% t#at repa6ment of
%ra1s on t#e facilit6 are senior to an6 ot#er claims on t#e cas# flo1s arisin" from t#e
securitise% e8posures7
,rticle -+1
,%%itional o1n fun%s re&uirements for securitisations of revolvin" e8posures 1it# earl6
amortisation provisions
17 ?#ere t#ere is a securitisation of revolvin" e8posures su!ect to an earl6 amortisation
provision* t#e ori"inator institution s#all calculate an a%%itional ris5;1ei"#te% e8posure
amount in respect of t#e ris5 t#at t#e levels of cre%it ris5 to 1#ic# it is e8pose% ma6
increase follo1in" t#e operation of t#e earl6 amortisation provision* accor%in" to t#is
,rticle7
-7 2#e institution s#all calculate a ris5;1ei"#te% e8posure amount in respect of t#e sum of t#e
e8posure values of t#e ori"inator(s interest an% t#e investors( interest7
3or securitisation structures 1#ere t#e securitise% e8posures comprise revolvin" an% non;
revolvin" e8posures* an ori"inator institution s#all appl6 t#e treatment set out in
para"rap#s 3 to = to t#at portion of t#e un%erl6in" pool containin" revolvin" e8posures7
2#e e8posure value of t#e ori"inator(s interest s#all e t#e e8posure value of t#at notional
part of a pool of %ra1n amounts sol% into a securitisation* t#e proportion of 1#ic# in
relation to t#e amount of t#e total pool sol% into t#e structure %etermines t#e proportion of
t#e cas# flo1s "enerate% 6 principal an% interest collections an% ot#er associate% amounts
1#ic# are not availale to ma5e pa6ments to t#ose #avin" securitisation positions in t#e
securitisation7 2#e ori"inator(s interest s#all not e suor%inate to t#e investors( interest7
2#e e8posure value of t#e investors( interest s#all e t#e e8posure value of t#e remainin"
notional part of t#e pool of %ra1n amounts7
2#e ris5;1ei"#te% e8posure amount in respect of t#e e8posure value of t#e ori"inator(s
interest s#all e calculate% as t#at for a pro rata e8posure to t#e securitise% e8posures as if
t#e6 #a% not een securitise%7
37 Ori"inators of t#e follo1in" t6pes of securitisation are e8empt from t#e calculation of an
a%%itional ris5;1ei"#te% e8posure amount in para"rap# 1:
)a/ securitisations of revolvin" e8posures 1#ere6 investors remain full6 e8pose% to all
future %ra1s 6 orro1ers so t#at t#e ris5 on t#e un%erl6in" facilities %oes not return
to t#e ori"inator institution even after an earl6 amortisation event #as occurre%E
)/ securitisations 1#ere an6 earl6 amortisation provision is solel6 tri""ere% 6 events
not relate% to t#e performance of t#e securitise% assets or t#e ori"inator institution*
suc# as material c#an"es in ta8 la1s or re"ulations7
47 3or an ori"inator institution su!ect to t#e calculation of an a%%itional ris5;1ei"#te%
e8posure amount accor%in" to para"rap# 1 t#e total of t#e ris5;1ei"#te% e8posure amounts
in respect of its positions in t#e investors( interest an% t#e ris5;1ei"#te% e8posure amounts
calculate% un%er para"rap# 1 s#all e no "reater t#an t#e "reater of:
)a/ t#e ris5;1ei"#te% e8posure amounts calculate% in respect of its positions in t#e
investors( interestE
)/ t#e ris5;1ei"#te% e8posure amounts t#at 1oul% e calculate% in respect of t#e
securitise% e8posures 6 an institution #ol%in" t#e e8posures as if t#e6 #a% not een
securitise% in an amount e&ual to t#e investors( interest7
De%uction of net "ains* if an6* arisin" from t#e capitalisation of future income re&uire%
un%er ,rticle -9)1/* s#all e treate% outsi%e t#e ma8imum amount in%icate% in t#e
prece%in" su;para"rap#7
+7 2#e ris5;1ei"#te% e8posure amount to e calculate% in accor%ance 1it# para"rap# 1 s#all
e %etermine% 6 multipl6in" t#e e8posure value of t#e investors( interest 6 t#e pro%uct of
t#e appropriate conversion factor as in%icate% in para"rap#s = to 9 an% t#e 1ei"#te%
avera"e ris5 1ei"#t t#at 1oul% appl6 to t#e securitise% e8posures if t#e e8posures #a% not
een securitise%7
,n earl6 amortisation provision s#all e consi%ere% to e controlle% 1#ere all of t#e
follo1in" con%itions are met:
)a/ t#e ori"inator institution #as an appropriate o1n fun%s/li&ui%it6 plan in place to
ensure t#at it #as sufficient o1n fun%s an% li&ui%it6 availale in t#e event of an earl6
amortisationE
)/ t#rou"#out t#e %uration of t#e transaction t#ere is pro;rata s#arin" et1een t#e
ori"inator(s interest an% t#e investor(s interest of pa6ments of interest an% principal*
e8penses* losses an% recoveries ase% on t#e alance of receivales outstan%in" at
one or more reference points %urin" eac# mont#E
)c/ t#e amortisation perio% is consi%ere% sufficient for 9. O of t#e total %et )ori"inator(s
an% investors( interest/ outstan%in" at t#e e"innin" of t#e earl6 amortisation perio%
to #ave een repai% or reco"nise% as in %efaultE
)%/ t#e spee% of repa6ment is no more rapi% t#an 1oul% e ac#ieve% 6 strai"#t;line
amortisation over t#e perio% set out in point )c/7
=7 0n t#e case of securitisations su!ect to an earl6 amortisation provision of retail e8posures
1#ic# are uncommitte% an% uncon%itionall6 cancellale 1it#out prior notice* 1#ere t#e
earl6 amortisation is tri""ere% 6 t#e e8cess sprea% level fallin" to a specifie% level*
institutions s#all compare t#e t#ree;mont# avera"e e8cess sprea% level 1it# t#e e8cess
sprea% levels at 1#ic# e8cess sprea% is re&uire% to e trappe%7
?#ere t#e securitisation %oes not re&uire e8cess sprea% to e trappe%* t#e trappin" point is
%eeme% to e 47+ percenta"e points "reater t#an t#e e8cess sprea% level at 1#ic# an earl6
amortisation is tri""ere%7
2#e conversion factor to e applie% s#all e %etermine% 6 t#e level of t#e actual t#ree
mont# avera"e e8cess sprea% in accor%ance 1it# 2ale -7
2ale -
Securitisations su!ect to a
controlle% earl6 amortisation
provision
Securitisations su!ect to a non;
controlle% earl6 amortisation
provision
3 mont#s avera"e
e8cess sprea%
Conversion factor Conversion factor
,ove level , . O . O
Fevel , 1 O + O
Fevel D - O 1+ O
Fevel C 1. O +. O
Fevel D -. O 1.. O
Fevel $ 4. O 1.. O
?#ere:
)a/ MFevel ,N refers to levels of e8cess sprea% less t#an 133733 O of t#e trappin" level of
e8cess sprea% ut not less t#an 1.. O of t#at trappin" levelE
)/ MFevel DN refers to levels of e8cess sprea% less t#an 1.. O of t#e trappin" level of
e8cess sprea% ut not less t#an >+ O of t#at trappin" levelE
)c/ MFevel CN refers to levels of e8cess sprea% less t#an >+ O of t#e trappin" level of
e8cess sprea% ut not less t#an +. O of t#at trappin" levelE
)%/ MFevel DN refers to levels of e8cess sprea% less t#an +. O of t#e trappin" level of
e8cess sprea% ut not less t#an -+ O of t#at trappin" levelE
)e/ MFevel $N refers to levels of e8cess sprea% less t#an -+ O of t#e trappin" level of
e8cess sprea%7
>7 0n t#e case of securitisations su!ect to an earl6 amortiLation provision of retail e8posures
1#ic# are uncommitte% an% uncon%itionall6 cancellale 1it#out prior notice an% 1#ere t#e
earl6 amortiLation is tri""ere% 6 a &uantitative value in respect of somet#in" ot#er t#an
t#e t#ree mont#s avera"e e8cess sprea%* su!ect to permission 6 t#e competent aut#orities*
institutions ma6 appl6 a treatment 1#ic# appro8imates closel6 to t#at prescrie% in
para"rap# = for %eterminin" t#e conversion factor in%icate%7 2#e competent aut#orit6 s#all
"rant permission* if t#e follo1in" con%itions are met:
)a/ t#is treatment is more appropriate ecause t#e institution can estalis# a &uantitative
measure e&uivalent* in relation to t#e &uantitative value tri""erin" earl6 amortisation*
to t#e trappin" level of e8cess sprea%E
)/ t#is treatment lea%s to a measure of t#e ris5 t#at t#e cre%it ris5 to 1#ic# t#e
institution is e8pose% ma6 increase follo1in" t#e operation of t#e earl6 amortisation
provision t#at is as pru%ent as t#at calculate% in accor%ance 1it# para"rap# =7
87 ,ll ot#er securitisations su!ect to a controlle% earl6 amortisation provision of revolvin"
e8posures s#all e su!ect to a conversion factor of 9. O7
97 ,ll ot#er securitisations su!ect to a non;controlle% earl6 amortisation provision of
revolvin" e8posures s#all e su!ect to a conversion factor of 1.. O7
,rticle -+-
Cre%it ris5 miti"ation for securitisation positions su!ect to t#e Stan%ar%ise% ,pproac#
?#ere cre%it protection is otaine% on a securitisation position* t#e calculation of ris5;1ei"#te%
e8posure amounts ma6 e mo%ifie% in accor%ance 1it# C#apter 47
,rticle -+3 A
Re%uction in ris5;1ei"#te% e8posure amounts
?#ere a securitisation position is assi"ne% a 1-+. O ris5 1ei"#t* institutions ma6 in accor%ance
1it# ,rticle 33)1/)5/* as an alternative to inclu%in" t#e position in t#eir calculation of ris5;1ei"#te%
e8posure amounts* %e%uct from Coon E6uit# +ier 4 $apital t#e e8posure value of t#e position7
3or t#ese purposes* t#e calculation of t#e e8posure value ma6 reflect eli"ile fun%e% cre%it
protection in a manner consistent 1it# ,rticle -+-7
?#ere an ori"inator institution ma5es use of t#is alternative* it ma6 sutract 1-7+ times t#e amount
%e%ucte% in accor%ance 1it# ,rticle 33)1/)5/ from t#e amount specifie% in ,rticle -4> as t#e ris5;
1ei"#te% e8posure amount 1#ic# 1oul% currentl6 e calculate% for t#e securitise% e8posures #a%
t#e6 not een securitise%7
S4D;S$C20OB 4
C,FC4F,20OB O3 R0S:;?$0GC2$D $GPOS4R$ ,9O4B2S 4BD$R 2C$ 0RD ,PPRO,CC
,rticle -+4
Cierarc#6 of met#o%s
17 0nstitutions s#all use t#e met#o%s in accor%ance 1it# t#e follo1in" #ierarc#6:
)a/ for a rate% position or a position in respect of 1#ic# an inferre% ratin" ma6 e use%*
t#e Ratin"s Dase% 9et#o% set out in ,rticle -+= s#all e use% to calculate t#e ris5;
1ei"#te% e8posure amountE
)/ for an unrate% position t#e institution ma6 use t#e Supervisor6 3ormula 9et#o% set
out in ,rticle -+> 1#ere it can pro%uce estimates of PD* an% 1#ere applicale
e5posure value an% FGD as inputs into t#e Supervisor6 3ormula 9et#o% in
accor%ance 1it# t#e re&uirements for t#e estimation of t#ose parameters un%er t#e
0nternal Ratin"s Dase% approac# in accor%ance 1it# Section 37 ,n institution ot#er
t#an t#e ori"inator institution ma6 onl6 use t#e Supervisor6 3ormula 9et#o% su!ect
to t#e prior permission of t#e competent aut#orities* 1#ic# s#all onl# e "rante%
1#ere t#e institution fulfils t#e con%ition provi%e% in t#e previous sentenceE
)c/ as an alternative to point )/ an% onl6 for unrate% positions in ,DCP pro"rammes*
t#e institution ma6 use t#e 0nternal ,ssessment ,pproac# as set out in para"rap# B if
t#e competent aut#orities #ave permitte% it to %o soE
)%/ in all ot#er cases* a ris5 1ei"#t of 1-+. O s#all e assi"ne% to securitisation
positions 1#ic# are unrate%7
(e) not*ithstanding point (d), and su!9e$t to the prior perission !# the $opetent
authorities, an institution a# $al$ulate the risk *eight for an unrated position in
an ABC. prograe a$$ording to arti$les 2BA or 2B>, if the unrated position is
not in $oer$ial paper and falls *ithin the s$ope of appli$ation of an &nternal
Assessent Approa$h for *hi$h perission is !eing sought3 +he aggregated
e5posure values treated !# this e5$eption shall not !e aterial and in an# $ase less
than 4:J of the aggregate e5posure values treated !# the institution under the
&AA3 +he institution shall stop aking use of this *hen the perission for the
relevant &AA has !een refused3
-7 3or t#e purposes of usin" inferre% ratin"s* an institution s#all attriute to an unrate%
position an inferre% cre%it assessment e&uivalent to t#e cre%it assessment of a rate%
reference position 1#ic# is t#e most senior position 1#ic# is in all respects suor%inate to
t#e unrate% securitisation position in &uestion an% meets all of t#e follo1in" con%itions:
)a/ t#e reference positions must e suor%inate in all respects to t#e unrate%
securitisation positionE
)/ t#e maturit6 of t#e reference positions s#all e e&ual to or lon"er t#an t#at of t#e
unrate% position in &uestionE
)c/ on an on"oin" asis* an6 inferre% ratin" s#all e up%ate% to reflect an6 c#an"es in t#e
cre%it assessment of t#e reference positions7
37 2#e competent aut#orities s#all "rant Ainstitutions permission to use t#e M0nternal
,ssessment ,pproac#N as set out in para"rap# 4 1#ere all of t#e follo1in" con%itions are
met:
)a/ positions in t#e commercial paper issue% from t#e ,DCP pro"ramme s#all e rate%
positionsE
)/ t#e internal assessment of t#e cre%it &ualit6 of t#e position s#all reflect t#e pulicl6
availale assessment met#o%olo"6 of one or more A$C,0s* for t#e ratin" of
securities ac5e% 6 t#e e8posures of t#e t6pe securitise%E
)c/ t#e $C,0s* t#e met#o%olo"6 of 1#ic# s#all e reflecte% as re&uire% 6 point )/*
s#all inclu%e t#ose $C,0s 1#ic# #ave provi%e% an e8ternal ratin" for t#e commercial
paper issue% from t#e ,DCP pro"ramme7 Quantitative elements* suc# as stress
factors* use% in assessin" t#e position to a particular cre%it &ualit6 s#all e at least as
conservative as t#ose use% in t#e relevant assessment met#o%olo"6 of t#e $C,0s in
&uestionE
)%/ in %evelopin" its internal assessment met#o%olo"6 t#e institution s#all ta5e into
consi%eration relevant pulis#e% ratin"s met#o%olo"ies of t#e A$C,0s t#at rate t#e
commercial paper of t#e ,DCP pro"ramme7 2#is consi%eration s#all e %ocumente%
6 t#e institution an% up%ate% re"ularl6* as outline% in point )"/E
)e/ t#e institution(s internal assessment met#o%olo"6 s#all inclu%e ratin" "ra%es7 2#ere
s#all e a correspon%ence et1een suc# ratin" "ra%es an% t#e cre%it assessments of A
$C,0s7 2#is correspon%ence s#all e e8plicitl6 %ocumente%E
)f/ t#e internal assessment met#o%olo"6 s#all e use% in t#e institution(s internal ris5
mana"ement processes* inclu%in" its %ecision ma5in"* mana"ement information an%
internal capital allocation processesE
)"/ internal or e8ternal au%itors* an $C,0* or t#e institution(s internal cre%it revie1 or
ris5 mana"ement function s#all perform re"ular revie1s of t#e internal assessment
process an% t#e &ualit6 of t#e internal assessments of t#e cre%it &ualit6 of t#e
institution(s e8posures to an ,DCP pro"ramme7 0f t#e institution(s internal au%it*
cre%it revie1* or ris5 mana"ement functions perform t#e revie1* t#en t#ese functions
s#all e in%epen%ent of t#e ,DCP pro"ramme usiness line* as 1ell as t#e customer
relations#ipE
)#/ t#e institution s#all trac5 t#e performance of its internal ratin"s over time to evaluate
t#e performance of its internal assessment met#o%olo"6 an% s#all ma5e a%!ustments*
as necessar6* to t#at met#o%olo"6 1#en t#e performance of t#e e8posures routinel6
%iver"es from t#at in%icate% 6 t#e internal ratin"sE
)i/ t#e ,DCP pro"ramme s#all incorporate un%er1ritin" stan%ar%s in t#e form of cre%it
an% investment "ui%elines7 0n %eci%in" on an asset purc#ase* t#e ,DCP pro"ramme
a%ministrator s#all consi%er t#e t6pe of asset ein" purc#ase%* t#e t6pe an% monetar6
value of t#e e8posures arisin" from t#e provision of li&ui%it6 facilities an% cre%it
en#ancements* t#e loss %istriution* an% t#e le"al an% economic isolation of t#e
transferre% assets from t#e entit6 sellin" t#e assets7 , cre%it anal6sis of t#e asset
seller(s ris5 profile s#all e performe% an% s#all inclu%e anal6sis of past an% e8pecte%
future financial performance* current mar5et position* e8pecte% future
competitiveness* levera"e* cas# flo1* interest covera"e an% %et ratin"7 0n a%%ition* a
revie1 of t#e seller(s un%er1ritin" stan%ar%s* servicin" capailities* an% collection
processes s#all e performe%E
)!/ t#e ,DCP pro"ramme(s un%er1ritin" stan%ar%s s#all estalis# minimum asset
eli"iilit6 criteria t#at* in particular:
)i/ e8clu%e t#e purc#ase of assets t#at are si"nificantl6 past %ue or %efaulte%E
)ii/ limit e8cess concentration to in%ivi%ual oli"or or "eo"rap#ic areaE
)iii/ limits t#e tenor of t#e assets to e purc#ase%E
)5/ t#e ,DCP pro"ramme s#all #ave collections policies an% processes t#at ta5e into
account t#e operational capailit6 an% cre%it &ualit6 of t#e servicer7 2#e ,DCP
pro"ramme s#all miti"ate ris5 relatin" to t#e performance of t#e seller an% t#e
servicer t#rou"# various met#o%s* suc# as tri""ers ase% on current cre%it &ualit6 t#at
1oul% preclu%e commin"lin" of fun%sE
)l/ t#e a""re"ate% estimate of loss on an asset pool t#at t#e ,DCP pro"ramme is
consi%erin" purc#asin" s#all ta5e into account all sources of potential ris5* suc# as
cre%it an% %ilution ris57 0f t#e seller;provi%e% cre%it en#ancement is siLe% ase% onl6
on cre%it;relate% losses* t#en a separate reserve s#all e estalis#e% for %ilution ris5*
if %ilution ris5 is material for t#e particular e8posure pool7 0n a%%ition* in siLin" t#e
re&uire% en#ancement level* t#e pro"ram s#all revie1 several 6ears of #istorical
information* inclu%in" losses* %elin&uencies* %ilutions* an% t#e turnover rate of t#e
receivalesE
)m/ t#e ,DCP pro"ramme s#all incorporate structural features* suc# as 1in%;%o1n
tri""ers* into t#e purc#ase of e8posures in or%er to miti"ate potential cre%it
%eterioration of t#e un%erl6in" portfolio7
47 4n%er t#e 0nternal ,ssessment ,pproac#* t#e unrate% position s#all e assi"ne% 6 t#e
institution to one of t#e ratin" "ra%es lai% %o1n in point )e/ para"rap# 37 2#e position s#all
e attriute% a %erive% ratin" t#e same as t#e cre%it assessments correspon%in" to t#at
ratin" "ra%e as lai% %o1n in point )e/ of para"rap# 37 ?#ere t#is %erive% ratin" is* at t#e
inception of t#e securitisation* at t#e level of investment "ra%e or etter* it s#all e
consi%ere% t#e same as an eli"ile cre%it assessment 6 an A$C,0 for t#e purposes of
calculatin" ris5;1ei"#te% e8posure amounts7
+7 0nstitutions 1#ic# #ave otaine% permission to use t#e 0nternal ,ssessment ,pproac# s#all
not revert to t#e use of ot#er met#o%s unless all of t#e follo1in" con%itions are met:
)a/ t#e institution #as %emonstrate% to t#e satisfaction of t#e competent aut#orit6 t#at t#e
institution #as "oo% cause to %o soE
)/ t#e institution #as receive% t#e prior permission of t#e competent aut#orit67
,rticle -++
9a8imum ris5;1ei"#te% e8posure amounts
An ori"inator institution* a sponsor institution* or Aot#er institutions 1#ic# can calculate :
0RD
* a#
liit t#e ris5;1ei"#te% e8posure amounts calculate% in respect of its positions in a securitisation
Ato t#at 1#ic# 1oul% pro%uce a o1n fun%s re&uirement un%er ,rticle 8>)3/ e&ual to t#e sum of 8 O
of t#e ris5;1ei"#te% e8posure amounts 1#ic# 1oul% e pro%uce% if t#e securitise% assets #a% not
een securitise% an% 1ere on t#e alance s#eet of t#e institution plus t#e e8pecte% loss amounts of
t#ose e8posures7
,rticle -+=
Ratin"s Dase% 9et#o%
17 4n%er t#e Ratin"s Dase% 9et#o%* t#e institution s#all calculate t#e ris5;1ei"#te% e8posure
amount of a rate% securitisation or re;securitisation position 6 appl6in" t#e relevant ris5
1ei"#t to t#e e8posure value an% multipl6in" t#e result 6 17.=7
2#e relevant ris5 1ei"#t s#all e t#e ris5 1ei"#t as lai% %o1n in 2ale 4* 1it# 1#ic# t#e
cre%it assessment of t#e position is associate% in accor%ance 1it# Section 47
2ale 4
Cre%it Qualit6 Step Securitisation Positions Re;securitisation
Positions
Cre%it
assessments
ot#er t#an
s#ort term
S#ort term
cre%it
assessments
, D C D $
1 1 >O 1-O -.O -.O 3.O
- 8O 1+O -+O -+O 4.O
3 1.O 18O 3+O 3+O +.O
4 - 1-O -.O 4.O =+O
+ -.O 3+O =.O 1..O
= 3+O +.O 1..O 1+.O
> 3 =.O >+O 1+.O --+O
8 1..O -..O 3+.O
9 -+.O 3..O +..O
1. 4-+O +..O =+.O
11 =+.O >+.O 8+.O
all ot#er an% unrate% 1-+.O
2#e 1ei"#tin"s in column C of 2ale 4 s#all e applie% 1#ere t#e securitisation position is
not a re;securitisation position an% 1#ere t#e effective numer of e8posures securitise% is
less t#an si87
3or t#e remain%er of t#e securitisation positions t#at are not re;securitisation positions* t#e
1ei"#tin"s in column D s#all e applie% unless t#e position is in t#e most senior tranc#e of
a securitisation* in 1#ic# case t#e 1ei"#tin"s in column , s#all e applie%7
3or re;securitisation positions t#e 1ei"#tin"s in column $ s#all e applie% unless t#e re;
securitisation position is in t#e most senior tranc#e of t#e re;securitisation an% none of t#e
un%erl6in" e8posures are t#emselves re;securitisation e8posures* in 1#ic# case column D
s#all e applie%7
?#en %eterminin" 1#et#er a tranc#e is t#e most senior* it is not re&uire% to ta5e into
consi%eration amounts %ue un%er interest rate or currenc6 %erivative contracts* fees %ue* or
ot#er similar pa6ments7
0n calculatin" t#e effective numer of e8posures securitise% multiple e8posures to one
oli"or s#all e treate% as one e8posure7 2#e effective numer of e8posures is calculate%
as:
-
_

EAD
i

9
i ,

EAD
i
-
i
1#ere $,Di represents t#e sum of t#e e8posure values of all e8posures to t#e it# oli"or7
0f t#e portfolio s#are associate% 1it# t#e lar"est e8posure* C1* is availale* t#e institution
ma6 compute B as 1/C
1
7
-7 Cre%it ris5 miti"ation on securitisation positions ma6 e reco"nise% in accor%ance 1it#
,rticles 2@>)1/ an% )4/* su!ect to t#e con%itions in ,rticle -4-7
,rticle -+>
Supervisor6 3ormula 9et#o%
17 4n%er t#e Supervisor6 3ormula 9et#o%* t#e ris5 1ei"#t for a securitisation position s#all
e calculate% as follo1s su!ect to a floor of -. O for re;securitisation positions an% > O
for all ot#er securitisation positions:
1-7+
S[7 + T ] S[7]
T
1#ere:

S
[
,
]

,*

(
A

, )

_
_

$
A
when , A
'585
'
A
+
A ,
A A
+

e8p
'585

'585
*
when , > A

'585

'585

'585 ,
,
'585
A

1#ere:

A
'585
_

E7!D
,
c
A
'585
1 h

(
E7!D A
'585
) A
'585
+ .7-+
(
1 E7!D
) A
'585
9

+ A
IRBR
2
_ (1 A
IRBR
) A
IRBR

f

1 h
c +
,
(1 h )
(1 c)
c
# 1
f
a # c
b # (1 c)
$ 1 (1 h ) (1 8eta[A
'585
E a* b])
-
9
A [,]
(1 h ) ((1 8eta[,E a* b]) , + 8eta[,E a + 1* b] c)
] U 1...E
^ U -.E
Deta J8E a* K U t#e cumulative eta %istriution 1it# parameters a an% evaluate% at
8E
2 U t#e t#ic5ness of t#e tranc#e in 1#ic# t#e position is #el%* measure% as t#e ratio of )a/
t#e nominal amount of t#e tranc#e to )/ t#e sum of t#e nominal amounts of t#e e8posures
t#at #ave een securitise%7 3or %erivative instruments liste% in ,nne8 00* t#e sum of t#e
current replacement $ost an% t#e potential future cre%it e8posure calculate% in accor%ance
1it# C#apter = s#all e use% in place of t#e nominal amountE
:
0RDR
U t#e ratio of )a/ :
0RD
to )/ t#e sum of t#e e8posure values of t#e e8posures
t#at #ave een securitise%* an% is e8presse% in %ecimal formE
F U t#e cre%it en#ancement level* measure% as t#e ratio of t#e nominal amount of all
tranc#es suor%inate to t#e tranc#e in 1#ic# t#e position is #el% to t#e sum of t#e nominal
amounts of t#e e8posures t#at #ave een securitise%7 Capitalise% future income s#all not e
inclu%e% in t#e measure% F7 ,mounts %ue 6 counterparties to %erivative instruments liste%
in ,nne8 00 t#at represent tranc#es more !unior t#an t#e tranc#e in &uestion ma6 e
measure% at t#eir current replacement cost* 1it#out t#e potential future cre%it e8posures* in
calculatin" t#e en#ancement levelE
B U t#e effective numer of e8posures calculate% in accor%ance 1it# ,rticle -+=7 0n t#e
case of re;securitisations* t#e institution s#all loo5 at t#e numer of securitisation
e8posures in t#e pool an% not t#e numer of un%erl6in" e8posures in t#e ori"inal pools
from 1#ic# t#e un%erl6in" securitisation e8posures stemE
$FGD U t#e e8posure;1ei"#te% avera"e loss;"iven;%efault* calculate% as follo1s:

7!D
i
EAD
i
E7!D
i

EAD
i
i
1#ere:
FGD
i
U t#e avera"e FGD associate% 1it# all e8posures to t#e i
t#
oli"or* 1#ere FGD
is %etermine% in accor%ance 1it# C#apter 37 0n t#e case of resecuritisation* an FGD of 1..
O s#all e applie% to t#e securitise% positions7 ?#en %efault an% %ilution ris5 for
purc#ase% receivales are treate% in an a""re"ate manner 1it#in a securitisation* t#e FGD
i
input s#all e constructe% as a 1ei"#te% avera"e of t#e FGD for cre%it ris5 an% t#e >+ O
FGD for %ilution ris57 2#e 1ei"#ts s#all e t#e stan%;alone o1n fun%s c#ar"es for cre%it
ris5 an% %ilution ris5 respectivel67
-7 ?#ere t#e nominal amount of t#e lar"est securitise% e8posure* C
1
* is no more t#an 3 O of
t#e sum of t#e nominal amount of t#e securitise% e8posures* t#en* for t#e purposes of t#e
Supervisor6 3ormula 9et#o%* t#e institution ma6 set FGDU +. O in the $ase of
se$uritisations, *hi$h are not re=se$uritisations, an% B e&ual to eit#er of t#e follo1in":
1

2
m

2
1
_
_
9 2
1
2
m
+

ma8{1 m 2
1
*.}

m 1
,
,
9
1
2
1
1#ere:
C
m
U t#e ratio of t#e sum of t#e nominal amounts of t#e lar"est MmN e8posures to t#e sum
of t#e nominal amounts of t#e e8posures securitise%7 2#e level of MmN ma6 e set 6 t#e
institution7
3or securitisations in 1#ic# materiall6 all securitise% e8posures are retail e8posures*
institutions ma6* su!ect to permission 6 t#e competent aut#orit6* use t#e Supervisor6
3ormula 9et#o% usin" t#e simplifications #U. an% vU.* provi%e% t#at t#e effective numer
of e8posures is not lo1 an% t#at t#e e8posures are not #i"#l6 concentrate%7
37 2#e competent aut#orities s#all 5eep t#e $D, informe% aout t#e use institutions ma5e of
t#e previous paragraph7 $D, s#all monitor t#e ran"e of practices in t#is area an% s#all* in
accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo7 1.93/-.1.* issue "ui%elines7
47 Cre%it ris5 miti"ation on securitisation positions ma6 e reco"nise% in accor%ance 1it#
para"rap#s - to 4 of ,rticle -+9* su!ect to t#e con%itions in ,rticle -4-7
,rticle -+8
Fi&ui%it6 3acilities
17 3or t#e purposes of %eterminin" t#e e8posure value of an unrate% securitisation position in
t#e form of cas# a%vance facilities* a conversion factor of . O ma6 e applie% to t#e
nominal amount of a li&ui%it6 facilit6 t#at meets t#e con%itions set out in ,rticle -+.)-/7
-7 ?#en it is not possi!le for t#e institution to calculate t#e ris5;1ei"#te% e8posure amounts
for t#e securitise% e8posures as if t#e6 #a% not een securitise%* an institution ma6* on an
e8ceptional asis and su!9e$t to the perission of the $opetent authorities* temporaril6
appl6 t#e met#o% set out in para"rap# 3 for t#e calculation of ris5;1ei"#te% e8posure
amounts for an unrate% securitisation position in t#e form of li&ui%it6 facilit6 t#at meets t#e
con%itions in ,rticle -+.)1/3 0nstitutions s#all notif6 t#e use t#e6 ma5e of t#e first sentence
to t#e competent aut#orities* to"et#er 1it# its reasons an% t#e inten%e% time perio% of use3
+he $al$ulation of risk=*eighted e5posure aounts should in general !e deeed to !e
not possi!le if an inferred rating, the &nternal Assessent Approa$h and the "upervisor#
1orula Approa$h are not at the institution7s disposal7
37 2#e #i"#est ris5 1ei"#t t#at 1oul% e applie% un%er C#apter - to an6 of t#e securitise%
e8posures* #a% t#e6 not een securitise%* ma6 e applie% to t#e securitisation position
represente% 6 a li&ui%it6 facilit6 t#at meets t#e con%itions in ,rticle -+.)1/7 2o %etermine
t#e e8posure value of t#e position a conversion factor of 1.. O s#all e applie%7
,rticle -+9
Cre%it ris5 miti"ation for securitisation positions su!ect to t#e 0RD approac#
17 ?#ere ris5;1ei"#te% e8posure amounts are calculate% usin" t#e Ratin"s Dase% 9et#o%*
t#e e8posure value or t#e ris5;1ei"#t for a securitisation position in respect of 1#ic# cre%it
protection #as een otaine% ma6 e mo%ifie% in accor%ance 1it# t#e provisions of
C#apter 4 as t#e6 appl6 for t#e calculation of ris5;1ei"#te% e8posure amounts un%er
C#apter -7
-7 0n case of full cre%it protection* 1#ere ris5;1ei"#te% e8posure amounts are calculate%
usin" t#e Supervisor6 3ormula 9et#o%* t#e follo1in" re&uirements s#all appl6:
)a/ t#e institution s#all %etermine t#e Meffective ris5 1ei"#tN of t#e position7 0t s#all %o
t#is 6 %ivi%in" t#e ris5;1ei"#te% e8posure amount of t#e position 6 t#e e8posure
value of t#e position an% multipl6in" t#e result 6 1..E
)/ in t#e case of fun%e% cre%it protection* t#e ris5;1ei"#te% e8posure amount of t#e
securitisation position s#all e calculate% 6 multipl6in" t#e fun%e% protection;
a%!uste% e8posure amount of t#e position )$
T
/* as calculate% un%er C#apter 4 for t#e
calculation of ris5;1ei"#te% e8posure amounts un%er C#apter - ta5in" t#e amount of
t#e securitisation position to e $* 6 t#e effective ris5 1ei"#tE
)c/ in t#e case of unfun%e% cre%it protection* t#e ris5;1ei"#te% e8posure amount of t#e
securitisation position s#all e calculate% 6 multipl6in" t#e amount of t#e protection
a%!uste% for an6 currenc6 mismatc# an% maturit6 mismatc# )G
,
/ in accor%ance 1it#
t#e provisions of C#apter 4 6 t#e ris5 1ei"#t of t#e protection provi%erE an% a%%in"
t#is to t#e amount arrive% at 6 multipl6in" t#e amount of t#e securitisation position
minus G
,
6 t#e effective ris5 1ei"#t7
37 0n case of partial protection* 1#ere ris5;1ei"#te% e8posure amounts are calculate% usin"
t#e Supervisor6 3ormula 9et#o%* t#e follo1in" re&uirements s#all appl6:
)a/ if t#e cre%it ris5 miti"ation covers t#e first loss or losses on a proportional asis on
t#e securitisation position* t#e institution ma6 appl6 para"rap# -E
)/ in ot#er cases* t#e institution s#all treat t#e securitisation position as t1o or more
positions 1it# t#e uncovere% portion ein" consi%ere% t#e position 1it# t#e lo1er
cre%it &ualit67 3or t#e purposes of calculatin" t#e ris5;1ei"#te% e8posure amount for
t#is position* t#e provisions in ,rticle -+> s#all appl6 su!ect to t#e mo%ifications
t#at 2 s#all e a%!uste% to e
T
in t#e case of fun%e% cre%it protectionE an% to 2;" in t#e
case of unfun%e% cre%it protection* 1#ere e
T
%enotes t#e ratio of $
T
to t#e total
notional amount of t#e un%erl6in" pool* 1#ere $
T
is t#e a%!uste% e8posure amount of
t#e securitisation position calculate% in accor%ance 1it# t#e provisions of C#apter 4
as t#e6 appl6 for t#e calculation of ris5;1ei"#te% e8posure amounts un%er C#apter -
ta5in" t#e amount of t#e securitisation position to e $E an% " is t#e ratio of t#e
nominal amount of cre%it protection* a%!uste% for an6 currenc6 or maturit6 mismatc#
in accor%ance 1it# t#e provisions of C#apter 4* to t#e sum of t#e e8posure amounts
of t#e securitise% e8posures7 0n t#e case of unfun%e% cre%it protection t#e ris5 1ei"#t
of t#e protection provi%er s#all e applie% to t#at portion of t#e position not fallin"
1it#in t#e a%!uste% value of 27
47 ?#ere* in case of unfun%e% cre%it protection* competent aut#orities #ave "rante% t#e
institution permission to calculate ris5;1ei"#te% e8posure amounts for comparale %irect
e8posures to t#e protection provi%er in accor%ance 1it# C#apter 3* t#e ris5 1ei"#t " of
e8posures to t#e protection provi%er accor%in" to ,rticle -3. s#all e %etermine% as
specifie% in C#apter 37
,rticle -=.
,%%itional o1n fun%s re&uirements for securitisations of revolvin" e8posures 1it# earl6
amortisation provisions
17 0n a%%ition to t#e ris5;1ei"#te% e8posure amounts calculate% in respect of its securitisation
positions* an ori"inator institution s#all calculate a ris5;1ei"#te% e8posure amount
accor%in" to t#e met#o%olo"6 set out in ,rticle -+1 1#en it sells revolvin" e8posures into
a securitisation t#at contains an earl6 amortisation provision7
-7 D6 %ero"ation from ,rticle -+1* t#e e8posure value of t#e ori"inators interest s#all e t#e
sum of t#e follo1in" items:
)a/ t#e e8posure value of t#at notional part of a pool of %ra1n amounts sol% into a
securitisation* t#e proportion of 1#ic# in relation to t#e amount of t#e total pool sol%
into t#e structure %etermines t#e proportion of t#e cas# flo1s "enerate% 6 principal
an% interest collections an% ot#er associate% amounts 1#ic# are not availale to ma5e
pa6ments to t#ose #avin" securitisation positions in t#e securitisationE
)/ t#e e8posure value of t#at part of t#e pool of un%ra1n amounts of t#e cre%it lines* t#e
%ra1n amounts of 1#ic# #ave een sol% into t#e securitisation* t#e proportion of
1#ic# to t#e total amount of suc# un%ra1n amounts is t#e same as t#e proportion of
t#e e8posure value %escrie% in point )a/ to t#e e8posure value of t#e pool of %ra1n
amounts sol% into t#e securitisation7
2#e ori"inator(s interest s#all not e suor%inate to t#e investors( interest7
2#e e8posure value of t#e 0nvestors( interest s#all e t#e e8posure value of t#e notional
part of t#e pool of %ra1n amounts not fallin" 1it#in point )a/ plus t#e e8posure value of
t#at part of t#e pool of un%ra1n amounts of cre%it lines* t#e %ra1n amounts of 1#ic# #ave
een sol% into t#e securitisation* not fallin" 1it#in point )/7
37 2#e ris5;1ei"#te% e8posure amount in respect of t#e e8posure value of t#e ori"inator(s
interest accor%in" to point )a/ of para"rap# - s#all e calculate% as t#at for a pro;rata
e8posure to t#e securitise% %ra1n amounts e8posures as if t#e6 #a% not een securitise%
an% a pro rata e8posure to t#e un%ra1n amounts of t#e cre%it lines* t#e %ra1n amounts of
1#ic# #ave een sol% into t#e securitisation7
,rticle -=1
Re%uction in ris5;1ei"#te% e8posure amounts
17 2#e ris5;1ei"#te% e8posure amount of a securitisation position to 1#ic# a 1-+. O ris5
1ei"#t is assi"ne% ma6 e re%uce% 6 1-7+ times t#e amount of an6 specific cre%it risk
a%!ustments treated in a$$ordan$e *ith Arti$le 4:@ ma%e 6 t#e institution in respect of
t#e securitise% e8posures7 2o t#e e8tent t#at specific cre%it a%!ustments are ta5en account
of for t#is purpose t#e6 s#all not e ta5en account of for t#e purposes of t#e calculation
lai% %o1n in ,rticle 1++7
-7 2#e ris5;1ei"#te% e8posure amount of a securitisation position ma6 e re%uce% 6 1-7+
times t#e amount of an6 specific cre%it risk a%!ustments ma%e 6 t#e institution in respect
of t#e position7
37 ,s provi%e% in ,rticle 33)1/)5/ in respect of a securitisation position in respect of 1#ic# a
1-+. O ris5 1ei"#t applies* institutions ma6* as an alternative to inclu%in" t#e position in
t#eir calculation of ris5;1ei"#te% e8posure amounts* %e%uct from o1n fun%s t#e e8posure
value of t#e position su!ect to t#e follo1in":
)a/ t#e e8posure value of t#e position ma6 e %erive% from t#e ris5;1ei"#te% e8posure
amounts ta5in" into account an6 re%uctions ma%e in accor%ance 1it# para"rap#s 1
an% -E
)/ t#e calculation of t#e e8posure value ma6 reflect eli"ile fun%e% protection in a
manner consistent 1it# t#e met#o%olo"6 prescrie% in ,rticles -4- an% -+9E
)c/ 1#ere t#e Supervisor6 3ormula 9et#o% is use% to calculate ris5;1ei"#te% e8posure
amounts an% F _ :
0RDR
an% JF`2K [ :
0RDR
t#e position ma6 e treate% as t1o
positions 1it# F e&ual to :
0RDR
for t#e more senior of t#e positions7
47 ?#ere an institution ma5es use of t#e option in para"rap# 3 it ma6 sutract 1-7+ times t#e
amount %e%ucte% in accor%ance 1it# t#at para"rap# from t#e amount specifie% in ,rticle
-++ as t#e amount to 1#ic# t#e ris5;1ei"#te% e8posure amount in respect of its positions
in a securitisation ma6 e limite%7
S$C20OB 4
$G2$RB,F CR$D02 ,SS$SS9$B2S
,rticle -=-
2se of Credit Assessents !# $C,0s
17 0nstitutions ma6 use Acre%it assessments to %etermine t#e ris5 1ei"#t of a securitisation
position onl6 1#ere t#e cre%it assessment #as een issue% Aor #as een en%orse% 6 an
A$C,0 in accor%ance 1it# Re"ulation )$C/ Bo 1.=./-..97
A
,rticle -=3
Re&uirements to e met 6 t#e cre%it assessments of $C,0s
3or t#e purposes of calculatin" ris5;1ei"#te% e8posure amounts accor%in" to Section 3* institutions
s#all onl6 use a cre%it assessment of an A $C,0 if t#e follo1in" con%itions are met:
)a/ t#ere s#all e no mismatc# et1een t#e t6pes of pa6ments reflecte% in t#e cre%it
assessment an% t#e t6pes of pa6ment to 1#ic# t#e institution is entitle% un%er t#e contract
"ivin" rise to t#e securitisation position in &uestionE
)/ AFoss an% cas#;flo1 anal6sis as 1ell as sensitivit6 of ratin"s to c#an"es in t#e un%erl6in"
ratin"s assumptions* inclu%in" t#e performance of pool assets* s#all e pulis#e% 6 t#e
$C,0 as *ell as the $redit assessents, pro$edures, ethodologies, assuptions, and the
ke# eleents underpinning the assessents in a$$ordan$e *ith )egulation (EC) Fo3
4:?:D2::>3 0nformation t#at is ma%e availale onl6 to a limite% numer of entities s#all not
e consi%ere% to #ave een pulis#e%7 2#e cre%it assessments s#all e inclu%e% in t#e
$C,0(s transition matri8E
)c/ t#e cre%it assessment s#all not e ase% or partl6 ase% on unfun%e% support provi%e% 6
t#e institution itself7 0n suc# case* t#e institution s#all consi%er t#e relevant position for t#e
purposes of calculatin" ris5;1ei"#te% e8posure amounts for t#is position accor%in" to
Section 3as if it 1ere not rate%7
2#e $C,0 s#all e committe% to pulis# e8planations #o1 t#e performance of pool assets affects
t#is cre%it assessment7
,rticle -=4
4se of cre%it assessments
17 ,n institution ma6 nominate one or more A$C,0s t#e cre%it assessments of 1#ic# s#all e
use% in t#e calculation of its ris5;1ei"#te% e8posure amounts un%er t#is C#apter )a
Mnominate% $C,0N/7
-7 ,n institution s#all use cre%it assessments consistentl6 an% not selectivel6 in respect of its
securitisation positions* in accor%ance 1it# t#e follo1in" principles:
)a/ an institution ma6 not use an $C,0(s cre%it assessments for its positions in some
tranc#es an% anot#er $C,0(s cre%it assessments for its positions in ot#er tranc#es
1it#in t#e same securitisation t#at ma6 or ma6 not e rate% 6 t#e first $C,0E
)/ 1#ere a position #as t1o cre%it assessments 6 nominate% $C,0s* t#e institution
s#all use t#e less favourale cre%it assessmentE
)c/ 1#ere a position #as more t#an t1o cre%it assessments 6 nominate% $C,0s* t#e t1o
most favourale cre%it assessments s#all e use%7 0f t#e t1o most favourale
assessments are %ifferent* t#e less favourale of t#e t1o s#all e use%7
(d) an institution shall not a$tivel# soli$it the *ithdra*al of less favoura!le ratings3
37 ?#ere cre%it protection eli"ile un%er C#apter 4 is provi%e% %irectl6 to t#e SSP$* an% t#at
protection is reflecte% in t#e cre%it assessment of a position 6 a nominate% $C,0* t#e ris5
1ei"#t associate% 1it# t#at cre%it assessment ma6 e use%7 ?#ere t#e protection is not
eli"ile un%er C#apter 4* t#e cre%it assessment s#all not e reco"nise%7 ?#ere t#e cre%it
protection is not provi%e% to t#e SSP$ ut %irectl6 to a securitisation position* t#e cre%it
assessment s#all not e reco"nise%7
,rticle -=+
9appin"
$D, s#all %evelop %raft implementin" tec#nical stan%ar%s to %etermine* for all A$C,0s* 1#ic# of
t#e cre%it &ualit6 steps set out in t#is C#apter are associate% 1it# t#e relevant cre%it assessments of
an A $C,07 2#ose %eterminations s#all e o!ective an% consistent* an% carrie% out in accor%ance
1it# t#e follo1in" principles:
)a/ $D, s#all %ifferentiate et1een t#e relative %e"rees of ris5 e8presse% 6 eac# assessmentE
)/ $D, s#all consi%er &uantitative factors* suc# as %efault an%/or loss rates an% t#e #istorical
performance of cre%it assessments of eac# $C,0 across %ifferent asset classesE
)c/ $D, s#all consi%er &ualitative factors suc# as t#e ran"e of transactions assesse% 6 t#e
$C,0* its met#o%olo"6 an% t#e meanin" of its cre%it assessments* in particular 1#et#er
ase% on e8pecte% loss or first $uro loss, and to tiel# pa#ent of interest or to ultiate
pa#ent of interestE
)%/ $D, s#all see5 to ensure t#at securitisation positions to 1#ic# t#e same ris5 1ei"#t is
applie% on t#e asis of t#e cre%it assessments of A $C,0s are su!ect to e&uivalent %e"rees
of cre%it ris57 $D, s#all consi%er mo%if6in" its %etermination as to t#e cre%it &ualit6 step
1it# 1#ic# a particular cre%it assessment s#all e associate%* as appropriate7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission 6 1 Eul# -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s referre% to in
t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of Re"ulation )$4/
Bo 1.93/-.1.7
C6pter 6
Counterprt: 2re.it risE
S$C20OB 1
D$30B020OBS
,rticle -==
Determination of t#e e8posure value
17 ,n institution s#all %etermine t#e e8posure value of %erivative instruments liste% in ,nne8
00 in accor%ance 1it# t#is C#apter7
-7 ,n institution ma6 %etermine t#e e8posure value of repurc#ase transactions* securities or
commo%ities len%in" or orro1in" transactions* lon" settlement transactions an% mar"in
len%in" transactions in accor%ance 1it# t#is C#apter instea% of ma5in" use of C#apter 47
,rticle -=>
Definitions
3or t#e purposes of t#is C#apter an% 2itle R0* t#e follo1in" %efinitions s#all appl6:
General terms
)1/ Mcounterpart6 cre%it ris5N )#ereinafter referre% to as MCCRN/ means t#e ris5 t#at t#e
counterpart6 to a transaction coul% %efault efore t#e final settlement of t#e transaction(s
cas# flo1sE
2ransaction t6pes
)-/ Mlon" settlement transactionsN means transactions 1#ere a counterpart6 un%erta5es to
%eliver a securit6* a commo%it6* or a forei"n e8c#an"e amount a"ainst cas#* ot#er financial
instruments* or commo%ities* or vice versa* at a settlement or %eliver6 %ate specifie% 6
contract t#at is later t#an t#e mar5et stan%ar% for t#is particular t6pe of transaction or five
usiness %a6s after t#e %ate on 1#ic# t#e institution enters into t#e transaction* 1#ic#ever
is earlierE
)3/ Mmar"in len%in" transactionsN means transactions in 1#ic# an institution e8ten%s cre%it in
connection 1it# t#e purc#ase* sale* carr6in" or tra%in" of securities7 9ar"in len%in"
transactions %o not inclu%e ot#er loans t#at are secure% 6 collateral in t#e form of
securitiesE
Bettin" set* #e%"in" sets* an% relate% terms
)4/ Mnettin" setN means a "roup of transactions et1een an institution an% a sin"le counterpart6
t#at is su!ect to a le"all6 enforceale ilateral nettin" arran"ement t#at is reco"nise%
un%er Section > an% C#apter 4E
$ac# transaction t#at is not su!ect to a le"all6 enforceale ilateral nettin" arran"ement
1#ic# is reco"nise% un%er Section > s#all e treate% as its o1n nettin" set for t#e purposes
of t#is C#apterE
4n%er t#e 0nternal 9o%el 9et#o% set out in Section =* all nettin" sets 1it# a sin"le
counterpart6 ma6 e treate% as a sin"le nettin" set if ne"ative simulate% mar5et values of
t#e in%ivi%ual nettin" sets are set to . in t#e estimation of e8pecte% e8posure )#ereinafter
referre% to as M$$N/E
)+/ Mris5 positionN means a ris5 numer t#at is assi"ne% to a transaction un%er t#e Stan%ar%ise%
9et#o% set out in Section+ follo1in" a pre%etermine% al"orit#mE
)=/ M#e%"in" setN means a "roup of ris5 positions arisin" from t#e transactions 1it#in a sin"le
nettin" set* 1#ere onl6 t#e alance of t#ose ris5 positions is use% for %eterminin" t#e
e8posure value un%er t#e Stan%ar%ise% 9et#o% set out in Section +E
)>/ Mmar"in a"reementN means an a"reement or provisions of an a"reement un%er 1#ic# one
counterpart6 must suppl6 collateral to a secon% counterpart6 1#en an e8posure of t#at
secon% counterpart6 to t#e first counterpart6 e8cee%s a specifie% levelE
)8/ Mmar"in t#res#ol%N means t#e lar"est amount of an e8posure t#at remains outstan%in"
efore one part6 #as t#e ri"#t to call for collateralE
)9/ Mmar"in perio% of ris5N means t#e time perio% from t#e most recent e8c#an"e of collateral
coverin" a nettin" set of transactions 1it# a %efaultin" counterpart6 until t#e transactions
are close% out an% t#e resultin" mar5et ris5 is re;#e%"e%E
)1./ Meffective maturit6 un%er t#e 0nternal 9o%el 9et#o% for a nettin" set 1it# maturit6 "reater
t#an one 6earN means t#e ratio of t#e sum of e8pecte% e8posure over t#e life of t#e
transactions in t#e nettin" set %iscounte% at t#e ris5;free rate of return* %ivi%e% 6 t#e sum
of e8pecte% e8posure over one 6ear in a nettin" set %iscounte% at t#e ris5;free rateE
2#is effective maturit6 ma6 e a%!uste% to reflect rollover ris5 6 replacin" e8pecte%
e8posure 1it# effective e8pecte% e8posure for forecastin" #oriLons un%er one 6earE
)11/ Mcross;pro%uct nettin"N means t#e inclusion of transactions of %ifferent pro%uct cate"ories
1it#in t#e same nettin" set pursuant to t#e Cross;Pro%uct Bettin" rules set out in t#is
C#apterE
)1-/ MCurrent 9ar5et RalueN )#ereinafter referre% to as MC9RN/ for t#e purposes of Section +
refers to t#e net mar5et value of t#e portfolio of transactions 1it#in a nettin" set* 1#ere
ot# positive an% ne"ative mar5et values are use% in computin" t#e C9RE
Distriutions
)13/ M%istriution of mar5et valuesN means t#e forecast of t#e proailit6 %istriution of net
mar5et values of transactions 1it#in a nettin" set for a future %ate )t#e forecastin"
#oriLon/* "iven t#e realise% mar5et value of t#ose transactions at t#e %ate of t#e forecastE
)14/ M%istriution of e8posuresN means t#e forecast of t#e proailit6 %istriution of mar5et
values t#at is "enerate% 6 settin" forecast instances of ne"ative net mar5et values e&ual to
LeroE
)1+/ Mris5;neutral %istriutionN means a %istriution of mar5et values or e8posures over a future
time perio% 1#ere t#e %istriution is calculate% usin" mar5et implie% values suc# as
implie% volatilitiesE
)1=/ Mactual %istriutionN means a %istriution of mar5et values or e8posures at a future time
perio% 1#ere t#e %istriution is calculate% usin" #istoric or realise% values suc# as
volatilities calculate% usin" past price or rate c#an"esE
$8posure measures an% a%!ustments
)1>/ Mcurrent e8posureN means t#e lar"er of Lero an% t#e mar5et value of a transaction or
portfolio of transactions 1it#in a nettin" set 1it# a counterpart6 t#at 1oul% e lost upon
t#e %efault of t#e counterpart6* assumin" no recover6 on t#e value of t#ose transactions in
insolvenc6 or li&ui%ationE
)18/ Mpea5 e8posureN means a #i"# percentile of t#e %istriution of e8posures at particular future
%ate efore t#e maturit6 %ate of t#e lon"est transaction in t#e nettin" setE
)19/ Me8pecte% e8posureN )#ereinafter referre% to as M$$N/ means t#e avera"e of t#e %istriution
of e8posures at a particular future %ate efore t#e lon"est maturit6 transaction in t#e nettin"
set maturesE
)-./ Meffective e8pecte% e8posure at a specific %ateN )#ereinafter referre% to as M$ffective $$N/
means t#e a5iu e5pe$ted e5posure that o$$urs at that date or an# prior date3
Alternativel#, it a# !e defined for a spe$ifi$ date as the "reater of t#e e8pecte% e8posure
at t#at A%ate or t#e effective e8pecte% e8posure at an# prior %ateE
)-1/ Me8pecte% positive e8posureN )#ereinafter referre% to as M$P$N/ means t#e 1ei"#te% avera"e
over time of e8pecte% e8posures* 1#ere t#e 1ei"#ts are t#e proportion of t#e entire time
perio% t#at an in%ivi%ual e8pecte% e8posure representsE
?#en calculatin" t#e o1n fun%s re&uirement* institutions s#all ta5e t#e avera"e over t#e
first 6ear or* if all t#e contracts 1it#in t#e nettin" set mature 1it#in less t#an one 6ear* over
t#e time perio% until the $ontra$t *ith t#e lon"est maturit6 Ain t#e nettin" set has
atured7
)--/ Meffective e8pecte% positive e8posureN )#ereinafter referre% to as M$ffective $P$N/ means
t#e 1ei"#te% avera"e of effective e8pecte% e8posure over t#e first 6ear of a nettin" set or*
if all t#e contracts 1it#in t#e nettin" set mature 1it#in less t#an one 6ear* over t#e time
perio% of t#e lon"est maturit6 contract in t#e nettin" set* 1#ere t#e 1ei"#ts are t#e
proportion of t#e entire time perio% t#at an in%ivi%ual e8pecte% e8posure representsE
CCR relate% ris5s
)-3/ Mrollover ris5N means t#e amount 6 1#ic# $P$ is un%erstate% 1#en future transactions
1it# a counterpart6 are e8pecte% to e con%ucte% on an on"oin" asisE
2#e a%%itional e8posure "enerate% 6 t#ose future transactions is not inclu%e% in
calculation of $P$E
)-4/ Mcounterpart6N for t#e purposes of Section > means an6 le"al or natural person t#at enters
into a nettin" a"reement* an% #as t#e contractual capacit6 to %o soE
)-+/ Mcontractual cross pro%uct nettin" a"reementN means a ilateral contractual a"reement
et1een an institution an% a counterpart6 1#ic# creates a sin"le le"al oli"ation )ase% on
nettin" of covere% transactions/ coverin" all ilateral master a"reements an% transactions
elon"in" to %ifferent pro%uct cate"ories t#at are inclu%e% 1it#in t#e a"reementE
3or t#e purposes of t#is %efinition* M%ifferent pro%uct cate"oriesN means:
)a/ repurc#ase transactions* securities an% commo%ities len%in" an% orro1in"
transactionsE
)/ mar"in len%in" transactionsE
)c/ t#e contracts liste% in ,nne8 00E
)-=/ Mpa6ment le"N means t#e pa6ment a"ree% in an O2C %erivative transaction 1it# a linear
ris5 profile 1#ic# stipulates t#e e8c#an"e of a financial instrument for a pa6ment7
0n t#e case of transactions t#at stipulate t#e e8c#an"e of pa6ment a"ainst pa6ment* t#ose
t1o pa6ment le"s s#all consist of t#e contractuall6 a"ree% "ross pa6ments* inclu%in" t#e
notional amount of t#e transaction7
S$C20OB -
9$2CODS 3OR C,FC4F,20BG 2C$ $GPOS4R$ R,F4$
,rticle -=8
9et#o%s for calculatin" t#e e8posure value
17 0nstitutions s#all %etermine t#e e8posure value for t#e contracts liste% in ,nne8 00 on t#e
asis of one of t#e met#o%s set out in Sections 3 to = in accor%ance 1it# t#is ,rticle7
,n institution 1#ic# is not eli"ile for t#e treatment set out in ,rticle 89 s#all not use t#e
ethod set out in "e$tion B3 2o %etermine t#e e8posure value for t#e contracts liste% in
point 3 of ,nne8 00 an institution s#all not use t#e ethod set out in "e$tion B3 &nstitutions
a# use in $o!ination t#e met#o%s set out in Sections 3 to = Aon a permanent asis
*ithin a group7 , sin"le institution s#all not use in $o!ination the ethods set out in
"e$tions C to ? on a peranent !asis !ut shall !e peritted to use in $o!ination
ethods set out in "e$tions C and @ *hen one of t#e met#o%s is use% for t#e cases set out
in ,rticle ->=)=/7
-7 ?#ere permitte% 6 t#e competent aut#orities in accor%ance 1it# para"rap#s 1 an% - of
,rticle ->>* an institution ma6 %etermine t#e e8posure value for t#e follo1in" items usin"
t#e 0nternal 9o%el 9et#o% set out in Section =:
)a/ t#e contracts liste% in ,nne8 00E
)/ repurc#ase transactionsE
)c/ securities or commo%ities len%in" or orro1in" transactionsE
)%/ mar"in len%in" transactionsE
)e/ lon" settlement transactions7
37 ?#en an institution purc#ases protection t#rou"# a cre%it %erivative a"ainst a non;tra%in"
oo5 e8posure or a"ainst a counterpart6 ris5 e8posure* it ma6 calculate its o1n fun%s
re&uirement for t#e #e%"e% e8posure in accor%ance 1it# eit#er of t#e follo1in":
)a/ ,rticle --8 to -31E
)/ in accor%ance 1it# ,rticle 148)3/* or ,rticle 1>9* 1#ere permission #as een "rante%
in accor%ance 1it# ,rticle 1387
2#e e8posure value for CCR for t#ose cre%it %erivatives s#all e Lero* unless an institution
applies t#e approac# )ii/ in point )#/ of ,rticle -93)-/7
47 Bot1it#stan%in" para"rap# 3* an institution ma6 c#oose consistentl6 to inclu%e for t#e
purposes of calculatin" o1n fun%s re&uirements for counterpart6 cre%it ris5 all cre%it
%erivatives not inclu%e% in t#e tra%in" oo5 an% purc#ase% as protection a"ainst a non;
tra%in" oo5 e8posure or a"ainst a counterpart6 $redit ris5 e8posure 1#ere t#e cre%it
protection is reco"nise% un%er t#is Re"ulation7
+7 ?#ere cre%it %efault s1aps sol% 6 an institution are treate% 6 an institution as cre%it
protection provi%e% 6 t#at institution an% are su!ect to o1n fun%s re&uirement for cre%it
ris5 of t#e un%erl6in" for t#e full notional amount* t#eir e8posure value for t#e purposes of
CCR in t#e non;tra%in" oo5 s#all e Lero7
=7 4n%er all met#o%s set out in Sections 3 to =* t#e e8posure value for a "iven counterpart6
s#all e e&ual to t#e sum of t#e e8posure values calculate% for eac# nettin" set 1it# t#at
counterpart67
1or a given $ounterpart#, t#e e8posure value for a "iven nettin" set of O2C %erivative
instruments liste% in ,nne8 00 calculate% in accor%ance 1it# t#is C#apter s#all e t#e
"reater of Lero an% t#e %ifference et1een t#e sum of e8posure values across all nettin"
sets 1it# t#e counterpart6 an% t#e sum of CR, for t#at counterpart6 ein" reco"nise% 6
t#e institution as an incurre% 1rite;%o1n3 +he $redit valuation ad9ustents shall !e
$al$ulated *ithout taking into a$$ount an# offsetting de!it value ad9ustent attri!uted to
the o*n $redit risk of the fir that has !een alread# e5$luded fro o*n funds under
Arti$le C: (4) ($)7
>7 0nstitutions s#all %etermine t#e e8posure value for e8posures arisin" from lon" settlement
transactions 6 an6 of t#e met#o%s set out in Sections 3 to =* re"ar%less of 1#ic# met#o%
t#e institution #as c#osen for treatin" O2C %erivatives an% repurc#ase transactions*
securities or commo%ities len%in" or orro1in" transactions* an% mar"in len%in"
transactions7 0n calculatin" t#e o1n fun%s re&uirements for lon" settlement transactions* an
institution t#at uses t#e approac# set out in C#apter 3 ma6 assi"n t#e ris5 1ei"#ts un%er t#e
approac# set out in C#apter - on a permanent asis an% irrespective of t#e materialit6 of
suc# positions7
87 3or t#e met#o%s set out in Sections 3 an% 4* t#e institution s#all a%opt a consistent
met#o%olo"6 for %eterminin" t#e notional amount for different produ$t t#pes* an% s#all
ensure t#at t#e notional amount to e ta5en into account provi%es an appropriate measure
of t#e ris5 in#erent in t#e contract7 ?#ere t#e contract provi%es for a multiplication of cas#
flo1s* t#e notional amount s#all e a%!uste% 6 an institution to ta5e into account t#e
effects of t#e multiplication on t#e ris5 structure of t#at contract7
1or the ethods set out in se$tions C to ?, institutions shall treat transa$tions *here
spe$ifi$ *rong *a# risk has !een identified in a$$ordan$e *ith Arti$le 2A@(2), (B), (@)
and (?) as appropriate3
S$C20OB 3
9,R: ' 2O ' 9,R:$2 9$2COD
,rticle -=9
9ar5;to;mar5et 9et#o%
17 0n or%er to %etermine t#e current replacement cost of all contracts 1it# positive values*
institutions s#all attac# t#e current mar5et values to t#e contracts7
-7 0n or%er to %etermine t#e potential future cre%it e8posure* institutions s#all multipl6 t#e
notional amounts or un%erl6in" values* as applicale* 6 t#e percenta"es in 2ale 1 an% in
accor%ance 1it# t#e follo1in" principles:
)a/ contracts 1#ic# %o not fall 1it#in one of t#e five cate"ories in%icate% in 2ale 1 s#all
e treate% as contracts concernin" commo%ities ot#er t#an precious metalsE
)/ for contracts 1it# multiple e8c#an"es of principal* t#e percenta"es s#all e
multiplie% 6 t#e numer of remainin" pa6ments still to e ma%e in accor%ance 1it#
t#e contractE
)c/ for contracts t#at are structure% to settle outstan%in" e8posure follo1in" specifie%
pa6ment %ates an% 1#ere t#e terms are reset so t#at t#e mar5et value of t#e contract
is Lero on t#ose specifie% %ates* t#e resi%ual maturit6 s#all e e&ual to t#e time until
t#e ne8t reset %ate7 0n t#e case of interest;rate contracts t#at meet t#ose criteria an%
#ave a remainin" maturit6 of over one 6ear* t#e percenta"e s#all e no lo1er t#an .7+
O7
2ale 1
Resi%ual
maturit6
0nterest;rate
contracts
Contracts
concernin"
forei"n;
e8c#an"e
rates an%
"ol%
Contracts
concernin"
e&uities
Contracts
concernin"
precious
metals
e8cept "ol%
Contracts
concernin"
commo%itie
s ot#er t#an
precious
metals
One 6ear or
less
. O 1 O = O > O 1. O
Over one
6ear* not
e8cee%in"
five 6ears
.7+ O + O 8 O > O 1- O
Over five
6ears
17+ O >7+ O 1. O 8 O 1+ O
37 3or contracts relatin" to commo%ities ot#er t#an "ol%* 1#ic# are referre% to in point 3 of
,nne8 00* an institution ma6* as an alternative to appl6in" t#e percenta"es in 2ale 1* appl6
t#e percenta"es in 2ale - provi%e% t#at t#at institution follo1s t#e e8ten%e% maturit6
la%%er approac# set out in ,rticle 3+. for t#ose contracts7
2ale -
Resi%ual
maturit6
Precious
metals )e8cept
"ol%/
Dase metals ,"ricultural
pro%ucts
)softs/
Ot#er*
inclu%in"
ener"6
pro%ucts
One 6ear or
less
- O -*+ O 3 O 4 O
Over one 6ear*
not e8cee%in"
five 6ears
+ O 4 O + O = O
Over five
6ears
>*+ O 8 O 9 O 1. O
47 2#e sum of current replacement cost an% potential future cre%it e8posure is t#e e8posure
value7
A
,rticle ->.
Ori"inal $8posure 9et#o%
17 2#e e8posure value is t#e notional amount of eac# instrument multiplie% 6 t#e
percenta"es set out in 2ale 37
2ale 3
Ori"inal maturit6 0nterest;rate
contracts
Contracts concernin" forei"n;
e8c#an"e rates an% "ol%
One 6ear or less .*+ O - O
Over one 6ear* not e8cee%in"
t1o 6ears
1 O + O
,%%itional allo1ance for eac#
a%%itional 6ear
1 O 3 O
-7 3or calculatin" t#e e8posure value of interest;rate contracts* an institution ma6 c#oose to
use eit#er t#e ori"inal or resi%ual maturit67
A
,rticle ->1
Stan%ar%ise% 9et#o%
17 0nstitutions ma6 use t#e Stan%ar%ise% 9et#o% )#ereinafter referre% to as MS9N/ onl6 for
calculatin" t#e e8posure value for O2C %erivatives an% lon" settlement transactions7
-7 ?#en appl6in" t#e S9* institutions s#all calculate t#e e8posure value separatel6 for eac#
nettin" set* net of collateral* as follo1s:

E,posure value ma8

'
2-? 2-2*

5PT
i4

5P2
l4

225-
4
;

4 i l

1#ere:
C9R U current mar5et value of t#e portfolio of transactions 1it#in t#e nettin" set 1it# a
counterpart6 "ross of collateral* 1#ere:
2-?

2-?i
i
1#ere:
C9R
i
U t#e current mar5et value of transaction iE
C9C U t#e current mar5et value of t#e collateral assi"ne% to t#e nettin" set* 1#ere:
2-2

2-2
l
l
1#ere
2-2
l
U t#e current mar5et value of collateral lE
i U in%e8 %esi"natin" transactionE
l U in%e8 %esi"natin" collateralE
4 U in%e8 %esi"natin" #e%"in" set cate"or6E
2#e #e%"in" sets for t#is purpose correspon% to ris5 factors for 1#ic# ris5 positions of
opposite si"n can e offset to 6iel% a net ris5 position on 1#ic# t#e e8posure measure is
t#en ase%7
5PT
i4
U ris5 position from transaction i 1it# respect to #e%"in" set !E
5P2
l4
U ris5 position from collateral l 1it# respect to #e%"in" set !E
225-
4
U CCR 9ultiplier set out in 2ale + 1it# respect to #e%"in" set !E
B U 1747
37 3or t#e purposes of t#e calculation un%er para"rap# -:
)a/ eli"ile collateral receive% from a counterpart6 s#all #ave a positive si"n an%
collateral poste% to a counterpart6 s#all #ave a ne"ative si"nE
)/ onl6 collateral t#at is eli"ile un%er ,rticle 193, Arti$le 4>B an% ,rticle 2>C(2)(d)
s#all e use% for t#e S9E
)c/ an institution ma6 %isre"ar% t#e interest rate ris5 from pa6ment le"s 1it# a remainin"
maturit6 of less t#an one 6earE
)%/ an institution ma6 treat transactions t#at consist of t1o pa6ment le"s t#at are
%enominate% in t#e same currenc6 as a sin"le a""re"ate transaction7 2#e treatment
for pa6ment le"s applies to t#e a""re"ate transaction7
Article 2%2
Transactions with a linear ris1 profile
17 0nstitutions s#all map transactions 1it# a linear ris5 profile to ris5 positions in accor%ance
1it# t#e follo1in" provisions:
)a/ transactions 1it# a linear ris5 profile 1it# e&uities )inclu%in" e&uit6 in%ices/* "ol%*
ot#er precious metals or ot#er commo%ities as t#e un%erl6in" s#all e mappe% to a
ris5 position in t#e respective e&uit6 )or e&uit6 in%e8/ or commo%it6 an% an interest
rate ris5 position for t#e pa6ment le"E
)/ transactions 1it# a linear ris5 profile 1it# a %et instrument as t#e un%erl6in"
instrument s#all e mappe% to an interest rate ris5 position for t#e %et instrument
an% anot#er interest rate ris5 position for t#e pa6ment le"E
)c/ transactions 1it# a linear ris5 profile t#at stipulate t#e e8c#an"e of pa6ment a"ainst
pa6ment* inclu%in" forei"n e8c#an"e for1ar%s* s#all e mappe% to an interest rate
ris5 position for eac# of t#e pa6ment le"s7
?#ere* un%er a transaction mentione% in point )a/* )/ or )c/* a pa6ment le" or t#e
un%erl6in" %et instrument is %enominate% in forei"n currenc6* t#at pa6ment le" or
un%erl6in" instrument s#all also e mappe% to a ris5 position in t#at currenc67
-7 3or t#e purposes of para"rap# 1* t#e siLe of a ris5 position from a transaction 1it# linear
ris5 profile s#all e t#e effective notional value )mar5et price multiplie% 6 &uantit6/ of t#e
un%erl6in" financial instruments or commo%ities converte% to t#e institution(s %omestic
currenc6 6 multiplication 1it# t#e relevant e8c#an"e rate* e8cept for %et instruments7
37 3or %et instruments an% for pa6ment le"s* t#e siLe of t#e ris5 position s#all e t#e
effective notional value of t#e outstan%in" "ross pa6ments )inclu%in" t#e notional amount/
converte% to t#e currenc6 of t#e #ome 9emer State of t#e institution* multiplie% 6 t#e
mo%ifie% %uration of t#e %et instrument or pa6ment le"* as t#e case ma6 e7
47 2#e siLe of a ris5 position from a cre%it %efault s1ap s#all e t#e notional value of t#e
reference %et instrument multiplie% 6 t#e remainin" maturit6 of t#e cre%it %efault s1ap7
,rticle ->3
2ransactions 1it# a non;linear ris5 profile
17 0nstitutions s#all %etermine t#e siLe of t#e ris5 positions for transactions 1it# a non;linear
ris5 profile in accor%ance 1it# t#e follo1in" para"rap#s7
-7 2#e siLe of a ris5 position from an O2C %erivative 1it# a non;linear ris5 profile* inclu%in"
options an% s1aptions* of 1#ic# t#e un%erl6in" is not a %et instrument or a pa#ent leg
s#all e e&ual to t#e %elta e&uivalent effective notional value of t#e financial instrument
t#at un%erlies t#e transaction in accor%ance 1it# ,rticle ->4)1/7
37 2#e siLe of a ris5 position from an O2C %erivative 1it# a non;linear ris5 profile* inclu%in"
options an% s1aptions* of 1#ic# t#e un%erl6in" is a %et instrument or a pa6ment le"* s#all
e e&ual to t#e %elta e&uivalent effective notional value of t#e financial instrument or
pa6ment le" multiplie% 6 t#e mo%ifie% %uration of t#e %et instrument or pa6ment le"* as
t#e case ma6 e7
Arti$le 20Ca
+reatent of Collateral
47 3or t#e %etermination of ris5 positions* institutions s#all treat collateral as follo1s:
)a/ collateral receive% from a counterpart6 s#all e treate% as a claim on t#e counterpart6
un%er a %erivative contract )lon" position/ t#at is %ue on t#e %a6 t#e %etermination is
ma%eE
)/ collateral it #as poste% 1it# t#e counterpart6 s#all e treate% as an oli"ation to t#e
counterpart6 )s#ort position/ t#at is %ue on t#e %a6 t#e %etermination is ma%e7
,rticle ->4
Calculation of ris5 positions
17 ,n institution s#all %etermine t#e siLe an% si"n of a ris5 position as follo1s:
)a/ for all instruments ot#er t#an %et instruments:
)i/ as t#e effective notional value in t#e case of a transaction 1it# a linear ris5
profileE
)ii/ as t#e %elta e&uivalent notional value*
1it# a non;linear ris5 profile*
1#ere:
p
ref

?
p
*in t#e case of a transaction
P
ref
U price of t#e un%erl6in" instrument* e8presse% in t#e reference currenc6E
R U value of t#e financial instrument )in t#e case of an option* t#e value is t#e
option price/E
p U price of t#e un%erl6in" instrument* e8presse% in t#e same currenc6 as RE
)/ for %et instruments an% t#e pa6ment le"s of all transactions:
)i/ as t#e effective notional value multiplie% 6 t#e mo%ifie% %uration in t#e case
of a transaction 1it# a linear ris5 profileE
)ii/ as t#e %elta e&uivalent in notional value multiplie% 6 t#e mo%ifie% %uration*
?
r
* in t#e case of a transaction 1it# a non;linear ris5 profile*
1#ere:
R U value of t#e financial instrument )in t#e case of an option t#is is t#e option
price/E
r U interest rate level7
0f R is %enominate% in a currenc6 ot#er t#an t#e reference currenc6* t#e
%erivative s#all e converte% into t#e reference currenc6 6 multiplication 1it#
t#e relevant e8c#an"e rate7
-7 &nstitutions s#all "roup t#e ris5 positions into #e%"in" sets7 2#e asolute value amount of
t#e sum of t#e resultin" ris5 positions s#all e calculate% for eac# #e%"in" set7 2#e net ris5
position s#all e t#e result of t#at calculation an% s#all e calculate% for t#e purposes of

5PT
i4

5P2
l4
Arti$le 204(2) as follo1s:
i l
,rticle ->+
0nterest rate ris5 positions
17 0n or%er to calculate interest rate risk position* institutions s#all appl6 t#e follo1in"
provisions7
-7 3or interest rate ris5 positions from t#e follo1in":
)a/ mone6 %eposits receive% from t#e counterpart6 as collateralE
)/ a pa6ment le"sE
)c/ un%erl6in" %et instruments*
to 1#ic# in eac# case a capital c#ar"e of 1*=. O or less applies in accor%ance 1it# 2ale 1
of ,rticle 3-+* institutions s#all assi"n t#ose positions to one of t#e si8 #e%"in" sets for
eac# currenc6 set out in 2ale 47
2ale 4
Government reference%
interest rates
Bon;"overnment reference%
interest rates
9aturit6 _ 1 6ear
[1 Z + 6ears
[ + 6ears
_ 1 6ear
[1 Z + 6ears
[ + 6ears
37 3or interest rate ris5 positions from un%erl6in" %et instruments or pa6ment le"s for 1#ic#
t#e interest rate is lin5e% to a reference interest rate t#at represents a "eneral mar5et
interest level* t#e remainin" maturit6 s#all e t#e len"t# of t#e time interval up to t#e ne8t
re;a%!ustment of t#e interest rate7 0n all ot#er cases* it s#all e t#e remainin" life of t#e
un%erl6in" %et instrument or* in t#e case of a pa6ment le"* t#e remainin" life of t#e
transaction7
,rticle ->=
Ce%"in" sets
17 0nstitutions s#all estalis# #e%"in" sets in accor%ance 1it# para"rap#s )-/ to )+/7
-7 2#ere s#all e one #e%"in" set for eac# issuer of a reference %et instrument t#at un%erlies
a cre%it %efault s1ap7
B;t# to %efault as5et cre%it %efault s1aps s#all e treate% as follo1s:
)a/ t#e siLe of a ris5 position in a reference %et instrument in a as5et un%erl6in" an n;
t# to %efault cre%it %efault s1ap s#all e t#e effective notional value of t#e reference
%et instrument* multiplie% 6 t#e mo%ifie% %uration of t#e n;t# to %efault %erivative
1it# respect to a c#an"e in t#e cre%it sprea% of t#e reference %et instrumentE
)/ t#ere s#all e one #e%"in" set for eac# reference %et instrument in a as5et
un%erl6in" a "iven Mnt# to %efaultN cre%it %efault s1ap7 Ris5 positions from %ifferent
n;t# to %efault cre%it %efault s1aps s#all not e inclu%e% in t#e same #e%"in" setE
)c/ t#e CCR multiplier applicale to eac# #e%"in" set create% for one of t#e reference
%et instruments of an n;t# to %efault %erivative s#all e as follo1s:
)i/ .73O for reference %et instruments t#at #ave a cre%it assessment from a
reco"nise% $C,0 e&uivalent to cre%it &ualit6 step 1 to 3E
)ii/ .7= O for ot#er %et instruments7
37 3or interest rate ris5 positions from:
)a/ mone6 %eposits t#at are poste% 1it# a counterpart6 as collateral 1#en t#at
counterpart6 %oes not #ave %et oli"ations of lo1 specific ris5 outstan%in"E
)/ un%erl6in" %et instruments* to 1#ic# accor%in" to 2ale 1 of ,rticle 3-+ a capital
c#ar"e of more t#an 17=. O applies%
+here s#all e one #e%"in" set for eac# issuer7
?#en a pa6ment le" emulates suc# a %et instrument* t#ere s#all also e one #e%"in" set
for eac# issuer of t#e reference %et instrument7
,n institution ma6 assi"n ris5 positions t#at arise from %et instruments of a particular
issuer* or from reference %et instruments of t#e same issuer t#at are emulate% 6 pa6ment
le"s* or t#at un%erlie a cre%it %efault s1ap* to t#e same #e%"in" set7
47 4n%erl6in" financial instruments ot#er t#an %et instruments s#all e assi"ne% to t#e same
#e%"in" sets onl6 if t#e6 are i%entical or similar instruments7 0n all ot#er cases t#e6 s#all e
assi"ne% to separate #e%"in" sets7
3or t#e purposes of t#is para"rap# institutions s#all %etermine 1#et#er un%erl6in"
instruments are similar in accor%ance 1it# t#e follo1in" principles:
)a/ for e&uities* t#e un%erl6in" is similar if it is issue% 6 t#e same issuer7 ,n e&uit6
in%e8 s#all e treate% as a separate issuerE
)/ for precious metals* t#e un%erl6in" is similar if it is t#e same metal7 , precious metal
in%e8 s#all e treate% as a separate precious metalE
)c/ for electric po1er* t#e un%erl6in" is similar if t#e %eliver6 ri"#ts an% oli"ations
refer to t#e same pea5 or off;pea5 loa% time interval 1it#in an6 -4;#our intervalE
)%/ for commo%ities* t#e un%erl6in" is similar if it is t#e same commo%it67 , commo%it6
in%e8 s#all e treate% as a separate commo%it67
+7 2#e CCR multipliers )#ereinafter referre% to as MCCR9N/ for t#e %ifferent #e%"in" set
cate"ories are set out in t#e follo1in" tale:
2ale +
Ce%"in" set cate"ories CCR9
17 0nterest Rates .7- O
-7 0nterest Rates for ris5 positions from a reference %et instrument
t#at un%erlies a cre%it %efault s1ap an% to 1#ic# a capital c#ar"e
of 17=. O* or less* applies un%er 2ale 1 of C#apter - of 2itle 0R7
.73 O
37 0nterest Rates for ris5 positions from a %et instrument or
reference %et instrument to 1#ic# a capital c#ar"e of more t#an
17=. O applies un%er 2ale 1 of C#apter - of 2itle 0R7
.7= O
47 $8c#an"e Rates -7+ O
+7 $lectric Po1er 4 O
=7 Gol% + O
>7 $&uit6 > O
87 Precious 9etals )ot#er t#an "ol%/ 87+ O
97 Ot#er Commo%ities )e8clu%in" precious metals an% electricit6
po1er/
1. O
1.7 4n%erl6in" instruments of O2C %erivatives t#at are not in an6 of
t#e aove cate"ories
1. O
2nderl#ing instruents of -+C derivatives, as referred to in point 4: of +a!le @, shall !e
assigned to separate individual hedging sets for ea$h $ategor# of underl#ing instruent3
A
=7 3or transactions 1it# a non;linear ris5 profile or for pa6ment le"s an% transactions 1it#
%et instruments as un%erl6in" for 1#ic# t#e institution cannot %etermine t#e %elta or t#e
mo%ifie% %uration* as t#e case ma6 e* 1it# an instrument mo%el t#at t#e competent
aut#orit6 #as approve% for t#e purposes of %eterminin" t#e o1n fun%s re&uirements for
mar5et ris5* t#e competent aut#orit6 s#all eit#er %etermine t#e siLe of t#e ris5 positions an%
t#e applicale CCR9
!
s conservativel6* or re&uire t#e institution to use of t#e met#o% set
out in Section 37Bettin" s#all not e reco"nise% )t#at is* t#e e8posure value s#all e
%etermine% as if t#ere 1ere a nettin" set t#at comprises !ust an in%ivi%ual transaction/7
>7 ,n institution s#all #ave internal proce%ures to verif6 t#at* prior to inclu%in" a transaction
in a #e%"in" set* t#e transaction is covere% 6 a le"all6 enforceale nettin" contract t#at
meets t#e re&uirements set out in Section >7
87 ,n institution t#at ma5es use of collateral to miti"ate its CCR s#all #ave internal
proce%ures to verif6 t#at* prior to reco"nisin" t#e effect of collateral in its calculations* t#e
collateral meets t#e le"al certaint6 stan%ar%s set out in C#apter 47
A
,rticle ->>
.erission to use the 0nternal 9o%el 9et#o%
17 Provi%e% t#at t#e competent aut#orities are satisfie% t#at t#e re&uirement in para"rap# -
#ave een met 6 an institution* t#e6 s#all permit t#at institution to use t#e 0nternal 9o%el
9et#o% )099/ to calculate t#e e8posure value for an6 of t#e follo1in" transactions:
)a/ transactions in ,rticle -=8)-/)a/E
)/ transactions in ,rticle -=8)-/)/* )c/ an% )%/E
)c/ transactions in ,rticle -=8)-/)a/ to )%/*
?#ere an institution is permitte% to use t#e 099 to calculate e8posure value for an6 of t#e
transactions mentione% in points )a/ to )c/ of t#e prece%in" su;para"rap#* it ma6 also use
t#e 099 for t#e transactions in ,rticle -=8)-/)e/7
Bot1it#stan%in" ,rticle -=8)1/* t#ir% su;para"rap#* an institution ma6 c#oose not to
appl6 t#is met#o% to e8posures t#at are immaterial in siLe an% ris57 0n suc# case* an
institution s#all appl6 one of t#e met#o%s set out in Sections 3 to + to t#ese e8posures
*here the relevant re6uireents for ea$h approa$h are et7
-7 Competent aut#orities s#all permit institutions to use 099 for t#e calculations referre% to
in para"rap# 1 onl6 if t#e institution #as %emonstrate% t#at it complies 1it# t#e
re&uirements set out in t#is Section* an% t#e competent aut#orities verifie% t#at t#e s6stems
for t#e mana"ement of CCR maintaine% 6 t#e institution are soun% an% properl6
implemente%7
37 2#e competent aut#orities ma6 permit institutions for a limite% perio% to implement t#e
099 se&uentiall6 across %ifferent transaction t6pes7 Durin" t#is perio% of se&uential
implementation institutions ma6 use t#e met#o%s set out in Section 3 or Section + for
transaction t6pe for 1#ic# t#e6 %o not use t#e 0997
47 3or all O2C %erivative transactions an% for lon" settlement transactions for 1#ic# an
institution #as not receive% permission un%er para"rap# 1 to use t#e 099* t#e institution
s#all use t#e met#o%s set out in Section 3 or Section +7
2#ose met#o%s ma6 e use% in comination on a permanent asis 1it#in a "roup7 ?it#in
an institution t#ose met#o%s ma6 e use% in comination onl6 1#ere one of t#e met#o%s is
use% for t#e cases set out in ,rticle ->=)=/
+7 ,n institution 1#ic# is permitte% in accor%ance 1it# para"rap# 1 to use t#e 099 s#all not
revert to t#e use of t#e met#o%s set out in Section 3 or Section + unless it is permitte% 6
t#e competent aut#orit6 to %o so7 Competent aut#orities s#all "ive suc# permission if t#e
institution %emonstrates "oo% cause7
=7 0f an institution ceases to compl6 1it# t#e re&uirements lai% %o1n in t#is Section* it s#all
notif6 t#e competent aut#orit6 an% %o one of t#e follo1in":
)a/ present to t#e competent aut#orit6 a plan for a timel6 return to complianceE
)/ %emonstrate to t#e satisfaction of t#e competent aut#orit6 t#at t#e effect of non;
compliance is immaterial7
,rticle ->8
$8posure value
17 ?#ere an institution is permitte%* in accor%ance 1it# ,rticle ->>)1/* to use t#e 099 to
calculate t#e e8posure value of some or all transactions mentione% in t#at para"rap#* it
s#all measure t#e e8posure value of t#ose transactions at t#e level of t#e nettin" set7
2#e mo%el use% 6 t#e institution for t#at purpose s#all:
)a/ specif6 t#e forecastin" %istriution for c#an"es in t#e mar5et value of t#e nettin" set
attriutale to !oint c#an"es in relevant mar5et variales* suc# as interest rates*
forei"n Ae8c#an"e ratesE
)/ calculate t#e e8posure value for t#e nettin" set at eac# of the future dates on t#e asis
of t#e !oint c#an"es in t#e mar5et variales7
-7 0n or%er for t#e mo%el to capture t#e effects of mar"inin"* t#e mo%el of t#e collateral value
s#all meet t#e &uantitative* &ualitative an% %ata re&uirements for t#e 099 mo%el in
accor%ance 1it# t#is Section an% t#e institution ma6 inclu%e in its forecastin" %istriutions
for c#an"es in t#e mar5et value of t#e nettin" set onl6 eli"ile financial collateral as
%efine% in ,rticle 193 A, ,rticle A4>B and Arti$le 2>C(2) ($) and d
37 2#e o1n fun%s re&uirement for counterpart6 cre%it ris5 1it# respect to t#e CCR e8posures
to 1#ic# an institution applies t#e 099* s#all e t#e #i"#er of t#e follo1in":
)a/ t#e o1n fun%s re&uirement for t#ose e8posures calculate% on t#e asis of $ffective
$P$ usin" current mar5et %ataE
)/ t#e o1n fun%s re&uirement for t#ose e8posures calculate% on t#e asis of $ffective
$P$ usin" a sin"le consistent stress caliration for all CCR e8posures to 1#ic# t#e6
appl6 t#e 0997
47 $8cept for counterparties i%entifie% as #avin" Specific ?ron";?a6 Ris5 t#at fall 1it#in
t#e scope of para"rap#s 4 an% + of ,rticle -8+* institutions s#all calculate t#e e8posure
value as t#e pro%uct of alp#a )a/ times $ffective $P$* as follo1s:
E,posure value Effective EPE
1#ere:
a U 174* unless competent aut#orities re&uire a #i"#er a or permit institutions to use t#eir
o1n estimates in accor%ance 1it# para"rap# 9E
$ffective $P$ s#all e calculate% 6 estimatin" e8pecte% e8posure )$$
t
/ as t#e avera"e
e8posure at future %ate t* 1#ere t#e avera"e is ta5en across possile future values of
relevant mar5et ris5 factors7
2#e mo%el s#all estimate $$ at a series of future %ates t
1
* t
-
* t
3
* etc7
+7 $ffective $$ s#all e calculate% recursivel6 as:
Effective EE
1
ma8{Effective EE
t
1 1
* EE
1
1#ere:
t#e current %ate is %enote% as t
.E
$ffective $$t
.
e&uals current e8posure7
=7 $ffective $P$ is t#e avera"e $ffective $$ %urin" t#e first 6ear of future e8posure7 0f all
contracts in t#e nettin" set mature 1it#in less t#an one 6ear* $P$ s#all e t#e avera"e of
$$ until all contracts in t#e nettin" set mature7 $ffective $P$ s#all e calculate% as a
1ei"#te% avera"e of $ffective $$:
Effective EPE
min{1 year *maturity}

Effective EE
t
1
t
1
1 1
1#ere t#e 1ei"#ts
t
1
t
1
t
1 1
allo1 for t#e case 1#en future e8posure is calculate% at
%ates t#at are not e&uall6 space% over time7
>7 0nstitutions s#all calculate $$ or pea5 e8posure measures on t#e asis of a %istriution of
e8posures t#at accounts for t#e possile non;normalit6 of t#e %istriution of e8posures7
t
t
}
87 ,n institution ma6 use a measure of t#e %istriution calculate% 6 t#e mo%el t#at is more
conservative t#an a multiplie% 6 $ffective $P$ as calculate% in accor%ance 1it# t#e
e&uation in para"rap# 4 for ever6 counterpart67
97 Bot1it#stan%in" para"rap# 4* competent aut#orities ma6 permit institutions to use t#eir
o1n estimates of alp#a* 1#ere:
)a/ alp#a s#all e&ual t#e ratio of internal capital from a full simulation of CCR e8posure
across counterparties )numerator/ an% internal capital ase% on $P$ )%enominator/E
)/ in t#e %enominator* $P$ s#all e use% as if it 1ere a fi8e% outstan%in" amount7
?#en estimate% in accor%ance 1it# t#is para"rap#* alp#a s#all e no lo1er t#an 17-7
1.7 3or t#e purposes of an estimate of alp#a un%er para"rap# 9* an institution s#all ensure t#at
t#e numerator an% %enominator are calculate% in a manner consistent 1it# t#e mo%ellin"
met#o%olo"6* parameter specifications an% portfolio composition7 2#e approac# use% to
estimate a s#all e ase% on t#e institution(s internal capital approac#* e 1ell %ocumente%
an% e su!ect to in%epen%ent vali%ation7 0n a%%ition* an institution s#all revie1 its
estimates of alp#a on at least a &uarterl6 asis* an% more fre&uentl6 1#en t#e composition
of t#e portfolio varies over time7 ,n institution s#all also assess t#e mo%el ris57
117 ,n institution s#all %emonstrate to t#e satisfaction of t#e competent aut#orities t#at its
internal estimates of alp#a capture in t#e numerator material sources of %epen%enc6 of
%istriution of mar5et values of transactions or of portfolios of transactions across
counterparties7 0nternal estimates of alp#a s#all ta5e account of t#e "ranularit6 of
portfolios7
1-7 0n supervisin" t#e use of estimates un%er para"rap# 9* competent aut#orities s#all #ave
re"ar% to t#e si"nificant variation in estimates of alp#a t#at arises from t#e potential for
mis;specification in t#e mo%els use% for t#e numerator* especiall6 1#ere conve8it6 is
present7
137 ?#ere appropriate* volatilities an% correlations of mar5et ris5 factors use% in t#e !oint
mo%ellin" of mar5et an% cre%it ris5 s#all e con%itione% on t#e cre%it ris5 factor to reflect
potential increases in volatilit6 or correlation in an economic %o1nturn7
,rticle ->9
$8posure value for nettin" sets su!ect to a mar"in a"reement
17 0f t#e nettin" set is su!ect to a mar"in a"reement an% %ail6 mar5;to;mar5et valuation* an
institution ma6 use one of t#e follo1in" $P$ measures:
)a/ $ffective $P$* 1it#out ta5in" into account an6 collateral #el% or poste% 6 1a6 of
mar"in plus an6 collateral t#at #as een poste% to t#e counterpart6 in%epen%ent of t#e
%ail6 valuation an% mar"inin" process or current e8posureE
)/ ,n a%%;on t#at reflects t#e potential increase in e8posure over t#e mar"in perio% of
ris5* plus t#e lar"er of:
)i/ t#e current e8posure inclu%in" all collateral currentl6 #el% or poste%* ot#er t#an
collateral calle% or in %isputeE
)ii/ t#e lar"est net e8posure* inclu%in" collateral un%er t#e mar"in a"reement* t#at
1oul% not tri""er a collateral call7 2#is amount s#all reflect all applicale
t#res#ol%s* minimum transfer amounts* in%epen%ent amounts an% initial
mar"ins un%er t#e mar"in a"reementE
)c/ 0f t#e mo%el captures t#e effects of mar"inin" 1#en estimatin" $$* t#e institution
ma6* su!ect to t#e permission of t#e competent aut#orit6* use t#e mo%el(s $$
measure %irectl6 in t#e e&uation in ,rticle 20A)+/7 Competent aut#orities s#all "rant
suc# permission onl6 if t#e6 verif6 t#at t#e mo%el properl6 captures t#e effects of
mar"inin" 1#en estimatin" $$7
3or t#e purposes of point )/* institutions s#all calculate t#e a%%;on as t#e e8pecte%
positive c#an"e of t#e mar5;to;mar5et value of t#e transactions %urin" t#e mar"in perio%
of ris57 C#an"es in t#e value of collateral s#all e reflecte% usin" t#e supervisor6 volatilit6
a%!ustments in accor%ance 1it# Section 3 of C#apter 4 or t#e o1n estimates of volatilit6
a%!ustments of t#e 3inancial Collateral Compre#ensive 9et#o%* ut no collateral pa6ments
s#all e assume% %urin" t#e mar"in perio% of ris57 2#e mar"in perio% of ris5 is su!ect to
t#e minimum perio%s set out in para"rap#s - to 47
-7 3or transactions su!ect to %ail6 re;mar"inin" an% mar5;to;mar5et valuation* t#e mar"in
perio% of ris5 use% for t#e purpose of mo%ellin" t#e e8posure value 1it# mar"in
a"reements s#all not e less t#an:
)a/ + usiness %a6s for nettin" sets consistin" onl6 of repurc#ase transactions* securities
or commo%ities len%in" or orro1in" transactions an% mar"in len%in" transactionsE
)/ 1. usiness %a6s for all ot#er nettin" sets7
Points )a/ an% )/ s#all e su!ect to t#e follo1in" e8ceptions:
)i/ for all nettin" sets 1#ere t#e numer of tra%es e8cee%s +*... at an6 point
%urin" a &uarter* t#e mar"in perio% of ris5 for t#e follo1in" &uarter s#all not e
less t#an -. usiness %a6s7 2#is e8ception s#all not appl6 to institutions( tra%e
e8posuresE
)ii/ for nettin" sets containin" one or more tra%es involvin" eit#er illi&ui%
collateral* or an O2C %erivative t#at cannot e easil6 replace%* t#e mar"in
perio% of ris5 s#all not e less t#an -. usiness %a6s7
,n institution s#all %etermine 1#et#er collateral is illi&ui% or 1#et#er O2C %erivatives
cannot e easil6 replace% in t#e conte8t of stresse% mar5et con%itions* c#aracterise% 6 t#e
asence of continuousl6 active mar5ets 1#ere a counterpart6 1oul%* 1it#in t1o %a6s or
fe1er* otain multiple price &uotations t#at 1oul% not move t#e mar5et or represent a price
reflectin" a mar5et %iscount )in t#e case of collateral/ or premium )in t#e case of an O2C
%erivative/7
,n institution s#all consi%er 1#et#er tra%es or securities it #ol%s as collateral are
concentrate% in a particular counterpart6 an% if t#at counterpart6 e8ite% t#e mar5et
precipitousl6 1#et#er t#e institution 1oul% e ale to replace t#ose tra%es or securities7
37 0f an institution #as een involve% in more t#an t1o mar"in call %isputes on a particular
nettin" set A over t#e imme%iatel6 prece%in" t1o &uarters t#at #ave laste% lon"er t#an t#e
applicale mar"in perio% of ris5 un%er para"rap# -* t#e institution s#all use a mar"in
perio% of ris5 t#at is at least %oule t#e perio% specifie% in para"rap# - for t#at nettin" set
for t#e suse&uent t1o &uarters7
47 3or re;mar"inin" 1it# a perio%icit6 of B %a6s* t#e mar"in perio% of ris5 s#all e at least
e&ual to t#e perio% specifie% in para"rap# -* 3* plus B %a6s minus one %a67 2#at is:
9ar"in Perio% of Ris5 U 3 ` B ; 1
+7 0f t#e internal mo%el inclu%es t#e effect of mar"inin" on c#an"es in t#e mar5et value of t#e
nettin" set* an institution s#all mo%el collateral* ot#er t#an cas# of t#e same currenc6 as t#e
e8posure itself* !ointl6 1it# t#e e8posure in its e8posure value calculations for O2C
%erivatives an% securities;financin" transactions7
=7 0f an institution is not ale to mo%el collateral !ointl6 1it# t#e e8posure* it s#all not
reco"nise in its e8posure value calculations for O2C %erivatives an% securities;financin"
transactions t#e effect of collateral ot#er t#an cas# of t#e same currenc6 as t#e e8posure
itself* unless it uses eit#er volatilit6 a%!ustments t#at meet t#e stan%ar%s of t#e financial
collateral compre#ensive met#o% 1it# o1n volatilit6 a%!ustments estimates or t#e stan%ar%
supervisor6 volatilit6 a%!ustments in accor%ance 1it# C#apter 47
>7 ,n institution usin" t#e 099 s#all i"nore in its mo%els t#e effect of a re%uction of t#e
e8posure value %ue to an6 clause in a collateral a"reement t#at re&uires receipt of collateral
1#en counterpart6 cre%it &ualit6 %eteriorates7
,rticle -8.
9ana"ement of CCR ' Policies* processes an% s6stems
17 ,n institution s#all estalis# an% maintain a CCR mana"ement frame1or5* consistin" of:
)a/ policies* processes an% s6stems to ensure t#e i%entification* measurement*
mana"ement* approval an% internal reportin" of CCRE
)/ proce%ures for ensurin" t#at t#ose policies* processes an% s6stems are complie% 1it#7
2#ose polices* processes an% s6stems s#all e conceptuall6 soun%* implemente% 1it#
inte"rit6 an% %ocumente%7 2#e %ocumentation s#all inclu%e an e8planation of t#e empirical
tec#ni&ues use% to measure CCR7
-7 2#e CCR ris5 mana"ement frame1or5 re&uire% 6 para"rap# 1 s#all ta5e account of
mar5et* li&ui%it6* an% le"al an% operational ris5s t#at are associate% 1it# CCR7 0n
particular* t#e frame1or5 s#all ensure t#at t#e institution complies 1it# t#e follo1in"
principles:
)a/ it %oes not un%erta5e usiness 1it# a counterpart6 1it#out assessin" its
cre%it1ort#inessE
)/ it ta5es %ue account of settlement an% pre;settlement cre%it ris5E
)c/ it mana"es suc# ris5s as compre#ensivel6 as practicale at t#e counterpart6 level 6
a""re"atin" CCR e8posures 1it# ot#er cre%it e8posures an% at t#e firm;1i%e level7
37 ,n institution usin" t#e 099 s#all ensure t#at its CCR ris5 mana"ement frame1or5
accounts to t#e satisfaction of t#e competent aut#orit6 for t#e li&ui%it6 ris5s of all of t#e
follo1in":
)a/ potential incomin" mar"in calls in t#e conte8t of e8c#an"es of variation mar"in or
ot#er mar"in t6pes* suc# as initial or in%epen%ent mar"in* un%er a%verse mar5et
s#oc5sE
)/ potential incomin" calls for t#e return of e8cess collateral poste% 6 counterpartiesE
)c/ calls resultin" from a potential %o1n"ra%e of its o1n e8ternal cre%it &ualit6
assessment7
,n institution s#all ensure t#at t#e nature an% #oriLon of collateral re;use is consistent 1it#
its li&ui%it6 nee%s an% %oes not !eopar%ise its ailit6 to post or return collateral in a timel6
manner7
47 ,n institution(s mana"ement o%6 an% senior mana"ement s#all e activel6 involve% in*
an% ensure t#at a%e&uate resources are allocate% to* t#e mana"ement of CCR7 Senior
mana"ement s#all e a1are of t#e limitations an% assumptions of t#e mo%el use% an% t#e
impact t#ose limitations an% assumptions can #ave on t#e reliailit6 of t#e output t#rou"# a
formal process7 Senior mana"ement s#all e also a1are of t#e uncertainties of t#e mar5et
environment an% operational issues an% of #o1 t#ese are reflecte% in t#e mo%el7
+7 2#e %ail6 reports prepare% on an institution(s e8posures to CCR in accor%ance 1it# ,rticle
-81)-/)/ s#all e revie1e% 6 a level of mana"ement 1it# sufficient seniorit6 an%
aut#orit6 to enforce ot# re%uctions of positions ta5en 6 in%ivi%ual cre%it mana"ers or
tra%ers an% re%uctions in t#e institution(s overall CCR e8posure7
=7 ,n institution(s CCR mana"ement frame1or5 estalis#e% in accor%ance 1it# para"rap# 1
s#all e use% in con!unction 1it# internal cre%it an% tra%in" limits7 Cre%it an% tra%in"
limits s#all e relate% to t#e institution(s ris5 measurement mo%el in a manner t#at is
consistent over time an% t#at is 1ell un%erstoo% 6 cre%it mana"ers* tra%ers an% senior
mana"ement7 ,n institution s#all #ave a formal process to report reac#es of ris5 limits to
t#e appropriate level of mana"ement7
>7 ,n institution(s measurement of CCR s#all inclu%e measurin" %ail6 an% intra;%a6 use of
cre%it lines7 2#e institution s#all measure current e8posure "ross an% net of collateral7 ,t
portfolio an% counterpart6 level* t#e institution s#all calculate an% monitor pea5 e8posure
or potential future e8posure at t#e confi%ence interval c#osen 6 t#e institution7 2#e
institution s#all ta5e account of lar"e or concentrate% positions* inclu%in" 6 "roups of
relate% counterparties* 6 in%ustr6 an% 6 mar5et7
87 ,n institution s#all estalis# an% maintain a routine an% ri"orous pro"ram of stress testin"7
2#e results of t#at stress testin" s#all e revie1e% re"ularl6 an% at least &uarterl6 6 senior
mana"ement an% s#all e reflecte% in t#e CCR policies an% limits set 6 t#e mana"ement
o%6 or senior mana"ement7 ?#ere stress tests reveal particular vulnerailit6 to a "iven set
of circumstances* t#e institution s#all ta5e prompt steps to mana"e t#ose ris5s7
,rticle -81
Or"anisation structures for CCR ris5 mana"ement
17 ,n institution usin" t#e 099 s#all estalis# an% maintain:
)a/ a ris5 control unit t#at complies 1it# para"rap# -E
)/ a collateral mana"ement unit t#at complies 1it# para"rap# 37
-7 2#e ris5 control unit s#all e responsile for t#e %esi"n an% implementation of its CCR
mana"ement* inclu%in" t#e initial an% on;"oin" vali%ation of t#e mo%el* an% s#all carr6 out
t#e follo1in" functions an% meet t#e follo1in" re&uirements:
)a/ it s#all e responsile for t#e %esi"n an% implementation of t#e CCR mana"ement
s6stem of t#e institutionE
)/ it s#all pro%uce %ail6 reports on an% anal6se t#e output of t#e institutionNs ris5
measurement mo%el7 2#at anal6sis s#all inclu%e an evaluation of t#e relations#ip
et1een measures of CCR e8posure values an% tra%in" limitsE
)c/ it s#all control input %ata inte"rit6 an% pro%uce an% anal6se reports on t#e output of
t#e institution(s ris5 measurement mo%el* inclu%in" an evaluation of t#e relations#ip
et1een measures of ris5 e8posure an% cre%it an% tra%in" limitsE
)%/ it s#all e in%epen%ent from units responsile for ori"inatin"* rene1in" or tra%in"
e8posures an% free from un%ue influenceE
)e/ it s#all e a%e&uatel6 staffe%E
)f/ it s#all report %irectl6 to t#e senior mana"ement of t#e institutionE
)"/ its 1or5 s#all e closel6 inte"rate% into t#e %a6;to;%a6 cre%it ris5 mana"ement
process of t#e institutionE
)#/ its output s#all e an inte"ral part of t#e process of plannin"* monitorin" an%
controllin" t#e institution(s cre%it an% overall ris5 profile7
37 2#e collateral mana"ement unit s#all carr6 out t#e follo1in" tas5s an% functions:
)a/ calculatin" an% ma5in" mar"in calls* mana"in" mar"in call %isputes an% reportin"
levels of in%epen%ent amounts* initial mar"ins an% variation mar"ins accuratel6 on a %ail6
asisE
)/ controllin" t#e inte"rit6 of t#e %ata use% to ma5e mar"in calls* an% ensurin" t#at it is
consistent an% reconcile% re"ularl6 1it# all relevant sources of %ata 1it#in t#e institutionE
)c/ trac5in" t#e e8tent of re;use of collateral an% an6 mo%ification of t#e ri"#ts of t#e
institution to or in connection 1it# t#e collateral t#at it postsE
)%/ reportin" to t#e appropriate level of mana"ement t#e t6pes of collateral assets t#at
are reuse%* an% t#e terms of suc# reuse inclu%in" instrument* cre%it &ualit6 an% maturit6E
)e/ trac5in" concentration to in%ivi%ual t6pes of collateral assets accepte% 6 t#e
institutionE
)f/ reportin" collateral mana"ement information on a re"ular asis* ut at least
&uarterl6* to senior mana"ement* inclu%in" information on t#e t6pe of collateral receive%
an% poste%* t#e siLe* a"in" an% cause for mar"in call %isputes7 2#at internal reportin" s#all
also reflect tren%s in t#ese fi"ures7
47 Senior mana"ement s#all allocate sufficient resources to t#e collateral mana"ement unit
re&uire% un%er para"rap# 1)/ to ensure t#at its s6stems ac#ieve an appropriate level of
operational performance* as measure% 6 t#e timeliness an% accurac6 of mar"in calls 6
t#e institution an% t#e timeliness of t#e response of t#e institution to mar"in calls 6 its
counterparties7 Senior mana"ement s#all ensure t#at t#e unit is a%e&uatel6 staffe% to
process calls an% %isputes in a timel6 manner even un%er severe mar5et crisis* an% to
enale t#e institution to limit its numer of lar"e %isputes cause% 6 tra%e volumes7
,rticle -8-
Revie1 of CCR ris5 mana"ement s6stem
,n institution s#all re"ularl6 con%uct an in%epen%ent revie1 of its CCR mana"ement s6stem
t#rou"# its internal au%itin" process7 2#at revie1 s#all inclu%e ot# t#e activities of t#e control an%
collateral mana"ement units re&uire% 6 ,rticle -81 an% s#all specificall6 a%%ress* as a minimum:
)a/ t#e a%e&uac6 of t#e %ocumentation of t#e CCR mana"ement s6stem an% process re&uire%
6 ,rticle -8.E
)/ t#e or"anisation of t#e CCR control unit re&uire% 6 ,rticle -81)1/)a/E
)c/ t#e or"anisation of t#e collateral mana"ement unit re&uire% 6 ,rticle -81)1/)/E
)%/ t#e inte"ration of CCR measures into %ail6 ris5 mana"ementE
)e/ t#e approval process for ris5 pricin" mo%els an% valuation s6stems use% 6 front an% ac5;
office personnelE
)f/ t#e vali%ation of an6 si"nificant c#an"e in t#e CCR measurement processE
)"/ t#e scope of CCR capture% 6 t#e ris5 measurement mo%elE
)#/ t#e inte"rit6 of t#e mana"ement information s6stemE
)i/ t#e accurac6 an% completeness of CCR %ataE
)!/ t#e accurate reflection of le"al terms in collateral an% nettin" a"reements into e8posure
value measurementsE
)5/ t#e verification of t#e consistenc6* timeliness an% reliailit6 of %ata sources use% to run
mo%els* inclu%in" t#e in%epen%ence of suc# %ata sourcesE
)l/ t#e accurac6 an% appropriateness of volatilit6 an% correlation assumptionsE
)m/ t#e accurac6 of valuation an% ris5 transformation calculationsE
)n/ t#e verification of t#e mo%el(s accurac6 t#rou"# fre&uent ac5;testin" as set out in points
)/ to )e/ of ,rticle -8>)1/E
)o/ t#e compliance of t#e CCR control unit an% collateral mana"ement unit 1it# t#e relevant
re"ulator6 re&uirements7
,rticle -83
4se test
17 0nstitutions s#all ensure t#at t#e %istriution of e8posures "enerate% 6 t#e mo%el use% to
calculate effective $P$ is closel6 inte"rate% into t#e %a6;to;%a6 CCR mana"ement process
of t#e institution* an% t#at t#e output of t#e mo%el is ta5en into account in t#e process of
cre%it approval* CCR mana"ement, internal capital allocation and $orporate governan$e7
-7 2#e institution s#all %emonstrate to t#e satisfaction of t#e competent aut#orities t#at it #as
een usin" a mo%el to calculate t#e %istriution of e8posures upon 1#ic# t#e $P$
calculation is ase% t#at meets* roa%l6* t#e re&uirements set out in t#is Section for at least
one 6ear prior to permission to use t#e 099 6 t#e competent aut#orities in accor%ance
1it# ,rticle ->>7
37 2#e mo%el use% to "enerate a %istriution of e8posures to CCR s#all e part of t#e CCR
mana"ement frame1or5 re&uire% 6 ,rticle -8.7 2#is frame1or5 s#all inclu%e t#e
measurement of usa"e of cre%it lines* a""re"atin" CCR e8posures 1it# ot#er cre%it
e8posures an% internal capital allocation7
47 0n a%%ition to $P$* an institution s#all measure an% mana"e current e8posures7 ?#ere
appropriate* t#e institution s#all measure current e8posure "ross an% net of collateral7 2#e
use test is satisfie% if an institution uses ot#er CCR measures* suc# as pea5 e8posure* ase%
on t#e %istriution of e8posures "enerate% 6 t#e same mo%el to compute $P$7
+7 ,n institution s#all #ave t#e s6stems capailit6 to estimate $$ %ail6 if necessar6* unless it
%emonstrates to t#e satisfaction of its competent aut#orities t#at its e8posures to CCR
1arrant less fre&uent calculation7 2#e institution s#all estimate $$ alon" a time profile of
forecastin" #oriLons t#at a%e&uatel6 reflects t#e time structure of future cas# flo1s an%
maturit6 of t#e contracts an% in a manner t#at is consistent 1it# t#e materialit6 an%
composition of t#e e8posures7
=7 $8posure s#all e measure%* monitore% an% controlle% over t#e life of all contracts in t#e
nettin" set an% not onl6 to t#e one 6ear #oriLon7 2#e institution s#all #ave proce%ures in
place to i%entif6 an% control t#e ris5s for counterparties 1#ere t#e e8posure rises e6on%
t#e one;6ear #oriLon7 2#e forecast increase in e8posure s#all e an input into t#e
institution(s internal capital mo%el7
,rticle -84
Stress testin"
17 ,n institution s#all #ave a compre#ensive stress testin" pro"ramme for CCR* inclu%in" for
use in assessment of o1n fun%s re&uirements for CCR* 1#ic# complies 1it# t#e
re&uirements lai% %o1n in para"rap#s - to 1.7
-7 0t s#all i%entif6 possile events or future c#an"es in economic con%itions t#at coul% #ave
unfavourale effects on an institution(s cre%it e8posures an% assess t#e institution(s ailit6
to 1it#stan% suc# c#an"es7
37 2#e stress measures un%er t#e pro"ramme s#all e compare% a"ainst ris5 limits an%
consi%ere% 6 t#e institution as part of t#e process set out in ,rticle >9 of Directive
Jinserte% 6 OPK7
47 2#e pro"ramme s#all compre#ensivel6 capture tra%es an% a""re"ate e8posures across all
forms of counterpart6 cre%it ris5 at t#e level of specific counterparties in a sufficient time
frame to con%uct re"ular stress testin"7
+7 0t s#all provi%e for at least mont#l6 e8posure stress testin" of principal mar5et ris5 factors
suc# as interest rates* 3G* e&uities* cre%it sprea%s* an% commo%it6 prices for all
counterparties of t#e institution* in or%er to i%entif6* an% enale t#e institution 1#en
necessar6 to re%uce outsiLe% concentrations in specific %irectional ris5s7 $8posure stress
testin" ;inclu%in" sin"le factor* multifactor an% material non;%irectional ris5s; an% !oint
stressin" of e8posure an% cre%it1ort#iness s#all e performe% at t#e counterpart6;specific*
counterpart6 "roup an% a""re"ate institution;1i%e CCR levels7
=7 0t s#all appl6 at least &uarterl6 multifactor stress testin" scenarios an% assess material non;
%irectional ris5s inclu%in" 6iel% curve e8posure an% asis ris5s7 9ultiple;factor stress tests
s#all* at a minimum* a%%ress t#e follo1in" scenarios in 1#ic# t#e follo1in" occurs:
)a/ severe economic or mar5et events #ave occurre%E
)/ roa% mar5et li&ui%it6 #as %ecrease% si"nificantl6E
)c/ a lar"e financial interme%iar6 is li&ui%atin" positions7
>7 2#e severit6 of t#e s#oc5s of t#e un%erl6in" ris5 factors s#all e consistent 1it# t#e
purpose of t#e stress test7 ?#en evaluatin" solvenc6 un%er stress* t#e s#oc5s of t#e
un%erl6in" ris5 factors s#all e sufficientl6 severe to capture #istorical e8treme mar5et
environments an% e8treme ut plausile stresse% mar5et con%itions7 2#e stress tests s#all
evaluate t#e impact of suc# s#oc5s on o1n fun%s* o1n fun%s re&uirements an% earnin"s7
3or t#e purpose of %a6;to;%a6 portfolio monitorin"* #e%"in"* an% mana"ement of
concentrations t#e testin" pro"ramme s#all also consi%er scenarios of lesser severit6 an%
#i"#er proailit67
87 2#e pro"ramme s#all inclu%e provision* 1#ere appropriate* for reverse stress tests to
i%entif6 e8treme* ut plausile* scenarios t#at coul% result in si"nificant a%verse outcomes7
Reverse stress testin" s#all account for t#e impact of material non;linearit6 in t#e portfolio7
97 2#e results of t#e stress testin" un%er t#e pro"ramme s#all e reporte% re"ularl6* at least on
a &uarterl6 asis* to senior mana"ement7 2#e reports an% anal6sis of t#e results s#all cover
t#e lar"est counterpart6;level impacts across t#e portfolio* material concentrations 1it#in
se"ments of t#e portfolio )1it#in t#e same in%ustr6 or re"ion/* an% relevant portfolio an%
counterpart6 specific tren%s7
1.7 Senior mana"ement s#all ta5e a lea% role in t#e inte"ration of stress testin" into t#e ris5
mana"ement frame1or5 an% ris5 culture of t#e institution an% ensure t#at t#e results are
meanin"ful an% use% to mana"e CCR7 2#e results of stress testin" for si"nificant e8posures
s#all e assesse% a"ainst "ui%elines t#at in%icate t#e institutionNs ris5 appetite* an% referre%
to senior mana"ement for %iscussion an% action 1#en e8cessive or concentrate% ris5s are
i%entifie%7
,rticle -8+
?ron";?a6 Ris5
17 3or t#e purposes of t#is ,rticle:
)a/ MGeneral ?ron";?a6 ris5N arises 1#en t#e li5eli#oo% of %efault 6 counterparties is
positivel6 correlate% 1it# "eneral mar5et ris5 factorsE
)/ (Specific ?ron";?a6 ris5N arises 1#en future e8posure to a specific counterpart6 is
positivel6 correlate% 1it# t#e counterpart6Ns proailit6 of %efault %ue to t#e nature
of t#e transactions 1it# t#e counterpart67 ,n institution s#all e consi%ere% to e
e8pose% to Specific ?ron";?a6 Ris5 if t#e future e8posure to a specific
counterpart6 is e8pecte% to e #i"# 1#en t#e counterpart6(s proailit6 of a %efault is
also #i"#7
-7 ,n institution s#all "ive %ue consi%eration to e8posures t#at "ive rise to a si"nificant
%e"ree of Specific an% General ?ron";?a6 Ris57
37 0n or%er to i%entif6 General ?ron";?a6 Ris5* an institution s#all %esi"n stress testin" an%
scenario anal6ses to stress ris5 factors t#at are a%versel6 relate% to counterpart6 cre%it
1ort#iness7 Suc# testin" s#all a%%ress t#e possiilit6 of severe s#oc5s occurrin" 1#en
relations#ips et1een ris5 factors #ave c#an"e%7 ,n institution s#all monitor General
?ron" ?a6 Ris5 6 pro%uct* 6 re"ion* 6 in%ustr6* or 6 ot#er cate"ories t#at are
relevant to t#e usiness7
47 ,n institution s#all maintain proce%ures to i%entif6* monitor an% control cases of Specific
?ron";?a6 ris5 for eac# le"al entit6* e"innin" at t#e inception of a transaction an%
continuin" t#rou"# t#e life of t#e transaction7 A
+7 0nstitutions s#all calculate t#e o1n fun%s re&uirements for CCR in relation to transa$tions
1#ere Specific ?ron";?a6 ris5 #as een i%entifie% and *here there e5ists a legal
$onne$tion !et*een the $ounterpart# and the issuer of the underl#ing of the -+C
derivative or the underl#ing of the transa$tions referred to in Arti$le 2?A(2)(!) to (d), in
accor%ance 1it# t#e follo1in" principles:
)a/ t#e instruments 1#ere Specific ?ron";?a6 ris5 e8ists s#all not e inclu%e% in t#e
same nettin" set as ot#er transactions 1it# t#e counterpart6* an% s#all eac# e treate%
as a separate nettin" setE
)/ 1it#in an6 suc# separate nettin" set* for sin"le;name cre%it %efault s1aps t#e
e8posure value e&uals t#e full e8pecte% loss in t#e value of t#e remainin" fair value
of t#e un%erl6in" instruments ase% on t#e assumption t#at t#e un%erl6in" issuer is in
li&ui%ationE
)c/ FGD for an institution usin" t#e approac# set out in C#apter 3 s#all e 1..O for
suc# s1ap transactionsE
)%/ for an institution usin" t#e approac# set out in C#apter -* t#e applicale ris5 1ei"#t
s#all e t#at of an unsecure% transactionE
)e/ for all ot#er transactions referencin" a sin"le name in an6 suc# separate nettin" set*
t#e calculation of t#e e8posure value s#all e consistent 1it# t#e assumption of a
!ump;to;%efault of At#ose un%erl6in" oli"ations 1#ere t#e issuer is le"all6
connecte% 1it# t#e counterpart67 3or transactions referencin" a as5et of names or
in%e8* t#e !ump;to;%efault of t#e respective un%erl6in" oli"ations 1#ere t#e issuer
is le"all6 connecte% 1it# t#e counterpart6* s#all e applie%* if materialE
)f/ to t#e e8tent t#at t#is uses e8istin" mar5et ris5 calculations for o1n fun%s
re&uirements for incremental %efault an% mi"ration ris5 as set out in 2itle 0R*
C#apter +* Section 4 t#at alrea%6 contain an FGD assumption* t#e FGD in t#e
formula use% s#all e 1..O7
=7 0nstitutions s#all provi%e senior mana"ement an% t#e appropriate committee of t#e
mana"ement o%6 1it# re"ular reports on ot# Specific an% General ?ron";?a6 ris5s an%
t#e steps ein" ta5en to mana"e t#ose ris5s7
,rticle -8=
0nte"rit6 of t#e mo%ellin" process
17 ,n institution s#all ensure t#e inte"rit6 of mo%ellin" process as set out in ,rticle ->8 6
a%optin" at least t#e follo1in" measures:
)a/ t#e mo%el s#all reflect transaction terms an% specifications in a timel6* complete* an%
conservative fas#ionE
)/ t#ose terms s#all inclu%e at least contract notional amounts* maturit6* reference
assets* mar"inin" arran"ements an% nettin" arran"ementsE
)c/ t#ose terms an% specifications s#all e maintaine% in a %ataase t#at is su!ect to
formal an% perio%ic au%itE
)%/ a process for reco"nisin" nettin" arran"ements t#at re&uires le"al staff to verif6 t#at
nettin" un%er t#ose arran"ements is le"all6 enforcealeE
)e/ t#e verification re&uire% 6 point )%/ s#all e entere% into t#e %ataase mentione% in
point )c/ 6 an in%epen%ent unitE
)f/ t#e transmission of transaction terms an% specification %ata to t#e $P$ mo%el s#all
e su!ect to internal au%itE
)"/ t#ere s#all e processes for formal reconciliation et1een t#e mo%el an% source %ata
s6stems to verif6 on an on"oin" asis t#at transaction terms an% specifications are
ein" reflecte% in $P$ correctl6 or at least conservativel67
-7 Current mar5et %ata s#all e use% to %etermine current e8posures7 ,n institution ma6
calirate its $P$ mo%el usin" eit#er #istoric mar5et %ata or mar5et implie% %ata to
estalis# parameters of t#e un%erl6in" stoc#astic processes* suc# as %rift* volatilit6 an%
correlation7 0f an institution uses #istorical %ata* it s#all use at least t#ree 6ears of suc#
%ata7 2#e %ata s#all e up%ate% at least &uarterl6* an% more fre&uentl6 if necessar6 to
reflect mar5et con%itions7
2o calculate t#e $ffective $P$ usin" a stress caliration* an institution s#all calirate
$ffective $P$ usin" eit#er t#ree 6ears of %ata t#at inclu%es a perio% of stress to t#e cre%it
%efault sprea%s of its counterparties or mar5et implie% %ata from suc# a perio% of stress7
2#e re&uirements in para"rap#s 3* 4 an% + s#all e applie% 6 t#e institution for t#at
purpose7
37 ,n institution s#all %emonstrate to t#e satisfaction of t#e competent aut#orit6* at least
&uarterl6* t#at t#e stress perio% use% for t#e calculation un%er t#is para"rap# coinci%es 1it#
a perio% of increase% cre%it %efault s1ap or ot#er cre%it )suc# as loan or corporate on%/
sprea%s for a representative selection of its counterparties 1it# tra%e% cre%it sprea%s7 0n
situations 1#ere t#e institution %oes not #ave a%e&uate cre%it sprea% %ata for a
counterpart6* it s#all map t#at counterpart6 to specific cre%it sprea% %ata ase% on re"ion*
internal ratin" an% usiness t6pes7
47 2#e $P$ mo%el for all counterparties s#all use %ata* eit#er #istoric or implie%* t#at inclu%e
t#e %ata from t#e stresse% cre%it perio% an% s#all use suc# %ata in a manner consistent 1it#
t#e met#o% use% for t#e caliration of t#e $P$ mo%el to current %ata7
+7 2o evaluate t#e effectiveness of its stress caliration for $$P$* an institution s#all create
several enc#mar5 portfolios t#at are vulnerale to t#e main ris5 factors to 1#ic# t#e
institution is e8pose%7 2#e e8posure to t#ese enc#mar5 portfolios s#all e calculate%
usin" )a/ a stress met#o%olo"6* ase% on current mar5et values an% mo%el parameters
calirate% to stresse% mar5et con%itions* an% )/ t#e e8posure "enerate% %urin" t#e stress
perio%* ut appl6in" t#e met#o% set out in t#is Section )en% of stress perio% mar5et value*
volatilities* an% correlations from t#e 3;6ear stress perio%/7
2#e competent aut#orities s#all re&uire an institution to a%!ust t#e stress caliration if t#e
e8posures of t#ose enc#mar5 portfolios %eviate sustantiall6 from eac# ot#er7
=7 ,n institution s#all su!ect t#e mo%el to a vali%ation process t#at is clearl6 articulate% in
t#e institutions( policies an% proce%ures7 2#at vali%ation process s#all:
)a/ specif6 t#e 5in% of testin" nee%e% to ensure mo%el inte"rit6 an% i%entif6 con%itions
un%er 1#ic# t#e assumptions un%erl6in" t#e mo%el are inappropriate an% ma6
t#erefore result in an un%erstatement of $P$E
)/ inclu%e a revie1 of t#e compre#ensiveness of t#e mo%el7
>7 ,n institution s#all monitor t#e relevant ris5s an% #ave processes in place to a%!ust its
estimation of $$P$ 1#en t#ose ris5s ecome si"nificant7 0n compl6in" 1it# t#is
para"rap#* t#e institution s#all:
)a/ i%entif6 an% mana"e its e8posures to Specific ?ron";?a6 ris5 arisin" as specifie% in
,rticle -8+)1/)/ an% e8posures to General ?ron";?a6 ris5 arisin" as specifie% in
,rticle -8+)1/)a/E
)/ for e8posures 1it# a risin" ris5 profile after one 6ear* compare on a re"ular asis t#e
estimate of a relevant measure of e8posure over one 6ear 1it# t#e same e8posure
measure over t#e life of t#e e8posureE
)c/ for e8posures 1it# a resi%ual maturit6 elo1 one 6ear* compare on a re"ular asis t#e
replacement cost )current e8posure/ an% t#e realise% e8posure profile* an% store %ata
t#at 1oul% allo1 suc# a comparison7
87 ,n institution s#all #ave internal proce%ures to verif6 t#at* prior to inclu%in" a transaction
in a nettin" set* t#e transaction is covere% 6 a le"all6 enforceale nettin" contract t#at
meets t#e re&uirements set out in Section >7
97 ,n institution t#at uses collateral to miti"ate its CCR s#all #ave internal proce%ures to
verif6 t#at* prior to reco"nisin" t#e effect of collateral in its calculations* t#e collateral
meets t#e le"al certaint6 stan%ar%s set out in C#apter B3
1.7 $D, s#all monitor t#e ran"e of practices in t#is area an% s#all* in accor%ance 1it# ,rticle
1= of Re"ulation )$4/ Bo 1.93/-.1.* issue "ui%elines on t#e application of t#is ,rticle7
,rticle -8>
Re&uirements for t#e ris5 mana"ement s6stem
17 ,n institution s#all compl6 1it# t#e follo1in" re&uirements:
)a/ it s#all meet t#e &ualitative re&uirements set out in Part 2#ree* 2itle 0R* C#apter +E
)/ it s#all con%uct a re"ular pro"ramme of ac5;testin"* comparin" t#e ris5 measures
"enerate% 6 t#e mo%el 1it# realise% ris5 measures* an% #6pot#etical c#an"es ase%
on static positions 1it# realise% measuresE
)c/ it s#all carr6 out an initial vali%ation an% an on;"oin" perio%ic revie1 of its CCR
e8posure mo%el an% t#e ris5 measures "enerate% 6 it7 2#e vali%ation an% revie1
s#all e in%epen%ent of t#e mo%el %evelopmentE
)%/ t#e mana"ement o%6 an% senior mana"ement s#all e involve% in t#e ris5 control
process an% s#all ensure t#at a%e&uate resources are %evote% to cre%it an%
counterpart6 cre%it ris5 control7 0n t#is re"ar%* t#e %ail6 reports prepare% 6 t#e
in%epen%ent ris5 control unit estalis#e% in accor%ance ,rticle -81)1/)a/ s#all e
revie1e% 6 a level of mana"ement 1it# sufficient seniorit6 an% aut#orit6 to enforce
ot# re%uctions of positions ta5en 6 in%ivi%ual tra%ers an% re%uctions in t#e overall
ris5 e8posure of t#e institutionE
)e/ t#e internal ris5 measurement e8posure mo%el s#all e inte"rate% into t#e %a6;to;%a6
ris5 mana"ement process of t#e institutionE
)f/ t#e ris5 measurement s6stem s#all e use% in con!unction 1it# internal tra%in" an%
e8posure limits7 0n t#is re"ar%* e8posure limits s#all e relate% to t#e institutionNs ris5
measurement mo%el in a manner t#at is consistent over time an% t#at is 1ell
un%erstoo% 6 tra%ers* t#e cre%it function an% senior mana"ementE
)"/ an institution s#all ensure t#at its ris5 mana"ement s6stem is 1ell %ocumente%7 0n
particular* it s#all maintain a %ocumente% set of internal policies* controls an%
proce%ures concernin" t#e operation of t#e ris5 measurement s6stem* an%
arran"ements to ensure t#at t#ose policies are complie% 1it#E
)#/ an in%epen%ent revie1 of t#e ris5 measurement s6stem s#all e carrie% out re"ularl6
in t#e institutionNs o1n internal au%itin" process7 2#is revie1 s#all inclu%e ot# t#e
activities of t#e usiness tra%in" units an% of t#e in%epen%ent ris5 control unit7 ,
revie1 of t#e overall ris5 mana"ement process s#all ta5e place at re"ular intervals
)an% no less t#an once a 6ear/ an% s#all specificall6 a%%ress* as a minimum* all items
referre% to in ,rticle -8-E
)i/ t#e on;"oin" vali%ation of counterpart6 cre%it ris5 mo%els* inclu%in" ac5;testin"*
s#all e revie1e% perio%icall6 6 a level of mana"ement 1it# sufficient aut#orit6 to
%eci%e t#e action t#at 1ill e ta5en to a%%ress 1ea5nesses in t#e mo%els7
-7 Competent aut#orities s#all ta5e into account t#e e8tent to 1#ic# an institution meets t#e
re&uirements of para"rap# 1 1#en settin" t#e level of alp#a* as set out in ,rticle ->8)4/7
Onl6 t#ose institutions t#at compl6 full6 1it# t#ose re&uirements s#all e eli"ile for
application of t#e minimum multiplication factor7
37 ,n institution s#all %ocument t#e process for initial an% on;"oin" vali%ation of its CCR
e8posure mo%el an% t#e calculation of t#e ris5 measures "enerate% 6 t#e mo%els to a level
of %etail t#at 1oul% enale a t#ir% part6 to recreate* respectivel6* t#e anal6sis an% t#e ris5
measures7 2#at %ocumentation s#all set out t#e fre&uenc6 1it# 1#ic# ac5 testin" anal6sis
an% an6 ot#er on;"oin" vali%ation 1ill e con%ucte%* #o1 t#e vali%ation is con%ucte% 1it#
respect to %ata flo1s an% portfolios an% t#e anal6ses t#at are use%7
47 ,n institution s#all %efine criteria 1it# 1#ic# to assess its CCR e8posure mo%els an% t#e
mo%els t#at input into t#e calculation of e8posure an% maintain a 1ritten polic6 t#at
%escries t#e process 6 1#ic# unacceptale performance 1ill e i%entifie% an% reme%ie%7
+7 ,n institution s#all %efine #o1 representative counterpart6 portfolios are constructe% for
t#e purposes of vali%atin" an CCR e8posure mo%el an% its ris5 measures7
=7 2#e vali%ation of CCR e8posure mo%els an% t#eir ris5 measures t#at pro%uce forecast
%istriutions s#all consi%er more t#an a sin"le statistic of t#e forecast %istriution7
,rticle -88
Rali%ation re&uirements A
17 ,s part of t#e initial an% on;"oin" vali%ation of its CCR e8posure mo%el an% its ris5
measures* an institution s#all ensure t#at t#e follo1in" re&uirements are met:
)a/ t#e institution s#all carr6 out ac5;testin" usin" #istorical %ata on movements in
mar5et ris5 factors prior to t#e permission 6 t#e competent aut#orities in accor%ance
1it# ,rticle ->>)1/7 2#at ac5;testin" s#all consi%er a numer of %istinct pre%iction
time #oriLons out to at least one 6ear* over a ran"e of various initialisation %ates an%
coverin" a 1i%e ran"e of mar5et con%itionsE
)/ t#e institution usin" t#e approac# set out in para"rap# 1-)/ of ,rticle ->8 s#all
re"ularl6 vali%ate its mo%el to test 1#et#er realise% current e8posures are consistent
1it# pre%iction over all mar"in perio%s 1it#in one 6ear7 0f some of t#e tra%es in t#e
nettin" set #ave a maturit6 of less t#an one 6ear* an% t#e nettin" set #as #i"#er ris5
factor sensitivities 1it#out t#ese tra%es* t#e vali%ation s#all ta5e t#is into accountE
)c/ it s#all ac5;test t#e performance of its CCR e8posure mo%el an% t#e mo%el(s
relevant ris5 measures as 1ell as t#e mar5et ris5 factor pre%ictions7 3or collateralise%
tra%es* t#e pre%iction time #oriLons consi%ere% s#all inclu%e t#ose reflectin" t6pical
mar"in perio%s of ris5 applie% in collateralise% or mar"ine% tra%in"E
)%/ if t#e mo%el vali%ation in%icates t#at effective $P$ is un%erestimate%* t#e institution
s#all ta5e t#e action necessar6 to a%%ress t#e inaccurac6 of t#e mo%elE
)e/ it s#all test t#e pricin" mo%els use% to calculate CCR e8posure for a "iven scenario
of future s#oc5s to mar5et ris5 factors as part of t#e initial an% on;"oin" mo%el
vali%ation process7 Pricin" mo%els for options s#all account for t#e nonlinearit6 of
option value 1it# respect to mar5et ris5 factorsE
)f/ t#e CCR e8posure mo%el s#all capture t#e transaction;specific information necessar6
to e ale to a""re"ate e8posures at t#e level of t#e nettin" set7 ,n institution s#all
verif6 t#at transactions are assi"ne% to t#e appropriate nettin" set 1it#in t#e mo%elE
)"/ t#e CCR e8posure mo%el s#all inclu%e transaction;specific information to capture t#e
effects of mar"inin"7 0t s#all ta5e into account ot# t#e current amount of mar"in an%
mar"in t#at 1oul% e passe% et1een counterparties in t#e future7 Suc# a mo%el s#all
account for t#e nature of mar"in a"reements t#at are unilateral or ilateral* t#e
fre&uenc6 of mar"in calls* t#e mar"in perio% of ris5* t#e minimum t#res#ol% of un;
mar"ine% e8posure t#e institution is 1illin" to accept* an% t#e minimum transfer
amount7 Suc# a mo%el s#all eit#er estimate t#e mar5;to;mar5et c#an"e in t#e value
of collateral poste% or appl6 t#e rules set out in C#apter 4E
)#/ t#e mo%el vali%ation process s#all inclu%e static* #istorical ac5;testin" on
representative counterpart6 portfolios ,n institution s#all con%uct suc# ac5;testin"
on a numer of representative counterpart6 portfolios t#at are actual or #6pot#etical
at re"ular intervals7 2#ose representative portfolios s#all e c#osen on t#e asis of
t#eir sensitivit6 to t#e material ris5 factors an% cominations of ris5 factors to 1#ic#
t#e institution is e8pose%E
)i/ an institution s#all con%uct ac5;testin" t#at is %esi"ne% to test t#e 5e6 assumptions
of t#e CCR e8posure mo%el an% t#e relevant ris5 measures* inclu%in" t#e mo%elle%
relations#ip et1een tenors of t#e same ris5 factor* an% t#e mo%elle% relations#ips
et1een ris5 factorsE
)!/ t#e performance of CCR e8posure mo%els an% its ris5 measures s#all e su!ect to
appropriate ac5;testin" practice7 2#e ac5 testin" pro"ramme s#all e capale of
i%entif6in" poor performance in an $P$ mo%el(s ris5 measuresE
)5/ an institution s#all vali%ate its CCR e8posure mo%els an% all ris5 measures out to
time #oriLons commensurate 1it# t#e maturit6 of tra%es covere% 6 t#e 099 1aiver
in accor%ance to t#e ,rticle ->>E
)l/ an institution s#all re"ularl6 test t#e pricin" mo%els use% to calculate counterpart6
e8posure a"ainst appropriate in%epen%ent enc#mar5s as part of t#e on;"oin" mo%el
vali%ation processE
)m/ t#e on;"oin" vali%ation of an institutionNs CCR e8posure mo%el an% t#e relevant ris5
measures s#all inclu%e an assessment of t#e a%e&uac6 of t#e recent performanceE
)n/ t#e fre&uenc6 1it# 1#ic# t#e parameters of an CCR e8posure mo%el are up%ate%
s#all e assesse% 6 an institution as part of t#e initial an% on;"oin" vali%ation
processE
)o/ t#e initial an% on;"oin" vali%ation of CCR e8posure mo%els s#all assess 1#et#er or
not t#e counterpart6 level an% nettin" set e8posure calculations of e8posure are
appropriate7
-7 , measure t#at is more conservative t#an t#e metric use% to calculate re"ulator6 e8posure
value for ever6 counterpart6 ma6 e use% in place of alp#a multiplie% 6 $ffective $P$
1it# t#e prior permission of t#e competent aut#orities7 2#e %e"ree of relative conservatism
1ill e assesse% upon initial approval 6 t#e competent aut#orities an% at t#e re"ular
supervisor6 revie1s of t#e $P$ mo%els7 ,n institution s#all vali%ate t#e conservatism
re"ularl67 2#e on;"oin" assessment of mo%el performance s#all cover all counterparties for
1#ic# t#e mo%els are use%7
37 0f ac5;testin" in%icates t#at a mo%el is not sufficientl6 accurate* t#e competent aut#orities
s#all revo5e its permission for t#e mo%el* or impose appropriate measures to ensure t#at
t#e mo%el is improve% promptl67
8439/13 SO/psc 771
EN
DQPG
S$C20OB >
COB2R,C24,F B$220BG
,rticle -89
Reco"nition of contractual nettin" as ris5;re%ucin"
17 0nstitutions ma6 treat as ris5 re%ucin" in accor%ance 1it# ,rticle -9- onl6 t#e follo1in"
t6pes of contractual nettin" a"reements 1#ere t#e nettin" a"reement #as een reco"nise%
6 competent aut#orities in accor%ance 1it# ,rticle -9. an% 1#ere t#e institution meets
t#e re&uirements set out in ,rticle -91:
)a/ ilateral contracts for novation et1een an institution an% its counterpart6 un%er
1#ic# mutual claims an% oli"ations are automaticall6 amal"amate% in suc# a 1a6
t#at t#e novation fi8es one sin"le net amount eac# time it applies so as to create a
sin"le ne1 contract t#at replaces all former contracts an% all oli"ations et1een
parties pursuant to t#ose contracts an% is in%in" on t#e partiesE
)/ ot#er ilateral a"reements et1een an institution an% its counterpart6E
)c/ contractual cross;pro%uct nettin" a"reements for institutions t#at have re$eived the
approval to use t#e met#o% set out in Section = for transactions fallin" un%er t#e
scope of t#at met#o%7 Copetent authorities shall report to EBA a list of the
$ontra$tual $ross=produ$t netting agreeents approved3
Bettin" across transactions entere% into 6 %ifferent le"al entities of a "roup s#all not e
reco"nise% for t#e purposes of calculatin" t#e o1n fun%s re&uirements7
,rticle -9.
Reco"nition of contractual nettin" a"reements
17 Competent aut#orities s#all reco"nise a contractual nettin" a"reement onl6 1#ere t#e
con%itions in para"rap# - an%* 1#ere relevant* 3 are fulfille%7
-7 2#e follo1in" con%itions s#all e fulfille% 6 all contractual nettin" a"reements use% 6 an
institution for t#e purposes of %eterminin" e8posure value in t#is Part:
)a/ t#e institution #as conclu%e% a contractual nettin" a"reement 1it# its counterpart6
1#ic# creates a sin"le le"al oli"ation* coverin" all inclu%e% transactions* suc# t#at*
in t#e event of %efault 6 t#e counterpart6 it 1oul% e entitle% to receive or oli"e%
to pa6 onl6 t#e net sum of t#e positive an% ne"ative mar5;to;mar5et values of
inclu%e% in%ivi%ual transactionsE
)/ t#e institution #as ma%e availale to t#e competent aut#orities 1ritten an% reasone%
le"al opinions to t#e effect t#at* in t#e event of a le"al c#allen"e of t#e nettin"
a"reement* t#e institution(s claims an% oli"ations 1oul% not e8cee% t#ose referre% to
in point )a/7 2#e le"al opinion s#all refer to t#e applicale la1:
)i/ t#e !uris%iction in 1#ic# t#e counterpart6 is incorporate%E
)ii/ if a ranc# of an un%erta5in" is involve%* 1#ic# is locate% in anot#er countr6
t#an t#e one 1#ere t#e un%erta5in" is incorporate%* t#e !uris%iction in 1#ic#
t#e ranc# is locate%E
)iii/ t#e !uris%iction 1#ose la1 "overns t#e in%ivi%ual transactions inclu%e% in t#e
nettin" a"reementE
)iv/ t#e !uris%iction 1#ose la1 "overns an6 contract or a"reement necessar6 to
effect t#e contractual nettin"E
)c/ cre%it ris5 to eac# counterpart6 is a""re"ate% to arrive at a sin"le le"al e8posure
across transactions 1it# eac# counterpart67 2#is a""re"ation s#all e factore% into
cre%it limit purposes an% internal capital purposesE
)%/ t#e contract s#all not contain an6 clause 1#ic#* in t#e event of %efault of a
counterpart6* permits a non;%efaultin" counterpart6 to ma5e limite% pa6ments onl6*
or no pa6ments at all* to t#e estate of t#e %efaultin" part6* even if t#e %efaultin" part6
is a net cre%itor (i3e3 *alk a*a# $lause)3
&f an# of the $opetent aut#orities are not satisfie% t#at t#e contractual nettin" is le"all6
vali% an% enforceale un%er t#e la1 of eac# of t#e !uris%ictions referre% to in point )/ A
t#e contractual nettin" a"reement s#all not e reco"nise% as ris5;re%ucin" for eit#er of t#e
counterparties7 Competent aut#orities s#all inform eac# ot#er accor%in"l67
37 2#e le"al opinions referre% to in point )/ ma6 e %ra1n up 6 reference to t6pes of
contractual nettin"7 2#e follo1in" a%%itional con%itions s#all e fulfille% 6 contractual
cross;pro%uct nettin" a"reements:
)a/ t#e net sum referre% to in ,rticle -9.)-/)a/ is t#e net sum of t#e positive an% ne"ative
close out values of an6 inclu%e% in%ivi%ual ilateral master a"reement an% of t#e
positive an% ne"ative mar5;to;mar5et value of t#e in%ivi%ual transactions )t#e
MCross;Pro%uct Bet ,mountN/E
)/ t#e le"al opinions referre% to in ,rticle -9.)-/)/ s#all a%%ress t#e vali%it6 an%
enforceailit6 of t#e entire contractual cross;pro%uct nettin" a"reement un%er its
terms an% t#e impact of t#e nettin" arran"ement on t#e material provisions of an6
inclu%e% in%ivi%ual ilateral master a"reement7
,rticle -91
Oli"ations of institutions
17 ,n institution s#all estalis# an% maintain proce%ures to ensure t#at t#e le"al vali%it6 an%
enforceailit6 of its contractual nettin" is revie1e% in t#e li"#t of c#an"es in t#e la1 of
relevant !uris%ictions referre% to in ,rticle -9.)-/)/7
-7 2#e institution s#all maintain all re&uire% %ocumentation relatin" to its contractual nettin"
in its files7
37 2#e institution s#all factor t#e effects of nettin" into its measurement of eac#
counterpart6(s a""re"ate cre%it ris5 e8posure an% t#e institution s#all mana"e its CCR on
t#e asis of t#ose effects of t#at measurement7
47 0n case of contractual cross;pro%uct nettin" a"reements referre% to in ,rticle -89* t#e
institution s#all maintain proce%ures un%er ,rticle -9.)-/)c/ to verif6 t#at an6 transaction
1#ic# is to e inclu%e% in a nettin" set is covere% 6 a le"al opinion referre% to in ,rticle
-9.)-/)/7
2a5in" into account t#e contractual cross;pro%uct nettin" a"reement* t#e institution s#all
continue to compl6 1it# t#e re&uirements for t#e reco"nition of ilateral nettin" an% t#e
re&uirements of C#apter 4 for t#e reco"nition of cre%it ris5 miti"ation* as applicale* 1it#
respect to eac# inclu%e% in%ivi%ual ilateral master a"reement an% transaction7
,rticle -9-
$ffects of reco"nition of nettin" as ris5;re%ucin"
17 2#e follo1in" treatment applies to contractual nettin" a"reements:
)a/ nettin" for t#e purposes of Sections + an% = s#all e reco"nise% as set out in t#ose
SectionsE
)/ in t#e case of contracts for novation* t#e sin"le net amounts fi8e% 6 suc# contracts
rat#er t#an t#e "ross amounts involve%* ma6 e 1ei"#te%7
0n t#e application of Section 3* institutions ma6 ta5e t#e contract for novation into
account 1#en %eterminin":
)i/ t#e current replacement cost referred to in ,rticle -=9)1/E
)ii/ t#e notional principal amounts or un%erl6in" values referre% to in ,rticle
-=9)-/7
0n t#e application of Section 4* in %eterminin" t#e notional amount referre% to in
,rticle ->.)1/ institutions ma6 ta5e into account t#e contract for novation for t#e
purposes of calculatin" t#e notional principal amount 0n suc# cases* institutions s#all
appl6 t#e percenta"es of 2ale 37
)c/ 0n t#e case of ot#er nettin" a"reements* institutions s#all appl6 Section 3 as follo1s:
)i/ t#e current replacement cost referre% to in ,rticle -=9)1/ for t#e contracts
inclu%e% in a nettin" a"reement s#all e otaine% 6 ta5in" account of t#e
actual #6pot#etical net replacement cost 1#ic# results from t#e a"reementE in
t#e case 1#ere nettin" lea%s to a net oli"ation for t#e institution calculatin"
t#e net replacement cost* t#e current replacement cost is calculate% as M.NE
)ii/ t#e fi"ure for potential future cre%it e8posure referre% to in ,rticle -=9)2/ for
all contracts inclu%e% in a nettin" a"reement s#all e re%uce% in accor%ance
1it# t#e follo1in" formula:
P2E
re$
.74
P2E
#ross
+ .7= 9!5 P2E
#ross
1#ere:
PC$
re%
U t#e re%uce% fi"ure for potential future cre%it e8posure for all
contracts 1it# a "iven counterpart6 inclu%e% in a le"all6 vali% ilateral nettin"
a"reementE
PC$
"ross
U t#e sum of t#e fi"ures for potential future cre%it e8posure for
all contracts 1it# a "iven counterpart6 1#ic# are inclu%e% in a le"all6 vali%
ilateral nettin" a"reement an% are calculate% 6 multipl6in" t#eir notional
principal amounts 6 t#e percenta"es set out in 2ale 1E
BGR U t#e net;to;"ross ratio calculate% as t#e &uotient of t#e net replacement
cost for all contracts inclu%e% in a le"all6 vali% ilateral nettin" a"reement 1it#
a "iven counterpart6 )numerator/ an% t#e "ross replacement cost for all
contracts inclu%e% in a le"all6 vali% ilateral nettin" a"reement 1it# t#at
counterpart6 )%enominator/7
-7 ?#en carr6in" out t#e calculation of t#e potential future cre%it e8posure in accor%ance
1it# t#e aove formula* institutions ma6 treat perfectl6 matc#in" contracts inclu%e% in t#e
nettin" a"reement as if t#e6 1ere a sin"le contract 1it# a notional principal e&uivalent to
t#e net receipts7
0n t#e application of ,rticle ->.)1/ institutions ma6 treat perfectl6 matc#in" contracts
inclu%e% in t#e nettin" a"reement as if t#e6 1ere a sin"le contract 1it# a notional principal
e&uivalent to t#e net receipts* an% t#e notional principal amounts s#all e multiplie% 6 t#e
percenta"es "iven in 2ale 37
3or t#e purposes of t#is para"rap#* perfectl6 matc#in" contracts are for1ar% forei"n;
e8c#an"e contracts or similar contracts in 1#ic# a notional principal is e&uivalent to cas#
flo1s if t#e cas# flo1s fall %ue on t#e same value %ate an% full6 in t#e same currenc67
37 3or all ot#er contracts inclu%e% in a nettin" a"reement* t#e percenta"es applicale ma6 e
re%uce% as in%icate% in 2ale =:
2ale =
Ori"inal maturit6 0nterest;rate
contracts
3orei"n;e8c#an"e
contracts
One 6ear or less .*3+ O 1*+. O
9ore t#an one 6ear ut not
more t#an t1o 6ears
.*>+ O 3*>+ O
,%%itional allo1ance for eac#
a%%itional 6ear
.*>+ O -*-+ O
47 0n t#e case of interest;rate contracts* Ainstitutions ma6* su!ect to t#e consent of t#eir
competent aut#orities* c#oose eit#er ori"inal or resi%ual maturit67
S$C20OB 8
02$9S 0B 2C$ 2R,D0BG DOO:
,rticle -93
0tems in t#e tra%in" oo5
17 3or t#e purposes of t#e application of t#is ,rticle* ,nne8 00 s#all inclu%e a reference to
%erivative instruments for t#e transfer of cre%it ris5 as mentione% in point )8/ of Section C
of ,nne8 0 to Directive -..4/39/$C7
-7 ?#en calculatin" ris5;1ei"#te% e8posure amounts for counterpart6 ris5 of items in t#e
tra%in" oo5* institutions s#all compl6 1it# t#e follo1in" principles:
)a/ in t#e case of total return s1ap cre%it %erivatives an% cre%it %efault s1ap cre%it
%erivatives* to otain a fi"ure for potential future cre%it e8posure un%er t#e met#o%
set out in Section 3* t#e nominal amount of t#e instrument s#all e multiplie% 6 t#e
follo1in" percenta"es:
)i/ +O* 1#ere t#e reference oli"ation is one t#at* if it "ave rise to a %irect
e8posure of t#e institution* 1oul% e a &ualif6in" item for t#e purposes of Part
2#ree* 2itle 0R* C#apter -E
)ii/ 1.O* 1#ere t#e reference oli"ation is one t#at* if it "ave rise to a %irect
e8posure of t#e institution* 1oul% not e a &ualif6in" item for t#e purposes of
Part 2#ree* 2itle 0R* C#apter -7
0n t#e case of an institution 1#ose e8posure arisin" from a cre%it %efault s1ap
represents a lon" position in t#e un%erl6in"* t#e percenta"e for potential future cre%it
e8posure ma6 e .O* unless t#e cre%it %efault s1ap is su!ect to close;out upon t#e
insolvenc6 of t#e entit6 1#ose e8posure arisin" from t#e s1ap represents a s#ort
position in t#e un%erl6in"* even t#ou"# t#e un%erl6in" #as not %efaulte%7
?#ere t#e cre%it %erivative provi%es protection in relation to Mnt# to %efaultN amon"st
a numer of un%erl6in" oli"ations* an institution s#all %etermine 1#ic# of t#e
percenta"e fi"ures prescrie% aove applies 6 reference to t#e oli"ation 1it# t#e
nt# lo1est cre%it &ualit6 1#ic#* if incurre% 6 t#e institution* 1oul% e a &ualif6in"
item for t#e purposes of Part 2#ree* 2itle 0R* C#apter -E
)/ institutions s#all not use t#e 3inancial Collateral Simple 9et#o% set out in ,rticle
-1> for t#e reco"nition of t#e effects of financial collateralE
)c/ in t#e case of repurc#ase transactions an% securities or commo%ities len%in" or
orro1in" transactions oo5e% in t#e tra%in" oo5* institutions ma6 reco"nise as
eli"ile collateral all financial instruments an% commo%ities t#at are eli"ile to e
inclu%e% in t#e tra%in" oo5E
)%/ for e8posures arisin" from O2C %erivative instruments oo5e% in t#e tra%in" oo5*
institutions ma6 reco"nise commo%ities t#at are eli"ile to e inclu%e% in t#e tra%in"
oo5 as eli"ile collateralE
)e/ for t#e purposes of calculatin" volatilit6 a%!ustments 1#ere suc# financial
instruments or commo%ities 1#ic# are not eli"ile un%er C#apter 4 are lent* sol% or
provi%e%* or orro1e%* purc#ase% or receive% 6 1a6 of collateral or ot#er1ise un%er
suc# a transaction* an% an institution is usin" t#e Supervisor6 volatilit6 a%!ustments
approac# un%er Section 3 of C#apter 4* institutions s#all treat suc# instruments an%
commo%ities in t#e same 1a6 as non;main in%e8 e&uities liste% on a reco"nise%
e8c#an"eE
)f/ 1#ere an institution is usin" t#e O1n $stimates of Rolatilit6 a%!ustments approac#
un%er Section 3 of C#apter 4 in respect of financial instruments or commo%ities
1#ic# are not eli"ile un%er C#apter 4* it s#all calculate volatilit6 a%!ustments for
eac# in%ivi%ual item7 ?#ere an institution has o!tained the approval to use t#e
0nternal 9o%els ,pproac# %efine% in C#apter 4* it ma6 also appl6 t#at approac# in
t#e tra%in" oo5E
)"/ in relation to t#e reco"nition of master nettin" a"reements coverin" repurc#ase
transactions* securities or commo%ities len%in" or orro1in" transactions* or ot#er
capital mar5et;%riven transactions* institutions s#all onl6 reco"nise nettin" across
positions in t#e tra%in" oo5 an% t#e non;tra%in" oo5 1#en t#e nette% transactions
fulfil t#e follo1in" con%itions:
)i/ all transactions are mar5e% to mar5et %ail6E
)ii/ an6 items orro1e%* purc#ase% or receive% un%er t#e transactions ma6 e
reco"nise% as eli"ile financial collateral un%er C#apter 4 1it#out t#e
application of points )c/ to )f/ of t#is para"rap#E
)#/ 1#ere a cre%it %erivative inclu%e% in t#e tra%in" oo5 forms part of an internal #e%"e
an% t#e cre%it protection is reco"nise% un%er t#is Re"ulation in accor%ance 1it#
,rticle 199* institutions s#all appl6 one of t#e follo1in" approac#es:
)i/ treat it as if t#ere 1ere no counterpart6 ris5 arisin" from t#e position in t#at
cre%it %erivativeE
)ii/ consistentl6 inclu%e for t#e purpose of calculatin" t#e o1n fun%s re&uirements
for counterpart6 cre%it ris5 all cre%it %erivatives in t#e tra%in" oo5 formin"
part of internal #e%"es or purc#ase% as protection a"ainst a CCR e8posure
1#ere t#e cre%it protection is reco"nise% as eli"ile un%er C#apter 47
S$C20OB 9
O?B 34BDS R$Q40R$9$B2S 3OR $GPOS4R$S 2O , C$B2R,F CO4B2$RP,R2H
,rticle -94
Definitions
2#e follo1in" %efinitions s#all appl6 for t#e purposes of t#is Section:
17 A(an5ruptc6 remote(* in relation to $lient assets* means t#at effective arran"ements e8ist
1#ic# ensure t#at those assets 1ill not e availale to t#e cre%itors of a CCP or of a
clearin" memer in t#e event of t#e insolvenc6 of t#at CCP or clearin" memer
respe$tivel# or that the assets *ill not !e availa!le to the $learing e!er to $over losses
it in$urred follo*ing the default of a $lient or $lients other than the ones that provided
those assetsC
:2; ALCCP;relate% transaction( means a contract or a transaction liste% in ,rticle -9+)1/
et1een a client an% a clearin" memer t#at is %irectl6 relate% to a contract or a transaction
liste% in ,rticle -9+)1/ et1een t#at clearin" memer an% a CCPE
:3; Mclearin" memerN means $learing e!er as defined in Arti$le 2, point 4B of )egulation
(E2) Fo3 ?BAD2:42
:4; G$lientG eans $lient as defined in Arti$le 2, point 4@ of )egulation (E2) Fo3 ?BAD2:42
or an undertaking that has esta!lished indire$t $learing arrangeents *ith a $learing
e!er, in a$$ordan$e *ith Arti$le B, paragraph C of )egulation (E2) Fo3 ?BAD2:42
A
,rticle -9+
9aterial scope
17 A2#is section applies to t#e follo1in" contracts an% transactions for as lon" as t#e6 are
outstan%in" 1it# a CCP:
)a/ t#e contracts liste% in ,nne8 00 an% cre%it %erivativesE
)/ repurc#ase transactionsE
)c/ securities or commo%ities len%in" or orro1in" transactionsE
)%/ lon" settlement transactionsE
)e/ mar"in len%in" transactionsE
-7 A0nstitutions a# $hoose *hether to appl# one of the follo*ing t*o treatents to t#e
contracts an% transactions outstan%in" 1it# a KCC. liste% in para"rap# 1 A:
A
(a) the treatent for trade e5posures and e5posures fro default fund $ontri!utions
spe$ified in Arti$le 2>0 e5$ept for paragraph 4, point (!) and in Arti$le 2>A,
respe$tivel#%
(!) the treatent spe$ified in Arti$le C::3
3D A&nstitutions s#all appl6 t#e treatment specifie% in Arti$les 2>0 e5$ept for paragraph
(4)(a) and in Arti$le 2>>, as appli$a!le, to the $ontra$ts and transa$tions outstanding
*ith a non=6ualif#ing CC. listed in paragraph 43
6
Arti$le 2>@!
Monitoring of e5posures to CC.s
17 0nstitutions s#all monitor all t#eir e8posures to CCPs an% s#all la# do*n pro$edures for
the regular reporting of information on t#ose e8posures to Asenior mana"ement an%
appropriate committee or committees of t#e mana"ement o%67
23 &nstitutions shall assess, through appropriate s$enario anal#sis and stress testing,
*hether the level of o*n funds held against e5posures to a CC., in$luding potential
future $redit e5posures or fro default fund $ontri!utions or, *here the !ank is a$ting
as a $learing e!er, resulting fro $ontra$tual arrangeents as laid do*n in Arti$le
2>?a ade6uatel# relates to the inherent risks of those transa$tions3
Arti$le 2>?
+reatent of $learing e!ers7 and $lients7 transa$tions
-7 ?#ere an institution acts as a clearin" memer* eit#er for its o1n purposes or as a financial
interme%iar6 et1een a client an% a CCP* it s#all calculate t#e o1n fun%s re&uirements for
its e8posures to a CCP in accor%ance 1it# ,rticles -9> to 3..7
37 ?#ere an institution acts as a clearin" memer an%* in t#at capacit6* acts as a financial
interme%iar6 et1een a client an% a CCP* it s#all calculate t#e o1n fun%s re&uirements for
its CCP;relate% transactions 1it# t#e client in accor%ance 1it# t#e previous Sections of t#is
C#apter* as applicale7
47 ?#ere an institution is a client of a clearin" memer* it s#all calculate t#e o1n fun%s
re&uirements for its CCP;relate% transactions 1it# t#e clearin" memer in accor%ance 1it#
t#e Aprevious Sections of t#is C#apter* as applicale7
+7 ,s an alternative to t#e approac# specifie% in para"rap# 4* 1#ere an institution is a client* it
ma6 calculate t#e o1n fun%s re&uirements for its CCP;relate% transactions 1it# t#e
clearin" memer in accor%ance 1it# Arti$le 2>? (!) (2) provi%e% t#at ot# of t#e follo1in"
con%itions are met:
)a/ t#e positions an% assets of t#at institution relate% to t#ose transactions are
%istin"uis#e% an% se"re"ate% *ithin the eaning of Arti$le C> of EM&)* at t#e level
of ot# t#e clearin" memer an% t#e CCP* from t#e positions an% assets of ot# t#e
clearin" memer an% t#e ot#er clients of t#at clearin" memer an% as a result of t#at
se"re"ation t#ose positions an% assets are an5ruptc6 remote in t#e event of t#e
%efault or insolvenc6 of t#e clearin" memer or one or more of its ot#er clientsE
)/ relevant la1s* re"ulations* rules an% contractual arran"ements applicale to or
in%in" t#at institution or t#e CCP ensure t#at in t#e event of %efault or insolvenc6 of
t#e clearin" memer* t#e transfer of t#e institutionNs positions relatin" to t#ose
contracts an% transactions an% of t#e correspon%in" collateral to anot#er clearin"
memer 1it#in t#e relevant mar"in perio% of ris57
=7 ?#ere an institution actin" as a clearin" memer enters into a contractual arran"ement
1it# a client of anot#er clearin" memer in or%er to ensure t#at client t#e portailit6 of
assets an% positions referre% to in point )/ of para"rap# +* t#at institution ma6 attriute an
e8posure value of Lero to t#e contin"ent oli"ation t#at is create% %ue to t#at contractual
arran"ement7
Arti$le 2>?a
+reatent of $learing e!ers7 e5posures to $lients
43 ;here an institution a$ts as a $learing e!er and, in that $apa$it#, a$ts as a finan$ial
interediar# !et*een a $lient and a CC., it shall $al$ulate the o*n funds re6uireents
for its CC.=related transa$tions *ith the $lient in a$$ordan$e *ith the previous "e$tions
of this Chapter and *ith the +itle M& of .art &&&, as appli$a!le3
23 ;here an institution a$ting as a $learing e!er enters into a $ontra$tual arrangeent
*ith a $lient of another $learing e!er that fa$ilitates, in a$$ordan$e *ith Arti$le BA,
paragraphs @ and ? of )egulation (E2) Fo3 ?BAD2:42, the transfer of positions and
$ollateral referred to in Arti$le 2>?!(2), point (!) for that $lient, and that $ontra$tual
agreeent gives rise to a $ontingent o!ligation for that institution, that institution shall
appl# the treatent spe$ified in this )egulation to that $ontingent o!ligation,
C3 An institution a$ting as a $learing e!er a# appl# a shorter argin period of risk
*hen $al$ulating the o*n fund re6uireent for its e5posures to a $lient in a$$ordan$e
*ith the &nternal Model Method3
B3 An institution a$ting as a $learing e!er a# ultipl# its EA( !# a s$alar *hen
$al$ulating the o*n fund re6uireent for its e5posures to $lient in a$$ordan$e *ith the
Mark=to=Market Method, the "tandardised Method or the -riginal E5posure Method3
+he s$alars that the institutions a# appl# are the follo*ing'
(a) :304 for a argin period of risk of @ da#s%
(!) :300 for a argin period of risk of ? da#s%
($) :3AB for a argin period of risk of 0 da#s%
(d) :3A> for a argin period of risk of A da#s%
(e) :3>@ for a argin period of risk of > da#s%
(f) 4 for a argin period of risk of 4: da#s or ore%
@3 EBA shall develop draft regulator# te$hni$al standards to spe$if# the argin periods of
risk that institutions a# use for the purposes of paragraphs C and B3
;hen developing those draft regulator# te$hni$al standards, the EBA shall appl# the
follo*ing prin$iples'
(a) it shall define the argin period of risk for ea$h of the t#pes of $ontra$ts and
transa$tions listed in Arti$le 2>@(4)%
(!) the argin periods of risk to !e defined in point (a) shall refle$t the $lose=out
period of the $ontra$ts and transa$tions referred to in that point and shall not !e
less than @ da#s3
EBA shall su!it those draft regulator# te$hni$al standards to the Coission !# C4
Mar$h 2:4B3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3
Arti$le 2>?!
+reatent of $lients7 e5posures
43 ;here an institution is a $lient, it shall $al$ulate the o*n funds re6uireents for its
CC.=related transa$tions *ith its $learing e!er in a$$ordan$e *ith the other
previous "e$tions of this Chapter and *ith the +itle M& of .art &&&, as appli$a!le3
23 ;ithout pre9udi$e to the approa$h spe$ified in paragraph 4, *here an institution is a
$lient, it a# $al$ulate the o*n funds re6uireents for its trade e5posures for CC.=
related transa$tions *ith its $learing e!er in a$$ordan$e *ith Arti$le 2>0 provided
that all the follo*ing $onditions are et'
(a) the positions and assets of that institution related to those transa$tions are
distinguished and segregated, at the level of !oth the $learing e!er and the
CC., fro the positions and assets of !oth the $learing e!er and the other
$lients of that $learing e!er and as a result of that distin$tion and segregation
those positions and assets are !ankrupt$# reote in the event of the default or
insolven$# of the $learing e!er or one or ore of its other $lients%
(!) la*s, regulations, rules and $ontra$tual arrangeents appli$a!le to or !inding that
institution or the CC. fa$ilitate the transfer of the $lientGs positions relating to
those $ontra$ts and transa$tions and of the $orresponding $ollateral to another
$learing e!er *ithin the appli$a!le argin period of risk in the event of default
or insolven$# of the original $learing e!er3 &n su$h $ir$ustan$e, the $lientGs
positions and the $ollateral *ill !e transferred at arket value unless the $lient
re6uests to $lose out the position at arket value%
($) the institution has availa!le an independent, *ritten and reasoned legal opinion
that $on$ludes that, in the event of legal $hallenge, the relevant $ourts and
adinistrative authorities *ould find that the $lient *ould !ear no losses on
a$$ount of the insolven$# of its $learing e!er or of an# of its $learing e!er7s
$lients under the la*s of the 9urisdi$tion of the institution, its $learing e!er and
the CC., the la* governing the transa$tions and $ontra$ts the institution $lears
through the CC., the la* governing the $ollateral, and the la* governing an#
$ontra$t or agreeent ne$essar# to eet the $ondition in point (!),
(d) the CC. is a KCC.3
2!3 ;ithout pre9udi$e to the $onditions spe$ified in paragraph 2, *here an institution that is
a $lient is not prote$ted fro losses in the $ase that the $learing e!er and another
$lient of the $learing e!er 9ointl# default, !ut all the other $onditions set out in
paragraph 2 are et, the $lient a# $al$ulate the o*n funds re6uireents for its trade
e5posures for CC.=related transa$tions *ith its $learing e!er in a$$ordan$e *ith
Arti$le 2>0, su!9e$t to repla$ing the 2J risk *eight in paragraph 4, su! paragraph (a) of
that arti$le *ith a BJ risk *eight3
C3 ;here an institution that is a $lient a$$esses the servi$es of a CC. through indire$t
$learing arrangeents, in a$$ordan$e *ith Arti$le B, paragraph C of )egulation (E2)
Fo3 ?BAD2:42, that institution a# appl# the treatent spe$ified in paragraph 2 or 2!
onl# *here the $onditions in ea$h paragraph are et at ever# level of the $hain of
interediaries3
Arti$le 2>0
O1n fun%s re&uirements for tra%e e8posures
17 ,n institution s#all appl6 the follo*ing treatent to its trade e5posures *ith CC.s'
(a) it shall appl# a ris5 1ei"#t of -O to t#e e8posure values of all its tra%e e8posures
1it# KCC.s%
!) it shall appl# the risk *eight used for the "tandardised approa$h to $redit risk as
set out in Arti$le 4:2, paragraphQ to all its trade e5posures *ith non=6ualif#ing
CC.s3
($) *here an institution is a$ting as a finan$ial interediar# !et*een a $lient and a
CC. and the ters of the CC.=related transa$tion stipulate that the institution is
not o!ligated to rei!urse the $lient for an# losses suffered due to $hanges in the
value of that transa$tion in the event that the CC. defaults3 +he e5posure value of
the transa$tion *ith the CC. that $orresponds to that CC.=related transa$tion is
e6ual to <ero3%
-7 Bot1it#stan%in" para"rap# 1* 1#ere assets poste% as collateral to a CCP or a clearin"
memer are an5ruptc6 remote in t#e event t#at t#e CCP* t#e clearin" memer or one or
more of t#e ot#er clients of t#e clearin" memer ecomes insolvent* an institution ma6
attriute an e8posure value of Lero to t#e counterpart6 cre%it ris5 e8posures for t#ose
assets7
37 ,n institution s#all calculate e8posure values of its tra%e e8posures 1it# a CCP in
accor%ance 1it# t#e other Sections of t#is C#apter* as applicale7
47 ,n institution s#all calculate t#e ris5 1ei"#te% e8posure amounts for its tra%e e8posures
1it# CCPs for t#e purposes of ,rticles 1.8)8/ an% 1+1 as t#e sum of t#e e8posure values
of its tra%e e8posures 1it# CCPs* calculate% in accor%ance 1it# para"rap#s - an% 3*
multiplie% 6 t#e ris5 1ei"#t %etermine% in accor%ance 1it# para"rap# 17
A
,rticle -98
O1n fun%s re&uirements for %efault fun% contriutions
17 An institution actin" as a clearin" e!er s#all #ol% o1n fun%s to cover t#e e8posures
arisin" from its contriutions to t#e %efault fun% of a KCC.7 &t s#all calculate t#e o1n
fun%s re&uirement for its pre=funded $ontri!utions to the default fund of that CC. in
accor%ance 1it# t#e approa$h set out in A,rticle 2>Aa7
A
(!) *here (1
CC.
R S
CC.
T(1
O
institutions shall use the follo*ing forula'
A
2-
c
-

(A
22P
D+
22P
) + c (D+
T

A
22P
1
)
Arti$le 2>Aa
-*n funds re6uireents for pre=funded $ontri!utions to the default fund of a KCC.
43 +he e5posure value for an institutionGs pre=funded $ontri!ution to the default fund of a
KCC. ((1i) shall !e the aount paid in or the arket value of the assets delivered !#
that institution redu$ed !# an# aount of that $ontri!ution that the KCC. has alread#
used to a!sor! its losses follo*ing the default of one or ore of its $learing e!ers3
-7 ,n institution s#all calculate t#e o1n fun%s re&uirement ):i/ to cover t#e e8posure arisin"
from its pre;fun%e% contriution )D3i/ as follo1s:
1#ere:
BU t#e concentration factor communicate% to t#e institution 6 t#e CCPE
9U t#e numer of clearin" memers communicate% to t#e institution 6 t#e CCPE
D+
2-
U t#e sum of pre;fun%e% contriutions of all clearin" memers of t#e CCP

D+
i
)
i
/ communicate% to t#e institution 6 t#e CCPE
A
2-
U t#e sum of t#e o1n fun%s re&uirements of all clearin" memers of t#e CCP

A
i
calculate% in accor%ance 1it# t#e applicale formula specifie% in para"rap# 3 )
i
/7
A
37 An institution s#all calculate A
2-
as follo1s:
)a/ 1#ere A
22P
E D+
22P
, the institution s#all use t#e follo1in" formula:
A
2- c D+
*
E
)/ 1#ere D+
22P
_ A
22P
ED+
@
, the institution s#all use t#e follo1in" formula:
A
2-
c
-
(A
22P
D+
22P
) + c
1
(D+
T

A
22P
)c/ 1#ere D+
@
_ A
22P
, the institution s#all use t#e follo1in" formula:
A
2-
c
-

(A D+
T
)+ c D+
T
1#ere:
D+
22P
U t#e pre;fun%e% financial resources of t#e CCP communicate% to t#e institution 6 t#e
CCPE
A
22P
U t#e #6pot#etical capital of t#e CCP communicate% to t#e institution 6 t#e CCPE
1 2-
22P - 2-
)
E
D+ U t#e total pre;fun%e% contriutions A
D+
@
U
T
22P 2-
E
D+
*
U
D+
2-
- D+
i
E
D+
i
U t#e avera"e pre;fun%e% contriution*
1
9

D+
2-
* communicate% to t#e institution 6 t#e CCPE
c
1
> a capital factor e&ual to A
c
2
> a capital factor e&ual to 1..OE
FU 17-7
47 An institution s#all calculate t#e risk *eighted e8posure aounts for e5posures arisin"
from Aan institution(s pre;fun%e% contriution Aas t#e o1n fun%s re&uirement ):i/
%etermine% in accor%ance 1it# para"rap#s - A multiplie% 6 1-7+7
A
D+ + D+
2-
@3 ?#ere :CCP is e&ual to Lero* institutions s#all use t#e value for c1 of :34?O for t#e
purpose of t#e calculation in para"rap#s C3
Arti$le 2>>
Cal$ulation of the h#potheti$al $apital of a CC.
43 An institution shall appl# the follo*ing forula to $al$ulate the o*n funds re6uireent
(S
i
) for the e5posures arising fro its pre=funded $ontri!utions to the default fund of a
non=6ualif#ing CC. ((1
i
) and fro unfunded $ontri!utions (2C
i
) to su$h CC.'
S
i
N $
2
UVU((1
i
W2C
i
)
23 1or the purpose of paragraph 4, unfunded $ontri!utions eans $ontri!utions that an
institution a$ting as a $learing e!er has $ontra$tuall# $oitted to provide to a CC.
after the CC. has depleted its default fund to $over the losses it in$urred follo*ing the
default of one or ore $learing e!ers3
23 An institution shall $al$ulate the risk *eighted e5posure aounts for e5posures arising
fro an institution7s pre=funded $ontri!ution as the o*n funds re6uireent (Si)
deterined in a$$ordan$e *ith paragraph 4 ultiplied !# 423@3
Arti$le C::
Alternative $al$ulation of o*n funds re6uireent for e5posures to a KCC.
An institution shall appl# the follo*ing forula to $al$ulate the o*n funds re6uireent (S
i
) for
the e5posures arising fro its trade e5posures and the trade e5posures of its $lient (+E
i
) and pre=
funded $ontri!utions ((1
i
) to the default fund of a KCC.'
P A
i
&G min[2G TE
i
+ 12*G D+
i
C2*G TE
i
]
Arti$le C::a
-*n funds re6uireents for e5posures to CC.s that $ease to eet $ertain $onditions
43 An institution shall appl# the treatent laid do*n in this Arti$le *here one or !oth of
the follo*ing $onditions have !een et'
(a) the institution has re$eived fro a CC. a notifi$ation re6uired !# point (h)(ii) of
Arti$le @:! of )egulation (E2) ?BAD2:42 that the CC. has stopped $al$ulating
S
CC.
%
(!) it has !e$oe kno*n to the institution X follo*ing a pu!li$ announ$eent or
notifi$ation fro the $opetent authorit# of a CC. used !# the institution or fro
that CC. itself = that the CC. *ill no longer $opl# *ith the $onditions for
authorisation or re$ognition, as appli$a!le3
23 ;here onl# the $ondition in paragraph 4, point (a) has !een et, the $opetent
authorit# of the institution shall verif# the reasons *h# the CC. has stopped $al$ulating
S
CC.
3
;here the $opetent authorit# $onsiders that the reasons referred to in the first su!paragraph
are valid, it a# perit institutions in its Me!er "tate to appl# the treatent laid do*n in
Arti$le C:: to their trade e5posures and default fund $ontri!utions to that CC.3 ;here it grants
su$h perission, it should dis$lose the reasons for its de$ision3
;here the $opetent authorit# $onsiders that the reasons referred to in the first su!paragraph
are not valid, all institutions in its Me!er "tate, irrespe$tive of the treatent the# $hose in
a$$ordan$e *ith Arti$le 2>@(2!), shall appl# the treatent laid do*n in paragraph C, points (a) to
(d)3
C3 ;here the $ondition in paragraph 4, point (!) has !een et, irrespe$tive of *hether the
$ondition in point (a) of that paragraph has !een et or not, the institution shall, *ithin
C onths of the $ir$ustan$e set out in paragraph 4, point (!) arising, or earlier *here
the $opetent authorit# of the institution re6uires it, an institution shall do the follo*ing
*ith respe$t to its e5posures to that CC.'
(a) cease to appl6 the treatent it $hose in a$$ordan$e *ith Arti$le 2>@(2a)%
(!) appl# the treatent laid do*n in Arti$le 2>0(4), point (!) to its trade e5posures to
that CC.%
($) appl# the treatent laid do*n in Arti$le 2>> to its %efault fun% contriutions to that
CC.%
(d) treat e5posures other than those listed in points (!) and ($) to that CC. as
e5posures to a $orporate in a$$ordan$e *ith the "tandardised Approa$h for $redit
risk as set out in Chapter 23
Title III
O<n 1un.s re/uire0ents 1or opertionl risE
C#apter 1
General principles "overnin" t#e use of t#e %ifferent approac#es
,rticle 3.1
Permission an% notification
17 2o &ualif6 for use of t#e Stan%ar%ise% ,pproac#* institutions s#all meet t#e criteria set out in
,rticle 3.9* in a%%ition to meetin" t#e "eneral ris5 mana"ement stan%ar%s set out in ,rticles
>3 an% 83of Directive Jinserte% 6 OPK7 0nstitutions s#all notif6 t#e competent aut#orities
prior to usin" t#e Stan%ar%ise% ,pproac#7
Competent aut#orities s#all permit institutions to use an alternative relevant in%icator for t#e
usiness lines @retail an5in"@ an% @commercial an5in"@ 1#ere t#e con%itions set out in
,rticles 3.8)-/ an% 3.9 are met7
-7 Competent aut#orities s#all permit institutions to use ,%vance% 9easurement ,pproac#es
ase% on t#eir o1n operational ris5 measurement s6stems* 1#ere all t#e &ualitative an%
&uantitative stan%ar%s set out in ,rticles 31. an% 311 respectivel6 are met an% 1#ere
institutions meet t#e "eneral ris5 mana"ement stan%ar%s set out in ,rticles >3 an% 83of
Directive Jinserte% 6 OPK an% Section 00* C#apter 3* 2itle R00 of t#at Directive7
0nstitutions s#all also appl6 for permission from t#eir competent aut#orities 1#ere t#e6 1ant
to implement material e8tensions an% c#an"es to t#ose ,%vance% 9easurement ,pproac#es7
Competent aut#orities s#all "rant t#e permission onl6 1#ere institutions 1oul% continue to
meet t#e stan%ar%s specifie% in t#e first supara"rap# follo1in" t#ose material e8tensions an%
c#an"es7
2a3 &nstitutions shall notif# the $opetent authorities of all $hanges to their Advan$ed
Measureent Approa$hes odels3
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e assessment met#o%olo"6 un%er 1#ic# t#e competent aut#orities permit institutions
to use ,%vance% 9easurement ,pproac#esE
)/ t#e con%itions for assessin" t#e materialit6 of e8tensions an% c#an"es to t#e ,%vance%
9easurement ,pproac#es7
($) the odalities of the notifi$ation re6uired in paragraph 2a3
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
Decemer 2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 3.-
Revertin" to t#e use of less sop#isticate% approac#es
17 0nstitutions t#at use t#e Stan%ar%ise% ,pproac# s#all not revert to t#e use of t#e Dasic
0n%icator ,pproac# unless t#e con%itions in para"rap# 3 are met7
-7 0nstitutions t#at use t#e ,%vance% 9easurement ,pproac#es s#all not revert to t#e use of t#e
Stan%ar%ise% ,pproac# or t#e Dasic 0n%icator ,pproac# unless t#e con%itions in para"rap# 3
are met7
37 ,n institution ma6 onl6 revert to t#e use of a less sop#isticate% approac# for operational ris5
1#ere ot# t#e follo1in" con%itions are met:
)a/ t#e institution #as %emonstrate% to t#e satisfaction of t#e competent aut#orit6 t#at t#e
use of a less sop#isticate% approac# is not propose% in or%er to re%uce t#e operational
ris5 relate% o1n fun%s re&uirements of t#e institution* is necessar6 on t#e asis of nature
an% comple8it6 of t#e institution an% 1oul% not #ave a material a%verse impact on t#e
solvenc6 of t#e institution or its ailit6 to mana"e operational ris5 effectivel6E
)/ t#e institution #as receive% t#e prior permission of t#e competent aut#orit67
,rticle 3.3
Comine% use% of %ifferent approac#es
17 0nstitutions ma6 use a comination of approac#es provi%e% t#at t#e6 otain permission from
t#e competent aut#orities7 Competent aut#orities s#all "rant suc# permission 1#ere t#e
re&uirements set out in para"rap#s - to 4* as applicale* are met7
-7 ,n institution ma6 use an ,%vance% 9easurement ,pproac# in comination 1it# eit#er t#e
Dasic 0n%icator ,pproac# or t#e Stan%ar%ise% ,pproac#* 1#ere ot# t#e follo1in" con%itions
are met:
)a/ t#e comination of ,pproac#es use% 6 t#e institution captures all its operational ris5s
an% competent aut#orities are satisfie% 1it# t#e met#o%olo"6 use% 6 t#e institution to
cover %ifferent activities* "eo"rap#ical locations* le"al structures or ot#er relevant
%ivisions %etermine% on an internal asisE
)/ t#e criteria set out in ,rticle 3.9 an% t#e stan%ar%s set out in ,rticles 31. an% 311 are
fulfille% for t#e part of activities covere% 6 t#e Stan%ar%ise% ,pproac# an% t#e
,%vance% 9easurement ,pproac#es respectivel67
37 3or institutions t#at 1ant to use an ,%vance% 9easurement ,pproac# in comination 1it#
eit#er t#e Dasic 0n%icator ,pproac# or t#e Stan%ar%ise% ,pproac# competent aut#orities
shall* impose t#e follo1in" a%%itional con%itions for "rantin" permission:
)a/ on t#e %ate of implementation of an ,%vance% 9easurement ,pproac#* a si"nificant
part of t#e institution(s operational ris5s are capture% 6 t#at ,pproac#E
)/ t#e institution ta5es a commitment to appl6 t#e ,%vance% 9easurement ,pproac#
across a material part of its operations 1it#in a time sc#e%ule t#at 1as sumitte% to an%
approve% 6 its competent aut#orities7
47 ,n institution ma6 re&uest permission from a competent aut#orit6 to use a comination of t#e
Dasic 0n%icator ,pproac# an% t#e Stan%ar%ise% ,pproac# onl6 in e8ceptional circumstances
suc# as t#e recent ac&uisition of ne1 usiness 1#ic# ma6 re&uire a transition perio% for t#e
application of t#e Stan%ar%ise% ,pproac#7
, competent aut#orit6 s#all "rant suc# permission onl6 1#ere t#e institution #as committe%
to appl6 t#e Stan%ar%ise% ,pproac# 1it#in a time sc#e%ule t#at 1as sumitte% to an%
approve% 6 t#e competent aut#orit67
+7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e con%itions t#at competent aut#orities s#all use 1#en assessin" t#e met#o%olo"6
referre% to in point )a/ of para"rap# -E
)/ t#e con%itions t#at t#e competent aut#orities s#all use 1#en %eci%in" 1#et#er to impose
t#e a%%itional con%itions referre% to in para"rap# 37
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
Decemer -.1=7
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
C#apter -
Dasic in%icator approac#
,rticle 3.4
Capital re&uirement
4n%er t#e Dasic 0n%icator ,pproac#* t#e o1n fun%s re&uirement for operational ris5 is e&ual to 1+
O of t#e avera"e over t#ree 6ears of t#e relevant in%icator as %efine% in ,rticle 3.+7
0nstitutions s#all calculate t#e avera"e over t#ree 6ears of t#e relevant in%icator on t#e asis of t#e
last t#ree t1elve;mont#l6 oservations at t#e en% of t#e financial 6ear7 ?#en au%ite% fi"ures are not
availale* institutions ma6 use usiness estimates7
;here an institution has !een in operation for less than three #ears it a# use for*ard=looking
!usiness estiates in $al$ulating the relevant indi$ator, provided that it starts using histori$al
data as soon as it is availa!le3
;here an institution $an prove to its $opetent authorit# that = due to a erger, an a$6uisition
or a disposal of entities or a$tivities = using a three #ear average to $al$ulate the relevant
indi$ator *ould lead to a !iased estiation for the o*n funds re6uireent for operational risk,
the $opetent authorit# a# perit institutions to odif# the $al$ulation in a *a# that *ould
take into a$$ount su$h events and shall dul# infor the EBA thereof3 &n su$h $ir$ustan$es, the
$opetent authorit# a#, on its o*n initiative, also re6uire an institution to odif# the
$al$ulation3
?#ere for an6 "iven oservation* t#e relevant in%icator is ne"ative or e&ual to Lero* institutions
s#all not ta5e into account t#is fi"ure in t#e calculation of t#e avera"e over t#ree 6ears7 0nstitutions
s#all calculate t#e avera"e over t#ree 6ears as t#e sum of positive fi"ures %ivi%e% 6 t#e numer of
positive fi"ures7
,rticle 3.+
Relevant in%icator
17 3or institutions appl6in" accountin" stan%ar%s estalis#e% 6 Directive 8=/=3+/$$C* ase% on
t#e accountin" cate"ories for t#e profit an% loss account of institutions un%er ,rticle -> of t#at
Directive* t#e relevant in%icator is t#e sum of t#e elements liste% in 2ale 1of t#is para"rap#7
0nstitutions s#all inclu%e eac# element in t#e sum 1it# its positive or ne"ative si"n7
2ale 1
1 0nterest receivale an% similar income
- 0nterest pa6ale an% similar c#ar"es
3 0ncome from s#ares an% ot#er
variale/fi8e%;6iel% securities
4 Commissions/fees receivale
+ Commissions/fees pa6ale
= Bet profit or net loss on financial operations
> Ot#er operatin" income
0nstitutions s#all a%!ust t#ese elements to reflect t#e follo1in" &ualifications:
)a/ institutions s#all calculate t#e relevant in%icator efore t#e %e%uction of an6 provisions
an% operatin" e8penses7 0nstitutions s#all inclu%e in operatin" e8penses fees pai% for
outsourcin" services ren%ere% 6 t#ir% parties 1#ic# are not a parent or susi%iar6 of
t#e institution or a susi%iar6 of a parent 1#ic# is also t#e parent of t#e institution7
0nstitutions ma6 use e8pen%iture on t#e outsourcin" of services ren%ere% 6 t#ir%
parties to re%uce t#e relevant in%icator 1#ere t#e e8pen%iture is incurre% from an
un%erta5in" su!ect to rules un%er* or e&uivalent to* t#is Re"ulationE
)/ institutions s#all not use t#e follo1in" elements in t#e calculation of t#e relevant
in%icator:
)i/ realise% profits/losses from t#e sale of non;tra%in" oo5 itemsE
)ii/ income from e8traor%inar6 or irre"ular itemsE
)iii/ income %erive% from insurance7
)c/ 1#en revaluation of tra%in" items is part of t#e profit an% loss statement* institutions
ma6 inclu%e revaluation7 ?#en institutions appl6 ,rticle 3=)-/ of Directive
8=/=3+/$$C* t#e6 s#all inclu%e revaluation oo5e% in t#e profit an% loss account7
-7 ?#en institutions appl6 accountin" stan%ar%s %ifferent from t#e ones estalis#e% 6 Directive
8=/=3+/$$C* t#e6 s#all calculate t#e relevant in%icator on t#e asis of %ata t#at est reflect t#e
%efinition set out in t#is ,rticle7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to %etermine t#e met#o%olo"6 to
calculate t#e relevant in%icator referre% to in para"rap# -7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
Decemer 2:403
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
F
C#apter 3
Stan%ar%ise% approac#
,rticle 3.=
Hwn fun$s requirement
17 4n%er t#e Stan%ar%ise% ,pproac#* institutions s#all %ivi%e t#eir activities into t#e usiness
lines set out in 2ale - of para"rap# 4 an% in accor%ance 1it# t#e principles set out in ,rticle
3.>7
-7 0nstitutions s#all calculate t#e o1n fun%s re&uirement for operational ris5 as t#e avera"e over
t#ree 6ears of t#e sum of t#e annual o1n fun%s re&uirements across all usiness lines referre%
to in 2ale - of para"rap# 47 2#e annual o1n fun%s re&uirement of eac# usiness line is e&ual
to t#e pro%uct of t#e correspon%in" eta factor referre% to in t#at 2ale an% t#e part of t#e
relevant in%icator mappe% to t#e respe$tive usiness line7
37 0n an6 "iven 6ear* institutions ma6 offset ne"ative o1n fun%s re&uirements resultin" from a
ne"ative part of t#e relevant in%icator in an6 usiness line 1it# positive o1n fun%s
re&uirements in ot#er usiness lines 1it#out limit7 Co1ever* 1#ere t#e a""re"ate o1n fun%s
re&uirement across all usiness lines 1it#in a "iven 6ear is ne"ative* institutions s#all use t#e
value Lero as t#e input to t#e numerator for t#at 6ear7
47 0nstitutions s#all calculate t#e avera"e over t#ree 6ears of t#e sum referre% to in para"rap# -
on t#e asis of t#e last t#ree t1elve;mont#l6 oservations at t#e en% of t#e financial 6ear7
?#en au%ite% fi"ures are not availale* institutions ma6 use usiness estimates7
;here an institution $an prove to its $opetent authorit# that = due to a erger3 an
a$6uisition or a disposal of entities or a$tivities= using a three #ear average to $al$ulate the
relevant indi$ator *ould lead to a !iased estiation for the o*n funds re6uireent for
operational risk, the $opetent authorit# a# perit institutions to odif# the $al$ulation
in a *a# that *ould take into a$$ount su$h events and shall dul# infor the EBA thereof3
&n su$h $ir$ustan$es, the $opetent authorit# a#, on its o*n initiative, also re6uire an
institution to odif# the $al$ulation3
;here an institution has !een in operation for less than three #ears it a# use for*ard=
looking !usiness estiates in $al$ulating the relevant indi$ator, provided that it starts using
histori$al data as soon as it is availa!le3
2ale -
Dusiness line Fist of activities Percenta"e )eta
factor/
Corporate finance 4n%er1ritin" of financial instruments or
placin" of financial instruments on a firm
commitment asis
Services relate% to un%er1ritin"
0nvestment a%vice
,%vice to un%erta5in"s on capital structure*
in%ustrial strate"6 an% relate% matters an%
a%vice an% services relatin" to t#e mer"ers
an% t#e purc#ase of un%erta5in"s
0nvestment researc# an% financial anal6sis
an% ot#er forms of "eneral recommen%ation
relatin" to transactions in financial
18 O
I instruments
8439/13 SO/psc 8-.
DQPG
EN
8439/13 SO/psc 822
EN
DQPG
2ra%in" an% sales Dealin" on o1n account
9one6 ro5in"
Reception an% transmission of or%ers in
relation to one or more financial instruments
$8ecution of or%ers on e#alf of clients
Placin" of financial instruments 1it#out a
firm commitment asis
Operation of 9ultilateral 2ra%in" 3acilities
18 O
Retail ro5era"e
),ctivities 1it# a in%ivi%ual
natural persons or 1it# small
an% me%ium siLe% enterprises
meetin" t#e criteria set out in
,rticle >9 for t#e retail e8posure
class/
Reception an% transmission of or%ers in
relation to one or more financial instruments
$8ecution of or%ers on e#alf of clients
Placin" of financial instruments 1it#out a
firm commitment asis
1- O
Commercial an5in" ,cceptance of %eposits an% ot#er repa6ale
fun%s
Fen%in"
3inancial leasin"
Guarantees an% commitments
1+ O
Retail an5in"
),ctivities 1it# a in%ivi%ual
natural persons or 1it# small
an% me%ium siLe% enterprises
meetin" t#e criteria set out in
,rticle >9 for t#e retail e8posure
class/
,cceptance of %eposits an% ot#er repa6ale
fun%s
Fen%in"
3inancial leasin"
Guarantees an% commitments
1- O
Pa6ment an% settlement 9one6 transmission services*
0ssuin" an% a%ministerin" means of pa6ment
18 O
,"enc6 services Safe5eepin" an% a%ministration of financial
instruments for t#e account of clients*
inclu%in" custo%ians#ip an% relate% services
suc# as cas#/collateral mana"ement
1+ O
,sset mana"ement Portfolio mana"ement
9ana"in" of 4C02S
Ot#er forms of asset mana"ement
1- O
,rticle 3.>
Principles for usiness line mappin"
17 0nstitutions s#all %evelop an% %ocument specific policies an% criteria for mappin" t#e relevant
in%icator for current usiness lines an% activities into t#e stan%ar%ise% frame1or5 set out in
article 3.=7 2#e6 s#all revie1 an% a%!ust t#ose policies an% criteria as appropriate for ne1 or
c#an"in" usiness activities an% ris5s7
-7 0nstitutions s#all appl6 t#e follo1in" principles for usiness line mappin":
)a/ institutions s#all map all activities into t#e usiness lines in a mutuall6 e8clusive an%
!ointl6 e8#austive mannerE
)/ institutions s#all allocate an6 activit6 1#ic# cannot e rea%il6 mappe% into t#e usiness
line frame1or5* ut 1#ic# represents an ancillar6 activit6 to an activit6 inclu%e% in t#e
frame1or5* to t#e usiness line it supports7 ?#ere more t#an one usiness line is
supporte% t#rou"# t#e ancillar6 activit6* institutions s#all use an o!ective;mappin"
criterionE
)c/ 1#ere an activit6 cannot e mappe% into a particular usiness line t#en institutions s#all
use t#e usiness line 6iel%in" t#e #i"#est percenta"e7 2#e same usiness line e&uall6
applies to an6 ancillar6 activit6 associate% 1it# t#at activit6E
)%/ institutions ma6 use internal pricin" met#o%s to allocate t#e relevant in%icator et1een
usiness lines7 Costs "enerate% in one usiness line 1#ic# are imputale to a %ifferent
usiness line ma6 e reallocate% to t#e usiness line to 1#ic# t#e6 pertainE
)e/ t#e mappin" of activities into usiness lines for operational ris5 capital purposes s#all
e consistent 1it# t#e cate"ories institutions use for cre%it an% mar5et ris5sE
)f/ senior mana"ement s#all e responsile for t#e mappin" polic6 un%er t#e control of t#e
mana"ement o%6 of t#e institutionE
)"/ institutions s#all su!ect t#e mappin" process to usiness lines to in%epen%ent revie17
37 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to %etermine t#e con%itions of
application of t#e principles for usiness line mappin" provi%e% in t#is ,rticle7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission 6 31
Decemer -.1>7
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 3.8
,lternative Stan%ar%ise% ,pproac#
17 4n%er t#e ,lternative Stan%ar%ise% ,pproac#* for t#e usiness lines @retail an5in"@ an%
@commercial an5in"@* institutions s#all appl6 t#e follo1in":
)a/ t#e relevant in%icator is a normalise% income in%icator e&ual to t#e nominal amount of
loans an% a%vances multiplie% 6 .7.3+E
)/ t#e loans an% a%vances consist of t#e total %ra1n amounts in t#e correspon%in" cre%it
portfolios7 3or t#e @commercial an5in"@ usiness line* institutions s#all also inclu%e
securities #el% in t#e non tra%in" oo5 in t#e nominal amount of loans an% a%vances7
-7 2o e permitte% to use t#e ,lternative Stan%ar%ise% ,pproac#* t#e institution s#all meet all
t#e follo1in" con%itions:
)a/ its retail or commercial an5in" activities s#all account for at least 9. O of its incomeE
)/ a si"nificant proportion of its retail or commercial an5in" activities s#all comprise
loans associate% 1it# a #i"# proailit6 of %efaultE
)c/ t#e alternative stan%ar%ise% approac# provi%es an appropriate asis for calculatin" its
o1n fun%s re&uirement for operational ris57
A
,rticle 3.9
Criteria for t#e stan%ar%ise% approac#
2#e criteria referre% to in supara"rap# 1 of ,rticle 3.1)1/ are t#e follo1in":
)a/ institutions s#all #ave in place a 1ell;%ocumente% assessment an% mana"ement s6stem for
operational ris5 1it# clear responsiilities assi"ne% for t#is s6stem7 2#e6 s#all i%entif6 t#eir
e8posures to operational ris5 an% trac5 relevant operational ris5 %ata* inclu%in" material loss
%ata7 2#is s6stem s#all e su!ect to re"ular in%epen%ent revie1 $arried out !# an internal or
e5ternal part# possessing the ne$essar# kno*ledge to $arr# out su$h revie*E
)/ an institutions operational ris5 assessment s6stem s#all e closel6 inte"rate% into t#e ris5
mana"ement processes of t#e institution7 0ts output s#all e an inte"ral part of t#e process of
monitorin" an% controllin" t#e institution(s operational ris5 profileE
)c/ institutions s#all implement a s6stem of reportin" to senior mana"ement t#at provi%es
operational ris5 reports to relevant functions 1it#in t#e institutions7 0nstitutions s#all #ave in
place proce%ures for ta5in" appropriate action accor%in" to t#e information 1it#in t#e reports
to mana"ement7
F
C6pter '
A.3n2e. 0esure0ent ppro26es
?ECTION 1
@UALIFAIN> CRITERIA
,rticle 31.
Qualitative stan%ar%s
2#e &ualitative stan%ar%s referre% to in ,rticle 3.1)-/ are t#e follo1in":
)a/ an institution(s internal operational ris5 measurement s6stem s#all e closel6 inte"rate% into
its %a6;to;%a6 ris5 mana"ement processesE
)/ institutions s#all #ave an in%epen%ent ris5 mana"ement function for operational ris5E
)c/ institutions s#all #ave in place re"ular reportin" of operational ris5 e8posures an% loss
e8perience an% s#all #ave in place proce%ures for ta5in" appropriate corrective actionE
)%/ an institution(s ris5 mana"ement s6stem s#all e 1ell %ocumente%7 0nstitution s#all #ave in
place routines for ensurin" compliance an% policies for t#e treatment of non;complianceE
)e/ institution s#all su!ect t#eir operational ris5 mana"ement processes an% measurement
s6stems to re"ular revie1s performe% 6 internal or e8ternal au%itorsE
)f/ an institution(s internal vali%ation processes s#all operate in a soun% an% effective mannerE
)"/ %ata flo1s an% processes associate% 1it# an institution(s ris5 measurement s6stem s#all e
transparent an% accessile7
,rticle 311
Quantitative Stan%ar%s
17 2#e &uantitative stan%ar%s referre% to in ,rticle 3.1)-/ inclu%e t#e stan%ar%s relatin" to
process* to internal %ata* to e8ternal %ata* to scenario anal6sis* to usiness environment an% to
internal control factors referre% to in para"rap#s - to = respectivel67
-7 2#e stan%ar%s relatin" to process are t#e follo1in":
)a/ institutions s#all calculate t#eir o1n fun%s re&uirement as comprisin" ot# e8pecte% loss
an% une8pecte% loss* unless e8pecte% loss is a%e&uatel6 capture% in t#eir internal
usiness practices7 2#e operational ris5 measure s#all capture potentiall6 severe tail
events* ac#ievin" a soun%ness stan%ar% comparale to a 9979 O confi%ence interval over
a one 6ear perio%E
)/ an institutions operational ris5 measurement s6stem s#all inclu%e t#e use of internal
%ata* e8ternal %ata* scenario anal6sis an% factors reflectin" t#e usiness environment
an% internal control s6stems as set out in para"rap#s 3 to =7 ,n institution s#all #ave in
place a 1ell %ocumente% approac# for 1ei"#tin" t#e use of t#ese four elements in its
overall operational ris5 measurement s6stemE
)c/ an institution(s ris5 measurement s6stem s#all capture t#e ma!or %rivers of ris5 affectin"
t#e s#ape of t#e tail of t#e estimate% %istriution of lossesE
)%/ institutions ma6 reco"nise correlations in operational ris5 losses across in%ivi%ual
operational ris5 estimates onl6 1#ere t#eir s6stems for measurin" correlations are
soun%* implemente% 1it# inte"rit6* an% ta5e into account t#e uncertaint6 surroun%in"
an6 suc# correlation estimates* particularl6 in perio%s of stress7 0nstitutions s#all
vali%ate t#eir correlation assumptions usin" appropriate &uantitative an% &ualitative
tec#ni&uesE
)e/ an institution(s ris5 measurement s6stem s#all e internall6 consistent an% s#all avoi%
t#e multiple countin" of &ualitative assessments or ris5 miti"ation tec#ni&ues
reco"nise% in ot#er areas of t#is Re"ulation7
37 2#e stan%ar%s relatin" to internal %ata are t#e follo1in":
)a/ institutions s#all ase t#eir internall6 "enerate% operational ris5 measures on a
minimum #istorical oservation perio% of five 6ears7 ?#en an institution first moves to
an ,%vance% 9easurement ,pproac#* it ma6 use a t#ree;6ear #istorical oservation
perio%E
)/ institutions s#all e ale to map t#eir #istorical internal loss %ata into t#e usiness lines
%efine% in ,rticle 3.= an% into t#e event t6pes %efine% in ,rticle 313* an% to provi%e
t#ese %ata to competent aut#orities upon re&uest7 0n e8ceptional circumstances* an
institution ma6 allocate loss events 1#ic# affect t#e entire institution to an a%%itional
usiness line @corporate items@7 0nstitutions s#all #ave in place %ocumente%* o!ective
criteria for allocatin" losses to t#e specifie% usiness lines an% event t6pes7 0nstitutions
s#all recor% t#e operational ris5 losses t#at are relate% to cre%it ris5 an% t#at institutions
#ave #istoricall6 inclu%e% in t#e internal cre%it ris5 %ataases in t#e operational ris5
%ataases an% s#all i%entif6 t#em separatel67 Suc# losses s#all not e su!ect to t#e
operational ris5 c#ar"e* as lon" as institutions continue to treat t#em as cre%it ris5 for
t#e purposes of calculatin" o1n fun%s re&uirements7 0nstitutions s#all inclu%e
operational ris5 losses t#at are relate% to mar5et ris5s in t#e scope of t#e o1n fun%s
re&uirement for operational ris5:
)c/ an institution(s internal loss %ata s#all e compre#ensive in t#at it captures all material
activities an% e8posures from all appropriate su;s6stems an% "eo"rap#ic locations7
0nstitutions s#all e ale to !ustif6 t#at an6 e8clu%e% activities or e8posures* ot#
in%ivi%uall6 an% in comination* 1oul% not #ave a material impact on t#e overall ris5
estimates7 0nstitutions s#all %efine appropriate minimum loss t#res#ol%s for internal loss
%ata collectionE
)%/ asi%e from information on "ross loss amounts* institutions s#all collect information
aout t#e %ate of t#e loss event* an6 recoveries of "ross loss amounts* as 1ell as
%escriptive information aout t#e %rivers or causes of t#e loss eventE
)e/ institutions s#all #ave in place specific criteria for assi"nin" loss %ata arisin" from a loss
event in a centralise% function or an activit6 t#at spans more t#an one usiness line* as
1ell as from relate% loss events over timeE
)f/ institutions s#all #ave in place %ocumente% proce%ures for assessin" t#e on;"oin"
relevance of #istorical loss %ata* inclu%in" t#ose situations in 1#ic# !u%"ement
overri%es* scalin"* or ot#er a%!ustments ma6 e use%* to 1#at e8tent t#e6 ma6 e use%
an% 1#o is aut#orise% to ma5e suc# %ecisions7
47 2#e &ualif6in" stan%ar%s relatin" to e8ternal %ata are t#e follo1in":
)a/ an institution(s operational ris5 measurement s6stem s#all use relevant e8ternal %ata*
especiall6 1#en t#ere is reason to elieve t#at t#e institution is e8pose% to infre&uent*
6et potentiall6 severe* losses7 ,n institution s#all #ave a s6stematic process for
%eterminin" t#e situations for 1#ic# e8ternal %ata s#all e use% an% t#e met#o%olo"ies
use% to incorporate t#e %ata in its measurement s6stemE
)/ institutions s#all re"ularl6 revie1 t#e con%itions an% practices for e8ternal %ata an%
s#all %ocument t#em an% su!ect t#em to perio%ic in%epen%ent revie17
+7 ,n institution s#all use scenario anal6sis of e8pert opinion in con!unction 1it# e8ternal %ata
to evaluate its e8posure to #i"# severit6 events7 Over time* t#e institution s#all vali%ate an%
reassess suc# assessments t#rou"# comparison to actual loss e8perience to ensure t#eir
reasonaleness7
=7 2#e &ualif6in" stan%ar%s relatin" to usiness environment an% internal control factors are t#e
follo1in":
)a/ an institution(s firm;1i%e ris5 assessment met#o%olo"6 s#all capture 5e6 usiness
environment an% internal control factors t#at can c#an"e t#e institutions operational ris5
profileE
)/ institutions s#all !ustif6 t#e c#oice of eac# factor as a meanin"ful %river of ris5* ase%
on e8perience an% involvin" t#e e8pert !u%"ment of t#e affecte% usiness areasE
)c/ institutions s#all e ale to !ustif6 to competent aut#orities t#e sensitivit6 of ris5
estimates to c#an"es in t#e factors an% t#e relative 1ei"#tin" of t#e various factors7 0n
a%%ition to capturin" c#an"es in ris5 %ue to improvements in ris5 controls* an
institution(s ris5 measurement frame1or5 s#all also capture potential increases in ris5
%ue to "reater comple8it6 of activities or increase% usiness volumeE
)%/ an institution s#all %ocument its ris5 measurement frame1or5 an% s#all su!ect it to
in%epen%ent revie1 1it#in t#e institution an% 6 competent aut#orities7 Over time*
institutions s#all vali%ate an% reassess t#e process an% t#e outcomes t#rou"# comparison
to actual internal loss e8perience an% relevant e8ternal %ata7
I
8439/13 SO/psc 834
DQPG
EN
DQPG
836
EN
8439/13 SO/psc
,rticle 31-
0mpact of insurance an% ot#er ris5 transfer mec#anisms
17 2#e competent aut#orities s#all permit institutions to reco"nise t#e impact of insurance
su!ect to t#e con%itions set out in para"rap#s - to + an% ot#er ris5 transfer mec#anisms 1#ere
t#e institution can %emonstrate t#at a noticeale ris5 miti"atin" effect is ac#ieve%7
-7 2#e insurance provi%er s#all e aut#orise% to provi%e insurance or re;insurance an% s#all #ave
a minimum claims pa6in" ailit6 ratin" 6 an A$C,0 1#ic# #as een %etermine% 6 $D, to
e associate% 1it# cre%it &ualit6 step 3 or aove un%er t#e rules for t#e ris5 1ei"#tin" of
e8posures to institutions un%er .art +hree, +itle &&, C#apter -7
37 2#e insurance an% t#e institutions( insurance frame1or5 s#all meet all t#e follo1in"
con%itions:
)a/ t#e insurance polic6 #as an initial term of no less t#an one 6ear7 3or policies 1it# a
resi%ual term of less t#an one 6ear* an institution s#all ma5e appropriate #aircuts
reflectin" t#e %eclinin" resi%ual term of t#e polic6* up to a full 1.. O #aircut for
policies 1it# a resi%ual term of 9. %a6s or lessE
)/ t#e insurance polic6 #as a minimum notice perio% for cancellation of t#e contract of 9.
%a6sE
)c/ t#e insurance polic6 #as no e8clusions or limitations tri""ere% 6 supervisor6 actions or*
in t#e case of a faile% institution* t#at preclu%e t#e institution7s receiver or li&ui%ator
from recoverin" t#e %ama"es suffere% or e8penses incurre% 6 t#e institution* e8cept in
respect of events occurrin" after t#e initiation of receivers#ip or li&ui%ation procee%in"s
in respect of t#e institution7 Co1ever* t#e insurance polic6 ma6 e8clu%e an6 fine*
penalt6* or punitive %ama"es resultin" from actions 6 t#e competent aut#oritiesE
)%/ t#e ris5 miti"ation calculations s#all reflect t#e insurance covera"e in a manner t#at is
transparent in its relations#ip to* an% consistent 1it#* t#e actual li5eli#oo% an% impact of
loss use% in t#e overall %etermination of operational ris5 capitalE
)e/ t#e insurance is provi%e% 6 a t#ir% part6 entit67 0n t#e case of insurance t#rou"#
captives an% affiliates* t#e e8posure #as to e lai% off to an in%epen%ent t#ir% part6
entit6 t#at meets t#e eli"iilit6 criteria set out in para"rap# -E
)f/ t#e frame1or5 for reco"nisin" insurance is 1ell reasone% an% %ocumente%7
47 2#e met#o%olo"6 for reco"nisin" insurance s#all capture all t#e follo1in" elements t#rou"#
%iscounts or #aircuts in t#e amount of insurance reco"nition:
)a/ t#e resi%ual term of t#e insurance polic6, *here less t#an one 6ear
)aa) t#e polic6(s cancellation terms, *here less than one #earE
)a!/ t#e uncertaint6 of pa6ment as 1ell as mismatc#es in covera"e of insurance policies7
+7 2#e re%uction in o1n fun%s re&uirements from t#e reco"nition of insurances an% ot#er ris5
transfer mec#anisms s#all not e8cee% -. O of t#e o1n fun%s re&uirement for operational ris5
efore t#e reco"nition of ris5 miti"ation tec#ni&ues7
,rticle 313
Foss event t6pe classification
2#e loss events t6pes referre% to in point )/ of ,rticle 311)3/ are t#e follo1in":
2ale 3
$vent;26pe Cate"or6 Definition
0nternal frau% Fosses %ue to acts of a t6pe inten%e% to %efrau%* misappropriate propert6 or
circumvent re"ulations* t#e la1 or compan6 polic6* e8clu%in"
%iversit6/%iscrimination events* 1#ic# involves at least one internal part6
$8ternal frau% Fosses %ue to acts of a t6pe inten%e% to %efrau%* misappropriate propert6 or
circumvent t#e la1* 6 a t#ir% part6
$mplo6ment Practices
an% ?or5place Safet6
Fosses arisin" from acts inconsistent 1it# emplo6ment* #ealt# or safet6 la1s
or a"reements* from pa6ment of personal in!ur6 claims* or from
%iversit6/%iscrimination events
Clients* Pro%ucts b
Dusiness Practices
Fosses arisin" from an unintentional or ne"li"ent failure to meet a
professional oli"ation to specific clients )inclu%in" fi%uciar6 an% suitailit6
re&uirements/* or from t#e nature or %esi"n of a pro%uct
Dama"e to P#6sical
,ssets
Fosses arisin" from loss or %ama"e to p#6sical assets from natural %isaster or
ot#er events
Dusiness %isruption
an% s6stem failures
Fosses arisin" from %isruption of usiness or s6stem failures
$8ecution* Deliver6 b
Process 9ana"ement
Fosses from faile% transaction processin" or process mana"ement* from
relations 1it# tra%e counterparties an% ven%ors
Title I,
O<n 1un.s re/uire0ents 1or 0rEet risE
C6pter 1
>enerl Pro3isions
,rticle 314
,llo1ances for consoli%ate% re&uirements
17 Su!ect to para"rap# - an% onl6 for t#e purpose of calculatin" net positions an% o1n fun%s
re&uirements in accor%ance 1it# t#is 2itle on a consoli%ate% asis* institutions ma6 use
positions in one institution or un%erta5in" to offset positions in anot#er institution or
un%erta5in"7
-7 0nstitutions ma6 appl6 para"rap# 1 onl6 su!ect to t#e permission of t#e competent
aut#orities* 1#ic# s#all e "rante% if all of t#e follo1in" con%itions are met:
)a/ t#ere is a satisfactor6 allocation of o1n fun%s 1it#in t#e "roupE
)/ t#e re"ulator6* le"al or contractual frame1or5 in 1#ic# t#e institutions operate is suc#
as to "uarantee mutual financial support 1it#in t#e "roup7
37 ?#ere t#ere are un%erta5in"s locate% in t#ir% countries all of t#e follo1in" con%itions s#all e
met in a%%ition to t#ose in para"rap# -:
)a/ suc# un%erta5in"s #ave een aut#orise% in a t#ir% countr6 an% eit#er satisf6 t#e
%efinition of a cre%it institution or are reco"nise% t#ir%;countr6 investment firmsE
)/ suc# un%erta5in"s compl6* on an in%ivi%ual asis* 1it# o1n fun%s re&uirements
e&uivalent to t#ose lai% %o1n in t#is Re"ulationE
)c/ no re"ulations e8ist in t#e t#ir% countries in &uestion 1#ic# mi"#t si"nificantl6 affect
t#e transfer of fun%s 1it#in t#e "roup7
C6pter 2
O<n 1un.s re/uire0ents 1or position risE
?ECTION 1
>ENERAL PRO,I?ION? AN$ ?PECIFIC IN?TRU*ENT?
,rticle 31+
O1n fun%s re&uirements for position ris5
2#e institution(s o1n fun%s re&uirement for position ris5 s#all e t#e sum of t#e o1n fun%s
re&uirements for t#e "eneral an% specific ris5 of its positions in %et an% e&uit6 instruments7
Securitisation positions in t#e tra%in" oo5 s#all e treate% as %et instruments7
,rticle 31=
Bettin"
17 2#e asolute value of t#e e8cess of an institution(s lon" )s#ort/ positions over its s#ort )lon"/
positions in t#e same e&uit6* %et an% convertile issues an% i%entical financial futures*
options* 1arrants an% covere% 1arrants s#all e its net position in eac# of t#ose %ifferent
instruments7 0n calculatin" t#e net position* positions in %erivative instruments s#all e treate%
as lai% %o1n in ,rticles 31> to 3197 0nstitutions( #ol%in"s of t#eir o1n %et instruments s#all
e %isre"ar%e% in calculatin" specific ris5 capital re&uirements un%er ,rticle 3-+7
-7 Bo nettin" s#all e allo1e% et1een a convertile an% an offsettin" position in t#e instrument
un%erl6in" it* unless t#e competent aut#orities a%opt an approac# un%er 1#ic# t#e li5eli#oo%
of a particular convertile(s ein" converte% is ta5en into account or re&uire an o1n fun%s
re&uirement to cover an6 loss 1#ic# conversion mi"#t entail7 Suc# approac#es or o1n fun%s
re&uirements s#all e notifie% to t#e $D,7 $D, s#all monitor t#e ran"e of practices in t#is
area an% s#all* in accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo7 1.93/-.1.* issue
"ui%elines7
37 ,ll net positions* irrespective of t#eir si"ns* must e converte% on a %ail6 asis into t#e
institution(s reportin" currenc6 at t#e prevailin" spot e8c#an"e rate efore t#eir a""re"ation7
,rticle 31>
0nterest rate futures an% for1ar%s
17 0nterest;rate futures* for1ar%;rate a"reements )3R,s/ an% for1ar% commitments to u6 or sell
%et instruments s#all e treate% as cominations of lon" an% s#ort positions7 2#us a lon"
interest;rate futures position s#all e treate% as a comination of a orro1in" maturin" on t#e
%eliver6 %ate of t#e futures contract an% a #ol%in" of an asset 1it# maturit6 %ate e&ual to t#at
of t#e instrument or notional position un%erl6in" t#e futures contract in &uestion7 Similarl6 a
sol% 3R, 1ill e treate% as a lon" position 1it# a maturit6 %ate e&ual to t#e settlement %ate
plus t#e contract perio%* an% a s#ort position 1it# maturit6 e&ual to t#e settlement %ate7 Dot#
t#e orro1in" an% t#e asset #ol%in" s#all e inclu%e% in t#e first cate"or6 set out in 2ale 1 in
,rticle 3-+ in or%er to calculate t#e o1n fun%s re&uirement for specific ris5 for interest;rate
futures an% 3R,s7 , for1ar% commitment to u6 a %et instrument s#all e treate% as a
comination of a orro1in" maturin" on t#e %eliver6 %ate an% a lon" )spot/ position in t#e
%et instrument itself7 2#e orro1in" s#all e inclu%e% in t#e first cate"or6 set out in 2ale 1
in ,rticle 3-+ for purposes of specific ris5* an% t#e %et instrument un%er 1#ic#ever column
is appropriate for it in t#e same tale7
-7 3or t#e purposes of t#is ,rticle* Mlon" positionN means a position in 1#ic# an institution #as
fi8e% t#e interest rate it 1ill receive at some time in t#e future* an% Ms#ort positionN means a
position in 1#ic# it #as fi8e% t#e interest rate it 1ill pa6 at some time in t#e future7
,rticle 318
Options an% 1arrants
17 Options an% 1arrants on interest rates* %et instruments* e&uities* e&uit6 in%ices* financial
futures* s1aps an% forei"n currencies s#all e treate% as if t#e6 1ere positions e&ual in value
to t#e amount of t#e un%erl6in" instrument to 1#ic# t#e option refers* multiplie% 6 its %elta
for t#e purposes of t#is C#apter7 2#e latter positions ma6 e nette% off a"ainst an6 offsettin"
positions in t#e i%entical un%erl6in" securities or %erivatives7 2#e %elta use% s#all A e t#at of
t#e e8c#an"e concerne%3 1or -+C=options* or 1#ere delta is not availale fro the
e5$hange $on$erned, t#e institution a# $al$ulate delta itself usin" an appropriate mo%el,
su!9e$t to perission !# the $opetent authorities7 Permission s#all e "rante% if t#e mo%el
appropriatel6 estimates t#e rate of c#an"e of t#e option(s or 1arrant(s value 1it# respect to
small c#an"es in t#e mar5et price of t#e un%erl6in"7
-7 0nstitutions s#all a%e&uatel6 reflect ot#er ris5s* apart from t#e %elta ris5* associate% 1it#
options in t#e o1n fun%s re&uirements7
2a3 Before the entr# into for$e of the te$hni$al standards, $opetent authorities a# $ontinue
to appl# the e5isting national treatents, *here the $opetent authorities have applied that
treatent !efore C4 (e$e!er 2:4C3
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s %efinin" a ran"e of met#o%s to reflect
in t#e o1n fun%s re&uirements ot#er ris5s* apart from %elta ris5* referre% to in para"rap# - in a
manner proportionate to t#e scale an% comple8it6 of institutions( activities in options an%
1arrants7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4
(e$e!er -.137
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first su;para"rap# in accor%ance 1it# ,rticles 1. to 14 of Re"ulation )$4/ Bo
1.93/-.1.7
,rticle 319
S1aps
S1aps s#all e treate% for interest;rate ris5 purposes on t#e same asis as on;alance;s#eet
instruments7 2#us* an interest;rate s1ap un%er 1#ic# an institution receives floatin";rate interest
an% pa6s fi8e%;rate interest s#all e treate% as e&uivalent to a lon" position in a floatin";rate
instrument of maturit6 e&uivalent to t#e perio% until t#e ne8t interest fi8in" an% a s#ort position in a
fi8e%;rate instrument 1it# t#e same maturit6 as t#e s1ap itself7
,rticle 3-.
0nterest rate ris5 on %erivative instruments
17 0nstitutions 1#ic# mar5 to mar5et an% mana"e t#e interest;rate ris5 on t#e %erivative
instruments covere% in ,rticles 31> to 319 on a %iscounte%;cas#;flo1 asis ma6* su!ect to
permission 6 t#e competent aut#orities* use sensitivit6 mo%els to calculate t#e positions
referre% to in t#ose Arti$les an% ma6 use t#em for an6 on% 1#ic# is amortise% over its
resi%ual life rat#er t#an via one final repa6ment of principal7 Permission s#all e "rante% if
t#ese mo%els "enerate positions 1#ic# #ave t#e same sensitivit6 to interest;rate c#an"es as t#e
un%erl6in" cas# flo1s7 2#is sensitivit6 s#all e assesse% 1it# reference to in%epen%ent
movements in sample rates across t#e 6iel% curve* 1it# at least one sensitivit6 point in eac# of
t#e maturit6 an%s set out in 2ale - in ,rticle 3-87 2#e positions s#all e inclu%e% in t#e
calculation of o1n fun%s re&uirements for "eneral ris5 of %et instruments7
-7 0nstitutions 1#ic# %o not use mo%els un%er para"rap# 1 ma6* treat as full6 offsettin" an6
positions in %erivative instruments covere% in ,rticles 31> to 319 1#ic# meet t#e follo1in"
con%itions at least:
)a/ t#e positions are of t#e same value an% %enominate% in t#e same currenc6E
)/ t#e reference rate )for floatin";rate positions/ or coupon )for fi8e%;rate positions/ is
closel6 matc#e%E
)c/ t#e ne8t interest;fi8in" %ate or* for fi8e% coupon positions* resi%ual maturit6
correspon%s 1it# t#e follo1in" limits:
)i/ less t#an one mont# #ence: same %a6E
)ii/ et1een one mont# an% one 6ear #ence: 1it#in seven %a6sE
)iii/ over one 6ear #ence: 1it#in 3. %a6s7
,rticle 3-1
Cre%it Derivatives
17 ?#en calculatin" t#e o1n fun%s re&uirement for "eneral an% specific ris5 of t#e part6 1#o
assumes t#e cre%it ris5 )t#e (protection seller(/* unless specifie% %ifferentl6* t#e notional
amount of t#e cre%it %erivative contract s#all e use%7 Bot1it#stan%in" t#e first sentence* t#e
institution ma6 elect to replace t#e notional value 6 t#e notional value plus t#e net mar5et
value c#an"e of t#e cre%it %erivative since tra%e inception* a net %o1n1ar% c#an"e from t#e
protection seller(s perspective carr6in" a ne"ative si"n7 3or t#e purpose of calculatin" t#e
specific ris5 c#ar"e* ot#er t#an for total return s1aps* t#e maturit6 of t#e cre%it %erivative
contract* rat#er t#an t#e maturit6 of t#e oli"ation* s#all appl67 Positions are %etermine% as
follo1s:
)a/ a total return s1ap creates a lon" position in t#e "eneral ris5 of t#e reference oli"ation
an% a s#ort position in t#e "eneral ris5 of a "overnment on% 1it# a maturit6 e&uivalent
to t#e perio% until t#e ne8t interest fi8in" an% 1#ic# is assi"ne% a . O ris5 1ei"#t un%er
2itle 00* C#apter -7 0t also creates a lon" position in t#e specific ris5 of t#e reference
oli"ationE
)/ a cre%it %efault s1ap %oes not create a position for "eneral ris57 3or t#e purposes of
specific ris5* t#e institution must recor% a s6nt#etic lon" position in an oli"ation of t#e
reference entit6* unless t#e %erivative is rate% e8ternall6 an% meets t#e con%itions for a
&ualif6in" %et item* in 1#ic# case a lon" position in t#e %erivative is recor%e%7 0f
premium or interest pa6ments are %ue un%er t#e pro%uct* t#ese cas# flo1s must e
represente% as notional positions in "overnment on%sE
)c/ a sin"le name cre%it lin5e% note creates a lon" position in t#e "eneral ris5 of t#e note
itself* as an interest rate pro%uct7 3or t#e purpose of specific ris5* a s6nt#etic lon"
position is create% in an oli"ation of t#e reference entit67 ,n a%%itional lon" position is
create% in t#e issuer of t#e note7 ?#ere t#e cre%it lin5e% note #as an e8ternal ratin" an%
meets t#e con%itions for a &ualif6in" %et item* a sin"le lon" position 1it# t#e specific
ris5 of t#e note nee% onl6 e recor%e%E
)%/ in a%%ition to a lon" position in t#e specific ris5 of t#e issuer of t#e note* a multiple
name cre%it lin5e% note provi%in" proportional protection creates a position in eac#
reference entit6* 1it# t#e total notional amount of t#e contract assi"ne% across t#e
positions accor%in" to t#e proportion of t#e total notional amount t#at eac# e8posure to
a reference entit6 represents7 ?#ere more t#an one oli"ation of a reference entit6 can
e selecte%* t#e oli"ation 1it# t#e #i"#est ris5 1ei"#tin" %etermines t#e specific ris57
A
)e/ a first;asset;to;%efault cre%it %erivative creates a position for t#e notional amount in an
oli"ation of eac# reference entit67 0f t#e siLe of t#e ma8imum cre%it event pa6ment is
lo1er t#an t#e o1n fun%s re&uirement un%er t#e met#o% in t#e first sentence of t#is
point* t#e ma8imum pa6ment amount ma6 e ta5en as t#e o1n fun%s re&uirement for
specific ris57
a =n=th;asset;to;%efault cre%it %erivative creates a position for t#e notional amount in an
oli"ation of eac# reference entit6 less the n=4 referen$e entities 1it# t#e lo1est
specific ris5 o1n fun%s re&uirement7 0f t#e siLe of t#e ma8imum cre%it event pa6ment is
lo1er t#an t#e o1n fun%s re&uirement un%er t#e met#o% in t#e first sentence of t#is
point* t#is amount ma6 e ta5en as t#e o1n fun%s re&uirement for specific ris57
?#ere an n;t#;to;%efault cre%it %erivative is e8ternall6 rate%* t#e protection seller s#all
calculate t#e specific ris5 o1n fun%s re&uirement usin" t#e ratin" of t#e %erivative an%
appl6 t#e respective securitisation ris5 1ei"#ts as applicaleE
-7 3or t#e part6 1#o transfers cre%it ris5 )t#e protection u6er/* t#e positions are %etermine% as
t#e mirror principle of t#e protection seller* 1it# t#e e8ception of a cre%it lin5e% note )1#ic#
entails no s#ort position in t#e issuer/7 ?#en calculatin" t#e o1n fun%s re&uirement for t#e
(protection u6er(* t#e notional amount of t#e cre%it %erivative contract s#all e use%7
Bot1it#stan%in" t#e first sentence* t#e institution ma6 elect to replace t#e notional value 6
t#e notional value plus t#e net A mar5et value $hange of t#e cre%it %erivative since tra%e
inception* a net %o1n1ar% c#an"e from t#e protection seller(s perspective carr6in" a ne"ative
si"n7 0f at a "iven moment t#ere is a call option in comination 1it# a step;up* suc# moment
is treate% as t#e maturit6 of t#e protection7
C3 Credit derivatives a$$ording to Arti$le C20 (4) or (C) shall !e in$luded onl# in the
deterination of the spe$ifi$ risk o*n funds re6uireent a$$ording to Arti$le C20 (B)3
,rticle 3--
Securities sol% un%er a repurc#ase a"reement or lent
2#e transferor of securities or "uarantee% ri"#ts relatin" to title to securities in a repurc#ase
a"reement an% t#e len%er of securities in a securities len%in" s#all inclu%e t#ese securities in t#e
calculation of its o1n fun%s re&uirement un%er t#is C#apter provi%e% t#at suc# securities are tra%in"
oo5 positions7
Section -
Det instruments
,rticle 3-3
Bet positions in %et instruments
Bet positions s#all e classifie% accor%in" to t#e currenc6 in 1#ic# t#e6 are %enominate% an% s#all
calculate t#e o1n fun%s re&uirement for "eneral an% specific ris5 in eac# in%ivi%ual currenc6
separatel67
?UB9?ECTION 1
?PECIFIC RI?B
,rticle 3-4
Cap on t#e o1n fun%s re&uirement for a net position
2#e institution ma6 cap t#e o1n fun%s re&uirement for specific ris5 of a net position in a %et
instrument at t#e ma8imum possile %efault;ris5 relate% loss7 3or a s#ort position* t#at limit ma6 e
calculate% as a c#an"e in value %ue to t#e instrument or* 1#ere relevant* t#e un%erl6in" names
imme%iatel6 ecomin" %efault ris5;free7
,rticle 3-+
O1n fun%s re&uirement for non;securitisation %et instruments
17 2#e institution s#all assi"n its net positions in t#e tra%in" oo5 in instruments t#at are not
securitisation positions as calculate% in accor%ance 1it# ,rticle 31= to t#e appropriate
cate"ories in 2ale 1 on t#e asis of t#eir issuer or oli"or* e8ternal or internal cre%it
assessment* an% resi%ual maturit6* an% t#en multipl6 t#em 6 t#e 1ei"#tin"s s#o1n in t#at
tale7 0t s#all sum its 1ei"#te% positions resultin" from t#e application of t#is Arti$le
re"ar%less of 1#et#er t#e6 are lon" or s#ort in or%er to calculate its o1n fun%s re&uirement
a"ainst specific ris57
Table 1
Cate"ories Specific ris5 o1n fun%s
re&uirement
Det securities 1#ic# 1oul% receive a . O ris5 1ei"#t un%er t#e
Stan%ar%ise% approac# for cre%it ris57
. O
Det securities 1#ic# 1oul% receive a -.O or +.O ris5 1ei"#t un%er
t#e Stan%ar%ise% approac# for cre%it ris5 an% ot#er &ualif6in" items as
%efine% in para"rap# 47
.*-+ O )resi%ual term to
final maturit6 si8 mont#s or
less/
1*.. O )resi%ual term to
final maturit6 "reater t#an
si8 mont#s an% up to an%
inclu%in" -4 mont#s/
1*=. O )resi%ual term to
maturit6 e8cee%in" -4
mont#s/
Det securities 1#ic# 1oul% receive a 1..O ris5 1ei"#t un%er t#e
Stan%ar%ise% approac# for cre%it ris57
8*.. O
Det 1#ic# 1oul% receive a 1+.O ris5 1ei"#t un%er t#e Stan%ar%ise%
approac# for cre%it ris57
1-*.. O
8439/13
DQPG
SO/psc 8+-
EN
8439/13 SO/psc 854
EN
DQPG
-7 3or institutions 1#ic# appl6 t#e 0RD approac# to t#e e8posure class of 1#ic# t#e issuer of t#e
%et instrument forms part* to &ualif6 for a ris5 1ei"#t un%er t#e Stan%ar%ise% approac# for
cre%it ris5 as referre% to in para"rap# 1* t#e issuer of t#e e8posure s#all #ave an internal ratin"
1it# a PD e&uivalent to or lo1er t#an t#at associate% 1it# t#e appropriate cre%it &ualit6 step
un%er t#e Stan%ar%ise% approac#7
37 0nstitutions ma6 calculate t#e specific ris5 re&uirements for an6 on%s t#at &ualif6 for a 1.O
ris5 1ei"#t in accor%ance 1it# t#e treatment in ,rticle 1-4)3), Arti$le 42B(B) and Arti$le
42B(@/ as #alf of t#e applicale specific ris5 o1n fun%s re&uirement for t#e secon% cate"or6 in
2ale 17
47 Ot#er &ualif6in" items are:
A
A
)c/ lon" an% s#ort positions in assets for 1#ic# a cre%it assessment 6 a nominate% e8ternal
cre%it assessment institution is not availale an% 1#ic# meet all of t#e follo1in"
con%itions:
)i/ t#e6 are consi%ere% 6 t#e institution concerne% to e sufficientl6 li&ui%E
)ii/ t#eir investment &ualit6 is* accor%in" to t#e institution(s o1n %iscretion* at least
e&uivalent to t#at of t#e assets referre% to un%er point +a!le 4 se$ond ro*E
)iii/ t#e6 are liste% on at least one re"ulate% mar5et in a 9emer State or on a stoc5
e8c#an"e in a t#ir% countr6 provi%e% t#at t#e e8c#an"e is reco"nise% 6 t#e
competent aut#orities of t#e relevant 9emer StateE
)%/ lon" an% s#ort positions in assets issue% 6 institutions su!ect to t#e o1n fun%s
re&uirements set out in t#is Re"ulation 1#ic# are consi%ere% 6 t#e institution
concerne% to e sufficientl6 li&ui% an% 1#ose investment &ualit6 is* accor%in" to t#e
institution(s o1n %iscretion* at least e&uivalent to t#at of t#e assets referre% to un%er
+a!le 4 se$ond ro*E
)e/ securities issue% 6 institutions t#at are %eeme% to e of e&uivalent* or #i"#er* cre%it
&ualit6 t#an t#ose associate% 1it# cre%it &ualit6 step - un%er t#e Stan%ar%ise% approac#
for cre%it ris5 of e8posures to institutions an% t#at are su!ect to supervisor6 an%
re"ulator6 arran"ements comparale to t#ose un%er t#is )egulation and Directive ,to !e
inserted !# -./7
0nstitutions t#at ma5e use of points )c/ or )%/ s#all #ave a %ocumente% met#o%olo"6 in place to
assess 1#et#er assets meet t#e re&uirements in t#ose points an% s#all notif6 t#is met#o%olo"6 to t#e
competent aut#orities7
,rticle 3-=
O1n fun%s re&uirement for securitisation instruments
17 3or instruments in t#e tra%in" oo5 t#at are securitisation positions* t#e institution s#all
1ei"#t 1it# t#e follo1in" its net positions as calculate% in accor%ance 1it# ,rticle 31=)1/:
)a/ for securitisation positions t#at 1oul% e su!ect to t#e Stan%ar%ise% ,pproac# for
cre%it ris5 in t#e same institution(s non;tra%in" oo5* 8 O of t#e ris5 1ei"#t un%er t#e
Stan%ar%ise% ,pproac# as set out in C#apter +E
)/ for securitisation positions t#at 1oul% e su!ect to t#e 0nternal Ratin"s Dase%
,pproac# in t#e same institution(s non;tra%in" oo5* 8 O of t#e ris5 1ei"#t un%er t#e
0nternal Ratin"s Dase% ,pproac# as set out in C#apter +7
-7 2#e Supervisor6 3ormula 9et#o% set out in ,rticle -+> ma6 e use% 1#ere t#e institution can
pro%uce estimates of PD* an% 1#ere applicale e5posure value an% FGD as inputs into t#e
Supervisor6 3ormula 9et#o% in accor%ance 1it# t#e re&uirements for t#e estimation of t#ose
parameters un%er t#e 0nternal Ratin"s Dase% approac# in accor%ance 1it# C#apter -* Section
37
,n institution ot#er t#an an ori"inator institution t#at coul% appl6 it for t#e same securitisation
position in its non;tra%in" oo5 ma6 onl6 use t#at met#o% su!ect to permission 6 t#e
competent aut#orities* 1#ic# s#all e "rante% 1#ere t#e institution fulfils t#e con%ition in t#e
previous sentence7
$stimates of PD an% FGD as inputs to t#e Supervisor6 3ormula 9et#o% ma6 alternativel6
also e %etermine% ase% on estimates t#at are %erive% from an 0RC approac# of an institution
t#at #as een "rante% permission to use an internal mo%el for specific ris5 of %et instruments7
2#e latter alternative ma6 e use% onl6 su!ect to permission 6 t#e competent aut#orities*
1#ic# s#all e "rante% if t#ose estimates meet t#e &uantitative re&uirements for t#e 0nternal
Ratin"s Dase% ,pproac# set out in C#apter -* Section 37
0n accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo7 1.93/-.1.* $D, s#all issue "ui%elines
on t#e use of estimates of PD an% FGD as inputs 1#en t#ose estimates are ase% on an 0RC
approac#7
37 3or securitisation positions t#at are su!ect to an a%%itional ris5 1ei"#t in accor%ance 1it#
,rticle 39=* 8 O of t#e total ris5 1ei"#t s#all e applie%7
E5$ept for se$uritisation positions treated a$$ording to Arti$le C20(B), the institution s#all
sum its 1ei"#te% positions resultin" from t#e application of t#is ,rticle )re"ar%less of 1#et#er
t#e6 are lon" or s#ort/ in or%er to calculate its o1n fun%s re&uirement a"ainst specific ris57
+7 D6 1a6 of %ero"ation from para"rap# 4* for a transitional perio% en%in" 31 Decemer 2:4B,
t#e institution s#all sum separatel6 its 1ei"#te% net lon" positions an% its 1ei"#te% net s#ort
positions7 2#e lar"er of t#ose sums s#all constitute t#e specific ris5 o1n fun%s re&uirement7
2#e institution s#all* #o1ever* &uarterl6 report to t#e #ome 9emer State competent
aut#orit6 t#e total sum of its 1ei"#te% net lon" an% net s#ort positions* ro5en %o1n 6 t6pes
of un%erl6in" assets7
@a3 ;hen an originator institution of a traditional se$uritisation does not eet the $onditions
for signifi$ant risk transfer in Arti$le 2CA, it shall in$lude in the $al$ulation of the o*n
funds re6uireent under this arti$le the se$uritised e5posures instead of its se$uritisation
positions fro this se$uritisation3
;hen an originator institution of a s#ntheti$ se$uritisation does not eet the $onditions for
signifi$ant risk transfer in Arti$le 2C>, it shall in$lude in the $al$ulation of the o*n funds
re6uireent under this arti$le the se$uritised e5posures fro this se$uritisation, !ut not
an# $redit prote$tion o!tained for the se$uritised portfolio3
,rticle 3->
O1n fun%s re&uirement for t#e correlation tra%in" portfolio
17 2#e correlation tra%in" portfolio s#all consist of securitisation positions an% n;t#;to;%efault
cre%it %erivatives t#at meet all of t#e follo1in" criteria:
)a/ t#e positions are neit#er re;securitisation positions* nor options on a securitisation
tranc#e* nor an6 ot#er %erivatives of securitisation e8posures t#at %o not provi%e a pro;
rata s#are in t#e procee%s of a securitisation tranc#eE
)/ all reference instruments are eit#er of t#e follo1in":
)i/ sin"le;name instruments* inclu%in" sin"le;name cre%it %erivatives* for 1#ic# a
li&ui% t1o;1a6 mar5et e8istsE
)ii/ commonl6;tra%e% in%ices ase% on t#ose reference entities7
, t1o;1a6 mar5et is %eeme% to e8ist 1#ere t#ere are in%epen%ent ona fi%e offers to u6
an% sell so t#at a price reasonal6 relate% to t#e last sales price or current ona fi%e
competitive i% an% offer &uotations can e %etermine% 1it#in one %a6 an% settle% at suc#
price 1it#in a relativel6 s#ort time conformin" to tra%e custom7
-7 Positions 1#ic# reference an6 of t#e follo1in" s#all not e part of t#e correlation tra%in"
portfolio:
)a/ an un%erl6in" t#at is capale of ein" assi"ne% to t#e e8posure class (retail e5posures( or
to t#e e8posure class (e5posures secure% 6 mort"a"es on immovale propert6( un%er
t#e Stan%ar%ise% approac# for cre%it ris5 in an institution(s non;tra%in" oo5E
)/ a claim on a special purpose entit6, $ollateralised, dire$tl# or indire$tl#, !# a position
that *ould itself not !e eligi!le for in$lusion in the $orrelation trading portfolio
a$$ording to points (4) and (2) of this arti$le C203
37 ,n institution ma6 inclu%e in t#e correlation tra%in" portfolio positions 1#ic# are neit#er
securitisation positions nor n;t#;to;%efault cre%it %erivatives ut 1#ic# #e%"e ot#er positions
of t#at portfolio* provi%e% t#at a li&ui% t1o;1a6 mar5et as %escrie% in t#e last supara"rap#
of para"rap# 1 e8ists for t#e instrument or its un%erl6in"s A7
47 ,n institution s#all %etermine t#e lar"er of t#e follo1in" amounts as t#e specific ris5 o1n
fun%s re&uirement for t#e correlation tra%in" portfolio:
)a/ t#e total specific ris5 o1n fun%s re&uirement t#at 1oul% appl6 !ust to t#e net lon"
positions of t#e correlation tra%in" portfolioE
)/ t#e total specific ris5 o1n fun%s re&uirement t#at 1oul% appl6 !ust to t#e net s#ort
positions of t#e correlation tra%in" portfolio7
?UB9?ECTION 2
>ENERAL RI?B
,rticle 3-8
9aturit6;ase% calculation of "eneral ris5
17 0n or%er to calculate o1n fun%s re&uirements a"ainst "eneral ris5 all positions s#all e
1ei"#te% accor%in" to maturit6 as e8plaine% in para"rap# - in or%er to compute t#e amount of
o1n fun%s re&uire% a"ainst t#em7 2#is re&uirement s#all e re%uce% 1#en a 1ei"#te% position
is #el% alon"si%e an opposite 1ei"#te% position 1it#in t#e same maturit6 an%7 , re%uction in
t#e re&uirement s#all also e ma%e 1#en t#e opposite 1ei"#te% positions fall into %ifferent
maturit6 an%s* 1it# t#e siLe of t#is re%uction %epen%in" ot# on 1#et#er t#e t1o positions
fall into t#e same Lone* or not* an% on t#e particular Lones t#e6 fall into7
-7 2#e institution s#all assi"n its net positions to t#e appropriate maturit6 an%s in column - or
3* as appropriate* in 2ale - in para"rap# 47 0t s#all %o so on t#e asis of resi%ual maturit6 in
t#e case of fi8e%;rate instruments an% on t#e asis of t#e perio% until t#e interest rate is ne8t
set in t#e case of instruments on 1#ic# t#e interest rate is variale efore final maturit67 0t
s#all also %istin"uis# et1een %et instruments 1it# a coupon of 3 O or more an% t#ose 1it#
a coupon of less t#an 3 O an% t#us allocate t#em to column - or column 3 in 2ale -7 0t s#all
t#en multipl6 eac# of t#em 6 t#e 1ei"#in" for t#e maturit6 an% in &uestion in column 4 in
2ale -7
37 2#e institution s#all t#en 1or5 out t#e sum of t#e 1ei"#te% lon" positions an% t#e sum of t#e
1ei"#te% s#ort positions in eac# maturit6 an%7 2#e amount of t#e former 1#ic# are matc#e%
6 t#e latter in a "iven maturit6 an% s#all e t#e matc#e% 1ei"#te% position in t#at an%*
1#ile t#e resi%ual lon" or s#ort position s#all e t#e unmatc#e% 1ei"#te% position for t#e
same an%7 2#e total of t#e matc#e% 1ei"#te% positions in all an%s s#all t#en e calculate%7
47 2#e institution s#all compute t#e totals of t#e unmatc#e% 1ei"#te% lon" positions for t#e
an%s inclu%e% in eac# of t#e Lones in 2ale - in or%er to %erive t#e unmatc#e% 1ei"#te% lon"
position for eac# Lone7 Similarl6* t#e sum of t#e unmatc#e% 1ei"#te% s#ort positions for eac#
an% in a particular Lone s#all e summe% to compute t#e unmatc#e% 1ei"#te% s#ort position
for t#at Lone7 2#at part of t#e unmatc#e% 1ei"#te% lon" position for a "iven Lone t#at is
matc#e% 6 t#e unmatc#e% 1ei"#te% s#ort position for t#e same Lone s#all e t#e matc#e%
1ei"#te% position for t#at Lone7 2#at part of t#e unmatc#e% 1ei"#te% lon" or unmatc#e%
1ei"#te% s#ort position for a Lone t#at cannot e t#us matc#e% s#all e t#e unmatc#e%
1ei"#te% position for t#at Lone7
2ale -
Yone 9aturit6 an%
Coupon of 3 O or
more
Coupon of less
t#an 3 O
One . Z 1 mont# . Z 1 mont# .*.. \
[ 1 Z 3 mont#s [ 1 Z 3 mont#s .*-. 1*..
[ 3 Z = mont#s [ 3 Z = mont#s .*4. 1*..
[ = Z 1- mont#s [ = Z 1- mont#s .*>. 1*..
21o [ 1 Z - 6ears [ 1*. Z 1*9 6ears 1*-+ .*9.
[ - Z 3 6ears [ 1*9 Z -*8 6ears 1*>+ .*8.
[ 3 Z 4 6ears [ -*8 Z 3*= 6ears -*-+ .*>+
2#ree [ 4 Z + 6ears [ 3*= Z 4*3 6ears -*>+ .*>+
[ + Z > 6ears [ 4*3 Z +*> 6ears 3*-+ .*>.
[ > Z 1. 6ears [ +*> Z >*3 6ears 3*>+ .*=+
[ 1. Z 1+ 6ears [ >*3 Z 9*3 6ears 4*+. .*=.
[ 1+ Z -. 6ears [ 9*3 Z 1.*= 6ears +*-+ .*=.
[ -. 6ears [ 1.*= Z 1-*.
6ears
=*.. .*=.
[ 1-*. Z -.*.
6ears
8*.. .*=.
[ -. 6ears 1-*+. .*=.
+7 2#e amount of t#e unmatc#e% 1ei"#te% lon" or s#ort position in Lone one 1#ic# is matc#e%
6 t#e unmatc#e% 1ei"#te% s#ort or lon" position in Lone t1o s#all t#en e t#e matc#e%
1ei"#te% position et1een Lones one an% t1o7 2#e same calculation s#all t#en e un%erta5en
1it# re"ar% to t#at part of t#e unmatc#e% 1ei"#te% position in Lone t1o 1#ic# is left over an%
t#e unmatc#e% 1ei"#te% position in Lone t#ree in or%er to calculate t#e matc#e% 1ei"#te%
position et1een Lones t1o an% t#ree7
=7 2#e institution ma6 reverse t#e or%er in para"rap# + so as to calculate t#e matc#e% 1ei"#te%
position et1een Lones t1o an% t#ree efore calculatin" t#at position et1een Lones one an%
t1o7
>7 2#e remain%er of t#e unmatc#e% 1ei"#te% position in Lone one s#all t#en e matc#e% 1it#
1#at remains of t#at for Lone t#ree after t#e latter(s matc#in" 1it# Lone t1o in or%er to %erive
t#e matc#e% 1ei"#te% position et1een Lones one an% t#ree7
87 Resi%ual positions* follo1in" t#e t#ree separate matc#in" calculations in para"rap# +* = an% >
s#all e summe%7
97 2#e institution(s o1n fun%s re&uirement s#all e calculate% as t#e sum of:
)a/ 1. O of t#e sum of t#e matc#e% 1ei"#te% positions in all maturit6 an%sE
)/ 4. O of t#e matc#e% 1ei"#te% position in Lone oneE
)c/ 3. O of t#e matc#e% 1ei"#te% position in Lone t1oE
)%/ 3. O of t#e matc#e% 1ei"#te% position in Lone t#reeE
)e/ 4. O of t#e matc#e% 1ei"#te% position et1een Lones one an% t1o an% et1een Lones
t1o an% t#reeE
)f/ 1+. O of t#e matc#e% 1ei"#te% position et1een Lones one an% t#reeE
)"/ 1.. O of t#e resi%ual unmatc#e% 1ei"#te% positions7
,rticle 3-9
Duration;ase% calculation of "eneral ris5
17 0nstitutions ma6 use an approac# for calculatin" t#e o1n fun%s re&uirement for t#e "eneral
ris5 on %et instruments 1#ic# reflects %uration* instea% of t#e approac# set out in ,rticle
3-8* provi%e% t#at t#e institution %oes so on a consistent asis7
-7 4n%er t#e %uration;ase% approac# referre% to in para"rap# 1* t#e institution s#all ta5e t#e
mar5et value of eac# fi8e%;rate %et instrument an% #ence calculate its 6iel% to maturit6*
1#ic# is implie% %iscount rate for t#at instrument7 0n t#e case of floatin";rate instruments* t#e
institution s#all ta5e t#e mar5et value of eac# instrument an% #ence calculate its 6iel% on t#e
assumption t#at t#e principal is %ue 1#en t#e interest rate can ne8t e c#an"e%7
37 2#e institution s#all t#en calculate t#e mo%ifie% %uration of eac# %et instrument on t#e asis
of t#e follo1in" formula:
mo$ifie$ $uration
D
1 + 5
1#ere:
D U %uration calculate% accor%in" to t#e follo1in" formula:
-
t 2
+

t
D
t 1
)1

t 1
5/
2
t
+ 5/
t
1#ere:
R U 6iel% to maturit6 AE
C
t
U cas# pa6ment in time tE
9 U total maturit6 A
Correction s#all e ma%e to t#e calculation of t#e mo%ifie% %uration for %et instruments
1#ic# are su!ect to prepa6ment ris57 $D, s#all* in accor%ance 1it# ,rticle 1= of Re"ulation
)$4/ Bo7 1.93/-.1.* issue "ui%elines aout #o1 to appl6 suc# corrections7
)1

t
-
47 2#e institution s#all t#en allocate eac# %et instrument to t#e appropriate Lone in 2ale 37 0t
s#all %o so on t#e asis of t#e mo%ifie% %uration of eac# instrument7
2ale 3
Yone 9o%ifie% %uration
)in 6ears/
,ssume% interest )c#an"e in O/
One [ . Z 1*. 1*.
21o [ 1*. Z 3*= .*8+
2#ree [ 3*= .*>
+7 2#e institution s#all t#en calculate t#e %uration;1ei"#te% position for eac# instrument 6
multipl6in" its mar5et price 6 its mo%ifie% %uration an% 6 t#e assume% interest;rate c#an"e
for an instrument 1it# t#at particular mo%ifie% %uration )see column 3 in 2ale 3/7
=7 2#e institution s#all calculate its %uration;1ei"#te% lon" an% its %uration;1ei"#te% s#ort
positions 1it#in eac# Lone7 2#e amount of t#e former 1#ic# are matc#e% 6 t#e latter 1it#in
eac# Lone s#all e t#e matc#e% %uration;1ei"#te% position for t#at Lone7
2#e institution s#all t#en calculate t#e unmatc#e% %uration;1ei"#te% positions for eac# Lone7
0t s#all t#en follo1 t#e proce%ures lai% %o1n for unmatc#e% 1ei"#te% positions in Arti$le
C2A, para"rap#s + to 87
>7 2#e institution(s o1n fun%s re&uirement s#all t#en e calculate% as t#e sum of t#e follo1in":
)a/ - O of t#e matc#e% %uration;1ei"#te% position for eac# LoneE
)/ 4. O of t#e matc#e% %uration;1ei"#te% positions et1een Lones one an% t1o an%
et1een Lones t1o an% t#reeE
)c/ 1+. O of t#e matc#e% %uration;1ei"#te% position et1een Lones one an% t#reeE
)%/ 1.. O of t#e resi%ual unmatc#e% %uration;1ei"#te% positions7
?ECTION 3
E@UITIE?
,rticle 33.
Bet positions in e&uit6 instruments
17 2#e institution s#all separatel6 sum all its net lon" positions an% all its net s#ort positions in
accor%ance 1it# ,rticle 31=7 2#e sum of t#e asolute values of t#e t1o fi"ures s#all e its
overall "ross position7
-7 2#e institution s#all calculate* separatel6 for eac# mar5et* t#e %ifference et1een t#e sum of
t#e net lon" an% t#e net s#ort positions7 2#e sum of t#e asolute values of t#ose %ifferences
s#all e its overall net position7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s %efinin" t#e term mar5et referre% to in
para"rap# -7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4 <anuar6
2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e previous su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 331
Specific ris5 of e&uit6 instruments
2#e institution s#all multipl6 its overall "ross position 6 8 O in or%er to calculate its o1n fun%s
re&uirement a"ainst specific ris57
,rticle 33-
General ris5 of e&uit6 instruments
2#e o1n fun%s re&uirement a"ainst "eneral ris5 s#all e its overall net position multiplie% 6 8 O7
,rticle 333
Stoc5 in%ices
17 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s listin" t#e stoc5 in%ices for 1#ic#
At#e treatments in the se$ond senten$e of paragraph 4 is availale7
$D, s#all sumit t#ose %raft tec#nical stan%ar%s to t#e Commission 6 1 <anuar6 -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
-7 Defore t#e entr6 into force of t#e tec#nical stan%ar%s referre% to in para"rap# 1* institutions
ma6 continue to appl6 t#e treatment set out in para"rap#s 3 an% 4* 1#ere t#e competent
aut#orities #ave applie% t#at treatment efore 1 <anuar6 2:4B3
37 Stoc5;in%e8 futures* t#e %elta;1ei"#te% e&uivalents of options in stoc5;in%e8 futures an%
stoc5 in%ices collectivel6 referre% to #ereafter as Mstoc5;in%e8 futuresN* ma6 e ro5en %o1n
into positions in eac# of t#eir constituent e&uities7 2#ese positions ma6 e treate% as
un%erl6in" positions in t#e e&uities in &uestion* an% ma6* e nette% a"ainst opposite positions
in t#e un%erl6in" e&uities t#emselves7 0nstitutions s#all notif6 t#e competent aut#orit6 of t#e
use t#e6 ma5e of t#is treatment7
47 ?#ere a stoc5;in%e8 future is not ro5en %o1n into its un%erl6in" positions* it s#all e treate%
as if it 1ere an in%ivi%ual e&uit67 Co1ever* t#e specific ris5 on t#is in%ivi%ual e&uit6 can e
i"nore% if t#e stoc5;in%e8 future in &uestion is e8c#an"e tra%e% an% represents a relevant
appropriatel6 %iversifie% in%e87
Section 4
4n%er1ritin"
,rticle 334
Re%uction of net positions
17 0n t#e case of t#e un%er1ritin" of %et an% e&uit6 instruments* an institution ma6 use t#e
follo1in" proce%ure in calculatin" its o1n fun%s re&uirements7 2#e institution s#all first
calculate t#e net positions 6 %e%uctin" t#e un%er1ritin" positions 1#ic# are suscrie% or
su;un%er1ritten 6 t#ir% parties on t#e asis of formal a"reements7 2#e institution s#all t#en
re%uce t#e net positions 6 t#e re%uction factors in 2ale 4 an% calculate its o1n fun%s
re&uirements usin" t#e re%uce% un%er1ritin" positions7
2ale 4
1or5in" %a6 .: 1.. O
1or5in" %a6 1: 9. O
1or5in" %a6s - to 3: >+ O
1or5in" %a6 4: +. O
1or5in" %a6 +: -+ O
after 1or5in" %a6 +: . O7
M?or5in" %a6 LeroN s#all e t#e 1or5in" %a6 on 1#ic# t#e institution ecomes
uncon%itionall6 committe% to acceptin" a 5no1n &uantit6 of securities at an a"ree% price7
-7 2#e institutions s#all notif6 to t#e competent aut#orities t#e use t#e6 ma5e of para"rap# 17
?ECTION 7
?PECIFIC RI?B OCN FUN$? RE@UIRE*ENT? FOR PO?ITION? HE$>E$ BA CRE$IT
$ERI,ATI,E?
,rticle 33+
,llo1ance for #e%"es 6 cre%it %erivatives
17 ,n allo1ance s#all e "iven for #e%"es provi%e% 6 cre%it %erivatives* in accor%ance 1it# t#e
principles set out in para"rap#s - to =7
-7 0nstitutions s#all treat t#e position in t#e cre%it %erivative as one (le"( an% t#e #e%"e% position
t#at #as t#e same nominal* or* 1#ere applicale* notional amount* as t#e ot#er (le"(7
37 3ull allo1ance s#all e "iven 1#en t#e values of t#e t1o le"s al1a6s move in t#e opposite
%irection an% roa%l6 to t#e same e8tent7 2#is 1ill e t#e case in t#e follo1in" situations:
)a/ t#e t1o le"s consist of completel6 i%entical instrumentsE
)/ a lon" cas# position is #e%"e% 6 a total rate of return s1ap )or vice versa/ an% t#ere is
an e8act matc# et1een t#e reference oli"ation an% t#e un%erl6in" e8posure )i7e7* t#e
cas# position/7 2#e maturit6 of t#e s1ap itself ma6 e %ifferent from t#at of t#e
un%erl6in" e8posure7
0n t#ese situations* a specific ris5 o1n fun%s re&uirement s#all not e applie% to eit#er si%e of
t#e position7
47 ,n 8. O offset 1ill e applie% 1#en t#e values of t#e t1o le"s al1a6s move in t#e opposite
%irection an% 1#ere t#ere is an e8act matc# in terms of t#e reference oli"ation* t#e maturit6
of ot# t#e reference oli"ation an% t#e cre%it %erivative* an% t#e currenc6 of t#e un%erl6in"
e8posure7 0n a%%ition* 5e6 features of t#e cre%it %erivative contract s#all not cause t#e price
movement of t#e cre%it %erivative to materiall6 %eviate from t#e price movements of t#e cas#
position7 2o t#e e8tent t#at t#e transaction transfers ris5* an 8. O specific ris5 offset 1ill e
applie% to t#e si%e of t#e transaction 1it# t#e #i"#er o1n fun%s re&uirement* 1#ile t#e
specific ris5 re&uirements on t#e ot#er si%e s#all e Lero7
+7 Partial allo1ance s#all e "iven* asent t#e situations in para"rap#s 3 an% 4* in t#e follo1in"
situations:
)a/ t#e position falls un%er para"rap# C)/ ut t#ere is an asset mismatc# et1een t#e
reference oli"ation an% t#e un%erl6in" e8posure7 Co1ever* t#e positions meet t#e
follo1in" re&uirements:
)i/ t#e reference oli"ation ran5s pari passu 1it# or is !unior to t#e un%erl6in"
oli"ationE
)ii/ t#e un%erl6in" oli"ation an% reference oli"ation s#are t#e same oli"or an%
#ave le"all6 enforceale cross;%efault or cross;acceleration clausesE
)/ t#e position falls un%er para"rap# C)a/ or B ut t#ere is a currenc6 or maturit6
mismatc# et1een t#e cre%it protection an% t#e un%erl6in" asset7 Suc# currenc6
mismatc# s#all e inclu%e% in t#e o1n fun%s re&uirement for forei"n e8c#an"e ris5E
)c/ t#e position falls un%er para"rap# B ut t#ere is an asset mismatc# et1een t#e cas#
position an% t#e cre%it %erivative7 Co1ever* t#e un%erl6in" asset is inclu%e% in t#e
)%eliverale/ oli"ations in t#e cre%it %erivative %ocumentation7
0n or%er to "ive partial allo1ance* rat#er t#an a%%in" t#e specific ris5 o1n fun%s re&uirements
for eac# si%e of t#e transaction* onl6 t#e #i"#er of t#e t1o o1n fun%s re&uirements s#all
appl67
=7 0n all situations not fallin" un%er para"rap#s 3 to +* an o1n fun%s re&uirement for specific ris5
s#all e calculate% for ot# si%es of t#e positions separatel67
,rticle 33=
,llo1ance for #e%"es 6 first an% nt#;to %efault cre%it %erivatives
0n t#e case of first;to;%efault cre%it %erivatives an% nt#;to;%efault cre%it %erivatives* t#e follo1in"
treatment applies for t#e allo1ance to e "iven accor%in" to ,rticle 33+:
)a/ 1#ere an institution otains cre%it protection for a numer of reference entities un%erl6in" a
cre%it %erivative un%er t#e terms t#at t#e first %efault amon" t#e assets s#all tri""er pa6ment
an% t#at t#is cre%it event s#all terminate t#e contract* t#e institution ma6 offset specific ris5
for t#e reference entit6 to 1#ic# t#e lo1est specific ris5 percenta"e c#ar"e amon" t#e
un%erl6in" reference entities applies accor%in" to 2ale 1 in ,rticle 3-+E
)/ 1#ere t#e nt# %efault amon" t#e e8posures tri""ers pa6ment un%er t#e cre%it protection* t#e
protection u6er ma6 onl6 offset specific ris5 if protection #as also een otaine% for %efaults
1 to n;1 or 1#en n;1 %efaults #ave alrea%6 occurre%7 0n suc# cases* t#e met#o%olo"6 set out
aove for first;to;%efault cre%it %erivatives s#all e follo1e% appropriatel6 mo%ifie% for nt#;
to;%efault pro%ucts7
?ECTION 6
OCN FUN$? RE@UIRE*ENT? FOR CIU?
,rticle 33>
O1n fun%s re&uirements for C04s
17 ?it#out pre!u%ice to ot#er provisions in t#is section* positions in C04s s#all e su!ect to an
o1n fun%s re&uirement for position ris5* comprisin" specific an% "eneral ris5* of 3- O7
?it#out pre!u%ice to ,rticle 34- Ata5en to"et#er 1it# At#e mo%ifie% "ol% treatment set out in
Arti$le CB4 (B) and Arti$le C@?(2)(!) positions in C04s s#all e su!ect to an o1n fun%s
re&uirement for position ris5* comprisin" specific an% "eneral ris5* an% forei"n;e8c#an"e ris5
of 4. O7
-7 4nless note% ot#er1ise in ,rticle 339* no nettin" is permitte% et1een t#e un%erl6in"
investments of a C04 an% ot#er positions #el% 6 t#e institution7
,rticle 338
General criteria for C04s
C04s s#all e eli"ile for t#e approac# set out in ,rticle 339* 1#ere all t#e follo1in" con%itions are
met:
)a/ t#e C04(s prospectus or e&uivalent %ocument s#all inclu%e all of t#e follo1in":
)i/ t#e cate"ories of assets t#e C04 is aut#orise% to invest inE
)ii/ 1#ere investment limits appl6* t#e relative limits an% t#e met#o%olo"ies to calculate
t#emE
)iii/ 1#ere levera"e is allo1e%* t#e ma8imum level of levera"eE
)iv/ 1#ere conclu%in" O2C financial %erivatives transactions or repurc#ase transactions or
securities orro1in" or len%in" is allo1e%* a polic6 to limit counterpart6 ris5 arisin"
from t#ese transactionsE
)/ t#e usiness of t#e C04 s#all e reporte% in #alf;6earl6 an% annual reports to enale an
assessment to e ma%e of t#e assets an% liailities* income an% operations over t#e reportin"
perio%E
)c/ t#e s#ares or units of t#e C04 are re%eemale in cas#* out of t#e un%erta5in"(s assets* on a
%ail6 asis at t#e re&uest of t#e unit #ol%erE
)%/ investments in t#e C04 s#all e se"re"ate% from t#e assets of t#e C04 mana"erE
)e/ t#ere s#all e a%e&uate ris5 assessment of t#e C04* 6 t#e investin" institutionE
)f/ C04s s#all e mana"e% 6 persons supervise% accor%in" to Directive )4C02S/ or e&uivalent
le"islation A7
,rticle 339
Specific met#o%s for C04s
17 ?#ere t#e institution is a1are of t#e un%erl6in" investments of t#e C04 on a %ail6 asis* t#e
institution ma6 loo5 t#rou"# to t#ose un%erl6in" investments in or%er to calculate t#e o1n
fun%s re&uirements for position ris5* comprisin" specific an% "eneral ris53 2nder t#is
approac#* positions in C04s s#all e treate% as positions in t#e un%erl6in" investments of t#e
C047 Bettin" s#all e permitte% et1een positions in t#e un%erl6in" investments of t#e C04
an% ot#er positions #el% 6 t#e institution* as lon" as t#e institution #ol%s a sufficient &uantit6
of s#ares or units to allo1 for re%emption/creation in e8c#an"e for t#e un%erl6in"
investments7
-7 0nstitutions ma6 calculate t#e o1n fun%s re&uirements for position ris5* comprisin" specific
an% "eneral ris5* for positions in C04s 6 assumin" positions representin" t#ose necessar6 to
replicate t#e composition an% performance of t#e e8ternall6 "enerate% in%e8 or fi8e% as5et of
e&uities or %et securities referre% to in point )a/* su!ect to t#e follo1in" con%itions:
)a/ purpose of t#e C04(s man%ate is to replicate t#e composition an% performance of an
e8ternall6 "enerate% in%e8 or fi8e% as5et of e&uities or %et securitiesE
)/ a minimum correlation of .79 et1een %ail6 price movements of t#e C04 an% t#e in%e8
or as5et of e&uities or %et securities it trac5s can e clearl6 estalis#e% over a
minimum perio% of si8 mont#s7 MCorrelationN in t#is conte8t means t#e correlation
coefficient et1een %ail6 returns on t#e C04 an% t#e in%e8 or as5et of e&uities or %et
securities it trac5s7
37 ?#ere t#e institution is not a1are of t#e un%erl6in" investments of t#e C04 on a %ail6 asis*
t#e institution ma6 calculate t#e o1n fun%s re&uirements for position ris5* comprisin" specific
an% "eneral ris5* su!ect to t#e follo1in" con%itions:
)a/ it 1ill e assume% t#at t#e C04 first invests to t#e ma8imum e8tent allo1e% un%er its
man%ate in t#e asset classes attractin" t#e #i"#est o1n fun%s re&uirement for specific
an% "eneral ris5 separatel6* an% t#en continues ma5in" investments in %escen%in" or%er
until t#e ma8imum total investment limit is reac#e%7 2#e position in t#e C04 1ill e
treate% as a %irect #ol%in" in t#e assume% positionE
)/ institutions s#all ta5e account of t#e ma8imum in%irect e8posure t#at t#e6 coul% ac#ieve
6 ta5in" levera"e% positions t#rou"# t#e C04 1#en calculatin" t#eir o1n fun%s
re&uirement for specific an% "eneral ris5 separatel6* 6 proportionall6 increasin" t#e
position in t#e C04 up to t#e ma8imum e8posure to t#e un%erl6in" investment items
resultin" from t#e man%ateE
)c/ if t#e o1n fun%s re&uirement for specific an% "eneral ris5 to"et#er accor%in" to t#is
paragraph e8cee% t#at set out in ,rticle 33>)1/ t#e o1n fun%s re&uirement s#all e
cappe% at t#at level7
47 0nstitutions ma6 rel6 on t#e follo1in" t#ir% parties to calculate an% report o1n fun%s
re&uirements for position ris5 for positions in C04s fallin" un%er para"rap#s 1 to 4* in
accor%ance 1it# t#e met#o%s set out in t#is C#apter:
)a/ t#e %epositor6 of t#e C04 provi%e% t#at t#e C04 e8clusivel6 invests in securities an%
%eposits all securities at t#is %epositor6E
)/ for ot#er C04s* t#e C04 mana"ement compan6* provi%e% t#at t#e C04 mana"ement
compan6 meets t#e criteria set out in para"rap# 3)a/ of ,rticle 1->7
2#e correctness of t#e calculation s#all e confirme% 6 an e8ternal au%itor7
2hapter 3
Hwn fun$s requirements for forei#n/e,chan#e ris1
,rticle 34.
De minimis an% 1ei"#tin" for forei"n e8c#an"e ris5
0f t#e sum of an institution(s overall net forei"n;e8c#an"e position an% its net "ol% position*
calculate% in accor%ance 1it# t#e proce%ure set out in ,rticle 341* inclu%in" for an6 forei"n
e8c#an"e an% "ol% positions for 1#ic# o1n fun%s re&uirements are calculate% usin" an internal
mo%el* e8cee%s - O of its total o1n fun%s* t#e institution s#all calculate an o1n fun%s re&uirement
for forei"n e8c#an"e ris57 2#e o1n fun%s re&uirement for forei"n e8c#an"e ris5 s#all e t#e sum of
its overall net forei"n;e8c#an"e position an% its net "ol% position in t#e reportin" currenc6*
multiplie% 6 8 O7
,rticle 341
Calculation of t#e overall net forei"n e8c#an"e A position
17 2#e institution(s net open position in eac# currenc6 )inclu%in" t#e reportin" currenc6/ an% in
"ol% s#all e calculate% as t#e sum of t#e follo1in" elements )positive or ne"ative/:
)a/ t#e net spot position )i7e7 all asset items less all liailit6 items* inclu%in" accrue%
interest* in t#e currenc6 in &uestion or* for "ol%* t#e net spot position in "ol%/E
)/ t#e net for1ar% position* 1#ic# are all amounts to e receive% less all amounts to e
pai% un%er for1ar% e8c#an"e an% "ol% transactions* inclu%in" currenc6 an% "ol% futures
an% t#e principal on currenc6 s1aps not inclu%e% in t#e spot positionE
)c/ irrevocale "uarantees an% similar instruments t#at are certain to e calle% an% li5el6 to
e irrecoveraleE
)%/ t#e net %elta* or %elta;ase%* e&uivalent of t#e total oo5 of forei"n;currenc6 an% "ol%
optionsE
)e/ t#e mar5et value of ot#er options7
2#e %elta use% for purposes of point )d/ s#all e A t#at of t#e e8c#an"e concerne% A3 1or
-+C options, or *here delta is not availale fro the e5$hange $on$erned* A t#e institution
a# $al$ulate delta itself usin" an appropriate mo%el, su!9e$t to perission !# the $opetent
authorities7 Permission s#all e "rante% if t#e mo%el appropriatel6 estimates t#e rate of
c#an"e of t#e option(s or 1arrant(s value 1it# respect to small c#an"es in t#e mar5et price of
t#e un%erl6in"7
2#e institution ma6 inclu%e net future income/e8penses not 6et accrue% ut alrea%6 full6
#e%"e% if it %oes so consistentl67
2#e institution ma6 rea5 %o1n net positions in composite currencies into t#e component
currencies accor%in" to t#e &uotas in force7
-7 ,n6 positions 1#ic# an institution #as %elieratel6 ta5en in or%er to #e%"e a"ainst t#e a%verse
effect of t#e e8c#an"e rate on its ratios in accor%in" to ,rticle 8>)1/ ma6* su!ect to
permission 6 t#e competent aut#orities* e e8clu%e% from t#e calculation of net open
currenc6 positions7 Suc# positions s#all e of a non;tra%in" or structural nature an% an6
variation of t#e terms of t#eir e8clusion* su!ect to separate permission 6 t#e competent
aut#orities7 2#e same treatment su!ect to t#e same con%itions as aove ma6 e applie% to
positions 1#ic# an institution #as 1#ic# relate to items t#at are alrea%6 %e%ucte% in t#e
calculation of o1n fun%s7
37 ,n institution ma6 use t#e net present value 1#en calculatin" t#e net open position in eac#
currenc6 an% in "ol% provi%e% t#at t#e institution applies t#is approac# consistentl67
47 Bet s#ort an% lon" positions in eac# currenc6 ot#er t#an t#e reportin" currenc6 an% t#e net
lon" or s#ort position in "ol% s#all e converte% at spot rates into t#e reportin" currenc67 2#e6
s#all t#en e summe% separatel6 to form t#e total of t#e net s#ort positions an% t#e total of t#e
net lon" positions respectivel67 2#e #i"#er of t#ese t1o totals s#all e t#e institution(s overall
net forei"n;e8c#an"e position7
+7 0nstitutions s#all a%e&uatel6 reflect ot#er ris5s associate% 1it# options* apart from t#e %elta
ris5* in t#e o1n fun%s re&uirements7
=7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s %efinin" a ran"e of met#o%s to reflect
in t#e o1n fun%s re&uirements ot#er ris5s* apart from %elta ris5* in a manner proportionate to
t#e scale an% comple8it6 of institutions( activities in options7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4
(e$e!er -.137
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e previous su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
Before the entr# into for$e of the te$hni$al standards, $opetent authorities a# $ontinue
to appl# the e5isting national treatents, *here the $opetent authorities have applied that
treatent !efore C4 (e$e!er 2:4C3
,rticle 34-
3orei"n e8c#an"e ris5 of C04s
17 3or t#e purposes of ,rticle 341* in respect of C04s t#e actual forei"n e8c#an"e positions of
t#e C04 s#all e ta5en into account7
-7 0nstitutions ma6 rel6 on t#e follo1in" t#ir% parties( reportin" of t#e forei"n e8c#an"e
positions in t#e C04:
)a/ t#e %epositor6 institution of t#e C04 provi%e% t#at t#e C04 e8clusivel6 invests in
securities an% %eposits all securities at t#is %epositor6 institutionE
)/ for ot#er C04s* t#e C04 mana"ement compan6* provi%e% t#at t#e C04 mana"ement
compan6 meets t#e criteria set out in point )a/ of para"rap# 37
2#e correctness of t#e calculation s#all e confirme% 6 an e8ternal au%itor7
37 ?#ere an institution is not a1are of t#e forei"n e8c#an"e positions in a C04* it s#all e
assume% t#at t#e C04 is investe% up to t#e ma8imum e8tent allo1e% un%er t#e C04(s man%ate
in forei"n e8c#an"e an% institutions s#all* for tra%in" oo5 positions* ta5e account of t#e
ma8imum in%irect e8posure t#at t#e6 coul% ac#ieve 6 ta5in" levera"e% positions t#rou"# t#e
C04 1#en calculatin" t#eir o1n fun%s re&uirement for forei"n e8c#an"e ris57 2#is s#all e
%one 6 proportionall6 increasin" t#e position in t#e C04 up to t#e ma8imum e8posure to t#e
un%erl6in" investment items resultin" from t#e investment man%ate7 2#e assume% position of
t#e C04 in forei"n e8c#an"e s#all e treate% as a separate currenc6 accor%in" to t#e treatment
of investments in "ol%* su!ect to t#e mo%ification t#at* 1#ere t#e %irection of t#e C04(s
investment is availale* t#e total lon" position ma6 e a%%e% to t#e total lon" open forei"n
e8c#an"e position an% t#e total s#ort position ma6 e a%%e% to t#e total s#ort open forei"n
e8c#an"e position7 2#ere s#all e no nettin" allo1e% et1een suc# positions prior to t#e
calculation7
,rticle 343
Closel6 correlate% currencies
17 0nstitutions ma6 provi%e lo1er o1n fun%s re&uirements a"ainst positions in relevant closel6
correlate% currencies7 , pair of currencies is %eeme% to e closel6 correlate% onl6 if t#e
li5eli#oo% of a loss \ calculate% on t#e asis of %ail6 e8c#an"e;rate %ata for t#e prece%in"
t#ree or five 6ears \ occurrin" on e&ual an% opposite positions in suc# currencies over t#e
follo1in" 1. 1or5in" %a6s* 1#ic# is 4 O or less of t#e value of t#e matc#e% position in
&uestion )value% in terms of t#e reportin" currenc6/ #as a proailit6 of at least 99 O* 1#en
an oservation perio% of t#ree 6ears is use%* and 9+ O* 1#en an oservation perio% of five
6ears is use%7 2#e o1n;fun%s re&uirement on t#e matc#e% position in t1o closel6 correlate%
currencies s#all e 4 O multiplie% 6 t#e value of t#e matc#e% position7
-7 0n calculatin" t#e re&uirements of t#is c#apter* institutions ma6 %isre"ar% positions in
currencies* 1#ic# are su!ect to a le"all6 in%in" inter"overnmental a"reement to limit its
variation relative to ot#er currencies covere% 6 t#e same a"reement7 0nstitutions s#all
calculate t#eir matc#e% positions in suc# currencies an% su!ect t#em to an o1n fun%s
re&uirement no lo1er t#an #alf of t#e ma8imum permissile variation lai% %o1n in t#e
inter"overnmental a"reement in &uestion in respect of t#e currencies concerne%7
37 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s listin" t#e currencies for 1#ic#
At#e treatent set out in para"rap# 4 is availa!le3
$D, s#all sumit t#ose %raft tec#nical stan%ar%s to t#e Commission 6 1 <anuar6 -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s referre%
to in t#e t#ir% supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
47 2#e o1n fun%s re&uirement on t#e matc#e% positions in currencies of 9emer States
participatin" in t#e secon% sta"e of t#e economic an% monetar6 union ma6 e calculate% as
1*= Oof t#e value of suc# matc#e% positions7
+7 Onl6 t#e unmatc#e% positions in currencies referre% to in t#is ,rticle s#all e incorporate%
into t#e overall net open position accor%in" to ,rticle 341)4/7
@a3 ;here dail# e5$hange=rate data for the pre$eding three or five #ears = o$$urring on e6ual
and opposite positions in a pair of $urren$ies over the follo*ing 4: *orking da#s sho* that
these t*o $urren$ies are perfe$tl# positivel# $orrelated and the institution al*a#s $an fa$e a
<ero !idDask spread on the respe$tive trades, the institution $an, upon e5pli$it perission !#
its $opetent authorit#, appl# an o*n funds re6uireent of : J until the end of 2:403
F
C#apter 4
O1n fun%s re&uirements for commo%ities ris5
,rticle 344
C#oice of met#o% for commo%ities ris5
Su!ect to ,rticles 34+ to 34>* institutions s#all calculate t#e o1n fun%s re&uirement for
commo%ities ris5 1it# one of t#e met#o%s set out in ,rticles 348* 349 or 3+.7
,rticle 34+
,ncillar6 commo%ities usiness
17 0nstitutions 1it# ancillar6 a"ricultural commo%ities usiness ma6 %etermine t#e o1n fun%s
re&uirements for t#eir p#6sical commo%it6 stoc5 at t#e en% of eac# 6ear for t#e follo1in" 6ear
1#ere all of t#e follo1in" con%itions are met:
)a/ at an6 time of t#e 6ear it #ol%s o1n fun%s for t#is ris5 1#ic# are not lo1er t#an t#e
avera"e o1n fun%s re&uirement for t#at ris5 estimate% on a conservative asis for t#e
comin" 6earE
)/ it estimates on a conservative asis t#e e8pecte% volatilit6 for t#e fi"ure calculate%
un%er point )a/E
)c/ its avera"e o1n fun%s re&uirement for t#is ris5 %oes not e8cee% +O of its o1n fun%s or
1 million $4R an%* ta5in" into account t#e volatilit6 estimate% in accor%ance 1it# )/*
t#e e8pecte% pea5 o1n fun%s re&uirements %o not e8cee% =7+O of its o1n fun%sE
)%/ the institution monitors on an on"oin" asis 1#et#er t#e estimates carrie% out un%er
points )a/ an% )/ still reflect t#e realit67
-7 0nstitutions s#all notif6 to t#e competent aut#orities t#e use t#e6 ma5e of t#e option provi%e%
in para"rap# 17
,rticle 34=
Positions in commo%ities
17 $ac# position in commo%ities or commo%it6 %erivatives s#all e e8presse% in terms of t#e
stan%ar% unit of measurement7 2#e spot price in eac# commo%it6 s#all e e8presse% in t#e
reportin" currenc67
-7 Positions in "ol% or "ol% %erivatives s#all e consi%ere% as ein" su!ect to forei"n;e8c#an"e
ris5 an% treate% accor%in" to C#apter 3 or +* as appropriate* for t#e purpose of calculatin"
commo%ities ris57
A
47 3or t#e purpose of ,rticle 349)1/* t#e e8cess of an institution(s lon" positions over its s#ort
positions* or vice versa* in t#e same commo%it6 an% i%entical commo%it6 futures* options an%
1arrants s#all e its net position in eac# commo%it67 Derivative instruments s#all e treate%*
as lai% %o1n in ,rticle 34>* as positions in t#e un%erl6in" commo%it67
+7 3or t#e purposes of calculatin" a position in a commo%it6* t#e follo1in" positions s#all e
treate% as positions in t#e same commo%it6:
)a/ positions in %ifferent su;cate"ories of commo%ities in cases 1#ere t#e su;cate"ories
are %eliverale a"ainst eac# ot#erE
)/ positions in similar commo%ities if t#e6 are close sustitutes an% 1#ere a minimum
correlation of .79 et1een price movements can e clearl6 estalis#e% over a minimum
perio% of one 6ear7
,rticle 34>
Particular instruments
17 Commo%it6 futures an% for1ar% commitments to u6 or sell in%ivi%ual commo%ities s#all e
incorporate% in t#e measurement s6stem as notional amounts in terms of t#e stan%ar% unit of
measurement an% assi"ne% a maturit6 1it# reference to e8pir6 %ate7
-7 Commo%it6 s1aps 1#ere one si%e of t#e transaction is a fi8e% price an% t#e ot#er t#e current
mar5et price s#all e treate%* as a series of positions e&ual to t#e notional amount of t#e
contract* 1it#* 1#ere relevant* one position correspon%in" 1it# eac# pa6ment on t#e s1ap
an% slotte% into t#e maturit6 an%s in ,rticle 348)1/7 2#e positions s#all e lon" positions if
t#e institution is pa6in" a fi8e% price an% receivin" a floatin" price an% s#ort positions if t#e
institution is receivin" a fi8e% price an% pa6in" a floatin" price7 Commo%it6 s1aps 1#ere t#e
si%es of t#e transaction are in %ifferent commo%ities are to e reporte% in t#e relevant
reportin" la%%er for t#e maturit6 la%%er approac#7
37 Options an% 1arrants on commo%ities or on commo%it6 %erivatives s#all e treate% as if t#e6
1ere positions e&ual in value to t#e amount of t#e un%erl6in" to 1#ic# t#e option refers*
multiplie% 6 its %elta for t#e purposes of t#is C#apter7 2#e latter positions ma6 e nette% off
a"ainst an6 offsettin" positions in t#e i%entical un%erl6in" commo%it6 or commo%it6
%erivative7 2#e %elta use% s#all A e t#at of t#e e8c#an"e concerne% A3 1or -+C options, or
*here delta is not availale fro the e5$hange $on$erned t#e institution a# $al$ulate delta
itself usin" an appropriate mo%el, su!9e$t to perission !# the $opetent authorities7
Permission s#all e "rante% if t#e mo%el appropriatel6 estimates t#e rate of c#an"e of t#e
option(s or 1arrant(s value 1it# respect to small c#an"es in t#e mar5et price of t#e un%erl6in"7
0nstitutions s#all a%e&uatel6 reflect ot#er ris5s associate% 1it# options* apart from t#e %elta
ris5* in t#e o1n fun%s re&uirements7
47 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s %efinin" a ran"e of met#o%s to reflect
in t#e o1n fun%s re&uirements ot#er ris5s* apart from %elta ris5* in a manner proportionate to
t#e scale an% comple8it6 of institutions( activities in options7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4
(e$e!er -.137
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first su;para"rap# in accor%ance 1it# ,rticles 1. to 14 of Re"ulation )$4/ Bo
1.93/-.1.7
Before the entr# into for$e of the te$hni$al standards, $opetent authorities a# $ontinue
to appl# the e5isting national treatents, *here the $opetent authorities have applied that
treatent !efore C4 (e$e!er 2:4C3
+7 ?#ere an institution is eit#er of t#e follo1in"* it s#all inclu%e t#e commo%ities concerne% in
t#e calculation of its o1n fun%s re&uirement for commo%ities ris5:
)a/ t#e transferor of commo%ities or "uarantee% ri"#ts relatin" to title to commo%ities in a
repurc#ase a"reementE
)/ t#e len%er of commo%ities in a commo%ities len%in" a"reement7
,rticle 348
9aturit6 la%%er approac#
17 2#e institution s#all use a separate maturit6 la%%er in line 1it# 2ale 1 for eac# commo%it67
,ll positions in t#at commo%it6 s#all e assi"ne% to t#e appropriate maturit6 an%s7 P#6sical
stoc5s s#all e assi"ne% to t#e first maturit6 an% et1een . an% up to an% inclu%in" 1 mont#7
2ale 1
9aturit6 an%
)1/
Sprea% rate )in O/
)-/
. Z 1 mont# 1*+.
[ 1 Z 3 mont#s 1*+.
[ 3 Z = mont#s 1*+.
[ = Z 1- mont#s 1*+.
[ 1 Z - 6ears 1*+.
[ - Z 3 6ears 1*+.
[ 3 6ears 1*+.
-7 Positions in t#e same commo%it6 ma6 e offset an% assi"ne% to t#e appropriate maturit6
an%s on a net asis for t#e follo1in":
)a/ positions in contracts maturin" on t#e same %ateE
)/ positions in contracts maturin" 1it#in 1. %a6s of eac# ot#er if t#e contracts are tra%e%
on mar5ets 1#ic# #ave %ail6 %eliver6 %ates7
37 2#e institution s#all t#en calculate t#e sum of t#e lon" positions an% t#e sum of t#e s#ort
positions in eac# maturit6 an%7 2#e amount of t#e former 1#ic# are matc#e% 6 t#e latter in
a "iven maturit6 an% s#all e t#e matc#e% positions in t#at an%* 1#ile t#e resi%ual lon" or
s#ort position s#all e t#e unmatc#e% position for t#e same an%7
47 2#at part of t#e unmatc#e% lon" position for a "iven maturit6 an% t#at is matc#e% 6 t#e
unmatc#e% s#ort position* or vice versa* for a maturit6 an% furt#er out s#all e t#e matc#e%
position et1een t1o maturit6 an%s7 2#at part of t#e unmatc#e% lon" or unmatc#e% s#ort
position t#at cannot e t#us matc#e% s#all e t#e unmatc#e% position7
+7 2#e institution(s o1n fun%s re&uirement for eac# commo%it6 s#all e calculate% on t#e asis
of t#e relevant maturit6 la%%er as t#e sum of t#e follo1in":
)a/ t#e sum of t#e matc#e% lon" an% s#ort positions* multiplie% 6 t#e appropriate sprea%
rate as in%icate% in t#e secon% column of 2ale 1 for eac# maturit6 an% an% 6 t#e spot
price for t#e commo%it6E
)/ t#e matc#e% position et1een t1o maturit6 an%s for eac# maturit6 an% into 1#ic# an
unmatc#e% position is carrie% for1ar%* multiplie% 6 .*= O* 1#ic# is t#e carr6 rate an%
6 t#e spot price for t#e commo%it6E
)c/ t#e resi%ual unmatc#e% positions* multiplie% 6 1+ O 1#ic# is t#e outri"#t rate an% 6
t#e spot price for t#e commo%it67
=7 2#e institution(s overall o1n fun%s re&uirement for commo%ities ris5 s#all e calculate% as t#e
sum of t#e o1n fun%s re&uirements calculate% for eac# commo%it6 accor%in" to para"rap# +7
,rticle 349
Simplifie% approac#
17 2#e institution(s o1n fun%s re&uirement for eac# commo%it6 s#all e calculate% as t#e sum of
t#e follo1in":
)a/ 1+ O of t#e net position* lon" or s#ort* multiplie% 6 t#e spot price for t#e commo%it6E
)/ 3 O of t#e "ross position* lon" plus s#ort* multiplie% 6 t#e spot price for t#e
commo%it67
-7 2#e institution(s overall o1n fun%s re&uirement for commo%ities ris5 s#all e calculate% as t#e
sum of t#e o1n fun%s re&uirements calculate% for eac# commo%it6 accor%in" to para"rap# 17
,rticle 3+.
$8ten%e% maturit6 la%%er approac#
0nstitutions ma6 use t#e minimum sprea%* carr6 an% outri"#t rates set out in t#e follo1in" tale -
instea% of t#ose in%icate% in ,rticle 348 provi%e% t#at t#e institutions:
)a/ un%erta5e si"nificant commo%ities usinessE
)/ #ave an appropriatel6 %iversifie% commo%ities portfolioE
)c/ are not 6et in a position to use internal mo%els for t#e purpose of calculatin" t#e o1n fun%s
re&uirement for commo%ities ris57
2ale -
Precious metals
)e8cept "ol%/
Dase metals ,"ricultural
pro%ucts )softs/
Ot#er* inclu%in"
ener"6 pro%ucts
Sprea%
rate )O/
1*. 1*- 1*+ 1*+
Carr6 rate
)O/
.*3 .*+ .*= .*=
Outri"#t
rate )O/
8 1. 1- 1+
0nstitutions s#all notif6 t#e use t#e6 ma5e of t#is ,rticle to t#eir competent aut#orities to"et#er 1it#
evi%ence of t#eir efforts to implement an internal mo%el for t#e purpose of calculatin" t#e o1n
fun%s re&uirement for commo%ities ris57
C6pter 7
Use o1 internl 0o.els to 2l2ulte o<n 1un.s re/uire0ents
?e2tion 1
Per0ission n. o<n 1un.s re/uire0ents
,rticle 3+1
Specific an% "eneral ris5s
Position ris5 on a tra%e% %et instrument or e&uit6 instrument or %erivative t#ereof ma6 e %ivi%e%
into t1o components for purposes of t#is c#apter7 2#e first s#all e its specific ris5 component an%
s#all encompass t#e ris5 of a price c#an"e in t#e instrument concerne% %ue to factors relate% to its
issuer or* in t#e case of a %erivative* t#e issuer of t#e un%erl6in" instrument7 2#e "eneral ris5
component s#all encompass t#e ris5 of a price c#an"e in t#e instrument %ue in t#e case of a tra%e%
%et instrument or %et %erivative to a c#an"e in t#e level of interest rates or in t#e case of an e&uit6
or e&uit6 %erivative to a roa% e&uit6;mar5et movement unrelate% to an6 specific attriutes of
in%ivi%ual securities7
,rticle 3+-
Permission to use internal mo%els
17 ,fter #avin" verifie% an institution(s compliance 1it# t#e re&uirements of sections -* 3 an% 4
as relevant* competent aut#orities s#all "rant permission to institutions to calculate t#eir o1n
fun%s re&uirements for one or more of t#e follo1in" ris5 cate"ories 6 usin" t#eir internal
mo%els instea% of or in comination 1it# t#e met#o%s in C#apters - to 4:
)a/ "eneral ris5 of e&uit6 instrumentsE
)/ specific ris5 of e&uit6 instrumentsE
)c/ "eneral ris5 of %et instrumentsE
)%/ specific ris5 of %et instrumentsE
)e/ forei"n;e8c#an"e ris5E
)f/ commo%ities ris57
-7 3or ris5 cate"ories for 1#ic# t#e institution #as not een "rante% t#e permission referre% to in
para"rap# 1 to use its internal mo%els* t#at institution s#all continue to calculate o1n fun%s
re&uirements in accor%ance 1it# t#ose C#apters -* 3 an% 4 as relevant7 Permission 6 t#e
competent aut#orities for t#e use of internal mo%els s#all e re&uire% for eac# ris5 cate"or6
and shall !e granted onl# if the internal odel $overs a signifi$ant share of the positions of
a $ertain risk $ategor#7
2a3 9aterial c#an"es to t#e use of internal mo%els that the institution has re$eived perission to
use* t#e e8tension of t#e use of internal mo%els that the institution has re$eived perission
to use* in particular to a%%itional ris5 cate"ories* an% t#e initial calculation of stresse% value;
at;ris5 accor%in" to ,rticle 3+4)-/ re&uire a separate permission 6 t#e competent aut#orit67
&nstitutions shall notif# the $opetent authorities of all other e5tensions and $hanges to the
use of those internal odels that the institution has re$eived perission to use3
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e con%itions for assessin" materialit6 of e8tensions an% c#an"es to t#e use of internal
mo%elsE
)/ t#e assessment met#o%olo"6 un%er 1#ic# competent aut#orities permit institutions to
use internal mo%els7
($) the $onditions under *hi$h the share of positions $overed !# the internal odel
*ithin a risk $ategor# shall !e $onsidered Hsignifi$antI as referred to in paragraph 23
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4
(e$e!er 2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
,rticle 3+3
O1n fun%s re&uirements 1#en usin" internal mo%els
17 $ac# institution usin" an internal mo%el s#all fulfil* in a%%ition to o1n fun%s re&uirements
calculate% accor%in" to C#apters -* 3 an% 4 for t#ose ris5 cate"ories for 1#ic# permission to
use an internal mo%el #as not een "rante%* an o1n fun%s re&uirement e8presse% as t#e sum of
points )a/ an% )/:
)a/ t#e #i"#er of t#e follo1in" values:
)i/ its previous %a6(s value;at;ris5 numer calculate% in accor%ance 1it# ,rticle
3+4)1/ )RaR
t;1
/E
)ii/ an avera"e of t#e %ail6 value;at;ris5 numers calculate% in accor%ance 1it#
,rticle 3+4)1/ on eac# of t#e prece%in" si8t6 usiness %a6s )RaR
av"
/* multiplie%
6 t#e multiplication factor )mc/ accor%in" to ,rticle 3++E
)/ t#e #i"#er of t#e follo1in" values:
)i/ its latest availale stresse%;value;at;ris5 numer calculate% in accor%ance 1it#
,rticle 3+4)-/ )sRaR
t;1
/E an%
)ii/ an avera"e of t#e stresse% value;at;ris5 numers calculate% in t#e manner an%
fre&uenc6 specifie% in Arti$le C@B(2) %urin" t#e prece%in" si8t6 usiness %a6s
)sRaR
av"
/* multiplie% 6 t#e multiplication factor )ms/ accor%in" to ,rticle 3++E
-7 0nstitutions t#at use an internal mo%el to calculate t#eir o1n fun%s re&uirement for specific
ris5 of %et instruments s#all fulfil an a%%itional o1n fun%s re&uirement e8presse% as t#e sum
of t#e follo1in" points )a/ an% )/:
)a/ t#e o1n fun%s re&uirement calculate% in accor%ance 1it# ,rticle 3-= an% 3-> for t#e
specific ris5 of securitisation positions an% nt# to %efault cre%it %erivatives in t#e tra%in"
oo5 1it# t#e e8ception of t#ose incorporate% in an o1n fun%s re&uirement for t#e
specific ris5 of t#e correlation tra%in" portfolio in accor%ance 1it# Section @ an%* 1#ere
applicale* t#e o1n fun%s re&uirement for specific ris5 in accor%ance 1it# C#apter -*
Section =* for t#ose positions in C04s for 1#ic# neit#er t#e con%itions in ,rticle 339)1/
nor ,rticle 339)-/ are fulfille%E
)/ t#e #i"#er of:
)i/ t#e most recent ris5 numer for t#e incremental %efault an% mi"ration ris5
calculate% in accor%ance 1it# Section 3E
)ii/ t#e avera"e of t#is numer over t#e prece%in" 1- 1ee5s7
37 0nstitutions t#at #ave a correlation tra%in" portfolio* 1#ic# meets t#e re&uirements in ,rticle
3->)1/ to )3/* s#all $hoose to fulfil an Ao1n fun%s re&uirement on the !asis of Arti$le C?0
instead of Arti$le C20 (B), calculate% as t#e #i"#er of t#e follo1in":
)a/ t#e most recent ris5 numer for t#e correlation tra%in" portfolio calculate% in
accor%ance 1it# Section +E
)/ t#e avera"e of t#is numer over t#e prece%in" 1-;1ee5sE
)c/ 8 O of t#e o1n fun%s re&uirement t#at 1oul%* at t#e time of calculation of t#e most
recent ris5 numer referre% to in Apoint (a)* e calculate% in accor%ance 1it# ,rticle
3->)4/ for all t#ose positions incorporate% into t#e internal mo%el for t#e correlation
tra%in" portfolio7
?ECTION 2
>ENERAL RE@UIRE*ENT?
,rticle 3+4
RaR an% stresse% RaR Calculation
17 2#e calculation of t#e value;at;ris5 numer referre% to in ,rticle 3+3 s#all e su!ect to t#e
follo1in" re&uirements:
)a/ %ail6 calculation of t#e value;at;ris5 numerE
)/ a 99
t#
percentile* one;taile% confi%ence intervalE
)c/ a 1.;%a6 #ol%in" perio%E
)%/ an effective #istorical oservation perio% of at least one 6ear e8cept 1#ere a s#orter
oservation perio% is !ustifie% 6 a si"nificant upsur"e in price volatilit6E
)e/ at least mont#l6 %ata set up%ates7
2#e institution ma6 use value;at;ris5 numers calculate% accor%in" to s#orter #ol%in" perio%s
t#an 1. %a6s scale% up to 1. %a6s 6 an appropriate met#o%olo"6 t#at is revie1e%
perio%icall67
-7 0n a%%ition* t#e institution s#all at least 1ee5l6 calculate a Mstresse% value;at;ris5( of t#e
current portfolio* in accor%ance 1it# t#e re&uirements set out in t#e first para"rap#* 1it#
value;at;ris5 mo%el inputs calirate% to #istorical %ata from a continuous 1-;mont# perio% of
si"nificant financial stress relevant to t#e institution(s portfolio7 2#e c#oice of suc# #istorical
%ata s#all e su!ect to at least annual revie1 6 t#e institution* 1#ic# s#all notif6 t#e
outcome to t#e competent aut#orities7 $D, s#all monitor t#e ran"e of practices for calculatin"
stresse% value at ris5 an% s#all* in accor%ance 1it# ,rticle 1= of Re"ulation )$4/ Bo7
1.93/-.1.* issue "ui%elines on suc# practices7
,rticle 3++
Re"ulator6 ac5testin" an% multiplication factors
17 2#e results of t#e calculations referre% to in ,rticle 3+4 s#all e scale% up 6 t#e
multiplication factors )m
c
/ an% )m
s
/7
-7 Ea$h of the multiplication factors )m
c
/ an% )m
s
/ s#all e t#e sum of at least 3 an% an a%%en%
et1een . an% 1 in accor%ance 1it# 2ale 17 2#at a%%en% s#all %epen% on t#e numer of
overs#ootin"s for t#e most recent -+. usiness %a6s as evi%ence% 6 t#e institution(s ac5;
testin" of t#e value;at;ris5 numer as set out in ,rticle 3+4)1/7
2ale 1
Bumer of overs#ootin"s a%%en%
3e1er t#an + .*..
+ .*4.
= .*+.
> .*=+
8 .*>+
9 .*8+
1. or more 1*..
8439/13
DQPG
SO/psc 9.8
EN
8439/13 SO/psc 910
EN
DQPG
37 2#e institutions s#all count %ail6 overs#ootin"s on t#e asis of ac5;testin" on #6pot#etical
an% actual c#an"es in t#e portfolio(s value7 ,n overs#ootin" is a one;%a6 c#an"e in t#e
portfolio(s value t#at e8cee%s t#e relate% one;%a6 value;at;ris5 numer "enerate% 6 t#e
institution(s mo%el7 3or t#e purpose of %eterminin" t#e a%%en% t#e numer of overs#ootin"s
s#all e assesse% at least &uarterl6 an% s#all e e&ual to t#e #i"#er of t#e numer of
overs#ootin"s un%er #6pot#etical an% actual c#an"es in t#e value of t#e portfolio7
Dac5;testin" on #6pot#etical c#an"es in t#e portfolio(s value s#all e ase% on a comparison
et1een t#e portfolio(s en%;of;%a6 value an%* assumin" unc#an"e% positions* its value at t#e
en% of t#e suse&uent %a67
Dac5;testin" on actual c#an"es in t#e portfolio(s value s#all e ase% on a comparison
et1een t#e portfolio(s en%;of;%a6 value an% its actual value at t#e en% of t#e suse&uent %a6
e8clu%in" fees* commissions* an% net interest income7
47 2#e competent aut#orities ma6 in in%ivi%ual cases limit t#e a%%en% to t#at resultin" from
overs#ootin"s un%er #6pot#etical c#an"es* 1#ere t#e numer of overs#ootin"s un%er actual
c#an"es %oes not result from %eficiencies in t#e internal mo%el7
+7 0n or%er to allo1 competent aut#orities to monitor t#e appropriateness of t#e multiplication
factors on an on"oin" asis* institutions s#all notif6 promptl6* an% in an6 case no later t#an
1it#in five 1or5in" %a6s* t#e competent aut#orities of overs#ootin"s t#at result form t#eir
ac5;testin" pro"ramme7
,rticle 3+=
Re&uirements on ris5 measurement
17 ,n6 internal mo%el use% to calculate capital re&uirements for position ris5* forei"n e8c#an"e
ris5* commo%ities ris5 an% an6 internal mo%el for correlation tra%in" s#all meet all of t#e
follo1in" re&uirements:
)a/ t#e mo%el s#all capture accuratel6 all material price ris5sE
)/ t#e mo%el s#all capture a sufficient numer of ris5 factors* %epen%in" on t#e level of
activit6 of t#e institution in t#e respective mar5ets7 ;here a risk fa$tor is in$orporated
into the institutionGs pri$ing odel !ut not into the risk=easureent odel, the
institution shall !e a!le to 9ustif# su$h an oission to the satisfa$tion of the
$opetent authorit#3 +he risk= measurement mo%el s#all capture nonlinearities for
options an% ot#er pro%ucts as 1ell as correlation ris5 an% asis ris57 ?#ere pro8ies for
ris5 factors are use% t#e6 s#all s#o1 a "oo% trac5 recor% for t#e actual position #el%7
-7 ,n6 internal mo%el use% to calculate capital re&uirements for position ris5* forei"n e8c#an"e
ris5 or commo%ities ris5 s#all meet all of t#e follo1in" re&uirements:
)a/ t#e mo%el s#all incorporate a set of ris5 factors correspon%in" to t#e interest rates in
eac# currenc6 in 1#ic# t#e institution #as interest rate sensitive on; or off;alance s#eet
positions7 2#e institution s#all mo%el t#e 6iel% curves usin" one of t#e "enerall6
accepte% approac#es7 3or material e8posures to interest;rate ris5 in t#e ma!or currencies
an% mar5ets* t#e 6iel% curve s#all e %ivi%e% into a minimum of si8 maturit6 se"ments*
to capture t#e variations of volatilit6 of rates alon" t#e 6iel% curve7 2#e mo%el s#all also
capture t#e ris5 of less t#an perfectl6 correlate% movements et1een %ifferent 6iel%
curvesE
)/ t#e mo%el s#all incorporate ris5 factors correspon%in" to "ol% an% to t#e in%ivi%ual
forei"n currencies in 1#ic# t#e institution(s positions are %enominate%7 3or C04s t#e
actual forei"n e8c#an"e positions of t#e C04 s#all e ta5en into account7 0nstitutions
ma6 rel6 on t#ir% part6 reportin" of t#e forei"n e8c#an"e position of t#e C04* 1#ere t#e
correctness of t#is report is a%e&uatel6 ensure%7 0f an institution is not a1are of t#e
forei"n e8c#an"e positions of a C04* t#is position s#all e carve% out an% treate% in
accor%ance 1it# ,rticle 34-)3/E
)c/ t#e mo%el s#all use a separate ris5 factor at least for eac# of t#e e&uit6 mar5ets in 1#ic#
t#e institution #ol%s si"nificant positionsE
)%/ t#e mo%el s#all use a separate ris5 factor at least for eac# commo%it6 in 1#ic# t#e
institution #ol%s si"nificant positions7 2#e mo%el must also capture t#e ris5 of less t#an
perfectl6 correlate% movements et1een similar* ut not i%entical* commo%ities an% t#e
e8posure to c#an"es in for1ar% prices arisin" from maturit6 mismatc#es7 0t s#all also
ta5e account of mar5et c#aracteristics* notal6 %eliver6 %ates an% t#e scope provi%e% to
tra%ers to close out positionsE
)e/ t#e institution(s internal mo%el s#all conservativel6 assess t#e ris5 arisin" from less
li&ui% positions an% positions 1it# limite% price transparenc6 un%er realistic mar5et
scenarios7 0n a%%ition* t#e internal mo%el s#all meet minimum %ata stan%ar%s7 Pro8ies
s#all e appropriatel6 conservative an% s#all e use% onl6 1#ere availale %ata is
insufficient or is not reflective of t#e true volatilit6 of a position or portfolio7
37 0nstitutions ma6* in an6 internal mo%el use% for purposes of t#is C#apter* use empirical
correlations 1it#in ris5 cate"ories an% across ris5 cate"ories onl6 if t#e institution(s approac#
for measurin" correlations is soun% an% implemente% 1it# inte"rit67
,rticle 3+>
Qualitative re&uirements
17 ,n6 internal mo%el use% for purposes of t#is C#apter s#all e conceptuall6 soun% an%
implemente% 1it# inte"rit6 an%* in particular* all of t#e follo1in" &ualitative re&uirements
s#all e met:
)a/ an6 internal mo%el use% to calculate capital re&uirements for position ris5* forei"n
e8c#an"e ris5 or commo%ities ris5 is s#all e closel6 inte"rate% into t#e %ail6 ris5;
mana"ement process of t#e institution an% serve as t#e asis for reportin" ris5 e8posures
to senior mana"ementE
)/ t#e institution s#all #ave a ris5 control unit t#at is in%epen%ent from usiness tra%in"
units an% reports %irectl6 to senior mana"ement7 2#e unit s#all e responsile for
%esi"nin" an% implementin" an6 internal mo%el use% for purposes of t#is C#apter7 2#e
unit s#all con%uct t#e initial an% on;"oin" vali%ation of an6 internal mo%el use% for
purposes of t#is C#apter, !eing responsi!le for the overall risk anageent s#ste7
2#e unit s#all pro%uce an% anal6se %ail6 reports on t#e output of an6 internal mo%el
use% for calculatin" capital re&uirements for position ris5* forei"n e8c#an"e ris5 an%
commo%ities ris5* an% on t#e appropriate measures to e ta5en in terms of tra%in"
limitsE
)c/ t#e institution(s mana"ement o%6 an% senior mana"ement s#all e activel6 involve% in
t#e ris5;control process an% t#e %ail6 reports pro%uce% 6 t#e ris5;control unit are
revie1e% 6 a level of mana"ement 1it# sufficient aut#orit6 to enforce ot# re%uctions
of positions ta5en 6 in%ivi%ual tra%ers as 1ell as in t#e institution(s overall ris5
e8posureE
)%/ t#e institution s#all #ave sufficient numers of staff s5ille% in t#e use of sop#isticate%
internal mo%els* an% inclu%in" t#e ones use% for purposes of t#is C#apter* in t#e tra%in"*
ris5;control* au%it an% ac5;office areasE
)e/ t#e institution s#all #ave estalis#e% proce%ures for monitorin" an% ensurin"
compliance 1it# a %ocumente% set of internal policies an% controls concernin" t#e
overall operation of its internal mo%els* an% inclu%in" t#e ones use% for purposes of t#is
C#apterE
)f/ an6 internal mo%el use% for purposes of t#is C#apter s#all #ave a proven trac5 recor% of
reasonale accurac6 in measurin" ris5sE
)"/ t#e institution s#all fre&uentl6 con%uct a ri"orous pro"ramme of stress testin"* inclu%in"
reverse stress tests* 1#ic# encompasses an6 internal mo%el use% for purposes of t#is
C#apter an% t#e results of t#ese stress tests s#all e revie1e% 6 senior mana"ement an%
reflecte% in t#e policies an% limits it sets7 2#is process s#all particularl6 a%%ress
illi&ui%it6 of mar5ets in stresse% mar5et con%itions* concentration ris5* one 1a6
mar5ets* event an% !ump;to;%efault ris5s* non;linearit6 of pro%ucts* %eep out;of;t#e;
mone6 positions* positions su!ect to t#e "appin" of prices an% ot#er ris5s t#at ma6 not
e capture% appropriatel6 in t#e internal mo%els7 2#e s#oc5s applie% s#all reflect t#e
nature of t#e portfolios an% t#e time it coul% ta5e to #e%"e out or mana"e ris5s un%er
severe mar5et con%itionsE
)#/ t#e institution s#all con%uct* as part of its re"ular internal au%itin" process* an
in%epen%ent revie1 of its internal mo%els* an% inclu%in" t#e ones use% for purposes of
t#is C#apter7
-7 2#e revie1 referre% to in point )#/ of t#e first para"rap# s#all inclu%e ot# t#e activities of t#e
usiness tra%in" units an% of t#e in%epen%ent ris5;control unit7 ,t least once a 6ear* t#e
institution s#all con%uct a revie1 of its overall ris5;mana"ement process7 2#e revie1 s#all
consi%er t#e follo1in":
)a/ t#e a%e&uac6 of t#e %ocumentation of t#e ris5;mana"ement s6stem an% process an% t#e
or"anisation of t#e ris5;control unitE
)/ t#e inte"ration of ris5 measures into %ail6 ris5 mana"ement an% t#e inte"rit6 of t#e
mana"ement information s6stemE
)c/ t#e process t#e institution emplo6s for approvin" ris5;pricin" mo%els an% valuation
s6stems t#at are use% 6 front an% ac5;office personnelE
)%/ t#e scope of ris5s capture% 6 t#e ris5;measurement mo%el an% t#e vali%ation of an6
si"nificant c#an"es in t#e ris5;measurement processE
)e/ t#e accurac6 an% completeness of position %ata* t#e accurac6 an% appropriateness of
volatilit6 an% correlation assumptions* an% t#e accurac6 of valuation an% ris5 sensitivit6
calculationsE
)f/ t#e verification process t#e institution emplo6s to evaluate t#e consistenc6* timeliness
an% reliailit6 of %ata sources use% to run internal mo%els* inclu%in" t#e in%epen%ence
of suc# %ata sourcesE
)"/ t#e verification process t#e institution uses to evaluate ac5;testin" t#at is con%ucte% to
assess t#e mo%els( accurac67
37 ,s tec#ni&ues an% est practices evolve* institutions s#all appl6 t#ose ne1 tec#ni&ues an%
practices in an6 internal mo%el use% for purposes of t#is C#apter7
,rticle 3+8
0nternal Rali%ation
17 0nstitutions s#all #ave processes in place to ensure t#at all t#eir internal mo%els use% for
purposes of t#is C#apter #ave een a%e&uatel6 vali%ate% 6 suital6 &ualifie% parties
in%epen%ent of t#e %evelopment process to ensure t#at t#e6 are conceptuall6 soun% an%
a%e&uatel6 capture all material ris5s7 2#e vali%ation s#all e con%ucte% 1#en t#e internal
mo%el is initiall6 %evelope% an% 1#en an6 si"nificant c#an"es are ma%e to t#e internal mo%el7
2#e vali%ation s#all also e con%ucte% on a perio%ic asis ut especiall6 1#ere t#ere #ave
een an6 si"nificant structural c#an"es in t#e mar5et or c#an"es to t#e composition of t#e
portfolio 1#ic# mi"#t lea% to t#e internal mo%el no lon"er ein" a%e&uate7 ,s tec#ni&ues an%
est practices for internal vali%ation evolve* institutions s#all appl6 t#ese a%vances7 0nternal
mo%el vali%ation s#all not e limite% to ac5;testin"* ut s#all* at a minimum* also inclu%e t#e
follo1in":
)a/ tests to %emonstrate t#at an6 assumptions ma%e 1it#in t#e internal mo%el are
appropriate an% %o not un%erestimate or overestimate t#e ris5E
)/ in a%%ition to t#e re"ulator6 ac5;testin" pro"rammes* institutions s#all carr6 out t#eir
o1n internal mo%el vali%ation tests* inclu%in" ac5;testin"* in relation to t#e ris5s an%
structures of t#eir portfoliosE
)c/ t#e use of #6pot#etical portfolios to ensure t#at t#e internal mo%el is ale to account for
particular structural features t#at ma6 arise* for e8ample material asis ris5s an%
concentration ris57
-7 2#e institution s#all perform ac5;testin" on ot# actual an% #6pot#etical c#an"es in t#e
portfolio(s value7
?ECTION 3
RE@UIRE*ENT? PARTICULAR TO ?PECIFIC RI?B *O$ELLIN>
,rticle 3+9
Re&uirements for mo%ellin" specific ris5
,n internal mo%el use% for calculatin" o1n fun%s re&uirements for specific ris5 an% an internal
mo%el for correlation tra%in" s#all meet t#e follo1in" a%%itional re&uirements:
)a/ it e8plains t#e #istorical price variation in t#e portfolioE
)/ it captures concentration in terms of ma"nitu%e an% c#an"es of composition of t#e portfolioE
)c/ it is roust to an a%verse environmentE
)%/ it is vali%ate% t#rou"# ac5;testin" aime% at assessin" 1#et#er specific ris5 is ein"
accuratel6 capture%7 0f t#e institution performs suc# ac5;testin" on t#e asis of relevant su;
portfolios* t#ese must e c#osen in a consistent mannerE
)e/ it captures name;relate% asis ris5 an% s#all in particular e sensitive to material i%ios6ncratic
%ifferences et1een similar ut not i%entical positionsE
)f/ it captures event ris57
,rticle 3=.
$8clusions from specific ris5 mo%els
17 ,n institution ma6 c#oose to e8clu%e from t#e calculation of its specific ris5 o1n fun%s
re&uirement usin" an internal mo%el t#ose positions for 1#ic# it fulfils an o1n fun%s
re&uirement for specific ris5 in accor%ance 1it# Arti$le C24(4)(e) or Arti$le C2? *ith
e5$eption of those positions that are su!9e$t to the approa$h set out in Arti$le C?03
-7 ,n institution ma6 c#oose not to capture %efault an% mi"ration ris5s for traded %et
instruments in its internal mo%el 1#ere it is capturin" t#ose ris5s t#rou"# t#e re&uirements set
out in Section 47
?ECTION '
INTERNAL *O$EL FOR INCRE*ENTAL $EFAULT AN$ *I>RATION RI?B
,rticle 3=1
Re&uirement to #ave an internal 0RC mo%el
,n institution t#at use an internal mo%el for calculatin" o1n fun%s re&uirements for specific ris5 of
traded %et instruments s#all also #ave an internal incremental %efault an% mi"ration ris5 )0RC/
mo%el in place to capture t#e %efault an% mi"ration ris5s of its tra%in" oo5 positions t#at are
incremental to t#e ris5s capture% 6 t#e value;at;ris5 measure as specifie% in ,rticle 3+4)1/7 +he
institution s#all %emonstrate t#at its internal mo%el meets the follo*ing stan%ar%s Aun%er t#e
assumption of a constant level of ris5* an% a%!uste% 1#ere appropriate to reflect t#e impact of
li&ui%it6* concentrations* #e%"in" an% optionalit6'
(a) the internal odel provides a eaningful differentiation of risk and a$$urate and
$onsistent estiates of in$reental default and igration risk%
(!) the internal odelYs estiates for potential losses pla# an essential role in the risk
anageent of the institution%
($) the arket and position data used for the internal odel are up=to=date and su!9e$t to an
appropriate 6ualit# assessent%
(d) the re6uireents in Arti$les C@?(C), C@0, C@A (4) and C@>(!), ($), (e) and (f) are et7
EBA shall issue guidelines on the re6uireents of Arti$les C?2, C?C, C?B and C?@3
,rticle 3=-
Scope of t#e internal 0RC mo%el
2#e internal 0RC mo%el s#all cover all positions su!ect to an o1n fun%s re&uirement for specific
interest rate ris5* inclu%in" t#ose su!ect to a .O specific ris5 capital c#ar"e un%er ,rticle 3-+* ut
s#all not cover securitisation positions an% n;t#;to;%efault cre%it %erivatives7
2#e institution ma6* su!ect to permission 6 t#e competent aut#orities, c#oose to consistentl6
inclu%e all liste% e&uit6 positions an% %erivatives positions ase% on liste% e&uities7 2#e permission
s#all e "rante% if suc# inclusion is consistent 1it# #o1 t#e institution internall6 measures an%
mana"es ris57
,rticle 3=3
Parameters of t#e internal 0RC mo%el
17 0nstitutions s#all use t#e internal mo%el to calculate a numer 1#ic# measures losses %ue to
%efault an% internal or e8ternal ratin"s mi"ration at t#e 99*9 O confi%ence interval over a time
#oriLon of one 6ear7 0nstitutions s#all calculate t#is numer at least 1ee5l67
-7 Correlation assumptions s#all e supporte% 6 anal6sis of o!ective %ata in a conceptuall6
soun% frame1or57 2#e internal mo%el s#all appropriatel6 reflect issuer concentrations7
Concentrations t#at can arise 1it#in an% across pro%uct classes un%er stresse% con%itions s#all
also e reflecte%7
37 2#e internal 0RC mo%el s#all reflect t#e impact of correlations et1een %efault an% mi"ration
events7 2#e impact of %iversification et1een* on t#e one #an%* %efault an% mi"ration events
an%* on t#e ot#er #an%* ot#er ris5 factors s#all not e reflecte%7
47 2#e internal mo%el s#all e ase% on t#e assumption of a constant level of ris5 over t#e one;
6ear time #oriLon* impl6in" t#at "iven in%ivi%ual tra%in" oo5 positions or sets of positions
t#at #ave e8perience% %efault or mi"ration over t#eir li&ui%it6 #oriLon are re;alance% at t#e
en% of t#eir li&ui%it6 #oriLon to attain t#e initial level of ris57 ,lternativel6* an institution ma6
c#oose to consistentl6 use a one;6ear constant position assumption7
+7 2#e li&ui%it6 #oriLons s#all e set accor%in" to t#e time re&uire% to sell t#e position or to
#e%"e all material relevant price ris5s in a stresse% mar5et* #avin" particular re"ar% to t#e siLe
of t#e position7 Fi&ui%it6 #oriLons s#all reflect actual practice an% e8perience %urin" perio%s
of ot# s6stematic an% i%ios6ncratic stresses7 2#e li&ui%it6 #oriLon s#all e measure% un%er
conservative assumptions an% s#all e sufficientl6 lon" t#at t#e act of sellin" or #e%"in"* in
itself* 1oul% not materiall6 affect t#e price at 1#ic# t#e sellin" or #e%"in" 1oul% e e8ecute%7
=7 2#e %etermination of t#e appropriate li&ui%it6 #oriLon for a position or set of positions is
su!ect to a floor of t#ree mont#s7
>7 2#e %etermination of t#e appropriate li&ui%it6 #oriLon for a position or set of positions s#all
ta5e into account an institution(s internal policies relatin" to valuation a%!ustments an% t#e
mana"ement of stale positions7 ?#en an institution %etermines li&ui%it6 #oriLons for sets of
positions rat#er t#an for in%ivi%ual positions* t#e criteria for %efinin" sets of positions s#all e
%efine% in a 1a6 t#at meanin"full6 reflects %ifferences in li&ui%it67 2#e li&ui%it6 #oriLons
s#all e "reater for positions t#at are concentrate%* reflectin" t#e lon"er perio% nee%e% to
li&ui%ate suc# positions7 2#e li&ui%it6 #oriLon for a securitisation 1are#ouse s#all reflect t#e
time to uil%* sell an% securitise t#e assets* or to #e%"e t#e material ris5 factors* un%er stresse%
mar5et con%itions7
,rticle 3=4
Reco"nition of #e%"es in t#e internal 0RC mo%el
17 Ce%"es ma6 e incorporate% into an institution(s internal mo%el to capture t#e incremental
%efault an% mi"ration ris5s7 Positions ma6 e nette% 1#en lon" an% s#ort positions refer to t#e
same financial instrument7 Ce%"in" or %iversification effects associate% 1it# lon" an% s#ort
positions involvin" %ifferent instruments or %ifferent securities of t#e same oli"or* as 1ell as
lon" an% s#ort positions in %ifferent issuers* ma6 onl6 e reco"nise% 6 e8plicitl6 mo%ellin"
"ross lon" an% s#ort positions in t#e %ifferent instruments7 0nstitutions s#all reflect t#e impact
of material ris5s t#at coul% occur %urin" t#e interval et1een t#e #e%"e(s maturit6 an% t#e
li&ui%it6 #oriLon as 1ell as t#e potential for si"nificant asis ris5s in #e%"in" strate"ies 6
pro%uct* seniorit6 in t#e capital structure* internal or e8ternal ratin"* maturit6* vinta"e an%
ot#er %ifferences in t#e instruments7 ,n institution s#all reflect a #e%"e onl6 to t#e e8tent t#at
it can e maintaine% even as t#e oli"or approac#es a cre%it or ot#er event7
-7 3or positions t#at are #e%"e% via %6namic #e%"in" strate"ies* a realancin" of t#e #e%"e
1it#in t#e li&ui%it6 #oriLon of t#e #e%"e% position ma6 e reco"nise% provi%e% t#at t#e
institution:
)a/ c#ooses to mo%el realancin" of t#e #e%"e consistentl6 over t#e relevant set of tra%in"
oo5 positionsE
)/ %emonstrates t#at t#e inclusion of realancin" results in a etter ris5 measurementE
)c/ %emonstrates t#at t#e mar5ets for t#e instruments servin" as #e%"es are li&ui% enou"# to
allo1 for suc# realancin" even %urin" perio%s of stress7 ,n6 resi%ual ris5s resultin"
from %6namic #e%"in" strate"ies must e reflecte% in t#e o1n fun%s re&uirement7
,rticle 3=+
Particular re&uirements for t#e internal 0RC mo%el
17 2#e internal mo%el to capture t#e incremental %efault an% mi"ration ris5s s#all reflect t#e
nonlinear impact of options* structure% cre%it %erivatives an% ot#er positions 1it# material
nonlinear e#aviour 1it# respect to price c#an"es7 2#e institution s#all also #ave %ue re"ar%
to t#e amount of mo%el ris5 in#erent in t#e valuation an% estimation of price ris5s associate%
1it# suc# pro%ucts7
-7 2#e internal mo%el s#all e ase% on %ata t#at are o!ective an% up;to;%ate7
37 ,s part of t#e in%epen%ent revie1 an% vali%ation of t#eir internal mo%els use% for purposes of
t#is C#apter* in$lusivel# for purposes of the risk easureent s#ste, an institution s#all in
particular %o all of t#e follo1in":
)a/ vali%ate t#at its mo%ellin" approac# for correlations an% price c#an"es is appropriate for
its portfolio* inclu%in" t#e c#oice an% 1ei"#ts of its s6stematic ris5 factorsE
)/ perform a variet6 of stress tests* inclu%in" sensitivit6 anal6sis an% scenario anal6sis* to
assess t#e &ualitative an% &uantitative reasonaleness of t#e internal mo%el* particularl6
1it# re"ar% to t#e treatment of concentrations7 Suc# tests s#all not e limite% to t#e
ran"e of events e8perience% #istoricall6E
)c/ appl6 appropriate &uantitative vali%ation inclu%in" relevant internal mo%ellin"
enc#mar5s7
47 2#e internal mo%el s#all e consistent 1it# t#e institution(s internal ris5 mana"ement
met#o%olo"ies for i%entif6in"* measurin"* an% mana"in" tra%in" ris5s7
+7 0nstitutions s#all %ocument t#eir internal mo%els so t#at its correlation an% ot#er mo%ellin"
assumptions are transparent to t#e competent aut#orities7
=7 2#e internal mo%el s#all conservativel6 assess t#e ris5 arisin" from less li&ui% positions an%
positions 1it# limite% price transparenc6 un%er realistic mar5et scenarios7 0n a%%ition* t#e
internal mo%el s#all meet minimum %ata stan%ar%s7 Pro8ies s#all e appropriatel6
conservative an% ma6 e use% onl6 1#ere availale %ata is insufficient or is not reflective of
t#e true volatilit6 of a position or portfolio7
6
?ECTION 7
INTERNAL *O$EL FOR CORRELATION TRA$IN>
,rticle 3=>
Re&uirements for an internal mo%el for correlation tra%in"
17 Competent aut#orities s#all "rant permission to use an internal mo%el for t#e o1n fun%s
re&uirement for t#e correlation tra%in" portfolio instea% of t#e o1n fun%s re&uirement
accor%in" to ,rticle 3-> to institutions t#at are allo1e% to use an internal mo%el for specific
ris5 of %et instruments an% t#at meet t#e re&uirements in para"rap#s - to = an% in ,rticles
3+=)1/* C@?(C), 3+>* 3+8 (4) an% C@> (a), (!), ($), (e) and (f)3
-7 0nstitutions s#all use t#is internal mo%el to calculate a numer 1#ic# a%e&uatel6 measures all
price ris5s at t#e 99*9 O confi%ence interval over a time #oriLon of one 6ear un%er t#e
assumption of a constant level of ris5* an% a%!uste% 1#ere appropriate to reflect t#e impact of
li&ui%it6* concentrations* #e%"in" an% optionalit67 0nstitutions s#all calculate t#is numer at
least 1ee5l67
37 2#e follo1in" ris5s s#all e a%e&uatel6 capture% 6 t#e mo%el referre% to in para"rap# 1:
)a/ t#e cumulative ris5 arisin" from multiple %efaults* inclu%in" %ifferent or%erin" of
%efaults* in tranc#e% pro%uctsE
)/ cre%it sprea% ris5* inclu%in" t#e "amma an% cross;"amma effectsE
)c/ volatilit6 of implie% correlations* inclu%in" t#e cross effect et1een sprea%s an%
correlationsE
)%/ asis ris5* inclu%in" ot# of t#e follo1in":
)i/ t#e asis et1een t#e sprea% of an in%e8 an% t#ose of its constituent sin"le namesE
)ii/ t#e asis et1een t#e implie% correlation of an in%e8 an% t#at of espo5e
portfoliosE
)e/ recover6 rate volatilit6* as it relates to t#e propensit6 for recover6 rates to affect
tranc#e pricesE
)f/ to t#e e8tent t#e compre#ensive ris5 measure incorporates enefits from %6namic
#e%"in"* t#e ris5 of #e%"e slippa"e an% t#e potential costs of realancin" suc# #e%"esE
)"/ an6 ot#er material price ris5s of positions in t#e correlation tra%in" portfolio7
47 ,n institution s#all use sufficient mar5et %ata 1it#in t#e mo%el referre% to in para"rap# 1 in
or%er to ensure t#at it full6 captures t#e salient ris5s of t#ose e8posures in its internal
approac# in accor%ance 1it# t#e re&uirements set out in t#is ,rticle7 0t s#all e ale to
%emonstrate to t#e competent aut#orit6 t#rou"# ac5 testin" or ot#er appropriate means t#at
its mo%el can appropriatel6 e8plain t#e #istorical price variation of t#ose pro%ucts7
2#e institution s#all #ave appropriate policies an% proce%ures in place in or%er to separate t#e
positions for 1#ic# it #ol%s permission to incorporate t#em in t#e o1n fun%s re&uirement in
accor%ance 1it# t#is ,rticle from ot#er positions for 1#ic# it %oes not #ol% suc# permission7
+7 ?it# re"ar% to t#e portfolio of all t#e positions incorporate% in t#e mo%el referre% to in
para"rap# 1* t#e institution s#all re"ularl6 appl6 a set of specific* pre%etermine% stress
scenarios7 Suc# stress scenarios s#all e8amine t#e effects of stress to %efault rates* recover6
rates* cre%it sprea%s* asis ris5* correlations an% ot#er relevant ris5 factors on t#e correlation
tra%in" portfolio7 2#e institution s#all appl6 stress scenarios at least 1ee5l6 an% report at least
&uarterl6 to t#e competent aut#orities t#e results* inclu%in" comparisons 1it# t#e institution(s
o1n fun%s re&uirement in accor%ance 1it# t#is Arti$le7 ,n6 instances 1#ere t#e stress test
results materiall6 e8cee% t#e o1n fun%s re&uirement for t#e correlation tra%in" portfolio s#all
e reporte% to t#e competent aut#orities in a timel6 manner7 EBA shall develop guidelines on
the appli$ation of stress s$enarios for the $orrelation trading portfolio3
=7 2#e internal mo%el s#all conservativel6 assess t#e ris5 arisin" from less li&ui% positions an%
positions 1it# limite% price transparenc6 un%er realistic mar5et scenarios7 0n a%%ition* t#e
internal mo%el s#all meet minimum %ata stan%ar%s7 Pro8ies s#all e appropriatel6
conservative an% ma6 e use% onl6 1#ere availale %ata is insufficient or is not reflective of
t#e true volatilit6 of a position or portfolio7
Title ,
O<n Fun.s Re/uire0ents 1or ?ettle0ent RisE
,rticle 3=8
Settlement/%eliver6 ris5
0n t#e case of transactions in 1#ic# %et instruments* e&uities* forei"n currencies an% commo%ities
e8clu%in" repurc#ase transactions an% securities or commo%ities len%in" an% securities or
commo%ities orro1in" are unsettle% after t#eir %ue %eliver6 %ates* an institution s#all calculate t#e
price %ifference to 1#ic# it is e8pose%7
2#e price differen$e is calculate% as the %ifference et1een t#e a"ree% settlement price for t#e %et
instrument* e&uit6* forei"n currenc6 or commo%it6 in &uestion an% its current mar5et value* 1#ere
t#e %ifference coul% involve a loss for t#e cre%it institution7
2#e institution s#all multipl6 t#at price %ifference 6 t#e appropriate factor in the right column Aof
t#e follo1in" 2ale 1 in or%er to calculate t#e institution(s o1n fun%s re&uirement for settlement
ris57
2ale 1
Bumer of 1or5in" %a6s after %ue settlement %ate ) O/
+ \ 1+ 8
1= \ 3. +.
31 \ 4+ >+
4= or more 1..
,rticle 3=9
+ree $eliveries
17 ,n institution s#all e re&uire% to #ol% o1n fun%s* as set out in 2ale -* 1#ere t#e follo1in"
occurs:
)a/ it #as pai% for securities* forei"n currencies or commo%ities efore receivin" t#em or it
#as %elivere% securities* forei"n currencies or commo%ities efore receivin" pa6ment
for t#emE
)/ in t#e case of cross;or%er transactions* one %a6 or more #as elapse% since it ma%e t#at
pa6ment or %eliver67
2ale -
Capital treatment for free %eliveries
Column 1 Column - Column 3 Column 4
2ransaction
26pe
4p to first
contractual
pa6ment or
%eliver6 le"
3rom first contractual
pa6ment or %eliver6 le" up
to four %a6s after secon%
contractual pa6ment or
%eliver6 le"
3rom + usiness %a6s post
secon% contractual pa6ment or
%eliver6 le" until e8tinction of
t#e transaction
3ree %eliver6 Bo capital c#ar"e 2reat as an e8posure 2reat as an e8posure ris5
1ei"#te% at 1 -+. O
-7 0n appl6in" a ris5 1ei"#t to free %eliver6 e8posures treate% accor%in" to Column 3 of 2ale -*
an institution usin" t#e 0nternal Ratin"s Dase% approac# set out in Part 2#ree* 2itle 00* C#apter
3 ma6 assi"n PDs to counterparties* for 1#ic# it #as no ot#er non;tra%in" oo5 e8posure* on
t#e asis of t#e counterpart6(s e8ternal ratin"7 0nstitutions usin" o1n estimates of MFGDsN ma6
appl6 t#e FGD set out in ,rticle 1+>)1/ to free %eliver6 e8posures treate% accor%in" to
Column 3 of 2ale - provi%e% t#at t#e6 appl6 it to all suc# e8posures7 ,lternativel6* an
institution usin" t#e 0nternal Ratin"s Dase% approac# set out in Part 2#ree* 2itle 00* C#apter 3
ma6 appl6 t#e ris5 1ei"#ts of t#e Stan%ar%ise% ,pproac#* as set out in Part 2#ree* 2itle 00*
C#apter - provi%e% t#at it applies t#em to all suc# e8posures or ma6 appl6 a 1.. O ris5
1ei"#t to all suc# e8posures7
0f t#e amount of positive e8posure resultin" from free %eliver6 transactions is not material*
institutions ma6 appl6 a ris5 1ei"#t of 1.. O to t#ese e8posures* e8cept 1#ere a ris5 1ei"#t
of 1 -+.O in accor%ance 1it# Column 4 of 2ale - in para"rap# 1 is re&uire%7
37 ,s an alternative to appl6in" a ris5 1ei"#t of 1 -+. O to free %eliver6 e8posures accor%in" to
Column 4 of 2ale - in para"rap# 1* institutions ma6 %e%uct t#e value transferre% plus t#e
current positive e8posure of t#ose e8posures from Common $&uit6 2ier 1 items in accor%ance
1it# point )5/ of ,rticle 33)1/7
,rticle 3>.
?aiver
?#ere a s6stem 1i%e failure of a settlement A, a clearin" s6stem or a CC. occurs* competent
aut#orities ma6 1aive t#e o1n fun%s re&uirements calculate% as set out in ,rticle 3=8 an% 3=9 until
t#e situation is rectifie%7 0n t#is case* t#e failure of a counterpart6 to settle a tra%e s#all not e
%eeme% a %efault for purposes of cre%it ris57
Title ,I
O<n 1un.s re/uire0ents 1or 2re.it 3lution .Gust0ent risE
,rticle 3>1
9eanin" of Cre%it Maluation ,%!ustment
3or t#e purposes of t#is 2itle an% C#apter = of 2itle &&* MCre%it Raluation ,%!ustmentN or (CR,(
means an a%!ustment to t#e mi%;mar5et valuation of t#e portfolio of transactions 1it# a
counterpart67 2#at a%!ustment reflects t#e current mar5et value of t#e cre%it ris5 of t#e counterpart6
to t#e institution* ut %oes not reflect t#e current mar5et value of t#e cre%it ris5 of t#e institution to
t#e counterpart67
,rticle 3>-
Scope
17 ,n institution s#all calculate t#e o1n fun%s re&uirements for CR, ris5 in accor%ance 1it#
t#is 2itle for all O2C %erivative instruments in respect of all of its usiness activities* ot#er
t#an cre%it %erivatives reco"nise% to re%uce ris5;1ei"#te% e8posure amounts for cre%it ris57
-7 ,n institution s#all inclu%e securities financin" transactions in t#e calculation of o1n fun%s
re&uire% 6 para"rap# 1 if t#e competent aut#orit6 %etermines t#at t#e institution(s CR, ris5
e8posures arisin" from t#ose transactions are material7
3+ 2ransactions 1it# a central counterpart6 and a $lientGs transa$tions *ith a $learing e!er,
*hen the $learing e!er is a$ting as an interediar# !et*een the $lient and a 6ualif#ing
$entral $ounterpart# and the transa$tions give rise to a trade e5posure of the $learing
e!er to the 6ualif#ing $entral $ounterpart#, are e8clu%e% from t#e o1n fun%s
re&uirements for CR, ris57
Ca3 +he follo*ing transa$tions are e5$luded fro the o*n funds re6uireents for CMA risk'
a) +ransa$tions *ith non=finan$ial $ounterparties as defined in )egulation (E2)
?BAD2:42 (EM&)) Arti$le 2 (>), or *ith non=finan$ial $ounterparties esta!lished in a
third $ountr#, *here those transa$tions do not e5$eed the $learing threshold as
spe$ified in Arti$le 4:(C) and 4: (B) of that )egulation3 EBA shall $ondu$t a revie*
!# 4 Eanuar# 2:4@ and ever# t*o #ears thereafter, in the light of international
regulator# developents and in$luding on potential ethodologies on the $ali!ration
and thresholds for appli$ation of CMA $harges to third $ountr# non finan$ial
$ounterparties3 EBA in $o=operation *ith E"MA shall, *ithin ? onths of the date of
the revie*, develop draft regulator# te$hni$al standards to spe$if# the pro$edures for
e5$luding transa$tions *ith non=finan$ial $ounterparties esta!lished outside the
2nion in a third $ountr# fro the o*n funds re6uireent for CMA risk3 .o*er is
delegated to the Coission to adopt the regulator# te$hni$al standards spe$if#ing
the pro$edures in a$$ordan$e Arti$les 4: to 4B of )egulation (E2) Fo 4:>CD2:4:3/
(!) intragroup transa$tions as provided for in Arti$le C of )egulation E2 Fo ?BAD2:42
,EM&)/unless Me!er "tates ena$t national la*s re6uiring the stru$tural separation
*ithin a !anking group, in *hi$h $ase $opetent authorities a# re6uire those
intragroup transa$tions !et*een the stru$turall# separated institutions to !e in$luded
in the o*n funds re6uireents3
$) +ransa$tions *ith $ounterparties referred to in Arti$le 2 (4:) of )egulation (E2) Fo3
?BAD2:42 and su!9e$t to the transitional provisions of Arti$le A@ (2) thereof until those
transitional provisions $ease to appl#3
d) +ransa$tions *ith $ounterparties referred to in Arti$le 4 paragraph B(a) and (!) and @
(a) to ($) of )egulation (E2) Fo3 ?BAD2:42 and transa$tions *ith $ounterparties for
*hi$h Arti$le 44: spe$if# a risk *eight of :J for e5posures to this $ounterpart#3
+he e5eption fro the CMA $harge for those transa$tions referred to in Arti$le C02 (Ca)
($) *hi$h are entered into during the transitional period laid do*n in Arti$le A@(2) of
EM&) should appl# for the length of the $ontra$t of that transa$tion3
,rticle 3>3
,%vance% met#o%
17 ,n institution 1#ic# #as permission to use an internal mo%el for t#e specific ris5 of %et
instruments in accor%ance 1it# ,rticle 3+- (4)(d) s#all* for all transactions for 1#ic# it #as
permission to use t#e 099 for %eterminin" t#e e8posure value for t#e associate% counterpart6
cre%it ris5 e8posure in accor%ance 1it# ,rticle ->>* %etermine t#e o1n fun%s re&uirements for
CR, ris5 6 mo%ellin" t#e impact of c#an"es in t#e counterpartiesN cre%it sprea%s on t#e
CR,s of all counterparties of t#ese transactions* ta5in" into account CR, #e%"es t#at are
eli"ile in accor%ance 1it# ,rticle 3>+7
,n institution s#all use its internal mo%el for %eterminin" t#e o1n fun%s re&uirements for
specific ris5 associate% 1it# tra%e% %et positions an% s#all appl6 a 99 percent confi%ence
interval an% a 1. %a6 e&uivalent #ol%in" perio%7 2#e internal mo%el s#all e use% in suc# 1a6
t#at it simulates c#an"es in t#e cre%it sprea%s of counterparties* ut %oes not mo%el t#e
sensitivit6 of CR, to c#an"es in ot#er mar5et factors* inclu%in" c#an"es in t#e value of t#e
reference asset* commo%it6* currenc6 or interest rate of a %erivative7
2#e o1n fun%s re&uirements for CR, ris5 for eac# counterpart6 s#all e calculate% in
accor%ance 1it# t#e follo1in" formula:
T

-AT
'

s t
_


s
t

_

EE
D

;
+ EE D
2?A 7!D ma8 .* e8p

i 1 i 1
e8p

i i

i 1 i 1 i i
i 1

7!D
-AT ,
7!D
-AT ,

-
1#ere:
t
i
U t#e time of t#e i;t# revaluation* startin" from t.U.E
t
2
U t#e lon"est contractual maturit6 across t#e nettin" sets 1it# t#e counterpart6E
s
i
U is t#e cre%it sprea% of t#e counterpart6 at tenor ti* use% to calculate t#e CR, of t#e
counterpart67 ?#ere t#e cre%it %efault s1ap sprea% of t#e counterpart6 is availale* an
institution s#all use t#at sprea%7 ?#ere suc# a cre%it %efault s1ap sprea% is not availale* an
institution s#all use a pro86 sprea% t#at is appropriate #avin" re"ar% to t#e ratin"* in%ustr6 an%
re"ion of t#e counterpart6E
FGD
9:2
U t#e loss "iven %efault of t#e counterpart6 t#at s#all e ase% on t#e sprea% of
a mar5et instrument of t#e counterpart6 if a counterpart6 instrument is availale7 ?#ere a
counterpart6 instrument is not availale* it s#all e ase% on t#e pro86 sprea% t#at is
appropriate #avin" re"ar% to t#e ratin"* in%ustr6 an% re"ion of t#e counterpart67 2#e first
factor 1it#in t#e su represents an appro8imation of t#e mar5et implie% mar"inal proailit6
of a %efault occurrin" et1een times t
i;1
an% t
i
E
$$
i
U t#e e8pecte% e8posure to t#e counterpart6 at revaluation time t
i
* as %efine% in point
19 of ,rticle -=>* 1#ere e8posures of %ifferent nettin" sets for suc# counterpart6 are a%%e%*
an% 1#ere t#e lon"est maturit6 of eac# nettin" set is "iven 6 t#e lon"est contractual maturit6
insi%e t#e nettin" setE ,n institution s#all appl6 t#e treatment referre% to in para"rap# C in t#e
case of mar"ine% tra%in"* if t#e institution uses t#e $P$ measure referre% to in point )a/ or )/
of ,rticle ->9)1/ for mar"ine% tra%esE
D
i
U t#e %efault ris5;free %iscount factor at time ti* 1#ere D
.
U17
-7 ?#en calculatin" t#e o1n fun%s re&uirements for CR, ris5 for a counterpart6* an institution
s#all ase all inputs into its internal mo%el for specific ris5 of %et instruments on t#e
follo1in" formulae )1#ic#ever is appropriate/:
(=a) *here the odel is !ased on full repri$ing, the forula in paragraph 4 ust !e used
dire$tl#3
)a/ 1#ere t#e mo%el is ase% on cre%it sprea% sensitivities for specific tenors* an institution
s#all ase eac# cre%it sprea% sensitivit6 )(Re"ulator6 CS.1(/ on t#e follo1in" formula:
A

t
_
EE D EE D
5e#ulatory 2S*1

.7...1

t
e8p

i i

i 1

i 1
+
i +1

i +1
i i

7!D
-AT ,
-
1or the final tie !u$ket iN+, the $orresponding forula is
)/ 1#ere t#e mo%el uses cre%it sprea% sensitivities to parallel s#ifts in cre%it sprea%s* an
institution s#all use t#e follo1in" formula:
T

i
s
t
_
i 1
s
t
_ _
EE
D

EE D
5e#ulatory 2S*1 .7...1

t e8p

i i
t e8p

i 1 i 1

i 1 i 1 i i
i 1

A

7!D
-AT ,
7!D
-AT ,
,
-
)c/ 1#ere t#e mo%el uses secon%;or%er sensitivities to s#ifts in cre%it sprea%s )sprea%
"amma/* t#e "ammas s#all e calculate% ase% on t#e formula in para"rap# 17

37 ,n institution usin" t#e $P$ measure for collateralise% O2C %erivatives referre% to in point
)a/ or )/ of ,rticle ->9)1/ s#all* 1#en %eterminin" t#e o1n fun%s re&uirements for CR, ris5
in accor%ance 1it# para"rap# 1* %o ot# of t#e follo1in":
)a/ assume a constant $$ profileE
)/ set $$ e&ual to t#e effective e8pecte% e8posure as calculate% un%er ,rticle ->9)1/)/ for
a maturit6 e&ual to t#e "reater of t#e follo1in":
)i/ #alf of t#e lon"est maturit6 occurrin" in t#e nettin" setE
)ii/ t#e notional 1ei"#te% avera"e maturit6 of all transactions insi%e t#e nettin" set7
47 ,n institution 1#ic# is permitte% 6 t#e competent aut#orit6 in accor%ance 1it# ,rticle ->> to
use 099 to calculate e8posure values in relation to t#e ma!orit6 of its usiness* ut 1#ic#
uses t#e met#o% set out in Section C, "e$tion B or Section @ of 2itle 00* C#apter = for smaller
portfolios* an% 1#ic# is permitte% to use t#e mar5et ris5 internal mo%els approac# for specific
ris5 of tra%e% %et instruments in accor%ance 1it# ,rticle 3+- ma6* su!ect to permission
from t#e competent aut#orities* calculate t#e o1n fun%s re&uirements for CR, ris5 in
accor%ance 1it# para"rap# 1 for t#e non;099 nettin" sets7 Competent aut#orities s#all "rant
t#is permission onl6 if t#e institution uses t#e met#o% set out in Section C, "e$tion B or
Section @ of 2itle 00* C#apter = for a limite% numer of smaller portfolios7
3or t#e purposes of a calculation un%er t#e prece%in" supara"rap# an% 1#ere t#e 099
mo%el %oes not pro%uce an e8pecte% e8posure profile* an institution s#all %o ot# of t#e
follo1in":
)a/ assume a constant $$ profileE
)/ set $$ e&ual to t#e e8posure value as compute% un%er t#e met#o%s set out in Section C,
"e$tion B or Section + of 2itle 00* C#apter =* or 099 for a maturit6 e&ual to t#e "reater
of:
)i/ #alf of t#e lon"est maturit6 occurrin" in t#e nettin" setE
)ii/ t#e notional 1ei"#te% avera"e maturit6 of all transactions insi%e t#e nettin" set7
+7 ,n institution s#all %etermine t#e o1n fun%s re&uirements for CR, ris5 in a$$ordan$e *ith
Arti$les C@C(4), C@B and C@? as t#e sum of non;stresse% an% stresse% Ralue;at;Ris5* 1#ic#
s#all e calculate% at least onthl# as follo1s:
)a/ for t#e non;stresse% Ralue;at;Ris5* current parameter calirations for e8pecte% e8posure
as set out in Arti$le 2A?(2), first su!paragraph s#all e use%E
)/ for t#e stresse% Ralue;at;Ris5* future counterpart6 $$ profiles usin" a stresse%
caliration as set out in ,rticle -8=)-/, se$ond su!=paragraph s#all e use%7 2#e perio%
of stress for t#e cre%it sprea% parameters s#all e t#e most severe one;6ear stress perio%
containe% 1it#in t#e t#ree;6ear stress perio% use% for t#e e8posure parameters7
(!a) +he three=ties ultiplier inherent in the $al$ulation of a Ma) and a stressed Ma)
*ill appl# to these $al$ulations3 +he EBA shall onitor for $onsisten$# an#
supervisor# dis$retion used to appl# a higher ultiplier than the three=ties ultiplier
to the Ma) and stressed Ma) inputs to the CMA $harge3 Copetent authorities
appl#ing a ultiplier higher than three shall provide a *ritten 9ustifi$ation to the
EBA%
!!) the $al$ulation shall !e $arried out on at least a onthl# !asis and the EE that is used
shall !e $al$ulated on the sae fre6uen$#3 &f lo*er than a dail# fre6uen$# is used, for
the purpose of the $al$ulation spe$ified in Arti$les C@C(4)(a)(ii) and C@C(4)(!)(ii)
institutions shall take the average over three onths3
=7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 in "reater %etail:
)a/ #o1 a pro86 sprea% s#oul% e %etermine% !# the institution s approved internal Ma)
odel for the spe$ifi$ interest rate risk for t#e purposes of i%entif6in" si and FGD
9:2
referred to in para"rap# 1E
)/ t#e numer an% siLe of portfolios t#at fulfil t#e criterion of a limite% numer of smaller
portfolios referre% to in para"rap# 47
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 1 <anuar6
2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo 1.93/-.1.7
1or e5posures to a $ounterpart#, for *hi$h the institutionGs approved internal Ma) odel
for the spe$ifi$ interest rate risk does not produ$e a pro5# spread that is appropriate *ith
respe$t to the $riteria of rating, industr# and region of the $ounterpart#, the institution shall
use Arti$le C0B to $al$ulate the o*n funds re6uireent for CMA risk3
,rticle 3>4
Stan%ar%ise% met#o%
17 ,n institution 1#ic# %oes not calculate t#e o1n fun%s re&uirements for CR, ris5 for its
counterparties in accor%ance 1it# ,rticle 3>3 s#all calculate a portfolio o1n fun%s
re&uirements for CR, ris5 for eac# counterpart6 in accor%ance 1it# t#e follo1in" formula*
ta5in" into account CR, #e%"es t#at are eli"ile in accor%ance 1it# ,rticle 3>+:

total
hedge
2
_
2 total
hedge
2
K 2.33 h

0.5 w
i
(M
i

EAD
i
M
i
B
i
)

w
ind
M
ind
B
ind

0.75 w
i
(M
EAD
M
i
B
i
)
i in$ , i
i i
1#ere:
# U t#e one;6ear ris5 #oriLon )in units of a 6ear/E # U 1E
1
i
U t#e 1ei"#t applicale to counterpart6 @i@7
Counterpart6 @i@ s#all e mappe% to one of t#e Asi5 1ei"#ts 1
i
ase% on an e8ternal
cre%it assessment 6 a nominate% $C,0* as set out in 2ale 17 3or a counterpart6 for
1#ic# a cre%it assessment 6 a nominate% $C,0 is not availale:
)a/ an institution usin" t#e approac# in 2itle 00* C#apter 3 s#all map t#e internal ratin"
of t#e counterpart6 to one of t#e e8ternal cre%it assessmentE
)/ an institution usin" t#e approac# in 2itle 00* C#apter - s#all assi"n A*iN43:J to
t#is counterpart63 Ho*ever, if an institution uses Arti$le 42C to risk *eight
$ounterpart# $redit risk e5posures to this $ounterpart#, *iNC3:J shall !e
assignedE
EAD
total Ut#e total counterpart6 cre%it ris5 e8posure value of counterpart6 @i@ )summe% across
its nettin" sets/ inclu%in" t#e effect of collateral in accor%ance 1it# t#e met#o%s
set out in Sections 3 to = of 2itle 00* C#apter = as applicale to t#e calculation of
t#e o1n fun%s re&uirements for counterpart6 cre%it ris5 for t#at counterpart67 An
institution using one of the ethods set out in "e$tions C and B of +itle &&,
Chapter ?, a# use as EA(
i
total
the full# ad9usted e5posure value in a$$ordan$e
*ith Arti$le 24A(@)3
3or an institution not usin" t#e met#o% set out in Section = of 2itle 00*
C#apter =* t#e
e8posure s#all e %iscounte% 6 appl6in" t#e follo1in" factor:
1 e
.7.+ -
i
.7.+ -
i
Di Ut#e notional of purc#ase% sin"le name cre%it %efault s1ap #e%"es
)summe% if more t#an one position/ referencin" counterpart6 @i@ an%
use% to #e%"e CR, ris57
2#at notional amount s#all e %iscounte% 6 appl6in" t#e follo1in"
factor:
1 e
.7.+ -
i
.7.+ -
he$#e
i
i
he$#e
Din% Uis t#e full notional of one or more in%e8 cre%it %efault s1ap of purc#ase% protection
use% to #e%"e CR, ris57
2#at notional amount s#all e %iscounte% 6 appl6in" t#e follo1in" factor:
1 e
.7.+ -
in$
.7.+ -
in$
1
in%
Uis t#e 1ei"#t applicale to in%e8 #e%"es7
,n institution s#all deterine ;
ind
!# $al$ulating a *eighted avera"e A of *
i
that are
appli$a!le to the individual $onstituents of the in%e8 AE
9i Ut#e effective maturit6 of t#e transactions 1it# counterpart6 i7
3or an institution usin" t#e met#o% set out in Section = of 2itle 00* C#apter =* 9
i
s#all e
calculate% in accor%ance 1it# ,rticle 1+8)-/)g)3 Ho*ever, for this purpose, Mi is not
$apped at @ #ears !ut at the longest $ontra$tual reaining aturit# in the netting set%
3or an institution not usin" t#e met#o% set out in Section = of 2itle 00* C#apter =* 9
i
is
t#e avera"e notional 1ei"#te% maturit6 as referre% to in point (!) of ,rticle 1+8)-/E
Ho*ever, for this purpose, Mi is not $apped at @ #ears !ut at the longest $ontra$tual
reaining aturit# in the netting set%
he$#e
i
Ut#e maturit6 of t#e #e%"e instrument 1it# notional D
i
)t#e &uantities 9
i
#e%"e
Di are to
e summe% if t#ese are
several positions/E 9
in%
U
t#e maturit6 of t#e
in%e8 #e%"e
in%
7
0n case of more t#an one in%e8 #e%"e position* 9
in%
is t#e notional;
1ei"#te% maturit67
-7 ?#ere a counterpart6 is inclu%e% in an in%e8 on 1#ic# a cre%it %efault s1ap
use% for #e%"in" counterpart6 cre%it ris5 is ase%* t#e institution ma6 sutract
t#e notional amount attriutale to t#at counterpart6 in accor%ance 1it# its
reference entit6 1ei"#t from t#e in%e8 CDS notional amount an% treat it as a
sin"le name #e%"e )D
i
/ of t#e in%ivi%ual counterpart6 1it# maturit6 ase% on
t#e maturit6 of t#e in%e87
2ale 1
Cre%it &ualit6 step ?ei"#t 1
i
1 .7>O
- .78O
3 17.O
4 -7.O
+ 37.O
= 1.7.O
-
Arti$le C0Ba
Alternative to using CMA ethods to $al$ulating o*n funds re6uireents
As an alternative to Arti$le C0B, for instruents referred to in Arti$le C02 and su!9e$t to the prior
$onsent of the $opetent authorit#, institutions using the -riginal E5posure Method as laid
do*n in Arti$le 20:, a# appl# a ultipli$ation fa$tor of (4:) to the resulting risk=*eighted
e5posure aounts for $ounterpart# $redit risk for those e5posures instead of $al$ulating o*n
funds re6uireents for CMA risk3
,rticle 3>+
$li"ile #e%"es
17 Ce%"es s#all e (eli"ile #e%"es( for t#e purposes of t#e calculation of o1n fun%s
re&uirements for CR, ris5 in accor%ance 1it# ,rticle 3>3 an% ,rticle 3>4 onl6 1#ere t#e6
are use% for t#e purpose of miti"atin" CR, ris5 an% mana"e% as suc#* an% are one of t#e
follo1in":
)a/ sin"le;name cre%it %efault s1aps or ot#er e&uivalent #e%"in" instruments referencin"
t#e counterpart6 %irectl6E
)/ in%e8 cre%it %efault s1aps* provi%e% t#at t#e asis et1een an6 in%ivi%ual counterpart6
sprea% an% t#e sprea%s of in%e8 cre%it %efault s1ap #e%"es is reflecte%, to the
satisfa$tion of the $opetent authorit#, in t#e Ralue;at;Ris57
2#e re&uirement in point )/ t#at t#e asis et1een an6 in%ivi%ual counterpart6 sprea% an% t#e
sprea%s of in%e8 cre%it %efault s1ap #e%"es is reflecte% in t#e Ralue;at;Ris5 s#all also appl6
to cases 1#ere a pro86 is use% for t#e sprea% of a counterpart67
3or all counterparties for 1#ic# a pro86 is use%* an institution s#all use reasonale asis time
series out of a representative "roup of similar names for 1#ic# a sprea% is availale7
0f t#e asis et1een an6 in%ivi%ual counterpart6 sprea% an% t#e sprea%s of in%e8 cre%it %efault
s1ap #e%"es is not reflecte% to t#e satisfaction of t#e competent aut#orit6* t#en an institution
s#all reflect onl6 +.O of t#e notional amount of in%e8 #e%"es in t#e Ralue;at;Ris57
A
-ver=hedging of the e5posures *ith single nae $redit default s*aps under the ethod laid out
in Arti$le C0C is not allo*ed3
-7 ,n institution s#all not reflect ot#er t6pes of counterpart6 ris5 #e%"es in t#e calculation of t#e
o1n fun%s re&uirements for CR, ris57 0n particular* tranc#e% or nt#;to;%efault cre%it %efault
s1aps an% cre%it lin5e% notes are not eli"ile #e%"es for t#e purposes t#e calculation of t#e
o1n fun%s re&uirements for CR, ris57
37 $li"ile #e%"es t#at are inclu%e% in t#e calculation of t#e o1n fun%s re&uirements for CR,
ris5 s#all not e inclu%e% in t#e calculation of t#e o1n fun%s re&uirements for specific ris5 as
set out in 2itle 0R or treate% as cre%it ris5 miti"ation ot#er t#an for t#e counterpart6 cre%it ris5
of t#e same portfolio of transaction7
F
PART FOUR LAR>E
E-PO?URE?
?ECTION I
LAR>E E-PO?URE RE>I*E
,rticle 3>=
Su!ect matter
0nstitutions s#all monitor an% control t#eir lar"e e8posures in accor%ance 1it# t#is Part7
,rticle 3>>
Be"ative Scope
2#is Part s#all not appl6 to investment firms t#at fulfil t#e criteria set out in ,rticle 9.)1/ or ,rticle
91)1/7
+his part shall not appl# on the !asis of the $onsolidated situation of a group that onl# in$ludes
investent firs referred to in Arti$le >:(4) or Arti$le >4(4) and an$illar# $opanies and *here
that group does not in$lude $redit institutions3
,rticle 3>8
Definition
2#e follo1in" %efinition applies for t#e purposes of t#is Part:
M$8posuresN* for t#e purposes of t#is Part means an6 asset or off;alance;s#eet item referre% to in
Part 2#ree* 2itle 00* C#apter -* 1it#out appli$ation of the ris5 1ei"#ts or %e"rees of ris57
,rticle 3>9
Calculation of t#e e8posure value
17 $8posures arisin" from t#e items referre% to in ,nne8 00 s#all e calculate% in accor%ance
1it# one of t#e met#o%s set out in Part 2#ree* 2itle 00* C#apter =7
-7 0nstitutions 1it# a permission to use t#e 0nternal 9o%el 9et#o% in accor%ance 1it# ,rticle
->> ma6 use t#e 0nternal 9o%el 9et#o% for calculatin" t#e e8posure value for repurc#ase
transactions* securities or commo%ities len%in" or orro1in" transactions* mar"in len%in"
transactions an% lon" settlement transactions7
37 2#e Ainstitutions t#at calculate t#e o1n fun%s re&uirements for t#eir tra%in";oo5 usiness in
accor%ance 1it# Part 2#ree* 2itle 0R* C#apter -* ,rticle -93 an% Part 2#ree* 2itle R an%* as
appropriate* 1it# Part 2#ree* 2itle 0R* C#apter +* $al$ulate the e5posures to individual
$lients *hi$h arise on the trading !ook 6 summin" t#e follo1in" items:
)a/ t#e positive e8cess of an institution(s lon" positions over its s#ort positions in all t#e
financial instruments issue% 6 t#e client in &uestion* t#e net position in eac# of t#e
%ifferent instruments ein" calculate% accor%in" to t#e met#o%s lai% %o1n in Part 2#ree*
2itle 0R* C#apter -E
)/ t#e net e8posure* in t#e case of t#e un%er1ritin" of a %et or an e&uit6 instrumentE
)c/ t#e e8posures %ue to t#e transactions* a"reements an% contracts referre% to in ,rticles
-93 an% 3=8 to 3>. 1it# t#e client in &uestion* suc# e8posures ein" calculate% in t#e
manner lai% %o1n in t#ose ,rticles* for t#e calculation of e8posure values7
3or t#e purposes of point )/* t#e net e8posure is calculate% 6 %e%uctin" t#ose un%er1ritin"
positions 1#ic# are suscrie% or su;un%er1ritten 6 t#ir% parties on t#e asis of a formal
a"reement re%uce% 6 t#e factors set out in ,rticle 3347
3or t#e purposes of point )/* institutions s#all set up s6stems to monitor an% control t#eir
un%er1ritin" e8posures et1een t#e time of t#e initial commitment an% t#e ne8t usiness %a6
in t#e li"#t of t#e nature of t#e ris5s incurre% in t#e mar5ets in &uestion7
3or t#e purposes of point )c/* Part 2#ree* 2itle 00* C#apter 3 s#all e e8clu%e% from t#e
reference in ,rticle -937
47 2#e overall e8posures to in%ivi%ual clients or "roups of connecte% clients s#all e calculate%
6 summin" t#e e8posures of t#e tra%in" oo5 an% t#ose of t#e non;tra%in" oo57
+7 2#e e8posures to "roups of connecte% clients s#all e calculate% 6 summin" t#e e8posures to
in%ivi%ual clients in a "roup7
=7 $8posures s#all not inclu%e an6 of t#e follo1in":
)a/ in t#e case of forei"n e8c#an"e transactions* e8posures incurre% in t#e or%inar6 course
of settlement %urin" t#e t1o 1or5in" %a6s follo1in" pa6mentE
)/ in t#e case of transactions for t#e purc#ase or sale of securities* e8posures incurre% in
t#e or%inar6 course of settlement %urin" five 1or5in" %a6s follo1in" pa6ment or
%eliver6 of t#e securities* 1#ic#ever t#e earlierE
)c/ in t#e case of t#e provision of mone6 transmission inclu%in" t#e e8ecution of pa6ment
services* clearin" an% settlement in an6 currenc6 an% correspon%ent an5in" or financial
instruments clearin"* settlement an% custo%6 services to clients* %ela6e% receipts in
fun%in" an% ot#er e8posures arisin" from client activit6 1#ic# %o not last lon"er t#an
t#e follo1in" usiness %a6E
)%/ in t#e case of t#e provision of mone6 transmission inclu%in" t#e e8ecution of pa6ment
services* clearin" an% settlement in an6 currenc6 an% correspon%ent an5in"* intra;%a6
e8posures to institutions provi%in" t#ose servicesE
)e/ e8posures %e%ucte% from o1n fun%s in accor%ance 1it# ,rticles 33* +3 an% =37
>7 0n or%er to %etermine t#e overall e5posure to a $lient or a "roup of connecte% clients* in
respect of $lients to *hi$h the institution has e8posures through transa$tions referre% to in
points )l/ an% )n/ of A,rticle 1.> or through other transa$tions 1#ere t#ere is A an e8posure
to un%erl6in" assets* an institution s#all assess Aits un%erl6in" e8posures taking into a$$ount
t#e economic sustance of the stru$ture of the transa$tion an% t#e ris5s in#erent in t#e
structure of t#e transaction itself, in order to deterine *hether it $onstitutes an additional
e5posure7
87 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ At#e con%itions an% met#o%olo"ies use% to %etermine t#e overall e5posure to a $lient
or a "roup of connecte% clients in respect of the t#pes of e5posures referred to in
paragraph 03
(aa) the $onditions under *hi$h the stru$ture of the transa$tion referred to in paragraph 0
does not $onstitute an additional e5posure%
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 1 <anuar6
-.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre% to
in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14 of
Re"ulation )$4/ Bo7 1.93/-.1.7
,rticle 38.
Definition of an institution for lar"e e8posures purposes
3or t#e purposes of calculatin" t#e value of e8posures in accor%ance 1it# t#is Part t#e term
LinstitutionG also means an6 private or pulic un%erta5in"* inclu%in" its ranc#es* 1#ic# meets t#e
%efinition of LinstitutionN an% #as een aut#orise% in a t#ir% countr6 that applies prudential
supervisor# and regulator# re6uireents at least e6uivalent to those applied in the European
2nion7
,rticle 381
Definition of a lar"e e8posure
,n institution(s e8posure to a client or "roup of connecte% clients s#all e consi%ere% a lar"e
e8posure 1#ere its value is e&ual to or e8cee%s 1. O of its eli"ile capital7
,rticle 38-
Capacit6 to i%entif6 an% mana"e lar"e e8posures
,n institution s#all #ave soun% a%ministrative an% accountin" proce%ures an% a%e&uate internal
control mec#anisms for t#e purposes of i%entif6in"* mana"in"* monitorin"* reportin" an% recor%in"
all lar"e e8posures an% suse&uent c#an"es to t#em* in accor%ance 1it# t#is Re"ulation
,rticle 383
Reportin" re&uirements
17 ,n institution s#all report t#e follo1in" information aout ever6 lar"e e8posure to t#e
competent aut#orities* inclu%in" lar"e e8posures e8empte% from t#e application of ,rticle
384)1/
)a/ t#e i%entification of t#e client or t#e "roup of connecte% clients to 1#ic# an institution
#as a lar"e e8posureE
)/ t#e e8posure value efore ta5in" into account t#e effect of t#e cre%it ris5 miti"ation*
1#en applicaleE
)c/ 1#ere use%* t#e t6pe of fun%e% or unfun%e% cre%it protectionE
)%/ t#e e8posure value after ta5in" into account t#e effect of t#e cre%it ris5 miti"ation
calculate% for t#e purpose of ,rticle 384)1/7
?#ere an institution is su!ect to Part 2#ree* 2itle 00* C#apter 3 its -. lar"est e8posures on a
consoli%ate% asis* e8clu%in" t#ose e8empte% from t#e application of ,rticle 384)1/ s#all e
ma%e availale to t#e competent aut#orities7
4a3 An institution shall report to the $opetent authorities, in addition to the report referred to
in paragraph 4, its 4: largest e5posures on a $onsolidated !asis to institutions as *ell as its
4: largest e5posures on a $onsolidated !asis to unregulated finan$ial entities, as defined in
Arti$le 4C0(4) point ?, in$luding large e5posures e5epted fro the appli$ation of Arti$le
CAB(4)
(a) the identifi$ation of the $lient or the group of $onne$ted $lients to *hi$h an
institution has a large e5posure%
(!) the e5posure value !efore taking into a$$ount the effe$t of the $redit risk itigation,
*hen appli$a!le%
($) *here used, the t#pe of funded or unfunded $redit prote$tion%
(d) the e5posure value after taking into a$$ount the effe$t of the $redit risk itigation
$al$ulated for the purpose of Arti$le CAB(4)%
(e) the e5pe$ted run=off of the e5posure e5pressed as the aount aturing *ithin
onthl# aturit# !u$kets up to one #ear, 6uarterl# aturit# !u$kets up to three #ears
and #earl# thereafter3
-7 Reportin" s#all e carrie% out at least t1ice a 6ear7
37 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ t#e uniform formats for t#e reportin" referre% to in para"rap# - 1#ic# s#all e
proportionate to t#e nature* scale an% comple8it6 of institutions( activities an% t#e
instructions for usin" t#ose formatsE
)/ t#e fre&uencies an% %ates of t#e reportin" referre% to in para"rap# -E
)c/ t#e 02 solutions to e applie% for t#e reportin" referre% to in para"rap# -7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission 6 1
<anuar6 2:4B3
Po1er is conferre% to t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
Arti$le CAB
Liits to e5posures to shado* !anking entities
17 ,n institution s#all not incur an e8posure* after ta5in" into account t#e effect of t#e cre%it ris5
miti"ation in accor%ance 1it# ,rticles 388 to 39-* to a client or "roup of connecte% clients t#e
value of 1#ic# e8cee%s -+ O of its eli"ile capital3 ?#ere t#at client is an institution or 1#ere
a "roup of connecte% clients inclu%es one or more institutions* t#at value s#all not e8cee% -+
O of t#e institution(s eli"ile capital or $4R 1+. million* 1#ic#ever t#e #i"#er* provi%e% t#at
t#e sum of e8posure values* after ta5in" into account t#e effect of t#e cre%it ris5 miti"ation in
accor%ance 1it# ,rticles 388 to 39-* to all connecte% clients t#at are not institutions %oes not
e8cee% -+ O of t#e institutionNs eli"ile capital
?#ere t#e amount of $4R 1+. million is #i"#er t#an -+ O of t#e institutionNs eli"ile capital
t#e value of t#e e8posure* after ta5in" into account t#e effect of cre%it ris5 miti"ation in
accor%ance 1it# ,rticles 388 to 39- s#all not e8cee% a reasonale limit in terms of t#e
institutionNs eli"ile capital3 2#at limit s#all e %etermine% 6 t#e institution in accor%ance
1it# t#e policies an% proce%ures referre% to in ,rticle >9 of Directive Jinserte% 6 OPK* to
a%%ress an% control concentration ris57 2#is limit s#all not e8cee% 1.. O of t#e institutionNs
eli"ile capital 3
Competent aut#orities ma6 set a lo1er limit t#an $4R 1+. million an% s#all inform $D, an%
t#e Commission t#ereof7
4a3 EBA shall, in a$$ordan$e *ith Arti$le 4? of )egulation (E2) Fo3 4:>CD2:4:, taking into
a$$ount the effe$t of the $redit risk itigation in a$$ordan$e *ith Arti$les CAA to C>2 as
*ell as the out$oes of developents in the area of shado* !anking and large e5posures at
the European and international levels, develop guidelines !# C4st (e$e!er 2:4B to set
appropriate aggregate liits to su$h e5posures or tighter individual liits on e5posures to
shado* !anking entities *hi$h $arr# out !anking a$tivities outside a regulated frae*ork3
&n developing these guidelines, EBA shall $onsider *hether the introdu$tion of additional
liits *ould have a aterial detriental ipa$t on the risk profile of European
institutions, on the provision of $redit to the real e$ono# or on the sta!ilit# and orderl#
fun$tioning of finan$ial arkets3
B# C4 (e$e!er 2:4@ the Coission shall assess the appropriateness and the ipa$t of
iposing liits on e5posures to shado* !anking entities *hi$h $arr# out !anking a$tivities
outside a regulated frae*ork, taking into a$$ount European and international
developents in the area of shado* !anking and large e5posures as *ell as $redit risk
itigation in a$$ordan$e *ith Arti$les CAA to C>23 +he Coission shall su!it the report
to the European .arliaent and the Coun$il and *here appropriate the report shall !e
a$$opanied !# a legislative proposal on e5posure liits to shado* !anking entities *hi$h
$arr# out !anking a$tivities outside a regulated frae*ork3
-7 Su!ect to ,rticle 38+* an institution s#all at all times compl6 1it# t#e relevant limit lai%
%o1n in para"rap# 17
37 ,ssets constitutin" claims an% ot#er e8posures onto reco"nise% t#ir% countr6 investment firms
ma6 e su!ect to t#e same treatment as lai% %o1n in para"rap# 17
47 2#e limits lai% %o1n in t#is ,rticle ma6 e e8cee%e% for t#e e8posures on t#e institution(s
tra%in" oo5 if t#e follo1in" con%itions are met:
)a/ t#e e8posure on t#e non;tra%in" oo5 to t#e client or "roup of clients in &uestion %oes
not e8cee% t#e limit lai% %o1n in para"rap# 1* t#is limit ein" calculate% 1it# reference
to eli"ile capital* so t#at t#e e8cess arises entirel6 on t#e tra%in" oo5E
)/ t#e institution meets an a%%itional o1n fun%s re&uirement on t#e e8cess in respect of t#e
limit lai% %o1n in para"rap# 1 1#ic# is calculate% in accor%ance 1it# ,rticles 38= an%
38>E
)c/ 1#ere 1. %a6s or less #ave elapse% since t#e e8cess occurre%* t#e tra%in";oo5 e8posure
to t#e client or "roup of connecte% clients in &uestion s#all not e8cee% +.. O of t#e
institution(s eli"ile capitalE
)%/ an6 e8cesses t#at #ave persiste% for more t#an 1. %a6s %o not* in a""re"ate* e8cee% =..
O of t#e institution(s eli"ile capital7
0n eac# case in 1#ic# t#e limit #as een e8cee%e%* t#e institution s#all report t#e amount of
t#e e8cess an% t#e name of t#e client concerne% 1it#out %ela6 to t#e competent aut#orities7
Ba3 1or the purpose of this paragraph onl#, stru$tural easures ean easures adopted !# a
Me!er "tate and ipleented !# the relevant $opetent authorities of that Me!er state,
until the entr# into for$e of a legislative proposal e5pli$itl# haronising su$h easures,
that re6uire $redit institutions authorised in that Me!er "tate to redu$e their e5posures to
different legal entities depending on their a$tivities, irrespe$tive of *here those a$tivities
are lo$ated, *ith a vie* to prote$ting depositors and preserving finan$ial sta!ilit#3
Fot*ithstanding Arti$les CAB(4) and CA> (4)(f), *here Me!er "tates ena$t national la*s
re6uiring stru$tural easures to !e adopted *ithin a !anking group, $opetent authorities
a# re6uire the institutions of the !anking group *hi$h hold deposits that are $overed !# a
(eposit 8uarantee "$hee a$$ording to (ire$tive >BD4>DEC or an e6uivalent deposit
guarantee s$hee in a third $ountr# to appl# a large e5posure liit !elo* 2@J !ut not
lo*er than 4@J !et*een the date of entr# into for$e of this )egulation and C: Eune 2:4@,
and than 4:J fro the 4 Eul# 2:4@ on a su!$onsolidated !asis as defined in Arti$le 4:(Ba)
ne* on intragroup e5posures *here these e5posures $onsist of e5posures to an entit# that
does not !elong to the sae su!group as regards the stru$tural easures3
1or the purpose of this paragraph, the follo*ing $onditions shall !e et'
(a) all entities !elonging to a sae su!group as regards the stru$tural easures are
$onsidered as one $lient or group of $onne$ted $lients%
(!) the $opetent authorities appl# a unifor liit to the e5posures referred to in the
first su!paragraph3
Appl#ing this approa$h shall !e *ithout pre9udi$e to effe$tive supervision on a $onsolidated
!asis and a# not entail disproportionate adverse effe$ts on the *hole or parts of the
finan$ial s#ste in other Me!er "tates or of the E2 as a *hole nor a# it for or $reate
an o!sta$le to the fun$tioning of the internal arket3
B!3 Before esta!lishing the spe$ifi$ stru$tural easures as referred to in paragraph @ relating
to large e5posures, the $opetent authorities shall notif# the Coission, the Coun$il, the
$opetent authorities $on$erned and EBA at least t*o onths prior to the pu!li$ation of
the de$ision, and su!it relevant 6uantitative or 6ualitative eviden$e of all of the follo*ing'
(a) the s$ope of the a$tivities that are su!9e$t to the stru$tural easures%
(!) an e5planation as to *h# su$h draft easures are deeed !e suita!le, effe$tive and
proportionate to prote$t depositors%
($) an assessent of the likel# positive or negative ipa$t of the easures on the single
arket !ased on inforation *hi$h is availa!le to the Me!er "tate3
B$3 +he po*er to adopt an ipleenting a$t to a$$ept or re9e$t the proposed national easures
referred to in paragraph ? is $onferred on the Coission a$ting in a$$ordan$e *ith the
pro$edure referred to in Art BB0(2)3
;ithin one onth of re$eiving the notifi$ation referred to in paragraph ?, the EBA shall
provide its opinion on the points entioned in paragraph ? to the Coission, the Coun$il
and the Me!er "tate in 6uestion3 Copetent authorities $on$erned a# also provide their
opinions on the points entioned in paragraph ? to the Coission, the Coun$il and the
Me!er "tate in 6uestion3
+aking utost a$$ount of the opinions entioned a!ove and if there is ro!ust and strong
eviden$e that the easures have a negative ipa$t on the single arket that out*eighs the
finan$ial sta!ilit# !enefits, the Coission shall, *ithin t*o onths of re$eiving the
notifi$ation, re9e$t the proposed national easures3 -ther*ise, the Coission shall
a$$ept the proposed national easures for an initial period of 2 #ears and *here
appropriate the easures a# !e su!9e$t to aendent3
+he Coission shall onl# re9e$t the proposed national easures if it $onsiders the
proposed national easures entail disproportionate adverse effe$ts on the *hole or parts of
the finan$ial s#ste in other Me!er "tates or of the 2nion as a *hole, thus foring or
$reating an o!sta$le to the fun$tioning of the internal arket or to the free oveent of
$apital in a$$ordan$e *ith the provisions of the +1E23
+he assessent of the Coission shall take a$$ount of the opinion of EBA and shall take
into a$$ount the eviden$e presented in a$$ordan$e *ith paragraph ?3
Before the e5pir# of the easures, the $opetent authorities a# propose ne* easures for
the e5tension of the period of appli$ation for an additional period of 2 #ears ea$h tie3 &n
this $ase, the# shall notif# the Coission, the Coun$il, the $opetent authorities
$on$erned and EBA3 Approval of the ne* easures shall !e su!9e$t to the a!ove pro$ess3
+he provisions of su!paragraphs @ to 0 shall !e *ithout pre9udi$e to Arti$le BBCa3
,rticle 38+
Compliance 1it# Far"e e8posures re&uirements
17 0f* in an e8ceptional case* e8posures e8cee% t#e limit set out in ,rticle 384)1/* t#e institution
s#all report t#e value of t#e e8posure 1it#out %ela6 to t#e competent aut#orities 1#ic# ma6*
1#ere t#e circumstances 1arrant it* allo1 t#e cre%it institution a limite% perio% of time in
1#ic# to compl6 1it# t#e limit7
?#ere t#e amount of $4R 1+. million referre% to in ,rticle 384)1/ is applicale* t#e
competent aut#orities ma6 allo1 on a case;6;case asis t#e 1.. O limit in terms of t#e
Ainstitution(s eligi!le $apital to e e8cee%e%7
-7 ?#ere compliance 6 a institution on an in%ivi%ual or su;consoli%ate% asis 1it# t#e
oli"ations impose% in t#is Part is %isapplie% un%er ,rticle =)1/* or t#e provisions of ,rticle 8
are applie% in t#e case of parent institutions in a 9emer State* measures must e ta5en to
ensure t#e satisfactor6 allocation of ris5s 1it#in t#e "roup7
,rticle 38=
Calculatin" a%%itional o1n fun%s re&uirements for lar"e e8posures in t#e tra%in" oo5
17 2#e e8cess referre% to in ,rticle 384)4/)/ s#all e calculate% 6 selectin" t#ose components
of t#e total tra%in" e8posure to t#e client or "roup of clients in &uestion 1#ic# attract t#e
#i"#est specific;ris5 re&uirements in Part 2#ree* 2itle 0R* C#apter - an%/or re&uirements in
,rticle -93 an% Part 2#ree* 2itle R* t#e sum of 1#ic# e&uals t#e amount of t#e e8cess referre%
to in point )a/ of ,rticle 384)4/7
-7 ?#ere t#e e8cess #as not persiste% for more t#an 1. %a6s* t#e a%%itional capital re&uirement
s#all e -.. O of t#e re&uirements referre% to in para"rap# 1* on t#ese components7
37 ,s from 1. %a6s after t#e e8cess #as occurre%* t#e components of t#e e8cess* selecte% in
accor%ance 1it# para"rap# 1* s#all e allocate% to t#e appropriate line in Column 1 of 2ale 1
in ascen%in" or%er of specific;ris5 re&uirements in Part 2#ree* 2itle 0R* C#apter - an%/or
re&uirements in ,rticle -93 an% Part 2#ree* 2itle R7 2#e a%%itional o1n fun%s re&uirement
s#all e e&ual to t#e sum of t#e specific;ris5 re&uirements in Part 2#ree* 2itle 0R* C#apter -
an%/or t#e ,rticle -93 an% Part 2#ree* 2itle R re&uirements on t#ese components* multiplie%
6 t#e correspon%in" factor in Column - of 2ale 17
2ale 1
Column 1: $8cess over t#e limits
)on t#e asis of a percenta"e of eli"ile capital/
Column -: 3actors
4p to 4. O -.. O
3rom 4. O to =. O 3.. O
3rom =. O to 8. O 4.. O
3rom 8. O to 1.. O +.. O
3rom 1.. O to -+. O =.. O
Over -+. O 9.. O
,rticle 38>
Proce%ures to prevent institutions fro avoi%in" t#e a%%itional o1n fun%s re&uirement
0nstitutions s#all not %elieratel6 avoi% t#e a%%itional o1n fun%s re&uirements set out in ,rticle 38=
t#at t#e6 1oul% ot#er1ise incur* on e8posures e8cee%in" t#e limit lai% %o1n in ,rticle 384)1/ once
t#ose e8posures #ave een maintaine% for more t#an 1. %a6s* 6 means of temporaril6 transferrin"
t#e e8posures in &uestion to anot#er compan6* 1#et#er 1it#in t#e same "roup or not* an%/or 6
un%erta5in" artificial transactions to close out t#e e8posure %urin" t#e 1.;%a6 perio% an% create a
ne1 e8posure7
0nstitutions s#all maintain s6stems 1#ic# ensure t#at an6 transfer 1#ic# #as t#e effect referre% to in
t#e first supara"rap# is imme%iatel6 reporte% to t#e competent aut#orities7
,rticle 388
$li"ile cre%it miti"ation tec#ni&ues
17 3or t#e purposes of ,rticles 389 to 39- t#e term M"uaranteeN s#all inclu%e cre%it %erivatives
reco"nise% un%er Part 2#ree* 2itle 00* C#apter 4 ot#er t#an cre%it lin5e% notes7
-7 Su!ect to para"rap# 3 of t#is ,rticle* 1#ere* un%er ,rticles 389 to 39- t#e reco"nition of
fun%e% or unfun%e% cre%it protection is permitte%* t#is s#all e su!ect to compliance 1it# t#e
eli"iilit6 re&uirements an% ot#er re&uirements set out in Part 2#ree* 2itle 00* C#apter 47
37 ?#ere an institution relies upon ,rticle 39.)-/* t#e reco"nition of fun%e% cre%it protection
s#all e su!ect to t#e relevant re&uirements un%er Part 2#ree* 2itle 00* C#apter C3 3or t#e
purposes of t#is .art* a cre%it institution s#all not ta5e into account t#e collateral referre% to in
,rticle 19+* para"rap#s 0 to >, unless permitte% un%er ,rticle 3917
47 0nstitutions s#all anal6se* to t#e e8tent possile* t#eir e8posures to collateral issuers* provi%ers
of unfun%e% cre%it protection an% un%erl6in" assets pursuant to ,rticle 3>9)>/ for possile
concentrations an% 1#ere appropriate ta5e action an% report an6 si"nificant fin%in"s to t#eir
competent aut#orit67
,rticle 389
$8emptions
17 2#e follo1in" e8posures s#all e e8empte% from t#e application of ,rticle 384)1/:
)a/ asset items constitutin" claims on central "overnments A, central an5s or pu!li$ se$tor
entities 1#ic#* unsecure%* 1oul% e assi"ne% a . O ris5 1ei"#t un%er Part 2#ree* 2itle
00* C#apter -E
)/ asset items constitutin" claims on international or"anisations or multilateral
%evelopment an5s 1#ic#* unsecure%* 1oul% e assi"ne% a . O ris5 1ei"#t un%er Part
2#ree* 2itle 00* C#apter -E
)c/ asset items constitutin" claims carr6in" t#e e8plicit "uarantees of central "overnments*
central an5s* international or"anisations* multilateral %evelopment an5s or pulic
sector entities* 1#ere unsecure% claims on t#e entit6 provi%in" t#e "uarantee 1oul% e
assi"ne% a . O ris5 1ei"#t un%er Part 2#ree* 2itle 00* C#apter -E
)%/ ot#er e8posures attriutale to* or "uarantee% 6* central "overnments* central an5s*
international or"anisations* multilateral %evelopment an5s or pulic sector entities*
1#ere unsecure% claims on t#e entit6 to 1#ic# t#e e8posure is attriutale or 6 1#ic#
it is "uarantee% 1oul% e assi"ne% a . O ris5 1ei"#t un%er Part 2#ree* 2itle 00* C#apter
-E
)e/ asset items constitutin" claims on re"ional "overnments or local aut#orities of 9emer
States 1#ere t#ose claims 1oul% e assi"ne% a . O ris5 1ei"#t un%er Part 2#ree* 2itle
00* C#apter - an% ot#er e8posures to or "uarantee% 6 t#ose re"ional "overnments or
local aut#orities* claims on 1#ic# 1oul% e assi"ne% a . O ris5 1ei"#t un%er Part
2#ree* 2itle 00* C#apter -E
)f/ e8posures to counterparties referre% to in ,rticle 1.8)=/ or ,rticle 1.8)>/ if t#e6 1oul%
e assi"ne% a . O ris5 1ei"#t un%er Part 2#ree* 2itle 00* C#apter -7 $8posures t#at %o
not meet t#ose criteria* 1#et#er or not e8empte% from ,rticle 384)1/ s#all e treate% as
e8posures to a t#ir% part6E
)"/ asset items an% ot#er e8posures secure% 6 collateral in t#e form of cas# %eposits place%
1it# t#e len%in" institution or 1it# an institution 1#ic# is t#e parent un%erta5in" or a
susi%iar6 of t#e len%in" institutionE
)#/ asset items an% ot#er e8posures secure% 6 collateral in t#e form of certificates of
%eposit issue% 6 t#e len%in" institution or 6 an institution 1#ic# is t#e parent
un%erta5in" or a susi%iar6 of t#e len%in" institution an% lo%"e% 1it# eit#er of t#emE
)i/ e8posures arisin" from un%ra1n cre%it facilities t#at are classifie% as lo1;ris5 off;
alance s#eet items in ,nne8 0 an% provi%e% t#at an a"reement #as een conclu%e% 1it#
t#e client or "roup of connecte% clients un%er 1#ic# t#e facilit6 ma6 e %ra1n onl6 if it
#as een ascertaine% t#at it 1ill not cause t#e limit applicale un%er ,rticle 384)1/ to e
e8cee%e%E
)!/ tra%e e8posures to central counterparties an% %efault fun% contriutions to central
counterpartiesE
)5/ e8posures to %eposit "uarantee sc#emes un%er Directive 94/19/$C arisin" from t#e
fun%in" of t#ose sc#emes* if t#e memer institutions of t#e sc#eme #ave a le"al or
contractual oli"ation to fun% t#e sc#eme7
Cas# receive% un%er a cre%it lin5e% note issue% 6 t#e institution an% loans an% %eposits of a
counterpart6 to or 1it# t#e institution 1#ic# are su!ect to an on;alance s#eet nettin"
a"reement reco"nise% un%er Part 2#ree* 2itle 00* C#apter 4 s#all e %eeme% to fall un%er
point )"/7
-7 Copetent aut#orities ma6 full6 or partiall6 e8empt t#e follo1in" e8posures A'
)a/ covere% on%s fallin" 1it#in t#e terms ,rticle 1-4)1/ A, ,rticle 1-4)-) and 42B(@/E
)/ asset items constitutin" claims on re"ional "overnments or local aut#orities of 9emer
States 1#ere t#ose claims 1oul% e assi"ne% a -. O ris5 1ei"#t un%er Part 2#ree* 2itle
00* C#apter - an% ot#er e8posures to or "uarantee% 6 t#ose re"ional "overnments or
local aut#orities* claims on 1#ic# 1oul% e assi"ne% a -. O ris5 1ei"#t un%er Part
2#ree* 2itle 00* C#apter -E
)c/ e8posures* inclu%in" participations or ot#er 5in%s of #ol%in"s* incurre% 6 an institution
to its parent un%erta5in"* to ot#er susi%iaries of t#at parent un%erta5in" or to its o1n
susi%iaries* in so far as t#ose un%erta5in"s are covere% 6 t#e supervision on a
consoli%ate% asis to 1#ic# t#e institution itself is su!ect* in accor%ance 1it# t#is
Re"ulation, (ire$tive 2::2DA0DEC or 1it# e&uivalent stan%ar%s in force in a t#ir%
countr6E e8posures t#at %o not meet t#ese criteria* 1#et#er or not e8empte% from ,rticle
384)1/, s#all e treate% as e8posures to a t#ir% part6E
)%/ asset items constitutin" claims on an% ot#er e8posures* inclu%in" participations or ot#er
5in%s of #ol%in"s* to re"ional or central cre%it institutions 1it# 1#ic# t#e cre%it
institution is associate% in a net1or5 in accor%ance 1it# le"al or statutor6 provisions
an% 1#ic# are responsile* un%er t#ose provisions* for cas#;clearin" operations 1it#in
t#e net1or5E
)e/ asset items constitutin" claims on an% ot#er e8posures to cre%it institutions incurre% 6
cre%it institutions, one of *hi$h operates on a non;competitive asis and provides or
guarantees loans un%er le"islative pro"rammes or its statutes* to promote specifie%
sectors of t#e econom6 un%er some form of "overnment oversi"#t an% restrictions on
t#e use of t#e loans* provi%e% t#at t#e respective e8posures arise from suc# loans t#at
are passe% on to t#e eneficiaries via Acre%it institutions or fro the guarantees of
these loansE
)f/ asset items constitutin" claims on an% ot#er e8posures to institutions* provi%e% t#at
t#ose e8posures %o not constitute suc# institutions( o1n fun%s* %o not last lon"er t#an
t#e follo1in" usiness %a6 an% are not %enominate% in a ma!or tra%in" currenc6E
)"/ asset items constitutin" claims on central an5s in t#e form of re&uire% minimum
reserves #el% at t#ose central an5s 1#ic# are %enominate% in t#eir national currenciesE
)#/ asset items constitutin" claims on central "overnments in t#e form of statutor6 li&ui%it6
re&uirements #el% in "overnment securities 1#ic# are %enominate% an% fun%e% in t#eir
national currencies provi%e% t#at* at t#e %iscretion of t#e competent aut#orit6* t#e cre%it
assessment of t#ose central "overnments assi"ne% 6 a nominate% $C,0 is investment
"ra%eE
)i/ +. O of me%ium/lo1 ris5 off;alance;s#eet %ocumentar6 cre%its an% of me%ium/lo1
ris5 off;alance s#eet un%ra1n cre%it facilities referre% to in ,nne8 0 an% su!ect to t#e
competent aut#oritiesN a"reement* 8. O of "uarantees ot#er t#an loan "uarantees 1#ic#
#ave a le"al or re"ulator6 asis an% are "iven for t#eir memers 6 mutual "uarantee
sc#emes possessin" t#e status of cre%it institutionsE
)!/ le"all6 re&uire% "uarantees use% 1#en a mort"a"e loan finance% 6 issuin" mort"a"e
on%s is pai% to t#e mort"a"e orro1er efore t#e final re"istration of t#e mort"a"e in
t#e lan% re"ister* provi%e% t#e "uarantee is not use% as re%ucin" t#e ris5 in calculatin"
t#e ris5 =1ei"#te% e5posure aountsE
)5/ assets ites constitutin" claims on an% ot#er e8posures to reco"nise% e8c#an"es7
Copetent authorities a# onl# ake use of the e5eption provided for in the first senten$e
*here the follo*ing $onditions are et'
(a) the spe$ifi$ nature of the e5posure, the $ounterpart# or the relationship !et*een the
institution and the $ounterpart# eliinate or redu$e the risk of the e5posure% and
(!) an# reaining $on$entration risk $an !e addressed !# other e6uall# effe$tive eans su$h
as the arrangeents, pro$esses and e$haniss provided for in Arti$le 0> of (ire$tive 33D33
,inserted !# -./3
Copetent authorities shall infor EBA *hether or not the# intend to use an# of the e5eptions
listed in the first senten$e in a$$ordan$e *ith the $riteria set out a!ove and shall $onsult EBA on
this $hoi$e3
,rticle 39.
Calculatin" t#e effect of t#e use of cre%it ris5 miti"ation tec#ni&ues
17 3or Acalculatin" t#e value of e8posures for t#e purposes of ,rticle 384)1/ an institution ma6
use t#e Mfull6 a%!uste% e8posure valueN as calculate% un%er Part 2#ree* 2itle 00* C#apter 4
ta5in" into account t#e cre%it ris5 miti"ation* volatilit6 a%!ustments* an% an6 maturit6
mismatc# )$T/7
-7 ,n institution permitte% to use o1n estimates of FGDs an% conversion factors for an e8posure
class un%er Part 2#ree* 2itle 00* C#apter 3 ma6* su!ect to a permission 6 t#e competent
aut#orities reco"nise t#e effects of financial collateral in calculatin" t#e value of e8posures for
t#e purposes of ,rticle 384)1/7
Competent aut#orities s#all "rant t#e permission referre% to in prece%in" supara"rap# onl6 if
t#e institution can estimate t#e effects of financial collateral on t#eir e8posures separatel6
from ot#er FGD;relevant aspects7
+he estiates produ$ed !# the institution s#all !e sufficientl6 suitale for re%ucin" t#e
e8posure value for t#e purposes of compliance 1it# t#e provisions of ,rticle 3847
?#ere an institution is permitte% to use its o1n estimates of t#e effects of financial collateral*
it s#all %o so on a asis consistent 1it# t#e approac# a%opte% in t#e calculation of t#e o1n
fun%s re&uirements in accor%ance 1it# t#is Re"ulation7
0nstitutions permitte% to use o1n estimates of FGDs an% conversion factors for an e8posure
class un%er Part 2#ree* 2itle 00* C#apter 3* 1#ic# %o not calculate t#e value of t#eir e8posures
usin" t#e met#o% referre% to in t#e first supara"rap# of t#is para"rap#* ma6 use t#e 3inancial
Collateral Compre#ensive 9et#o% or t#e approac# set out in ,rticle 39-)1/)/ for calculatin"
t#e value of e8posures7
37 ,n institution t#at ma5es use of t#e 3inancial Collateral Compre#ensive 9et#o% or is
permitte% to use t#e met#o% %escrie% in para"rap# - of t#is ,rticle in calculatin" t#e value of
e8posures for t#e purposes of ,rticle 384)1/ s#all con%uct perio%ic stress tests of t#eir cre%it;
ris5 concentrations* inclu%in" in relation to t#e realisale value of an6 collateral ta5en7
2#ese perio%ic stress tests referre% to in t#e first supara"rap# s#all a%%ress ris5s arisin" from
potential c#an"es in mar5et con%itions t#at coul% a%versel6 impact t#e institutions( a%e&uac6
of o1n fun%s an% ris5s arisin" from t#e realisation of collateral in stresse% situations7
2#e stress tests carrie% out s#all e a%e&uate an% appropriate for t#e assessment of suc# ris5s7
0n t#e event t#at t#e periodi$ stress test in%icates a lo1er realisale value of collateral ta5en
t#an 1oul% e permitte% to e ta5en into account 1#ile ma5in" use of t#e 3inancial Collateral
Compre#ensive 9et#o% or t#e met#o% %escrie% in para"rap# - as appropriate* t#e value of
collateral permitte% to e reco"nise% in calculatin" t#e value of e8posures for t#e purposes of
,rticle 384)1/ s#all e re%uce% accor%in"l67
0nstitutions referre% to in t#e first supara"rap# s#all inclu%e t#e follo1in" in t#eir strate"ies
to a%%ress concentration ris5:
)a/ policies an% proce%ures to a%%ress ris5s arisin" from maturit6 mismatc#es et1een
e8posures an% an6 cre%it protection on t#ose e8posuresE
)/ policies an% proce%ures in t#e event t#at a stress test in%icates a lo1er realisale value
of collateral t#an ta5en into account 1#ile ma5in" use of t#e 3inancial Collateral
Compre#ensive 9et#o% or t#e met#o% %escrie% in para"rap# -E
)c/ policies an% proce%ures relatin" to concentration ris5 arisin" from t#e application of
cre%it ris5 miti"ation tec#ni&ues* an% in particular lar"e in%irect cre%it e8posures* for
e8ample to a sin"le issuer of securities ta5en as collateral7
,rticle 391
$8posures arisin" from mort"a"e len%in"
17 3or t#e $al$ulation of e5posure values for the purposes of Arti$le CAB, an institution ma6
re%uce t#e value of an e5posure or an# part of an e5posure full# se$ured !# real estate
propert# in a$$ordan$e *ith Arti$le 42:(4) !# the pledged aount of the arket or
ortgage lending value of the propert# $on$erned !ut not ore than @: J of the arket or
?:J of the ortgage lending value in those Me!er "tates that have laid do*n rigorous
$riteria for the assessent of the ortgage lending value in statutor# or regulator#
provisions, if all of t#e follo1in" con%itions are met:
)a/ +he $opetent authorit# of the Me!er "tate has not set a higher risk *eight than
C@J for e5posures or parts of e5posures secure% A 6 Aresi%ential real estate in
accor%ance 1it# Arti$le 44>(2)E
)/ t#e e8posure or part of the e5posure is full# se$ured !#
(i) ortgages on residential propert#% or
(ii) a residential propert# in a leasin" transaction un%er 1#ic# t#e lessor retains full
o1ners#ip of t#e resi%ential propert6 and t#e lessee #as not e8ercise% #is option
to purc#ase #et%
A
(!!) 2#e re&uirements in Arti$les -.3 an% A--4)1/ are et7
A
A
1or the $al$ulation of e5posure values for the purposes of Arti$le CAB, an institution a# redu$e
the value of an e5posure or an6 part of an e8posure Afull# se$ured !# real estate propert# in
a$$ordan$e *ith Arti$le 424(4) !# the pledged aount of the arket or ortgage lending value
of the propert# $on$erned !ut not ore than @: J of the arket or ?:J of the ortgage lending
value in those Me!er "tates that have laid do*n rigorous $riteria for the assessent of the
ortgage lending value in statutor# or regulator# provisions, if all of the follo*ing $onditions are
et'
(a) +he $opetent authorit# of the Me!er "tate has not set a higher risk *eight than @:J for
e5posures or parts of e5posures se$ured !# $oer$ial real estate in a$$ordan$e *ith
Arti$le 44>(2)%
)/ the e5posure is full# se$ured !#'
(i) ortgages on offi$es or other $oer$ial preises% or
(ii) offi$es or other $oer$ial preises and the e8posures relate% to propert6 leasin"
transactions A7
A
A
($) +he re6uireents in Arti$les 424(2)(a), 2:C and 22B(4) are et%
(d) the $oer$ial propert# shall !e full# $onstru$ted3
An institution a# treat an e5posure to a $ounterpart# that results fro a reverse repur$hase
agreeent under *hi$h the institution has pur$hased fro the $ounterpart# non=a$$essor#
independent ortgage liens on iova!le propert# of third parties as a nu!er of individual
e5posures to ea$h of those third parties, provided that all of the follo*ing $onditions are et'
(a) the $ounterpart# is an institution%
(!) the e5posure is full# se$ured !# liens on the iova!le propert# of those third parties that
have !een pur$hased !# the institution and the institution is a!le to e5er$ise those liens%
($) the institution has ensured that the re6uireents of Arti$les 2:C and 22B(4) are et%
(d) the institution !e$oes !enefi$iar# of the $lais that the $ounterpart# has against the third
parties in the event of default, insolven$# or li6uidation of the $ounterpart#%
(e) the institution reports to the $opetent authorities in a$$ordan$e *ith Arti$le CAC the total
aount of e5posures to ea$h other institution that are treated in a$$ordan$e *ith this
paragraph3
1or these purposes, the institution shall assue that it has an e5posure to ea$h single one of
those third parties for the aount of the $lai that the $ounterpart# has on the third part#
instead of the $orresponding aount of the e5posure to the $ounterpart#3 +he reainder of the
e5posure to the $ounter part#, if an#, shall $ontinue to !e treated as an e5posure to the $ounter
part#3
,rticle 39-
Sustitution approac#
17 ?#ere an e8posure to a client is "uarantee% 6 a t#ir% part6* or secure% 6 collateral issue% 6
a t#ir% part6* an institution ma6:
)a/ treat t#e portion of t#e e8posure 1#ic# is "uarantee% as #avin" een incurre% to t#e
"uarantor rat#er t#an to t#e client provi%e% t#at t#e unsecure% e8posure to t#e "uarantor
1oul% e assi"ne% an e&ual or lo1er ris5 1ei"#t t#an a ris5 1ei"#t of t#e unsecure%
e8posure to t#e client un%er Part 2#ree* 2itle 00* C#apter -E
)/ treat t#e portion of t#e e8posure collateralise% 6 t#e mar5et value of reco"nise%
collateral as #avin" een incurre% to t#e t#ir% part6 rat#er t#an to t#e client* if t#e
e8posure is secure% 6 collateral an% provi%e% t#at t#e collateralise% portion of t#e
e8posure 1oul% e assi"ne% an e&ual or lo1er ris5 1ei"#t t#an a ris5 1ei"#t of t#e
unsecure% e8posure to t#e client un%er Part 2#ree* 2itle 00* C#apter -7
2#e approac# referre% to in point )/ of t#e first supara"rap# s#all not e use% 6 an
institution 1#ere t#ere is a mismatc# et1een t#e maturit6 of t#e e8posure an% t#e maturit6 of
t#e protection7
3or t#e purpose of t#is Part* an institution ma6 use ot# t#e 3inancial Collateral
Compre#ensive 9et#o% an% t#e treatment provi%e% for in point )/ of t#e first supara"rap#
onl6 1#ere it is permitte% to use ot# t#e 3inancial Collateral Compre#ensive 9et#o% an% t#e
3inancial Collateral Simple 9et#o% for t#e purposes of ,rticle 8>7
-7 ?#ere an institution applies point )a/ of para"rap# 1:
)a/ 1#ere t#e "uarantee is %enominate% in a currenc6 %ifferent from t#at in 1#ic# t#e
e8posure is %enominate% t#e amount of t#e e8posure %eeme% to e covere% s#all e
calculate% in accor%ance 1it# t#e provisions on t#e treatment of currenc6 mismatc# for
unfun%e% cre%it protection in Part 2#ree* 2itle 00* C#apter 4E
)/ a mismatc# et1een t#e maturit6 of t#e e8posure an% t#e maturit6 of t#e protection
s#all e treate% in accor%ance 1it# t#e provisions on t#e treatment of maturit6 mismatc#
in Part 2#ree* 2itle 00* C#apter 4E
)c/ partial covera"e ma6 e reco"nise% in accor%ance 1it# t#e treatment set out in Part
2#ree* 2itle 00* C#apter 47
F
PART FI,E
E-PO?URE? TO TRAN?FERRE$ CRE$IT RI?B
Title I
>enerl pro3isions 1or t6is Prt
,rticle 393
Scope of application
2itles 00 an% 000 s#all appl6 to ne1 securitisations issue% on or after 1 <anuar6 -.117 2itles 00 an% 000
s#all* after 31 Decemer -.14* appl6 to e8istin" securitisations 1#ere ne1 un%erl6in" e8posures are
a%%e% or sustitute% after t#at %ate7
Title II
Re/uire0ents 1or in3estor institutions
,rticle 394
Retaine% interest of t#e issuer
17 ,n institution* ot#er t#an 1#en actin" as an ori"inator* a sponsor or ori"inal len%er* s#all e
e8pose% to t#e cre%it ris5 of a securitisation position in its tra%in" oo5 or non;tra%in" oo5
onl6 if t#e ori"inator* sponsor or ori"inal len%er #as e8plicitl6 %isclose% to t#e institution t#at
it 1ill retain* on an on"oin" asis* a material net economic interest 1#ic#* in an6 event* s#all
not e less t#an + O7
Onl6 an6 of t#e follo1in" &ualifies as retention of a material net economic interest of not less
t#an +O:
)a/ retention of no less t#an + O of t#e nominal value of eac# of t#e tranc#es sol% or
transferre% to t#e investorsE
)/ in t#e case of securitisations of revolvin" e8posures* retention of t#e ori"inatorNs interest
of no less t#an + O of t#e nominal value of t#e securitise% e8posuresE
)c/ retention of ran%oml6 selecte% e8posures* e&uivalent to no less t#an + O of t#e nominal
value of t#e securitise% e8posures* 1#ere suc# e8posures 1oul% ot#er1ise #ave een
securitise% in t#e securitisation* provi%e% t#at t#e numer of potentiall6 securitise%
e8posures is no less t#an 1.. at ori"inationE
)%/ retention of t#e first loss tranc#e an%* if necessar6* ot#er tranc#es #avin" t#e same or a
more severe ris5 profile t#an t#ose transferre% or sol% to investors an% not maturin" an6
earlier t#an t#ose transferre% or sol% to investors* so t#at t#e retention e&uals in total no
less t#an + O of t#e nominal value of t#e securitise% e8posures7
(e) retention of a first loss e5posure not less than @ J of ever# se$uritised e5posure in the
se$uritisation
Bet economic interest is measure% at t#e ori"ination an% s#all e maintaine% on an on"oin"
asis7 2#e net economic interest* inclu%in" retaine% positions* interest or e8posures* s#all not
e su!ect to an6 cre%it ris5 miti"ation or an6 s#ort positions or an6 ot#er #e%"e an% s#all not
e sol%7 2#e net economic interest s#all e %etermine% 6 t#e notional value for off;alance
s#eet items7
2#ere s#all e no multiple applications of t#e retention re&uirements for an6 "iven
securitisation7
-7 ?#ere an $4 parent cre%it institution A, an $4 financial #ol%in" compan6* an E2 i5ed
finan$ial holding $opan# or one of its susi%iaries* as an ori"inator or a sponsor* securitises
e8posures from several cre%it institutions* investment firms or ot#er financial institutions
1#ic# are inclu%e% in t#e scope of supervision on a consoli%ate% asis* t#e re&uirement
referre% to in para"rap# 1 ma6 e satisfie% on t#e asis of t#e consoli%ate% situation of t#e
relate% $4 parent cre%it institution, E2 finan$ial holding $opan#, or $4 i5ed financial
#ol%in" compan67
2#e first supara"rap# s#all appl6 onl6 1#ere cre%it institutions* investment firms or financial
institutions 1#ic# create% t#e securitise% e8posures #ave committe% t#emselves to a%#ere to
t#e re&uirements set out in ,rticle 39> an% %eliver* in a timel6 manner* to t#e ori"inator or
sponsor an% to t#e $4 parent cre%it institution or an $4 financial #ol%in" compan6 t#e
information nee%e% to satisf6 t#e re&uirements referre% to in ,rticle 3987
37 Para"rap# 1 s#all not appl6 1#ere t#e securitise% e8posures are e5posures on or full6*
uncon%itionall6 an% irrevocal6 "uarantee% 6 t#e follo1in" entities:
)a/ central "overnments or central an5sE
)/ re"ional "overnments* local aut#orities an% pulic sector entities of 9emer StatesE
)c/ institutions to 1#ic# a +. O ris5 1ei"#t or less is assi"ne% un%er Part 2#ree* 2itle 00*
C#apter -E
)%/ multilateral %evelopment an5s7
47 Para"rap# 1 s#all not appl6 to A:
)a/ transactions ase% on a clear* transparent an% accessile in%e8* 1#ere t#e un%erl6in"
reference entities are i%entical to t#ose t#at ma5e up an in%e8 of entities t#at is 1i%el6
tra%e%* or are ot#er tra%ale securities ot#er t#an securitisation positionsE
A
,rticle 39+
Due %ili"ence
17 Defore !e$oing e5posed to the risks of a se$uritisation, an% as appropriate t#ereafter*
institutions* s#all e ale to %emonstrate to t#e competent aut#orities for eac# of t#eir
in%ivi%ual securitisation positions* t#at t#e6 #ave a compre#ensive an% t#orou"#
un%erstan%in" of an% #ave implemente% formal policies an% proce%ures appropriate to t#eir
tra%in" oo5 an% non;tra%in" oo5 an% commensurate 1it# t#e ris5 profile of t#eir
investments in securitise% positions for anal6sin" an% recor%in":
)a/ information %isclose% un%er ,rticle 394)1/* 6 ori"inators or sponsors to specif6 t#e net
economic interest t#at t#e6 maintain* on an on"oin" asis* in t#e securitisationE
)/ t#e ris5 c#aracteristics of t#e in%ivi%ual securitisation position A
)c/ t#e ris5 c#aracteristics of t#e e8posures un%erl6in" t#e securitisation positionE
)%/ t#e reputation an% loss e8perience in earlier securitisations of t#e ori"inators or sponsors
in t#e relevant e8posure classes un%erl6in" t#e securitisation positionE
)e/ t#e statements an% %isclosures ma%e 6 t#e ori"inators or sponsors* or t#eir a"ents or
a%visors* aout t#eir %ue %ili"ence on t#e securitise% e8posures an%* 1#ere applicale*
on t#e &ualit6 of t#e collateral supportin" t#e securitise% e8posuresE
)f/ 1#ere applicale* t#e met#o%olo"ies an% concepts on 1#ic# t#e valuation of collateral
supportin" t#e securitise% e8posures is ase% an% t#e policies a%opte% 6 t#e ori"inator
or sponsor to ensure t#e in%epen%ence of t#e valuerE
)"/ all t#e structural features of t#e securitisation t#at can materiall6 impact t#e performance
of t#e institutionNs securitisation position, su$h as the $ontra$tual *aterfall and
*aterfall related triggers, $redit enhan$eents, li6uidit# enhan$eents, arket value
triggers, and deal=spe$ifi$ definitions of default3
0nstitutions s#all re"ularl6 perform t#eir o1n stress tests appropriate to t#eir securitisation
positions7 2o t#is en%* institutions ma6 rel6 on financial mo%els %evelope% 6 an $C,0
provi%e% t#at institutions can %emonstrate* 1#en re&ueste%* t#at t#e6 too5 %ue care prior to
investin" to vali%ate t#e relevant assumptions in an% structurin" of t#e mo%els an% to
un%erstan% met#o%olo"6* assumptions an% results7
-7 0nstitutions* ot#er t#an 1#en actin" as ori"inators or sponsors or ori"inal len%ers* s#all
estalis# formal proce%ures appropriate to t#eir tra%in" oo5 an% non;tra%in" oo5 an%
commensurate 1it# t#e ris5 profile of t#eir investments in securitise% positions to monitor on
an on"oin" asis an% in a timel6 manner performance information on t#e e8posures
un%erl6in" t#eir securitisation positions7 ?#ere relevant* t#is s#all inclu%e t#e e8posure t6pe*
t#e percenta"e of loans more t#an 3.* =. an% 9. %a6s past %ue* %efault rates* prepa6ment
rates* loans in foreclosure* collateral t6pe an% occupanc6* an% fre&uenc6 %istriution of cre%it
scores or ot#er measures of cre%it 1ort#iness across un%erl6in" e8posures* in%ustr6 an%
"eo"rap#ical %iversification* fre&uenc6 %istriution of loan to value ratios 1it# an% 1i%t#s
t#at facilitate a%e&uate sensitivit6 anal6sis7 ?#ere t#e un%erl6in" e8posures are t#emselves
securitisation positions* institutions s#all #ave t#e information set out in t#is supara"rap# not
onl6 on t#e un%erl6in" securitisation tranc#es* suc# as t#e issuer name an% cre%it &ualit6* ut
also on t#e c#aracteristics an% performance of t#e pools un%erl6in" t#ose securitisation
tranc#es7
A
&nstitutions shall also appl# the sae standards of anal#sis to parti$ipations or under*ritings in
se$uritisation issues pur$hased fro third parties *hether su$h parti$ipations or under*ritings
are to !e held on their trading or non=trading !ook3
,rticle 39=
,%%itional ris5 1ei"#t
?#ere an institution %oes not meet t#e re&uirements in ,rticles C>B, C>@ or C>A in an6 material
respect 6 reason of t#e ne"li"ence or omission of t#e institution* t#e competent aut#orities s#all
impose a proportionate a%%itional ris5 1ei"#t of no less t#an -+. O of t#e ris5 1ei"#t )cappe% at
1-+. O/ 1#ic# s#all appl6 to t#e relevant securitisation positions in t#e manner specifie% in
,rticles -4.)=/ or 3-=)3/ respectivel67 2#e a%%itional ris5 1ei"#t s#all pro"ressivel6 increase 1it#
eac# suse&uent infrin"ement of t#e %ue %ili"ence provisions7
2#e competent aut#orities s#all ta5e into account t#e e8emptions for certain securitisations provi%e%
in ,rticle 394)3/ 6 re%ucin" t#e ris5 1ei"#t it 1oul% ot#er1ise impose un%er t#is ,rticle in respect
of a securitisation to 1#ic# ,rticle 394)3/ applies7
F
Title III
Re/uire0ents 1or sponsor n. ori5intor institutions
,rticle 39>
Criteria for cre%it "rantin"
Sponsor an% ori"inator institutions s#all appl6 t#e same soun% an% 1ell;%efine% criteria for cre%it;
"rantin" in accor%ance 1it# t#e re&uirements of ,rticle >> of Directive Jinserte% 6 OPK to
e8posures to e securitise% as t#e6 appl6 to e8posures to e #el% n t#eir o*n non=trading oo57 2o
t#is en% t#e same processes for approvin" an%* 1#ere relevant* amen%in"* rene1in" an% re;
financin" cre%its s#all e applie% 6 t#e ori"inator an% sponsor institutions7 A
?#ere t#e re&uirements referre% to in t#e first supara"rap# of t#is ,rticle are not met* ,rticle
-4.)1/ s#all not e applie% 6 an ori"inator institution an% t#at ori"inator institution s#all not e
allo1e% to e8clu%e t#e securitise% e8posures from t#e calculation of its capital re&uirements un%er
t#is Re"ulation7
,rticle 398
Disclosure to investors
&nstitutions a$ting as an ori"inator, a sponsor or original lender s#all %isclose to investors t#e
level of t#eir commitment un%er ,rticle 394 to maintain a net economic interest in t#e
securitisation7 Sponsor an% ori"inator institutions s#all ensure t#at prospective investors #ave
rea%il6 availale access to all materiall6 relevant %ata on t#e cre%it &ualit6 an% performance of t#e
in%ivi%ual un%erl6in" e8posures* cas# flo1s an% collateral supportin" a securitisation e8posure as
1ell as suc# information t#at is necessar6 to con%uct compre#ensive an% 1ell informe% stress tests
on t#e cas# flo1s an% collateral values supportin" t#e un%erl6in" e8posures7 3or t#at purpose*
materiall6 relevant %ata s#all e %etermine% as at t#e %ate of t#e securitisation an% 1#ere
appropriate %ue to t#e nature of t#e securitisation t#ereafter7
,rticle 399
4niform con%ition of application
17 $D, s#all report to t#e Commission annuall6 on measures ta5en 6 t#e competent aut#orities
in or%er to ensure t#e compliance 1it# t#e re&uirements of 2itles 00 an% 000 6 institutions7
-7 +he EBA shall develop draft regulator# te$hni$al standards to spe$if# in greater detail'
(a) the re6uireents in Arti$les C>B=C>@ appl#ing to institutions !e$oing e5posed to the
$redit risk of a se$uritisation position%
(!) the retention re6uireent, in$luding the 6ualif#ing $riteria for retaining a aterial
net e$onoi$ interest as referred to in Arti$le C>B and the level of retention%
($) the due diligen$e re6uireents in Arti$le C>@ for institutions !e$oing e5posed to a
se$uritisation position% and
(d) the re6uireents in Arti$les C>0=C>A appl#ing to sponsor and originator institutions3
EBA shall su!it those draft regulator# te$hni$al standards to the Coission !# 4
Eanuar# 2:4B3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards referred
to in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$les 4: to 4B
of )egulation (E2)Fo 4:>CD2:4:3
C3 EBA shall develop draft ipleenting te$hni$al standards for fa$ilitating the $onvergen$e
of supervisor# pra$ti$es *ith regard to the ipleentation of arti$le C>?, in$luding the
easures to !e taken in $ase of !rea$h of the due diligen$e and risk anageent
o!ligations3
EBA shall su!it those draft ipleenting te$hni$al standards to the Coission !# 4
Eanuar# 2:4B3
.o*er is $onferred on the Coission to adopt the ipleenting te$hni$al standards
referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$les
4@ of )egulation (E2) Fo 4:>CD2:4:3
F
F
PART ?I-
LI@UI$ITA
Title I
$e1initions n. li/ui.it: 2o3er5e re/uire0ent
,rticle 4..
Definitions
3or t#e purposes of t#is Part* t#e follo1in" %efinitions appl6:
)1/ (3inancial customer( means a customer t#at performs one or more of t#e activities liste% in
,nne8 0 of Directive Jinserte% 6 OPK as t#eir main usiness* or is one of t#e follo1in":
)a/ a cre%it institutionE
)/ an investment firmE
)c/ a SSP$E
)%/ a C04E
)e/ a non;open en%e% investment sc#eme
)f/ an insurance un%erta5in"E
)"/ a financial #ol%in" compan6 or mi8e%;finan$ial #ol%in" compan67
)-/ (Retail %eposit( means a liailit6 to a natural person or to a small an% me%ium siLe% enterprise
if the natural person or enterprise *ould 6ualif# for the retail e5posure $lass under the
"tandardised or &)B approa$hes for $redit risk or to a $opan# *hi$h is eligi!le to the
treatent entioned in Arti$le 4BA(B) and *here the aggregate deposits to all suc#
enterprises on a group !asis does not e5$eed 1 million $4R7
,rticle 4.1
Fi&ui%it6 covera"e re&uirement
17 0nstitutions s#all #ol% li&ui% assets* t#e sum of t#e values of 1#ic# $overs t#e li&ui%it6
outflo1s less t#e li&ui%it6 inflo1s un%er stresse% con%itions so as to ensure t#at institutions
maintain levels of li&ui%it6 uffers 1#ic# are a%e&uate to face an6 possile imalance
et1een li&ui%it6 inflo1s an% outflo1s un%er gravel# stresse% con%itions over a period of
thirt# da#s3 (uring ties of stress, institutions a# use their li6uid assets to $over their net
li6uidit# outflo*s7
-7 0nstitutions s#all not count %oule li&ui%it6 inflo1s an% li&ui% assets7
37 0nstitutions ma6 use t#e li&ui% assets referre% to in para"rap# 1 to meet t#eir oli"ations un%er
stressed circumstances as specifie% un%er ,rticle 4.-7
47 2#e provisions set out in 2itle 00 s#all appl6 e8clusivel6 for t#e purposes of specif6in"
reportin" oli"ations set out in ,rticle 4.37
@3 Me!er "tates a# aintain or introdu$e national provisions in the area of li6uidit#
re6uireents !efore !inding iniu standards for li6uidit# $overage re6uireents are
spe$ified and full# introdu$ed in the 2nion in a$$ordan$e *ith Arti$le BBB3 Me!er states
or $opetent authorities a# re6uire doesti$all# authorised institutions, or a su!set of
those institutions to aintain a li6uidit# $overage re6uireent up to 4::J until the !inding
iniu standard is full# introdu$ed at a rate of 4::J in a$$ordan$e *ith Arti$le BBB3
Arti$le B:4 a
"ta!le 1unding
43 &nstitutions shall ensure that long ter o!ligations are ade6uatel# et *ith a diversit# of
sta!le funding instruents under !oth noral and stressed $onditions3
23 +he provisions set out in +itle &&& shall appl# e5$lusivel# for the purposes of spe$if#ing
reporting o!ligations set out in Arti$le B:C3
C3 Me!er "tates a# aintain or introdu$e national provisions in the area of sta!le funding
re6uireents !efore !inding iniu standards for net sta!le funding re6uireents are
spe$ified and introdu$ed in the 2nion in a$$ordan$e *ith Arti$le BA4a3
,rticle 4.-
Compliance 1it# li&ui%it6 re&uirements
?#ere an institution %oes not meet* or e5pe$ts not to meet t#e re&uirement set out in ,rticle 4.1)1/
or the general o!ligation set out in Arti$le B:4a (4), in$luding during ties of stress* it s#all
imme%iatel6 notif6 t#e competent aut#orities an% s#all sumit 1it#out un%ue %ela6 to t#e competent
authorities a plan for t#e timel6 restoration of compliance 1it# ,rticle B:4 or B:4a (4)3 4ntil
Acompliance #as een restore%* t#e Ainstitution s#all report t#e items referred to in +itle && or +itle
&&&, as appropriate, %ail6 6 t#e en% of eac# usiness %a6 unless t#e competent aut#orit6 aut#orises
a lo1er reporting fre&uenc6 an% a lon"er reporting %ela67 Competent aut#orities s#all onl6 "rant
suc# aut#orisations ase% on t#e in%ivi%ual situation of an institution and taking into a$$ount the
s$ale and $ople5it# of the institution7s a$tivities7 2#e6 s#all monitor t#e implementation of t#e
restoration plan an% s#all re&uire a more timel6 restoration if appropriate7
F
Title II Li/ui.it:
reportin5
,rticle 4.3
Reportin" oli"ation an% reportin" format
17 0nstitutions s#all report in a single $urren$#, regardless of their a$tual denoination, to t#e
competent aut#orities t#e items referre% to in +itles 00 an% 000 an% t#eir components* inclu%in"
t#e composition of their li&ui% assets accor%in" to ,rticle B:B3 2ntil the li6uidit# $overage
re6uireent in .art "i5 is full# spe$ified and ipleented as a iniu standard
a$$ording to Arti$le BBB, institutions shall report the ites set in +itle && and Anne5 &&&3
&nstitutions shall report the ites in +itle 0007 2#e reportin" fre&uenc6 s#all not e less t#an
mont#l6 for Aites referred to in 2itle 00 an% ,nne8 000 an% not less t#an &uarterl6 for items
referre% to in 2itle 0007
A
+he reporting forats shall in$lude all the ne$essar# inforation and shall allo* EBA to
assess *hether se$ured lending and $ollateral s*ap transa$tions *here li6uid assets
referred to in points (a) to ($) of paragraph 4 of Arti$le B:B have !een o!tained against
$ollateral that does not 6ualif# under point (a) to ($) of paragraph 4 of Arti$le B:B have
!een properl# un*ound3
4a3 An institution shall report separatel# to the $opetent authorities of the hoe Me!er
"tate the ites referred to in paragraph 4 in the $urren$# !elo* *hen it has'
(a) aggregate lia!ilities in a $urren$# different fro the reporting $urren$# as defined in
paragraph 4 aounting to or e5$eeding @ J of the institutionGs or the single li6uidit#
su!=groupGs total lia!ilities, or
(!) a si"nificant ranc# as %efine% in ,rticle +- of Directive Jinserte% 6 OPK in a #ost
9emer State usin" a $urren$# different fro the reporting $urren$# as defined in
paragraph 43
37 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 t#e follo1in":
)a/ uniform formats and &+ solutions 1it# associate% instructions for Afre&uencies and
referen$e and reittan$e %ates A7 2#e reportin" formats an% fre&uencies s#all e
proportionate to t#e nature* scale an% comple8it6 of the %ifferent a$tivities of the
institutions A an% s#all comprise t#e reportin" re&uire% accor%in" to para"rap#s 1 an%
-E
)/ a%%itional li&ui%it6 monitorin" metrics re&uire%* to allo1 competent aut#orities to
otain a compre#ensive vie1 of t#e li&ui%it6 ris5 profile* proportionate to t#e nature*
scale an% comple8it6 of an institution(s activitiesE
A
A
$D, s#all sumit to the Coission t#ose %raft tec#nical stan%ar%s for those ites
spe$ified in point (a) !# the entr# into for$e date of this )egulation W one onth and point
(!) !# 4 Eanuar# 2:4B3
2ntil the full introdu$tion of !inding li6uidit# re6uireents, $opetent authorities a#
$ontinue to $olle$t onitoring tools for the purpose of onitoring $oplian$e *ith
e5isting national li6uidit# standards3
Po1er is conferre% on t#e Commission to a%opt t#e %raft implementin" tec#nical stan%ar%s
referre% to in t#e first su;para"rap# in accor%ance 1it# ,rticle 1+ of Re"ulation )$4/ Bo7
1.93/-.1.7
47 Competent aut#orities of t#e #ome 9emer State s#all upon re&uest tiel# provi%e !#
ele$troni$ eans t#e competent aut#orities an% t#e national central an5 of t#e #ost 9emer
States an% $D, 1it# A t#e in%ivi%ual reportin" in accor%ance 1it# t#is ,rticle7
+7 Competent aut#orities t#at e8ercise supervision on a consoli%ate% asis accor%in" to ,rticle
1.> of Directive Jinserte% 6 OPK s#all tiel# provi%e !# ele$troni$ eans upon re&uest t#e
follo1in" aut#orities 1it# Aall reportin" sumitte% 6 t#e institution in accor%ance 1it# the
unifor reporting forats referred to in paragraph C:
)a/ t#e competent aut#orities an% t#e national central an5 of t#e #ost 9emer States in
1#ic# t#ere are si"nificant ranc#es as defined in Arti$le @2 of (ire$tive ,inserted !#
-./ of t#e parent institution or institutions controlle% 6 t#e same parent financial
#ol%in" compan6E
)/ t#e competent aut#orities t#at #ave aut#orise% susi%iaries of t#e parent institution or
institutions controlle% 6 t#e same parent financial #ol%in" compan6 an% t#e national
central an5 of t#e same 9emer StateE
)c/ $D,E
)%/ $CD7
=7 2#e competent aut#orities t#at #ave aut#orise% an institution t#at is a susi%iar6 of a parent
institution or parent financial #ol%in" compan6 s#all tiel# provi%e !# ele$troni$ eans upon
re&uest t#e competent aut#orities t#at s#all e8ercise supervision on a consoli%ate% asis
accor%in" to ,rticle 1.= of Directive Jinserte% 6 OPK* t#e central an5 of t#e 9emer State
1#ere t#e institution is aut#orise% an% $D, Aall reportin" sumitte% 6 t#e institution in
accor%ance 1it# t#e uniform reporting formats referre% to in para"rap# 37
Article 4*4
5eportin# on liqui$ assets
17 0nstitutions s#all report t#e follo1in" as li&ui% assets unless e8clu%e% 6 para"rap# - an% onl6
if t#e li&ui% assets fulfil t#e con%itions in para"rap# 3:
)a/ cas# an% e5posures to $entral !anks to the e5tent that these e5posures $an !e
*ithdra*n at an# tie in ties of stress3 As regards .eposits 6el. <it6 2entrl
HnEs, the $opetent authorit# and the $entral !ank shall ai at rea$hing a $oon
understanding regarding the e5tent to *hi$h iniu reserves 2n He <it6.r<n in
ti0es o1 stress A3
)/ -ther transferale assets t#at are of e8tremel6 #i"# li&ui%it6 an% cre%it &ualit6E
(!a) transfera!le assets representing $lais on or guaranteed !#'
i7 A t#e central "overnment of a 9emer State A, a region *ith fis$al autono# to
raise and $olle$t ta5es, or of a t#ir% countr6 in the doesti$ $urren$# of the
$entral or regional governent, if t#e institution incurs a li&ui%it6 ris5 in t#at
9emer State or t#ir% countr6 t#at it covers 6 #ol%in" t#ose li&ui% assets%
ii3 $entral !anks and non=$entral governent ."Es in the doesti$ $urren$# of
the $entral !ank and ."E%
iii3 the Bank for &nternational "ettleents, the &nternational Monetar# 1und, the
European Coission and ultilateral developent !anksE
)%/ transferale assets t#at are of #i"# li&ui%it6 an% cre%it &ualit67
(da) "tand!# $redit fa$ilities granted !# $entral !anks *ithin the s$ope of onetar# poli$#
to the e5tent that these fa$ilities are not $ollateralised !# li6uid assets and e5$luding
eergen$# li6uidit# assistan$e
(d!) if the $redit institution is asso$iated in a net*ork in a$$ordan$e *ith legal or statutor#
provisions, the legal or statutor# iniu deposits *ith the $entral $redit institution
and other statutor# or $ontra$tuall# availa!le li6uid funding fro the $entral $redit
institution or institutions that are e!ers of the net*ork referred to in Arti$le 4:A
(0), or eligi!le for the *aiver provided in Arti$le >, to the e5tent that this funding is
not $ollateralised !# li6uid assets3
Pen%in" a uniform %efinition in accor%ance 1it# ,rticle BBB of #i"# an% e8tremel6 #i"#
li&ui%it6 an% cre%it &ualit6* institutions s#all i%entif6 t#emselves in a "iven currenc6
transferale assets t#at are respectivel6 of #i"# or e8tremel6 #i"# li&ui%it6 an% cre%it &ualit67
Pen%in" a uniform %efinition* competent aut#orities ma6* ta5in" into account t#e criteria
liste% in ,rticle 481)-/* provi%e "eneral "ui%ance t#at institutions s#all follo1 in i%entif6in"
assets of #i"# an% e8tremel6 #i"# li&ui%it6 an% cre%it &ualit67 0n t#e asence of suc# "ui%ance*
institutions s#all use transparent an% o!ective criteria to t#is en%* inclu%in" some or all of t#e
criteria liste% in ,rticle 481)-/7
-7 2#e follo1in" s#all not e consi%ere% li&ui% assets:
)a/ assets t#at are issue% 6 a cre%it institution unless t#e6 fulfil one of t#e follo1in"
con%itions:
)i/ t#e6 are on%s eli"ile for t#e treatment set out in ,rticle 1-4)3/ or )4/ or asset
!a$ked instruents if deonstrated to !e of the highest $redit 6ualit# as
esta!lished !# EBA pursuant to the $riteria in Arti$le BA4(2)E
)ii/ t#e6 are on%s as %efine% in ,rticle +-)4/ of Directive -..9/=+/$C ot#er t#an
t#ose referre% to in )i/E
)iii/ t#e cre%it institution #as een set up A6 a 9emer State central or re"ional
"overnment an% that governent has an o!ligation to prote$t the e$onoi$ !asis
of the institution and aintain its via!ilit# throughout its lifetie% or the asset is
e5pli$itl# guaranteed !# that governent% or at least >:J of the loans granted
!# the institution are dire$tl# or indire$tl# guaranteed !# that governent and
the asset is predoinantl# use% to fun% promotional loans "rante% on a non;
competitive* not for profit asis in or%er to promote that governent7s pulic
polic6 o!ectives%
aa) ne* assets that are provided as $ollateral to the institution under reverse repo and
se$urities finan$ing transa$tions and that are held !# the institution onl# as a $redit
risk itigant and that are not legall# and $ontra$tuall# availa!le for use !# the
institutionE
)/ assets issue% 6 an6 of t#e follo1in":
)i/ an investment firmE
)ii/ an insurance un%erta5in"E
)iii/ a financial #ol%in" compan6E
)iv/ a mi8e% finan$ial #ol%in" $opan#E
)v/ an6 ot#er entit6 t#at performs one or more of t#e activities liste% in ,nne8 0 of
Directive Jinserte% 6 OPK as its main usiness7
37 &n a$$ordan$e *ith the provisions of su!paragraphs 4 and 2 of Arti$le B:B(4), institutions
shall report as li&ui% assets t#at fulfil At#e follo1in" con%itions:
(=a) the# are unen$u!ered or stand availa!le *ithin $ollateral pools to !e used for the
o!taining of additional funding under $oitted !ut not #et funded $redit lines
availa!le to the institution%
)a/ t#e6 are not issue% 6 t#e institution itself or its parent or susi%iar6 institutions or
anot#er susi%iar6 of its parent institutions or parent financial #ol%in" compan6E
) Ac/ their pri$e is generall# agreed upon !# arkets parti$ipants and $an easil# !e
o!served in the arket, or t#eir price can e %etermine% 6 a formula t#at is eas6 to
calculate ase% on pulicl6 availale inputs an% %oes not %epen% on stron" assumptions
as is t6picall6 t#e case for structure% or e8otic pro%uctsE
)%) the# are eligi!le $ollateral for standard li6uidit# operations of a $entral !ank in a
Me!er "tate or if the li6uid assets are held to eet li6uidit# outflo*s in the $urren$#
of a third $ountr#, of the $entral !ank of that third $ountr#%
(e/ t#e6 are liste% on a reco"nise% e8c#an"e or t#e6 are tra%ale on active outri"#t sale or
via a siple repurc#ase a"reement on approved repur$hase arkets3 +hese $riteria
shall !e assessed separatel# for ea$h arket3
+he $onditions ($), (d) and (e) shall not appl# to the assets referred to under paragraph
4(e)3
2#e con%ition in point )d/ s#all not appl6 in case of li&ui% assets #el% to meet li&ui%it6
outflo1s in a currenc6 in 1#ic# t#ere is an e8tremel6 narro1 %efinition of central an5
eli"iilit67 0n case of li6uid assets denoinated in currencies of t#ir% countries* t#is
e8ception s#all appl6 an% onl6 appl6 if t#e competent aut#orities of t#e t#ir% countr6 appl6
t#e same or an e6uivalent e8ception A7
Ca3 Fot*ithstanding the provisions of paragraphs 4 to C, pending the spe$ifi$ation of a !inding
li6uidit# re6uireent in a$$ordan$e *ith Arti$le BBB and in a$$ordan$e *ith the provisions
of su!paragraph 2 of Arti$le B:B(4), institutions shall report on'
= other non=$entral !ank eligi!le !ut trada!le assets su$h as e6uities and gold !ased on
transparent and o!9e$tive $riteria, in$luding soe or all of the $riteria listed in Arti$le
BA4(2)%
= other $entral !ank eligi!le and trada!le assets su$h as asset !a$ked instruents of the
highest $redit 6ualit# as esta!lished !# EBA pursuant to the $riteria in Arti$le BA4(2)%
= other $entral !ank eligi!le !ut non=trada!le assets su$h as $redit $lais as esta!lished !#
EBA pursuant to the $riteria in Arti$le BA4(2)3
47 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s listin" t#e currencies 1#ic# meet
t#e con%itions referre% to in t#e se$ond su!=para"rap# of paragraph C
$D, s#all sumit t#ose %raft tec#nical stan%ar%s to t#e Commission 6 C4 Mar$h 2:4B3
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle 1+ of
Re"ulation )$4/ Bo 1.93/-.1.7
Defore t#e entr6 into force of t#e tec#nical stan%ar%s referre% to in t#e previous supara"rap#*
institutions ma6 continue to appl6 t#e treatment set out in t#e se$ond supara"rap# of
paragraph C, 1#ere t#e competent aut#orities #ave applie% t#at treatment efore the date of
appli$ation3
+7 S#ares or units in C04s ma6 e treate% as li&ui% assets up to an asolute amount of @::
million $4R in the portfolio of li6uid assets of ea$h institution provi%e% t#at t#e
re&uirements in ,rticle 1->)3/ are met an% t#at t#e C04* apart from %erivatives to miti"ate
interest rate or cre%it or $urren$# ris5* onl6 invests in li6uid assets as defined in paragraph
43
+he use (or potential use) !# a C&2 of derivative instruents to hedge risks of peritted
investents shall not prevent that C&2 fro !eing eligi!le3 ;here the value of the shares or
units of the C&2 is not regularl# arked to arket !# the third parties referred to in Arti$le
B:? paragraph C points (a) and (!) and the $opetent authorit# is not satisfied that an
institution has a ro!ust internal ethod for su$h valuation as referred to in the
introdu$tor# part of Arti$le B:? paragraph C, shares or units in that C&2 shall not !e
treated as li&ui% assets7
=7 ?#ere a li&ui% asset ceases to e eli"ile in the sto$k of li6uid assets, an institution ma6
nevert#eless continue to consi%er it a li&ui% asset for an a%%itional perio% of 3. calen%ar %a6s7
&f a share or unit in a C&2 $eases to !e eligi!le for the treatent set out in paragraph @, it
a# nevertheless !e $onsidered a li6uid asset for an additional period of C: da#s provided
that those shares or units do not e5$eed 4:J of the C&27s shares or units3
,rticle 4.+
Operational re&uirements for #ol%in"s of li&ui% assets
2#e institution s#all onl6 report as li&ui% assets t#ose #ol%in"s of li&ui% assets t#at meet t#e
follo1in" con%itions:
)a/ t#e6 are appropriatel6 %iversifie%3 (iversifi$ation is not re6uired in ters of assets
$orresponding to Arti$le B:B(4) (a) to ($/E
)c/ t#e6 are le"all6 an% practicall6 rea%il6 availale at an6 time %urin" t#e ne8t 3. %a6s to e
li&ui%ate% via outri"#t sale or via siple repurc#ase a"reements on an approved repur$hase
arket in or%er to meet oli"ations comin" %ue7 Fi&ui% assets referre% to in point )c/ of
.aragraph 4 of ,rticle 4.4 1#ic# are #el% in t#ir% countries 1#ere t#ere are transfer
restrictions or 1#ic# are %enominate% in non;convertile currencies s#all e consi%ere%
availale onl6 to t#e e8tent t#at t#e6 correspon% to outflo1s in t#e t#ir% countr6 or currenc6
in &uestion% unless the &nstitution $an deonstrate to the $opetent authorities that it has
appropriatel# hedged the ensuing $urren$# riskE
)%/ t#e li&ui% assets are controlle% 6 a li&ui%it6 mana"ement functionE
)e/ a portion of t#e li&ui% assets e5$ept those in points (a) and ($) of Arti$le B:B(4) is
perio%icall6 an% at least annuall6 li&ui%ate% via outri"#t sale or via siple repurc#ase
a"reements on an approved repur$hase arket for t#e follo1in" purposes:
)i/ to test t#e access to t#e mar5et for t#ese assets*
)ii/ to test t#e effectiveness of its processes for t#e li&ui%ation of assets,
)iii/ to test t#e usailit6 of t#e assets*
)iv/ to minimise t#e ris5 of ne"ative si"nallin" %urin" a perio% of stressE
)f/ price ris5s associate% 1it# t#e assets ma6 e #e%"e% ut t#e li&ui% assets are su!ect to
appropriate internal arran"ements t#at ensure t#at t#e6 are readil# availa!le to the treasur#
*hen needed and espe$iall# that the# are not A use% in ot#er on"oin" operations* inclu%in":
)i/ #e%"in" or ot#er tra%in" strate"iesE
)ii/ provi%in" cre%it en#ancements in structure% transactionsE
)iii/ $overing operational costs7
)"/ t#e %enomination of t#e li&ui% assets is consistent 1it# t#e %istriution 6 currenc6 of
li&ui%it6 outflo1s after t#e %e%uction of inflo1s7
Article 4*"
?aluation of liqui$ assets
17 2#e value of a li&ui% asset to e reporte% s#all e its mar5et value* su!ect to appropriate
#aircuts t#at reflect at least t#e %uration* t#e cre%it an% li&ui%it6 ris5 an% t6pical repo
#aircuts in perio%s of "eneral mar5et stress7 2#e #aircuts s#all not e less t#an 1+O for t#e
assets in point )%/ of ,rticle 4.4)1/7 0f t#e Ainstitution #e%"es t#e price ris5 associate%
1it# an asset* it s#all ta5e into account t#e cas# flo1 resultin" from t#e potential close;out
of t#e #e%"e7
-7 S#ares or units in C04s as referre% to in ,rticle 4.4)4/ s#all e su!ect to #aircuts* loo5in"
t#rou"# to t#e un%erl6in" assets as follo1s:
)a/ .O for t#e assets in point )a/ of ,rticle 4.4)1/E
)/ +O for t#e assets in points )/ an% )c/ of ,rticle 4.4)1/ E
)c/ -.O for t#e assets in point )%/ of ,rticle 4.4)1/7
2#e loo5;t#rou"# approac# s#all e applie% as follo1s:
)a/ 1#ere t#e institution is a1are of t#e un%erl6in" e8posures of a C04* it ma6 loo5
t#rou"# to t#ose un%erl6in" e8posures in or%er to assi"n t#em to points )a/ to )%/ of
,rticle 4.4)1/E
)/ 1#ere t#e institution is not a1are of t#e un%erl6in" e8posures of a C04* it s#all e
assume% t#at t#e C04 invests* to t#e ma8imum e8tent allo1e% un%er its man%ate* in
%escen%in" or%er in t#e asset t6pes referre% to in points )a/ to )%/ of ,rticle 4.4)1/
until t#e ma8imum total investment limit is reac#e%7
37 0nstitutions shall develop ro!ust ethodologies and pro$esses to $al$ulate and report the
arket value and hair$uts for shares or units in C&2s3 -nl# *here the# $an deonstrate
to the satisfa$tion of the $opetent authorit# that the aterialit# of the e5posure does
not 9ustif# the developent of their o*n ethodologies, institutions ma6 rel6 on t#e
follo1in" t#ir% parties to calculate an% report t#e #aircuts for s#ares or units in C04s* in
accor%ance 1it# t#e met#o%s set out in points )a/ an% )/ in t#e secon% supara"rap# of
para"rap# -:
)a/ t#e %epositor6 institution of t#e C04 provi%e% t#at t#e C04 e8clusivel6 invests in
securities an% %eposits all securities at t#is %epositor6 institutionE
)/ for ot#er C04s* t#e C04 mana"ement compan6* provi%e% t#at t#e C04 mana"ement
compan6 meets t#e criteria set out in ,rticle 1->)3/)a/7
2#e correctness of t#e calculations 6 t#e %epositor6 institution or t#e C04 mana"ement
compan6 s#all e confirme% 6 an e8ternal au%itor7
Article 4*%
2urrencies with constraints on the availability of liqui$ assets
17 $D, s#all assess t#e availailit6 for institutions of t#e li&ui% assets referre% to in point )/
of ,rticle 4.4)1/ in t#e currencies t#at are relevant for $4 institutions7
-7 ?#ere t#e !ustifie% nee%s for li&ui% assets in li"#t of t#e re&uirement in ,rticle 4.1 are
e8cee%in" t#e availailit6 of t#ose li&ui% assets in a currenc6* one or more of t#e follo1in"
%ero"ations s#all appl6:
)!/ 6 %ero"ation to point )g/ of ,rticle 4.+* t#e A%enomination of t#e li&ui% assets ma6
e inconsistent 1it# t#e %istriution 6 currenc6 of li&ui%it6 outflo1s after t#e
%e%uction of Ainflo1s7
)c/ for currencies of a Me!er "tate or t#ir% countries* re&uire% li&ui% assets ma6 e
sustitute% 6 cre%it lines from t#e central an5 of t#at Me!er "tate or t#ir%
countr6* 1#ic# are contractuall6 irrevocal6 committe% for t#e ne8t 3. %a6s an% are
fairl6 price%* in%epen%ent of t#e amount currentl6 %ra1n* provi%e% t#at t#e
competent aut#orities of that Me!er "tate or t#ir% countr6 %o t#e same an% that
Me!er "tate or t#ir% countr6 #as comparale reportin" re&uirements in place7
37 2#e %ero"ations applie% in accor%ance 1it# para"rap# - s#all e inversel6 proportional to
t#e availailit6 of t#e relevant assets7 2#e !ustifie% nee%s of institutions s#all e assesse%
ta5in" into account t#eir ailit6 to re%uce* 6 soun% li&ui%it6 mana"ement* t#e nee% for
t#ose li&ui% assets an% t#e #ol%in"s of t#ose assets 6 ot#er mar5et participants7
47 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s listin" t#e currencies 1#ic#
meet t#e con%itions set out in t#is ,rticle7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission 6 C4
Mar$h 2:4B3
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle
1+ of Re"ulation )$4/Bo 1.93/-.1.7
+7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e derogations referre%
to in para"rap# 2 in$luding the $onditions of their appli$ation3
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4
Mar$h 2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e regulator# tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/Bo 1.93/-.1.7
A
Article 4*&
7iqui$ity outflows
17 .ending the spe$ifi$ation of a li6uidit# re6uireent in a$$ordan$e *ith Arti$le BBB,
li6uidit# outflo1s to e reporte% s#all in$lude:
)a/ t#e Acurrent amount outstan%in" for retail %eposits as set out in ,rticle 4.9E
)/ t#e Acurrent amounts outstan%in" of ot#er liailities t#at come %ue* can e calle% for
pa6out !# the issuing institutions or !# the provider of the funding or entail an
implicit e8pectation of t#e provi%er of t#e fun%in" t#at t#e institution 1oul% repa6
t#e liailit6 %urin" t#e ne8t 3. %a6s as set out in ,rticle 41.E
)c/ t#e a%%itional outflo1s referre% to in ,rticle 411E
)%/ t#e Ama8imum amount t#at can e %ra1n %urin" t#e ne8t 3. %a6s from un%ra1n
$oitted cre%it an% li&ui%it6 facilities A* as set out in ,rticle 41-E
)e/ t#e a%%itional outflo1s i%entifie% in t#e assessment accor%in" to para"rap# -7
-7 0nstitutions s#all re"ularl6 assess t#e li5eli#oo% an% potential volume of li&ui%it6 outflo1s
%urin" t#e ne8t 3. %a6s as far as pro%ucts or services are concerne%* 1#ic# are not
capture% in ,rticles 41. to 41- an% 1#ic# the# offer or sponsor or 1#ic# potential
purc#asers 1oul% consi%er to e associate% 1it# the* inclu%in" !ut not liited to
li6uidit# outflo*s resulting fro an6 contractual arran"ements suc# as ot#er off alance
s#eet an% contin"ent fun%in" oli"ations, in$luding, !ut not liited to $oitted funding
fa$ilities, un=dra*n loans and advan$es to *holesale $ounterparties, ortgages that
have !een agreed !ut not #et dra*n do*n, $redit $ards, overdrafts, planned outflo*s
related to rene*al or e5tension of ne* retail or *holesale loans, planned derivative
pa#a!les and trade finan$e off !alan$e sheet related produ$ts, as defined in Arti$le B4?
and Anne5 43 2#ese outflo1s s#all e assesse% un%er t#e assumption of a comine%
i%ios6ncratic an% mar5et;1i%e stress scenario7
3or t#is assessment* institutions s#all ta5e particular account of material reputational
%ama"es t#at coul% result from Anot provi%in" li&ui%it6 support to suc# pro%ucts or
services7 0nstitutions s#all report not less than #earl# to the $opetent authorities those
pro%ucts an% services of *hi$h t#e li5eli#oo% an% volume referre% to in t#e first
supara"rap# are material Aan% t#e competent aut#orities s#all %etermine t#e outflo1s to
e assi"ne%7 +he $opetent authorities a# appl# an outflo* rate up to @J for trade
finan$e off !alan$e sheet related produ$ts, as defined in Arti$le B4? and Anne5 43
2#e competent aut#orities s#all at least annuall6 report to $D, t#e t6pes of pro%ucts or
services for 1#ic# t#e6 #ave %etermine% outflo1s on t#e asis of t#e reports from
institutions7 2#e6 s#all in t#is report also e8plain t#e met#o%olo"6 applie% to %etermine t#e
outflo1s7
A
Article 4*(
Hutflows on retail $eposits
17 0nstitutions s#all separatel# report t#e amount of retail %eposits Acovere% 6 a Deposit
Guarantee Sc#eme accor%in" to Directive 94/19/EC or an e&uivalent %eposit "uarantee
sc#eme in a t#ir% countr6, and ultipl# 6 at least +O 1#ere t#e %eposit is eit#er
)a/ part of an estalis#e% relations#ip ma5in" 1it#%ra1al #i"#l6 unli5el6E
)/ #el% in a transactional account* inclu%in" accounts to 1#ic# salaries are re"ularl6
cre%ite%7
-7 0nstitutions s#all multipl6 ot#er retail %eposits not referre% to in para"rap# 1 6 at least
1.O7
37 +aking into a$$ount the !ehaviour of lo$al depositors as advised !# national $opetent
authorities, EBA shall pu!lish guidelines !# C4 (e$e!er 2:4C on the $riteria to
%etermine t#e con%itions of application of para"rap#s 1 an% - in relation to t#e
i%entification of retail %eposits su!ect to different outflo1s A an% t#e %efinitions of t#ose
pro%ucts Afor purposes of t#is 2itle7 2#ese guidelines s#all ta5e account of t#e li5eli#oo%
of t#ese %eposits to lea% to outflo1s of li&ui%it6 %urin" t#e ne8t 3. %a6s7 2#ese outflo1s
s#all e assesse% un%er t#e assumption of a comine% i%ios6ncratic an% mar5et;1i%e stress
scenario7
A
47 Fot*ithstanding *hat is spe$ified under Arti$le B:> (4) and (2), institutions s#all
multipl6 retail %eposits t#at t#e6 #ave ta5en in t#ir% countries 6 a #i"#er percenta"e t#an
provi%e% for in para"rap#s 1 an% - if suc# percenta"e is provi%e% 6 comparale t#ir%
countr6 reportin" re&uirements7
+7 0nstitutions ma6 e8clu%e from t#e calculation of outflo1s certain clearl6 circumscrie%
cate"ories of retail %eposits as lon" as in eac# an% ever6 instance t#e institution ri"orousl6
applies t#e follo1in" for t#e 1#ole cate"or6 of t#ose %eposits* unless in in%ivi%uall6
!ustifie% circumstances of #ar%s#ip for t#e %epositor:
)a/ 1it#in 3. %a6s* t#e %epositor is not allo1e% to 1it#%ra1 t#e %epositE
)/ for earl6 1it#%ra1als 1it#in 3. %a6s* t#e %epositor #as to pa6 a penalt6 that in$ludes
the loss of interest !et*een the date of *ithdra*al and the $ontra$tual aturit#
date plus a aterial penalt# that %oes not #ave to e8cee% t#e interest %ue for t#e
time elapse% !et*een t#e date of A%eposit and the date of *ithdra*al7
Article 41*
Hutflows on other liabilities
17 0nstitutions s#all multipl6 liailities resultin" from t#e institutionGs o1n operatin"
e8penses 6 .O7
-7 0nstitutions s#all multipl6 liailities resultin" from secure% len%in" an% capital mar5et
%riven transactions as %efine% in ,rticle 188 !#'
(a) :J up to the value of the li6uid assets a$$ording to Arti$le B:? if t#e6 are
collateralise% 6 assets t#at 1oul% &ualif6 as li&ui% assets accor%in" to ,rticle 4.4
A%
A
(!) 4::J over the value of the li6uid assets a$$ording to Arti$le B:?, if the# are
$ollaterali<ed !# assets that *ould 6ualif# as li6uid assets a$$ording to Arti$le B:B%
(!a) 4::J if the# are $ollaterali<ed !# assets that *ould not 6ualif# as li6uid assets
a$$ording to Arti$le B:B, *ith the e5$eption of transa$tions $overed !# Arti$le
B4:(2)($) and B4:(2)(d)3
A
($) 2@J if the# are $ollaterali<ed !# assets that 1oul% not &ualif6 as li&ui% assets
accor%in" to ,rticle 4.4 an% t#e len%er is t#e central governent, a pulic sector
entit6 of t#e 9emer State in 1#ic# t#e cre%it institution has !een authorised or has
esta!lished a !ran$h, or a Multilateral (evelopent Bank3 ."Es that re$eive this
treatent are liited to those that have a risk *eight of 2:J or lo*er in
a$$ordan$e *ith Chapter 2, +itle && of .art C3
(d) :J if the lender is a $entral !ank3
47 0nstitutions s#all multipl6 liailities resultin" from %eposits t#at #ave to e maintaine%:
)a/ 6 t#e %epositor in or%er to otain clearin"* custo%6 or cas# mana"ement or other
$opara!le services from t#e institutionE
)/ in t#e conte8t of common tas5 s#arin" 1it#in an institutional protection sc#eme
meetin" t#e re&uirements of ,rticle 1.8)>/ or as a le"al or statutor6 minimum
%eposit 6 anot#er entit6 ein" a 9emer of t#e same institutional protection
sc#emeE
($) !# the depositor in the $onte5t of an esta!lished operational relationship other
than that entioned under point (a)%
(!a) !# the depositor to o!tain $ash $learing and $entral $redit institution servi$es and
*here the $redit institution is asso$iated in a net*ork in a$$ordan$e *ith legal or
statutor# provisions%
6 +O in t#e case of point )a/ to t#e e8tent to 1#ic# t#e6 are covere% 6 a Deposit
Guarantee Sc#eme accor%in" to Directive 94/19/$C or an e&uivalent %eposit "uarantee
sc#eme in a t#ir% countr6 an% 6 -+O ot#er1ise7 (eposits fro $redit institutions pla$ed
at $entral $redit institutions that are $onsidered as li6uid assets a$$ording to Arti$le
B:B(4)(d$) are ultiplied !# 4::J outflo* rate3
Clearin"* custo%6 or cas# mana"ement or other $opara!le services referre% to in point
)a) and (!a/ onl6 covers suc# services to t#e e8tent t#at t#e6 are ren%ere% in t#e conte8t of
an estalis#e% relations#ip on 1#ic# t#e %epositor #as sustantial %epen%enc67 2#e6 s#all
not merel6 consist in correspon%ent an5in" or prime ro5era"e services an% t#e institution
s#all #ave Aevi%ence t#at t#e client is unale to 1it#%ra1 Aamounts legall# due over a 3.
%a6 #oriLon 1it#out compromisin" its operational functionin"7
.ending a unifor definition of an esta!lished operational relationship as referred to in
point ($) of su!paragraph B34 a!ove, institutions shall esta!lish theselves the $riteria to
identif# an esta!lished operational relationship for *hi$h the# have eviden$e that the
$lient is una!le to *ithdra* aounts legall# due over a C: da# hori<on *ithout
$oproising their operational fun$tioning and shall report these $riteria to the
$opetent authorities3 Copetent authorities a#, in the a!sen$e of a unifor
definition, provide general guidan$e that institutions shall follo* in identif#ing deposits
aintained !# the depositor in a $onte5t of an esta!lished operational relationship3
+7 0nstitutions s#all multipl6 liailities resultin" from %eposits 6 clients t#at are not financial
customers Ato t#e e8tent t#e6 %o not fall un%er para"rap# B !# B:J and shall ultipl# the
aount of these lia!ilities $overed !# a (eposit 8uarantee "$hee a$$ording to
(ire$tive >BD4>DEC or an e6uivalent (eposit 8uarantee "$hee in a third $ountr# !#
2:J3
=7 0nstitutions s#all ta5e outflo*s an% inflo*s e8pecte% over t#e 3. %a6 #oriLon from t#e
contracts liste% in ,nne8 00 into account on a net asis across counterparties an% s#all
multipl6 t#em 6 1..O in case of a net outflo*7 Bet asis s#all mean also net of collateral
to e receive% t#at &ualifies as li&ui% assets un%er ,rticle 4.47
>7 0nstitutions s#all separatel# report ot#er liailities t#at %o not fall un%er para"rap#s 1 to @3
87 Copetent aut#orities ma6 "rant t#e permission to appl6 a lo1er outflo* percenta"e on a
case;6;case asis, !# derogation to paragraph 0, 1#en Aall of t#e follo1in" con%itions
are fulfille%:
)a/ t#e %epositor is'
(i) a parent or susi%iar6 institution of t#e institution or anot#er susi%iar6 of t#e
same parent institution A%
(ii) lin5e% to t#e institution 6 a relations#ip 1it#in t#e meanin" of ,rticle 1-)1/ of
Directive 83/349/$$CE
)iii) an institution falling *ithin the sae institutional prote$tion s$hee eeting
the re6uireents of Arti$le 4:A(0)%
(iv) the $entral institution or a e!er of a net*ork $opliant *ith Arti$le CA>
(2) d)%
)/ t#ere are reasons to e8pect a lo1er outflo1 over t#e ne8t 3. %a6s even un%er a
comine% i%ios6ncratic an% mar5et;1i%e stress scenarioE
)c/ a correspon%in" s6mmetric or more conservative inflo1 is applie% 6 t#e %epositor
6 %ero"ation from ,rticle 413E
)%/ t#e institution an% t#e %epositor are estalis#e% in t#e same 9emer State A
Aa3 Copetent authorities a# *aive the $onditions set out in point (d) of paragraph A
*here ,rticle 18 )1/ point (!) is applied3 &n that $ase additional o!9e$tive $riteria as set
out in the legislative a$t referred to in Arti$le BBB have to !e et3 ?#ere suc# lo1er
outflo1 is permitte% to e applie%* t#e competent aut#orities s#all inform $D, aout t#e
result of the pro$ess referred to in Arti$le 4A (4) point (!)3 +he fulfilent of the
con%itions for suc# lo1er outflo1s s#all e re"ularl6 revie1e% 6 t#e competent
aut#orities7
>3 B# 4 Eanuar# 2:4@, EBA shall develop draft regulator# te$hni$al standards to further
spe$if# the additional o!9e$tive $riteria referred to in paragraph Aa3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in this paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$les 4:
to 4B of )egulation (E2) Fo 4:>CD2:4:3
Article 411
A$$itional Hutflows
17 Collateral ot#er t#an assets correspon%in" to ,rticle 4.4)1/ a/ to c/* 1#ic# is poste% 6 t#e
institution for contracts liste% in ,nne8 00 and $redit derivatives* s#all e su!ect to an
a%%itional outflo1 of 2:J7
-7 &nstitutions shall notif# to the $opetent authorities all $ontra$ts entered into the
$ontra$tual $onditions of *hi$h lead, *ithin C: da#s, follo*ing a aterial deterioration
of the $redit 6ualit# of the institution, to li6uidit# outflo*s or additional $ollateral needs3
&f the $opetent authorities $onsider su$h $ontra$ts material in relation to t#e potential
li&ui%it6 outflo1s of t#e institution* the# shall re6uire t#e institution to a%% an a%%itional
outflo1 for those $ontra$ts, in$luding $orresponding to t#e a%%itional collateral nee%s
resultin"* Afrom a material %eterioration in t#e cre%it &ualit6 of t#e institution suc# as a
%o1n"ra%e in its e8ternal cre%it assessment 6 t#ree notc#es7 2#e institution shall
regularl# revie* the e8tent of t#is material %eterioration in light of *hat is relevant under
the $ontra$ts it has entered into and shall notif# the result of its revie* to t#e competent
authorities7
37
2#e institution s#all a%% an a%%itional outflo1 correspon%in" to collateral nee%s t#at 1oul%
result from t#e impact of an a%verse mar5et scenario on t#e institution(s derivatives
transa$tions, finan$ing transa$tions and other contracts if material7
$D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to %etermine t#e con%itions of
application in relation to t#e notion of materialit6 an% met#o%s for t#e measurement of t#is
a%%itional outflo17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 C4
Mar$h 2:4B3
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e secon% supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
47 2#e institution s#all a%% an a%%itional outflo1 correspon%in" to t#e mar5et value of
securities or ot#er assets sol% s#ort an% to e %elivere% 1it#in t#e 3. %a6s #oriLon unless
t#e institution o1ns t#e securities to e %elivere% or #as orro1e% t#em at terms re&uirin"
t#eir return onl6 after t#e 3. %a6 #oriLon an% t#e securities %o not form part of t#e
institutions li&ui% assets7
Ba3 +he institution shall add an additional outflo* $orresponding to'
(i) the e5$ess $ollateral the institution holds that $an !e $ontra$tuall# $alled at an#
tie !# the $ounterpart#%
(ii) $ollateral that is due to !e returned to a $ounterpart#%
(iii) $ollateral that $orresponds to assets that *ould 6ualif# as li6uid assets for the
purposes of Arti$le B:B that $an !e su!stituted for assets $orresponding to assets
that *ould not 6ualif# as li6uid assets for the purposes of Arti$le B:B *ithout the
$onsent of the $redit institution3
@a3 (eposits re$eived as $ollateral shall not !e $onsidered lia!ilities for the purposes of
Arti$le B4: !ut *ill !e su!9e$t to the provisions of this Arti$le *here appli$a!le3
Article 412
Hutflows from cre$it an$ liqui$ity facilities
17 0nstitutions s#all report outflo1s from $oitted cre%it fa$ilities an% $oitted li&ui%it6
facilities* 1#ic# s#all e %etermine% as a percenta"e of t#e ma8imum amount t#at can e
%ra1n *ithin the ne5t C: da#s7 2#is ma8imum amount t#at can e %ra1n ma6 e assesse%
net of an# li6uidit# re6uireent that *ould !e andated under Arti$le B:A paragraph 2
for the trade finan$e off !alan$e sheet ites and net of t#e value accor%in" to ,rticle 4.=
of collateral to e provi%e% if t#e institution can reuse t#e collateral an% if t#e collateral is
held in t#e form of li&ui% assets in accor%ance 1it# ,rticle 4.47 2#e collateral to e
provi%e% shall not e assets issue% 6 t#e counterpart6 of t#e facilit6 or one of its affiliate%
entities7 0f t#e necessar6 information is availale to t#e institution* t#e ma8imum amount
t#at can e %ra1n for cre%it an% li&ui%it6 facilities As#all e %etermine% as t#e ma8imum
amount t#at coul% e %ra1n "iven the $ounterpart#7s o1n oli"ations or given the pre=
defined $ontra$tual dra*do*n s$hedule comin" %ue over t#e ne8t 3. %a6s7
-7 2#e ma8imum amount t#at can e %ra1n of un%ra1n $oitted cre%it fa$ilities an%
undra*n $oitted li&ui%it6 facilities *ithin the ne5t C: da#s s#all e multiplie% 6 +O
if t#e6 &ualif6 for t#e retail e8posure class un%er t#e Stan%ar%ise% or 0RD approac#es for
cre%it ris57
37 2#e ma8imum amount t#at can e %ra1n of un%ra1n $oitted cre%it fa$ilities an%
undra*n $oitted li&ui%it6 facilities *ithin the ne5t C: da#s s#all e multiplie% 6 1.O
1#ere t#e6 meet t#e follo1in" con%itions:
)a/ t#e6 %o not &ualif6 for t#e retail e8posure class un%er t#e Stan%ar%ise% or 0RD
approac#es for cre%it ris5E
)/ t#e6 #ave een provi%e% to clients t#at are not financial customersE
)c/ t#e6 #ave not een provi%e% for t#e purpose of replacin" fun%in" of t#e client in
situations 1#ere #e is unale to otain its fun%in" re&uirements in t#e financial
mar5ets7
Ca3 +he $oitted aount of a li6uidit# fa$ilit# that has !een provided to an "".E for the
purpose of ena!ling su$h "".E to pur$hase assets other than se$urities fro $lients that
are not finan$ial $ustoers shall !e ultiplied !# 4:J to the e5tent that it e5$eeds the
aount of assets $urrentl# pur$hased fro $lients and *here the a5iu aount that
$an !e dra*n is $ontra$tuall# liited to the aount of assets $urrentl# pur$hased3
47 2#e institutions shall report the ma8imum amount t#at can e %ra1n of ot#er un%ra1n
$oitted cre%it fa$ilities an% undra*n $oitted li&ui%it6 facilities *ithin the ne5t C:
da#s7 2#is applies in particular to t#e follo1in":
)a/ li&ui%it6 facilities t#at t#e institution #as "rante% to SSP$s other than des$ri!ed in
paragraph C(!) a!oveE
)/ arran"ements un%er 1#ic# t#e institution is re&uire% to u6 or s1ap assets from a
SSP$7
($) fa$ilities e5tended to $redit institutions
(d) fa$ilities e5tended to finan$ial institutions and investent firs
+7 0nstitutions* 1#ic# #ave een set up an% are sponsore% 6 at least one 9emer StateGs
central or re"ional "overnment ma6 appl6 t#e treatments in para"rap#s - an% 3 6
%ero"ation from para"rap# 4 also to cre%it an% li&ui%it6 facilities t#at are provi%e% to
institutions for t#e sole purpose of %irectl6 or in%irectl6 fun%in" promotional loans
&ualif6in" for t#e e8posure classes referre% to in t#ose para"rap#s7 &f those prootional
loans are e5tended via another institution as interediar# (pass through loans), a
s#etri$ in and outflo* a# !e applied !# institutions, !# derogation of paragraph
2(d) of Arti$le B4C3 2#ose promotional loans s#all e availale onl6 to persons 1#o are not
financial customers on a non;competitive* not for profit asis in or%er to promote pulic
polic6 o!ectives of the European 2nion andDor t#at 9emer StateGs central or re"ional
"overnment7 0t s#all onl6 e possile to %ra1 on suc# facilities follo1in" the reasona!l#
e5pe$ted deand for a promotional loan an% up to t#e amount of suc# deand linked to a
su!se6uent reporting on the use of the funds dis!ursed3
Article 413
'nflows
17 0nstitutions s#all report t#eir Ali&ui%it6 inflo1s7 Cappe% li&ui%it6 inflo1s s#all e t#e
li&ui%it6 inflo1s limite% to >+O of li&ui%it6 outflo1s7 0nstitutions ma6 e8empt li&ui%it6
inflo1s from %eposits place% 1it# ot#er institutions an% &ualif6in" for t#e treatments set
out in ,rticle 1.8)=/ or ,rticle 1.8)>/ from t#is limit7 &nstitutions a# e5ept li6uidit#
inflo*s fro onies due fro !orro*ers and !ond investors related to ortgage lending
funded !# !onds eligi!le for the treatent set out in Arti$le 42B(C), (B) or (@) or as
defined in Arti$le @2(B) of (ire$tive 2::>D?@DEC fro this liit3 &nstitutions a# e5ept
inflo*s fro prootional loans that the institution has passed through3 "u!9e$t to the
prior approval of the $opetent authorit# responsi!le for supervision on an individual
!asis, the institution a# full# or partiall# e5ept inflo*s *here the provider is a parent
or a su!sidiar# institution of the institution or another su!sidiar# of the sae parent
institution or linked to the institution !# a relationship *ithin the eaning of Arti$le
42(4) of (ire$tive ACDCB>DEEC3
-7 2#e li&ui%it6 inflo1s s#all e measure% over t#e ne8t 3. %a6s7 2#e6 s#all comprise onl6
contractual inflo1s from e8posures t#at are not past %ue an% for 1#ic# t#e institution #as
no reason to e8pect non;performance 1it#in t#e 3.;%a6 time #oriLon7 Li6uidit# inflo*s
s#all e reported in full 1it# At#e follo1in" inflo*s reported separatel#'
)a/ monies %ue from customers t#at are not financial customers for the purposes of
prin$ipal pa#ent shall e re%uce% 6 +.O of t#eir value or 6 t#e contractual
commitments to t#ose customers to e8ten% fun%in"* 1#ic#ever is #i"#er7 2#is %oes
not appl6 to monies %ue from secure% len%in" an% capital mar5et %riven transactions
as %efine% in ,rticle 188 t#at are collateralise% 6 li&ui% assets accor%in" to ,rticle
4.4 as referred to in point (!) of this Arti$le3
B# derogation, institutions that have re$eived a $oitent referred to in Arti$le
B42(@) in order for the to dis!urse a prootional loan to a final re$ipient a#
take an inflo* into a$$ount up to the aount of the outflo* the# appl# to the
$orresponding $oitent to e5tend those prootional loans3
(aa) onies due fro trade finan$ing transa$tions referred to in point (!) in the se$ond
su!paragraph of Arti$le 4@A(C) *ith a residual aturit# of up to C: da#s, shall !e
taken into a$$ount in full as inflo*s3
(a!) assets *ith an undefined $ontra$tual end date shall !e taken into a$$ount *ith a
2:J inflo* provided that the $ontra$t allo*s the !ank to *ithdra* and re6uest
pa#ent *ithin C: da#s3
)/ monies %ue from secure% len%in" an% capital mar5et %riven transactions as %efine% in
,rticle 188 if t#e6 are collateralise% 6 li&ui% assets as defined in Arti$le B:B(4)*
s#all not e ta5en into account up to t#e value net of #aircuts of t#e li&ui% assets an%
s#all e ta5en into account in full for t#e remainin" monies %ueE
)c/ monies %ue t#at t#e institution o1in" t#ose monies treats accor%in" to ,rticle 41.)4/*
shall !e ultiplied !# a $orresponding s#etri$al inflo*3
($a) onies due fro positions in a9or inde5 e6uit# instruents provided there is no
dou!le $ounting *ith li6uid assets3
(d) an# undra*n $redit or li6uidit# fa$ilities and an# other $oitents re$eived shall
not !e taken into a$$ount3
37 -utflo*s an% inflo*s e8pecte% over t#e 3. %a6 #oriLon from t#e contracts liste% in ,nne8
00 s#all e reflecte% on a net asis across counterparties an% s#all e multiplie% 6 1..O of
a net inflo*7 Bet asis s#all mean also net of collateral to e receive% t#at &ualifies as
li&ui% assets un%er ,rticle 4.47
47 Competent aut#orities ma6 "rant t#e permission to appl6* 6 %ero"ation from para"rap# -
point d/* a #i"#er inflo1 on a case 6 case asis for cre%it an% li&ui%it6 facilities 1#en all
of t#e follo1in" con%itions are fulfille%:
)a/ t#ere are reasons to e8pect a #i"#er inflo1 even un%er a $o!ined arket and
i%ios6ncratic stress of the providerE
)/ t#e $ounterpart# is a parent or susi%iar6 institution of t#e institution or anot#er susi%iar6
of t#e same parent institution or lin5e% to t#e institution 6 a relations#ip 1it#in t#e
meanin" of ,rticle 1-)1/ of Directive 83/349/$$C or a e!er of the sae institutional
prote$tion s$hee referred to in Arti$le 4:A(0) or the $entral institution or a e!er of
a net*ork that is su!9e$t to the *aiver referred to in Arti$le >%
($) a $orresponding s#etri$ or ore $onservative outflo* is applied !# the $ounterpart#
!# derogation fro Arti$le B4: to B42%
(d) t#e institution an% t#e $ounterpart# s#all e estalis#e% in t#e same 9emer State A
Ba3 Copetent authorities a# *aive the $ondition set out in point (d) *here arti$le 4A (4)
point (!) is applied3 &n that $ase additional o!9e$tive $riteria as set out in the legislative
a$t referred to in Arti$le BBB have to !e et3 ;here su$h higher inflo* is peritted to !e
applied, the $opetent authorities shall infor EBA a!out the result of the pro$ess
referred to in Arti$le 4A (4) point !3 1ulfilent of the $onditions for su$h higher inflo*s
shall !e regularl# revie*ed !# the $opetent authorities3
B!3 B# 4 Eanuar# 2:4@, EBA shall develop draft regulator# te$hni$al standards to further
spe$if# the additional o!9e$tive $riteria referred to in paragraph Ba3
.o*er is delegated to the Coission to adopt the regulator# te$hni$al standards
referred to in this paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$les 4:
to 4B of )egulation (E2) Fo 4:>CD2:4:3
+7 0nstitutions s#all not report inflo1s from an6 of t#e li&ui% assets reporte% in accor%ance
1it# ,rticle 4.4 ot#er t#an pa6ments %ue on t#e assets t#at are not reflecte% in t#e mar5et
value of t#e asset7
=7 0nstitutions s#all not report inflo1s from an# ne* oli"ations entered into7
>7 0nstitutions s#all ta5e li&ui%it6 inflo1s 1#ic# are to e receive% in t#ir% countries 1#ere
t#ere are transfer restrictions or 1#ic# are %enominate% in non;convertile currencies into
account onl6 to t#e e8tent t#at t#e6 correspon% to outflo1s respe$tivel# in t#e t#ir% countr6
or currenc6 in &uestion7
Arti$le B4Ca
2pdating 1uture li6uidit# re6uireents
1ollo*ing, the adoption !# the Coission of a spe$ifi$ation of a li6uidit# re6uireent in
a$$ordan$e *ith Arti$le BBB, EBA a# develop draft ipleenting te$hni$al standards to spe$if#
the $onditions set out in Arti$les B:>(4), B4: (*ith the e5$eption of paragraphs A, Aa and >), and
B42 to take a$$ount of standards agreed internationall#3
A
.o*er is $onferred on the Coission to adopt the ipleenting te$hni$al standards referred to
in this paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$les 4@ of )egulation (E2)
Fo 4:>CD2:4:
Title III
Reportin5 on stHle 1un.in5
Article 414
'tems provi$in# stable fun$in#
17 &nstitutions shall report to the $opetent authorities, in a$$ordan$e *ith the reporting
re6uireents set out in Arti$le B:C34 and the unifor reporting forats referred to in
Arti$le B:C3C, the follo*ing ites and their $oponents in order to allo* an assessent
of the availa!ilit# of sta!le funding:
)a/ o1n fun%s after dedu$tion *here appropriateE
(i) tier 4 $apital instruents
(ii) tier 2 $apital instruents
(iii) other preferred shares and $apital instruents in e5$ess of +ier 2 allo*a!le
aount having an effe$tive aturit# of one #ear or greater%
)/ t#e follo1in" liailities not inclu%e% in point )a/ A
)i/ retail %eposits as %efine% in Arti$le B::(2) that 6ualif# for the treatent in
,rticle 4.9)1/E
)ii/ retail %eposits as defined in Arti$le B::(2) t#at &ualif6 for t#e treatment in
,rticle 4.9)-/%
)iii/ %eposits t#at &ualif6 for t#e treatment in ,rticle 41.)B/E
)iv/ of t#e %eposits in )iii/* t#ose t#at are su!ect to a (eposit 8uarantee "$hee
accor%in" to Directive 94/19/$C or an e&uivalent (eposit 8uarantee "$hee
in a t#ir% countr6 %eposit "uarantees 1it#in t#e terms of ,rticle 4.9)-/E
)v/ of t#e %eposits in )iii/* t#ose t#at fall un%er point )/ of ,rticle 41.(B)%
(va) of the deposits in (iii), those that fall under point (!a) of ,rticle 41.)B;E
)vi/ amounts %eposite% not fallin" un%er )i/, (ii) or )iii/ if t#e6 are not %eposite% !#
financial customersE
)vii/ all fun%in" otaine% from financial customersE
)viii/ separatel6 for amounts fallin" un%er )vi/ an% )vii/ respectivel6* fun%in" from
secure% len%in" an% capital mar5et %riven transactions as %efine% in ,rticle
188'
= collateralise% 6 assets that *ould 6ualif# as li&ui% assets a$$ording to
,rticle 4.4E
= collateralise% 6 an6 ot#er assetsE
)i8/ liailities resultin" from securities issue% &ualif6in" for t#e treatment in ,rticle
1-4 (C) or (B) or as defined in Arti$le @2(B) of (ire$tive 2::>D?@DECE
)8/ ot#er liailities resultin" from securities issue% that do not fall under (a)
X lia!ilities resulting fro se$urities issued *ith an effe$tive aturit# of one
#ear or greater
X lia!ilities resulting fro se$urities issued *ith an effe$tive aturit# of less
than one #earE
)8i/ an6 ot#er liailities7
-7 ?#ere applicale* all items s#all e presente% in t#e follo1in" five uc5ets accor%in" to
t#e $losest of t#eir maturit6 %ate an% t#e earliest %ate at 1#ic# t#e6 can contractuall6 e
calle%:
)a/ 1it#in t#ree mont#s*
)/ et1een t#ree an% = mont#sE
)c/ et1een = an% 9 mont#sE
)%/ et1een 9 an% 1- mont#sE
)e/ after 1- mont#s7
Article 41
'tems requirin# stable fun$in#
17 2nless dedu$ted fro o*n funds, the follo1in" items s#all e reporte% to competent
aut#orities separatel6 in or%er to allo1 an assessment of t#e nee%s for stale fun%in":
)a/ t#e assets that *ould 6ualif# as li6uid assets a$$ording to ,rticle 4.4* ro5en %o1n
6 asset t6peE
)/ securities an% mone6 mar5et instruments not inclu%e% in )a/E
X assets 6ualif#ing for $redit step 4 under Arti$le 440%
X assets 6ualif#ing for $redit step 2 under Arti$le 440
X other assets
)c/ e&uit6 securities of non;financial entities liste% on a ma!or in%e8 in a reco"nise%
e8c#an"eE
)%/ ot#er e&uit6 securitiesE
)e/ "ol%E
)f/ ot#er precious metalsE
)"/ non;re$eiva!le loans an% receivales* and thereof separatel# those for *hi$h
!orro*ers are:
(i) natural persons other than $oer$ial sole proprietors and partnerships%
(ii) Asmall an% me%ium siLe% enterprises that 6ualif# for the retail e5posure $lass
under the "tandardised or &)B approa$hes for $redit risk or to a $opan#
*hi$h is eligi!le for the treatent entioned in Arti$le 4BA(B) and 1#ere t#e
a""re"ate %eposit place% 6 t#at client or "roup of connecte% clients is less
t#an 1 million $4RE
(iii) soverei"ns* central an5s an% PS$sE
(iv) clients not referre% to in )i/ an% )ii/ ot#er t#an financial customersE
(v) A
(vi) $lients not referred to in (i), (ii) and (iii) that are finan$ial $ustoers,
separatel# those that are $redit institutions and other finan$ial $ustoers3
(ga) non=rene*a!le loans and re$eiva!les referred to in (g), separatel# those that are'
(i) $ollateralised !# $oer$ial real estate (C)E)%
(ii) $ollateralised !# residential real estate ())E)%
(iii) at$h funded (pass=through) via !ond eligi!le for the treatent set out in
Arti$le 42B(C) or (B) or as defined in Arti$le @2(B) of (ire$tive 2::>D?@DEC3
)#/ %erivatives receivalesE
)i/ an6 ot#er assetsE
)!/ un%ra1n $oitted cre%it facilities t#at &ualif6 as (me%ium ris5( or (me%ium/lo1
ris5( un%er ,nne8 07
-7 ?#ere applicale* all items s#all e presente% in t#e five uc5ets %escrie% in ,rticle
414)-/7
PART ?E,EN
LE,ERA>E
Article 41"
2alculation of the levera#e ratio
17 0nstitutions s#all calculate t#eir levera"e ratio accor%in" to t#e met#o%olo"6 set out in
para"rap#s - to 1.7
-7 2#e levera"e ratio s#all e calculate% as an institution(s capital measure %ivi%e% 6 t#at
institution(s total e8posure measure an% s#all e e8presse% as a percenta"e7
0nstitutions s#all calculate t#e levera"e ratio as t#e simple arit#metic mean of t#e mont#l6
levera"e ratios over a &uarter7
37 3or t#e purposes of para"rap# -* t#e capital measure s#all e t#e 2ier 1 capital7
47 2#e total e8posure measure is t#e sum of t#e e8posure values of all assets an% off;alance
s#eet items not %e%ucte% 1#en %eterminin" t#e capital measure referre% to in para"rap# 3
and the add=ons deterined a$$ording to paragraph 03
?#ere institutions inclu%e a finan$ial se$tor entit# in 1#ic# t#e6 #ol% a si"nificant
investent a$$ording to Arti$le B: in t#eir consoli%ation accor%in" to t#e appli$a!le
accountin" frame1or5* ut not in t#eir pru%ential consoli%ation accor%in" to C#apter - of
2itle 00 of Part One* t#e6 s#all deterine the e5posure value for the signifi$ant
investent not a$$ording to paragraph @ point (a) !ut as t#e amount t#at is otaine% 6
multipl6in" t#e amount %efine% in point )a/ 1it# t#e factor %efine% in point )/:
)a/ t#e sum of t#e e8posure values of all e5posures of the finan$ial se$tor entit# in
*hi$h the signifi$ant investent is held%
)/ for all dire$t, indire$t and s#ntheti$ holdings of the institution of the Coon
E6uit# +ier 4 instruents of the finan$ial se$tor entit#, the total aount of su$h
ites not dedu$ted pursuant to Arti$les BB and B@(4) point (!) %ivi%e% 6 t#e total
amount of su$h ites3
A
+7 0nstitutions s#all %etermine t#e e8posure value of assets in accor%ance 1it# t#e follo1in"
principles:
)a/ t#e e8posure values of assets Ae8clu%in" items liste% in ,nne8 00 an% cre%it
%erivatives* means e8posure values as %efine% in the first senten$e of ,rticle 1.=)1/E
)/ p#6sical or financial collateral* "uarantees or cre%it ris5 miti"ation purc#ase% s#all
not e use% to re%uce e8posure values of assetsE
A
($) loans shall not !e netted *ith deposits3
=7 0nstitutions s#all %etermine t#e e8posure value of $ontra$ts liste% in ,nne8 00 an% of cre%it
%erivatives in$luding those that are off=!alan$e sheet, in accor%ance 1it# the ethod set
out in ,rticle 2?>3
0n %eterminin" t#e e8posure value of items liste% in ,nne8 00 an% of cre%it %erivatives*
institutions s#all ta5e into account t#e effects of contracts for novation an% ot#er nettin"
a"reements* e8cept contractual cross;pro%uct nettin" a"reements* in accor%ance 1it#
,rticle -897
?aa3 B# *a# of derogation fro paragraph ?, institutions a# use the ethod set out in
Arti$le 20: to deterine the e5posure value of $ontra$ts listed in points 4 and 2 of Anne5
&& onl# *here the# also use this ethod for deterining the e5posure value of these
$ontra$ts for the purposes of eeting the o*n funds re6uireents set out in Arti$le A03
?a3 ;hen deterining the potential future $redit e5posure of $redit derivatives, institutions
shall appl# the prin$iples laid do*n in Arti$le 2>C(2) to all their $redit derivatives, not
9ust those assigned to the trading !ook3
>7 1or repurc#ase transactions* securities or commo%ities len%in" or orro1in" transactions*
lon" settlement transactions an% mar"in len%in" transactions in$luding those that are off=
!alan$e sheet, institutions shall for netting sets that $onsist
(a) in $ase of a aster netting agreeent that eets the re6uireents in Arti$le 2:4,
of all assets in$luded in all su$h transa$tions that are in$luded in this aster
netting agreeent, and
(!) other*ise of all assets in$luded in the transa$tion,
and shall deterine for ea$h netting set the add=on for $urrent $ounterpart# e5posure
a$$ording to the forula
;here
i N nu!er of the transa$tion in$luded in the netting set
N for transa$tion i, the value E
i
as defined in Arti$le 24@, paragraph C3
N for transa$tion i, the value C
i
as defined in Arti$le 24@, paragraph C
87 0nstitutions s#all %etermine t#e e8posure value of off;alance s#eet items* e8cept t#e items
referred to in paragraphs ? and 0, in accor%ance 1it# ,rticle 1.=)1/* su!ect to t#e
follo1in" mo%ifications to t#e $onversion fa$tors liste% in t#at ,rticle:
)a/ t#e $onversion fa$tor to !e applied to the noinal value for un%ra1n cre%it
facilities* 1#ic# ma6 e cancelle% uncon%itionall6 at an6 time 1it#out notice*
referre% to in t#e points (i) and (ii) of para"rap# 4 of ,nne8 0* is 1.OE
)/ t#e $onversion fa$tor for ediuDlo* risk trade related off=!alan$e=sheet ites
referred to in paragraph C(a) of Anne5 & and to offi$iall# supported e5port finan$e
related off !alan$e sheet ites referred to in paragraph C(!)(i) of Anne5 4 is 2:J%
(!a) the $onversion fa$tor for ediu risk trade related off=!alan$e sheet ites
referred to in paragraph 2a and paragraph 2(!)(i) of Anne5 & and to offi$iall#
supported e5port finan$e related off !alan$e sheet ites referred to in paragraph
2(!)(ii) is @:J3
(!!) the $onversion fa$tor for all other -ff;alance;s#eet items liste% in ,nne8 0 is
1..O7
A
443 ;here national 8AA. re$ognises fidu$iar# assets on !alan$e sheet, in a$$ordan$e *ith
arti$le 4: of Coun$il (ire$tive A?D?C@DEEC4B, the# $an !e e5$luded fro the leverage ratio total
e5posure easure provided the assets eet the $riteria in &A" C>, as appli$a!le under )egulation
(EC) Fo 4?:?D2::2, for non= re$ognition and, *here appli$a!le, &1)" 4:, as appli$a!le under
)egulation (EC) Fo 4?:?D2::2, for non=$onsolidation3
Article 41%
5eportin# requirement
17 0nstitutions s#all sumit to t#e competent aut#orities all necessar6 information on t#e
levera"e ratio an% its components as %etermine% in ,rticle 41=7 Competent aut#orities s#all
ta5e into account t#is information 1#en un%erta5in" t#e supervisor6 revie1 referre% to in
,rticle 9- of Directive Jinserte% 6 OPK7
4B -E L C 02, C4 34 2 34 >A?, p3 4
&nstitutions shall also su!it to the $opetent authorities the inforation re6uired for
the purposes of the preparation of the report referred to in Arti$le BA23
Competent aut#orities s#all sumit t#e information receive% from institutions to $D, upon
its re&uest to facilitate t#e revie1 referre% to in ,rticle 48-7
-7 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to %etermine t#e Auniform
reportin" template A, t#e instructions on #o1 to use suc# template A, t#e fre&uencies an%
%ates of reportin" and the &+ solutions, for the purposes of the reporting re6uireent laid
do*n in paragraph 43
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission *ithin
one onth of the date of entr# into for$e of this )egulation3
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle
1+ of Re"ulation )$4/ Bo 1.93/-.1.7
PART EI>HT $I?CLO?URE BA
IN?TITUTION?
Title I >enerl
Prin2iples
Article 41&
Scope of $isclosure requirements
17 0nstitutions s#all pulicl6 %isclose t#e information lai% %o1n in 2itle 00* su!ect to t#e
provisions lai% %o1n in ,rticle 4197
-7 Permission 6 t#e competent aut#orities un%er Part t#ree of t#e instruments an%
met#o%olo"ies referre% to in 2itle 000 s#all e su!ect to t#e pulic %isclosure 6
institutions of t#e information lai% %o1n t#erein7
37 0nstitutions s#all a%opt a formal polic6 to compl6 1it# t#e %isclosure re&uirements lai%
%o1n in t#is Part* an% #ave policies for assessin" t#e appropriateness of t#eir %isclosures*
inclu%in" t#eir verification an% fre&uenc67 0nstitutions s#all also #ave policies for assessin"
1#et#er t#eir %isclosures conve6 t#eir ris5 profile compre#ensivel6 to mar5et participants7
?#ere t#ose %isclosures %o not conve6 t#e ris5 profile compre#ensivel6 to mar5et
participants* institutions s#all pulicl6 %isclose t#e information necessar6 in a%%ition to
t#at re&uire% in accor%ance 1it# para"rap# 17 Co1ever* t#e6 s#all onl6 e re&uire% to
%isclose information 1#ic# is material an% not proprietar6 or confi%ential in accor%ance
1it# ,rticle 4197
47 0nstitutions s#all* if re&ueste%* e8plain t#eir ratin" %ecisions to small an% me%ium;siLe
enterprises an% ot#er corporate applicants for loans* provi%in" an e8planation in 1ritin"
1#en as5e%7 2#e a%ministrative costs of t#e e8planation s#all e proportionate to t#e siLe
of t#e loan7
Article 41(
9on/material3 proprietary or confi$ential information
17 0nstitutions ma6 omit one or more of t#e %isclosures liste% in 2itle 00 if t#e information
provi%e% 6 suc# %isclosures is not re"ar%e% as material* e8cept for t#e %isclosures lai%
%o1n in ,rticle B2B, B22(2)($) and BC@3
0nformation s#all e re"ar%e% as material in %isclosures if its omission or misstatement
coul% c#an"e or influence t#e assessment or %ecision of a user rel6in" on t#at information
for t#e purpose of ma5in" economic %ecisions7
EBA shall, in a$$ordan$e *ith Arti$le 4? of )egulation (E2) Fo3 4:>CD2:4:, issue
guidelines !# C4 (e$e!er 2:4B on ho* institutions have to appl# aterialit# in relation
to the dis$losure re6uireents of +itle &&3
-7 0nstitutions ma6 also omit one or more items of information inclu%e% in t#e %isclosures
liste% in 2itles 00 an% 000 if t#ose items inclu%e information 1#ic# is re"ar%e% as proprietar6
or confi%ential in accor%ance 1it# t#e secon% an% t#ir% supara"rap#s* e8cept for t#e
%isclosures lai% %o1n in ,rticle B2B and BC@3
0nformation s#all e re"ar%e% as proprietar6 to an institution if %isclosin" it pulicl6 1oul%
un%ermine its competitive position7 0t ma6 inclu%e information on pro%ucts or s6stems
1#ic#* if s#are% 1it# competitors* 1oul% ren%er an institution(s investments t#erein less
valuale7
0nformation s#all e re"ar%e% as confi%ential if t#ere are oli"ations to customers or ot#er
counterpart6 relations#ips in%in" an institution to confi%entialit67
EBA shall, in a$$ordan$e *ith Arti$le 4? of )egulation (E2) Fo3 4:>CD2:4:, issue
guidelines !# C4 (e$e!er 2:4B on ho* institutions have to appl# proprietar# and
$onfidentialit# in relation to the dis$losure re6uireents of +itle && and &&&3
37 0n t#e e5$eptional cases referre% to in para"rap# -* t#e institution concerne% s#all state in
its %isclosures t#e fact t#at t#e specific items of information are not %isclose%* t#e reason
for non;%isclosure* an% pulis# more "eneral information aout t#e su!ect matter of t#e
%isclosure re&uirement* e8cept 1#ere t#ese are to e classifie% as proprietar6 or
confi%ential7
Ca3 Arti$le B4>(4), (2) and (C) are *ithout pre9udi$e to the s$ope of lia!ilit# for failure to
dis$lose aterial inforation3
Article 42*
+requency of $isclosure
0nstitutions s#all pulis# t#e %isclosures re&uire% 6 t#is Part at least on an annual asis7
,nnual %isclosures s#all e pulis#e% in con!unction 1it# t#e %ate of pulication of t#e financial
statements7
0nstitutions s#all assess t#e nee% to pulis# some or all %isclosures more fre&uentl6 t#an annuall6 in
t#e li"#t of t#e relevant c#aracteristics of t#eir usiness suc# as scale of operations* ran"e of
activities* presence in %ifferent countries* involvement in %ifferent financial sectors* an%
participation in international financial mar5ets an% pa6ment* settlement an% clearin" s6stems7 2#at
assessment s#all pa6 particular attention to t#e possile nee% for more fre&uent %isclosure of items
of information lai% %o1n in ,rticle 4-4* an% points )/ to )e/ of ,rticle 4-+* an% information on ris5
e8posure an% ot#er items prone to rapi% c#an"e7
EBA shall, in a$$ordan$e *ith Arti$le 4? of )egulation (E2) Fo3 4:>CD2:4:, issue guidelines !#
C4 (e$e!er 2:4B on institutions assessing ore fre6uent dis$losures of +itle && and &&&3
Article 421
-eans of $isclosures
17 0nstitutions ma6 %etermine t#e appropriate me%ium* location an% means of verification to
compl6 effectivel6 1it# t#e %isclosure re&uirements lai% %o1n in t#is Part7 2o t#e %e"ree
feasile* all %isclosures s#all e provi%e% in one me%ium or location7 &f a siilar pie$e of
inforation is dis$losed in t*o or ore edias, a referen$e to the s#non#ous
inforation in the other edias shall !e in$luded *ithin ea$h edia3
-7 $&uivalent %isclosures ma%e 6 institutions un%er accountin"* listin" or ot#er re&uirements
ma6 e %eeme% to constitute compliance 1it# t#is Part7 0f %isclosures are not inclu%e% in
t#e financial statements* institutions s#all una!iguousl# in%icate in the finan$ial
stateents 1#ere t#e6 can e foun%7
Title II
Te26ni2l 2riteri on trnspren2: n. .is2losure
Article 422
5is1 mana#ement ob4ectives an$ policies
17 0nstitutions s#all %isclose t#eir ris5 mana"ement o!ectives an% poli$ies for eac# separate
cate"or6 of ris5* inclu%in" t#e ris5s referre% to un%er t#is 2itle7 2#ese %isclosures s#all
inclu%e:
)a/ t#e strate"ies an% processes to mana"e t#ose ris5sE
)/ t#e structure an% or"anisation of t#e relevant ris5 mana"ement function inclu%in"
information on its aut#orit6 an% statute* or ot#er appropriate arran"ementsE
)c/ t#e scope an% nature of ris5 reportin" an% measurement s6stemsE
)%/ t#e policies for #e%"in" an% miti"atin" ris5* an% t#e strate"ies an% processes for
monitorin" t#e continuin" effectiveness of #e%"es an% miti"antsE
)e/ a %eclaration approve% 6 t#e mana"ement o%6 on t#e a%e&uac6 of ris5
mana"ement arran"ements of t#e institution provi%in" assurance t#at t#e ris5
mana"ement s6stems put in place are a%e&uate 1it# re"ar% to institution(s profile an%
strate"6E
)f/ a concise ris5 statement approve% 6 t#e mana"ement o%6 succinctl6 %escriin" t#e
institution(s overall ris5 profile associate% 1it# t#e usiness strate"67 2#is statement
s#all inclu%e 5e6 ratios an% fi"ures provi%in" e8ternal sta5e#ol%ers 1it# a
Acompre#ensive vie1 of the institution7s anageent of risk, in$luding ho* the
ris5 profile of t#e institution interacts 1it# t#e ris5 tolerance set 6 t#e mana"ement
o%67
-7 0nstitutions s#all %isclose t#e follo1in" information* inclu%in" re"ular* at least annual
up%ates* re"ar%in" "overnance arran"ements:
)a/ t#e numer of %irectors#ips #el% 6 memers of t#e mana"ement o%6E
)/ t#e recruitment polic6 for t#e selection of memers of t#e mana"ement o%6 an%
t#eir actual 5no1le%"e* s5ills an% e8pertiseE
)c/ t#e polic6 on %iversit6 1it# re"ar% to selection of memers of t#e mana"ement o%6*
its o!ectives an% an6 relevant tar"ets set out in t#at polic6* an% t#e e8tent to 1#ic#
t#ese o!ectives an% tar"ets #ave een ac#ieve%E
)%/ 1#et#er or not t#e institution #as set up a separate ris5 committee an% t#e numer of
times t#e ris5 committee #as metE
)e/ t#e %escription of t#e information flo1 on ris5 to t#e mana"ement o%6 A7
Article 423
Scope of application
0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#e scope of application of t#e
re&uirements of t#is Re"ulation in accor%ance 1it# Directive Jinserte% 6 OPK:
)a/ t#e name of t#e institution to 1#ic# t#e re&uirements of t#is Re"ulation appl6E
)/ an outline of t#e %ifferences in t#e asis of consoli%ation for accountin" an% pru%ential
purposes* 1it# a rief %escription of t#e entities t#erein* e8plainin" 1#et#er t#e6 are:
)i/ full6 consoli%ate%E
)ii/ proportionall6 consoli%ate%E
)iii/ %e%ucte% from o1n fun%sE
)iv/ neit#er consoli%ate% nor %e%ucte%E
)c/ an6 current or foreseen material practical or le"al impe%iment to t#e prompt transfer of
o1n fun%s or repa6ment of liailities amon" t#e parent un%erta5in" an% its susi%iariesE
)%/ t#e a""re"ate amount 6 1#ic# t#e actual o1n fun%s are less t#an re&uire% in all
susi%iaries not inclu%e% in t#e consoli%ation* an% t#e name or names of suc# susi%iariesE
)e/ if applicale* t#e circumstance of ma5in" use of t#e provisions lai% %o1n in ,rticles = an%
8
Article 424
Hwn fun$s
17 0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#eir o1n fun%s:
)a/ a full reconciliation of Common $&uit6 2ier 1 items* ,%%itional 2ier 1 items* 2ier -
items an% filters an% %e%uctions applie% pursuant to ,rticles -9 to 3-* 33* +3* =3 an%
>4 to o1n fun%s of t#e institution an% t#e alance s#eet in t#e au%ite% financial
statements of t#e institutionE
)/ a %escription of t#e main features of t#e Common $&uit6 2ier 1 an% ,%%itional 2ier
1 instruments an% 2ier - instruments issue% 6 t#e institutionE
)c/ t#e full terms an% con%itions of all Common $&uit6 2ier 1* ,%%itional 2ier 1 an%
2ier - instrumentsE
)%/ separate %isclosure of t#e nature an% amounts of t#e follo1in":
)i/ eac# pru%ential filter applie% pursuant to ,rticles -9 to 3-E
)ii/ eac# %e%uction ma%e pursuant to ,rticles 33* +3 an% =3E
)iii/ items not %e%ucte% in accor%ance 1it# ,rticles 44* 4+* +3* =3 an% >4E
)e/ a %escription of all restrictions applie% to t#e calculation of o1n fun%s in accor%ance
1it# t#is Re"ulation an% t#e instruments* pru%ential filters an% %e%uctions to 1#ic#
t#ose restrictions appl6E
)f/ 1#ere institutions %isclose capital ratios calculate% usin" elements of o1n fun%s
%etermine% on a asis ot#er t#an t#at lai% %o1n in t#is Re"ulation* a compre#ensive
e8planation of t#e asis on 1#ic# t#ose capital ratios are calculate%7
-7 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to specif6 uniform templates for
%isclosure un%er points )a/* )/* )%/ an% )e/ of para"rap# 17
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission *ithin
one onth of the date of entr# into for$e of this )egulation3
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in Arti$le
4@ of Re"ulation )$4/ Bo 1.93/-.1.7
Article 42
Capital requirements
0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#e compliance 6 t#e institution
1it# t#e re&uirements lai% %o1n in ,rticles 8> an% ,rticle >- of Directive Jinserte% 6 OPK:
)a/ a summar6 of t#e institution(s approac# to assessin" t#e a%e&uac6 of its internal capital to
support current an% future activitiesE
(aa) upon deand fro the relevant Copetent Authorit#, the result of the institution7s
internal $apital ade6ua$# assessent pro$ess in$luding the $oposition of the .illar &&
add=ons3
)/ for institutions calculatin" t#e ris5;1ei"#te% e8posure amounts in accor%ance 1it# C#apter
- of Part 2#ree* 2itle 00* 8O of t#e ris5;1ei"#te% e8posure amounts for eac# of t#e
e8posure classes specifie% in ,rticle 1.>E
)c/ for institutions calculatin" ris5;1ei"#te% e8posure amounts in accor%ance 1it# C#apter 3
of Part 2#ree* 2itle 00* 8O of t#e ris5;1ei"#te% e8posure amounts for eac# of t#e e8posure
classes specifie% in ,rticle 14-7 3or t#e retail e8posure class* t#is re&uirement applies to
eac# of t#e cate"ories of e8posures to 1#ic# t#e %ifferent correlations in ,rticle 149)1/ to
)4/ correspon%7 3or t#e e&uit6 e8posure class* t#is re&uirement applies to:
)i/ eac# of t#e approac#es provi%e% in ,rticle 1+.E
)ii/ e8c#an"e tra%e% e8posures* private e&uit6 e8posures in sufficientl6 %iversifie%
portfolios* an% ot#er e8posuresE
)iii/ e8posures su!ect to supervisor6 transition re"ar%in" o1n fun%s re&uirementsE
)iv/ e8posures su!ect to "ran%fat#erin" provisions re"ar%in" o1n fun%s re&uirementsE
)%/ o1n fun%s re&uirements calculate% in accor%ance 1it# points )/ an% )c/ of ,rticle 8>E
)e/ o1n fun%s re&uirements calculate% in accor%ance 1it# Part 2#ree* 2itle 000* Sections - to 4
an% %isclose% separatel67
2#e institutions calculatin" t#e ris5;1ei"#te% e8posure amounts in accor%ance 1it# ,rticle 148)+/
or 1+.)-/ s#all %isclose t#e e8posures assi"ne% to eac# cate"or6 in 2ale 1 in para"rap# + of ,rticle
148)+/* or to eac# ris5 1ei"#t mentione% in ,rticle 1+.)-/7
Article 42"
E,posure to counterparty cre$it ris1
0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#e institution(s e8posure to
counterpart6 cre%it ris5 as %efine% in 2itle 000* C#apter =:
)a/ a %iscussion of t#e met#o%olo"6 use% to assi"n internal capital an% cre%it limits for
counterpart6 cre%it e8posuresE
)/ a %iscussion of policies for securin" collateral an% estalis#in" cre%it reservesE
)c/ a %iscussion of policies 1it# respect to 1ron";1a6 ris5 e8posuresE
)%/ a %iscussion of t#e impact of t#e amount of collateral t#e institution 1oul% #ave to provi%e
"iven a %o1n"ra%e in its cre%it ratin"E
)e/ "ross positive fair value of contracts* nettin" enefits* nette% current cre%it e8posure*
collateral #el% an% net %erivatives cre%it e8posure7 Bet %erivatives cre%it e8posure is t#e
cre%it e8posure on %erivatives transactions after consi%erin" ot# t#e enefits from le"all6
enforceale nettin" a"reements an% collateral arran"ementsE
)f/ measures for e8posure value un%er t#e met#o%s set out in Sections 3 to = of 2itle 000*
C#apter = 1#ic#ever met#o% is applicaleE
)"/ t#e notional value of cre%it %erivative #e%"es* an% t#e %istriution of current cre%it
e8posure 6 t6pes of cre%it e8posureE
)#/ t#e notional amounts of cre%it %erivative transactions* se"re"ate% et1een use for t#e
institution(s o1n cre%it portfolio* as 1ell as in its interme%iation activities* inclu%in" t#e
%istriution of t#e cre%it %erivatives pro%ucts use%* ro5en %o1n furt#er 6 protection
ou"#t an% sol% 1it#in eac# pro%uct "roupE
)i/ t#e estimate of a if t#e institution #as receive% t#e permission of t#e competent aut#orities
to estimate a7
Article 42%
2apital buffers
17 ,n institution s#all %isclose t#e follo1in" information in relation to its compliance 1it#
t#e re&uirement for a counterc6clical capital uffer referre% to in 2itle R00* C#apter 4 of
Directive Jinserte% 6 OPK:
)a/ t#e "eo"rap#ical %istriution of its cre%it e8posures relevant for t#e calculation of its
counterc6clical capital ufferE
)/ t#e aount of its institution specific counterc6clical capital uffer7
-7 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s specif6in" t#e %isclosure
re&uirements set out in para"rap# 17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 31
Decemer -.147
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to 14
of Re"ulation )$4/ Bo 1.93/-.1.7
Arti$le B20a
&ndi$ators of glo!al s#stei$ iportan$e
43 &nstitutions identified as 8="&&s in a$$ordan$e *ith Arti$le 42Ba of (ire$tive ,inserted !#
-./ shall dis$lose, on a #earl# !asis, the values of the indi$ators used for deterining
the s$ore of the institutions in a$$ordan$e *ith the identifi$ation ethodolog# referred
to in that Arti$le3
23 EBA shall develop draft ipleenting te$hni$al standards to spe$if# the unifor
forats and date for the purposes of the dis$losure referred to in paragraph 43 &n
developing those te$hni$al standards, the EBA shall take into a$$ount international
standards3
EBA shall su!it those draft ipleenting te$hni$al standards to the Coission !# 4
Eul# 2:4B3
.o*er is $onferred on the Coission to adopt the ipleenting te$hni$al standards
referred to in the first su!=paragraph in a$$ordan$e *ith the pro$edure laid do*n in
Arti$le 4@ of )egulation (E2) Fo 4:>CD2:4:3
Article 42&
2re$it ris1 a$4ustments
0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#e institution(s e8posure to cre%it
ris5 an% %ilution ris5:
)a/ t#e %efinitions for accountin" purposes of Mpast %ueN an% Mimpaire%NE
)/ a %escription of t#e approac#es an% met#o%s a%opte% for %eterminin" specific an% "eneral
cre%it ris5 a%!ustmentsE
)c/ t#e total amount of e8posures after accountin" offsets an% 1it#out ta5in" into account t#e
effects of cre%it ris5 miti"ation* an% t#e avera"e amount of t#e e8posures over t#e perio%
ro5en %o1n 6 %ifferent t6pes of e8posure classesE
)%/ t#e "eo"rap#ic %istriution of t#e e8posures* ro5en %o1n in si"nificant areas 6 material
e8posure classes* an% furt#er %etaile% if appropriateE
)e/ t#e %istriution of t#e e8posures 6 in%ustr6 or counterpart6 t6pe* ro5en %o1n 6
e8posure classes* in$luding spe$if#ing e5posure to "MEs, an% furt#er %etaile% if
appropriateE
)f/ t#e resi%ual maturit6 rea5%o1n of all t#e e8posures* ro5en %o1n 6 e8posure classes*
an% furt#er %etaile% if appropriateE
)"/ 6 si"nificant in%ustr6 or counterpart6 t6pe* t#e amount of:
)i/ impaire% e8posures an% past %ue e8posures* provi%e% separatel6E
)ii/ Specific an% "eneral cre%it ris5 a%!ustmentsE
)iii/ c#ar"es for specific an% "eneral cre%it ris5 a%!ustments %urin" t#e reportin" perio%E
)#/ t#e amount of t#e impaire% e8posures an% past %ue e8posures* provi%e% separatel6* ro5en
%o1n 6 si"nificant "eo"rap#ical areas inclu%in"* if practical* t#e amounts of specific an%
"eneral cre%it ris5 a%!ustments relate% to eac# "eo"rap#ical areaE
)i/ t#e reconciliation of c#an"es in t#e specific an% "eneral cre%it ris5 a%!ustments for
impaire% e8posures* s#o1n separatel67 2#e information s#all comprise:
)i/ a %escription of t#e t6pe of specific an% "eneral cre%it ris5 a%!ustmentsE
)ii/ t#e openin" alancesE
)iii/ t#e amounts ta5en a"ainst t#e cre%it ris5 a%!ustments %urin" t#e reportin" perio%E
)iv/ t#e amounts set asi%e or reverse% for estimate% proale losses on e8posures %urin"
t#e reportin" perio%* an6 ot#er a%!ustments inclu%in" t#ose %etermine% 6 e8c#an"e
rate %ifferences* usiness cominations* ac&uisitions an% %isposals of susi%iaries*
an% transfers et1een cre%it ris5 a%!ustmentsE
)v/ t#e closin" alances7
Specific cre%it ris5 a%!ustments an% recoveries recor%e% %irectl6 to t#e income statement s#all e
%isclose% separatel67
Arti$le B2Aa
2nen$u!ered assets
EBA shall issue guidelines spe$if#ing the dis$losure of unen$u!ered assets, taking into a$$ount
the )e$oendation of the E")B of 2: (e$e!er 2:42 on funding of $redit institutions
(E")BD2:42D2) and in parti$ular )e$oendation ( = Market +ransparen$# on Asset
En$u!ran$e, !# C4 (e$e!er 2:4C3 +he guidelines shall !e adopted in a$$ordan$e *ith Arti$le
4? of )egulation (E2) Fo3 4:>CD2:4:3
B# 4 Eanuar# 2:4?, EBA shall develop draft regulator# te$hni$al standards to spe$if# dis$losure
of the !alan$e sheet value per e5posure $lass and asset 6ualit# the total aount of the !alan$e
sheet value that is unen$u!ered, taking into a$$ount E")B )e$oendation (E")BD2:42D2)
and $onditional on EBA $onsidering in its report that su$h additional dis$losure offers relia!le
and eaningful inforation3
EBA shall su!it those draft regulator# te$hni$al standards to the Coission !# 4 Eanuar#
2:4?3
.o*er is $onferred on the Coission to adopt the regulator# te$hni$al standards referred to in
the first and se$ond su!=paragraphs in a$$ordan$e *ith the pro$edure laid do*n in Arti$les 4:=
4B of )egulation 4:>CD2:4:3
Article 42(
0se of E2A's
3or institutions calculatin" t#e ris5;1ei"#te% e8posure amounts in accor%ance 1it# Part 2#ree* 2itle
00* C#apter -* t#e follo1in" information s#all e %isclose% for eac# of t#e e8posure classes specifie%
in ,rticle 1.>:
)a/ t#e names of t#e nominate% $C,0s an% $C,s an% t#e reasons for an6 c#an"esE
)/ t#e e8posure classes for 1#ic# eac# $C,0 or $C, is use%E
)c/ a %escription of t#e process use% to transfer t#e issuer an% issue cre%it assessments onto
items not inclu%e% in t#e tra%in" oo5E
)%/ t#e association of t#e e8ternal ratin" of eac# nominate% $C,0 or $C, 1it# t#e cre%it
&ualit6 steps prescrie% in Part 2#ree* 2itle 00* C#apter -* ta5in" into account t#at t#is
information nee%s not e %isclose% if t#e institution complies 1it# t#e stan%ar% association
pulis#e% 6 $D,E
)e/ t#e e8posure values an% t#e e8posure values after cre%it ris5 miti"ation associate% 1it#
eac# cre%it &ualit6 step prescrie% in Part 2#ree* 2itle 00* C#apter - as 1ell as t#ose
%e%ucte% from o1n fun%s7
Article 43*
E,posure to mar1et ris1
2#e institutions calculatin" t#eir o1n fun%s re&uirements in accor%ance 1it# points )/ an% )c/ of
,rticle 8>)3/ s#all %isclose t#ose re&uirements separatel6 for eac# ris5 referre% to in t#ose
provisions7 0n a%%ition* t#e o1n fun%s re&uirement for specific interest rate ris5 of securitisation
positions s#all e %isclose% separatel67
Article 431
Hperational ris1
0nstitutions s#all %isclose t#e approac#es for t#e assessment of o1n fun%s re&uirements for
operational ris5 t#at t#e institution &ualifies forE a %escription of t#e met#o%olo"6 set out in ,rticle
3.1)-/* if use% 6 t#e institution* inclu%in" a %iscussion of relevant internal an% e8ternal factors
consi%ere% in t#e institution(s measurement approac#* an% in t#e case of partial use* t#e scope an%
covera"e of t#e %ifferent met#o%olo"ies use%7
Article 432
E,posures in equities not inclu$e$ in the tra$in# boo1
0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#e e8posures in e&uities not inclu%e%
in t#e tra%in" oo5:
)a/ t#e %ifferentiation et1een e8posures ase% on t#eir o!ectives* inclu%in" for capital "ains
relations#ip an% strate"ic reasons* an% an overvie1 of t#e accountin" tec#ni&ues an%
valuation met#o%olo"ies use%* inclu%in" 5e6 assumptions an% practices affectin" valuation
an% an6 si"nificant c#an"es in t#ese practicesE
)/ t#e alance s#eet value* t#e fair value an%* for t#ose e8c#an"e;tra%e%* a comparison to t#e
mar5et price 1#ere it is materiall6 %ifferent from t#e fair valueE
)c/ t#e t6pes* nature an% amounts of e8c#an"e;tra%e% e8posures* private e&uit6 e8posures in
sufficientl6 %iversifie% portfolios* an% ot#er e8posuresE
)%/ t#e cumulative realise% "ains or losses arisin" from sales an% li&ui%ations in t#e perio%E
an%
)e/ t#e total unrealise% "ains or losses* t#e total latent revaluation "ains or losses* an% an6 of
t#ese amounts inclu%e% in t#e ori"inal or a%%itional o1n fun%s7
Article 433
E,posure to interest rate ris1 on positions not inclu$e$ in the tra$in# boo1
0nstitutions s#all %isclose t#e follo1in" information on t#eir e8posure to interest rate ris5 on
positions not inclu%e% in t#e tra%in" oo5:
)a/ t#e nature of t#e interest rate ris5 an% t#e 5e6 assumptions )inclu%in" assumptions
re"ar%in" loan prepa6ments an% e#aviour of non;maturit6 %eposits/* an% fre&uenc6 of
measurement of t#e interest rate ris5E
)/ t#e variation in earnin"s* economic value or ot#er relevant measure use% 6 t#e
mana"ement for up1ar% an% %o1n1ar% rate s#oc5s accor%in" to mana"ement(s met#o% for
measurin" t#e interest rate ris5* ro5en %o1n 6 currenc67
Article 434
E,posure to securitisation positions
0nstitutions calculatin" ris5 1ei"#te% e8posure amounts in accor%ance 1it# Part 2#ree* 2itle 00*
C#apter + or o1n fun%s re&uirements in accor%ance 1it# ,rticle 3-= or ,rticle 3-> s#all %isclose
t#e follo1in" information* 1#ere relevant* separatel6 for t#eir tra%in" an% non;tra%in" oo5:
)a/ a %escription of t#e institutionNs o!ectives in relation to securitisation activit6E
)/ t#e nature of ot#er ris5s inclu%in" li&ui%it6 ris5 in#erent in securitise% assetsE
)c/ t#e t6pe of ris5s in terms of seniorit6 of un%erl6in" securitisation positions an% in terms of
assets un%erl6in" t#ose latter securitisation positions assume% an% retaine% 1it# re;
securitisation activit6E
)%/ t#e %ifferent roles pla6e% 6 t#e institution in t#e securitisation processE
)e/ an in%ication of t#e e8tent of t#e institutionNs involvement in eac# of t#e roles referre% to in
point )%/E
)f/ a %escription of t#e processes in place to monitor c#an"es in t#e cre%it an% mar5et ris5 of
securitisation e8posures inclu%in"* #o1 t#e e#aviour of t#e un%erl6in" assets impacts
securitisation e8posures an% a %escription of #o1 t#ose processes %iffer for re;
securitisation e8posuresE
)"/ a %escription of t#e institutionNs polic6 "overnin" t#e use of #e%"in" an% unfun%e%
protection to miti"ate t#e ris5s of retaine% securitisation an% re;securitisation e8posures*
inclu%in" i%entification of material #e%"e counterparties 6 relevant t6pe of ris5 e8posureE
)#/ t#e approac#es to calculatin" ris5 1ei"#te% e8posure amounts t#at t#e institution follo1s
for its securitisation activities inclu%in" t#e t6pes of securitisation e8posures to 1#ic# eac#
approac# appliesE
)i/ t#e t6pes of SSP$ t#at t#e institution* as sponsor* uses to securitise t#ir%;part6 e8posures
inclu%in" 1#et#er an% in 1#at form an% to 1#at e8tent t#e institution #as e8posures to
t#ose SSP$s* separatel6 for on; an% off;alance s#eet e8posures* as 1ell as a list of t#e
entities t#at t#e institution mana"es or a%vises an% t#at invest in eit#er t#e securitisation
positions t#at t#e institution #as securitise% or in SSP$s t#at t#e institution sponsorsE
)!/ a summar6 of t#e institutionNs accountin" policies for securitisation activities* inclu%in":
)i/ 1#et#er t#e transactions are treate% as sales or financin"sE
)ii/ t#e reco"nition of "ains on salesE
)iii/ t#e met#o%s* 5e6 assumptions* inputs an% c#an"es from t#e previous perio% for
valuin" securitisation positionsE
)iv/ t#e treatment of s6nt#etic securitisations if not covere% 6 ot#er accountin" policiesE
)v/ #o1 assets a1aitin" securitisation are value% an% 1#et#er t#e6 are recor%e% in t#e
institutionNs non;tra%in" oo5 or t#e tra%in" oo5E
)vi/ policies for reco"nisin" liailities on t#e alance s#eet for arran"ements t#at coul%
re&uire t#e institution to provi%e financial support for securitise% assetsE
)5/ t#e names of t#e $C,0s use% for securitisations an% t#e t6pes of e8posure for 1#ic# eac#
a"enc6 is use%E
)l/ 1#ere applicale* a %escription of t#e 0nternal ,ssessment ,pproac# as set out in Part
2#ree* 2itle 00* C#apter +* Section 3* inclu%in" t#e structure of t#e internal assessment
process an% relation et1een internal assessment an% e8ternal ratin"s* t#e use of internal
assessment ot#er t#an for 0,, capital purposes* t#e control mec#anisms for t#e internal
assessment process inclu%in" %iscussion of in%epen%ence* accountailit6* an% internal
assessment process revie1* t#e e8posure t6pes to 1#ic# t#e internal assessment process is
applie% an% t#e stress factors use% for %eterminin" cre%it en#ancement levels* 6 e8posure
t6peE
)m/ an e8planation of si"nificant c#an"es to an6 of t#e &uantitative %isclosures in points )n/ to
)&/ since t#e last reportin" perio%E
)n/ separatel6 for t#e tra%in" an% t#e non;tra%in" oo5* t#e follo1in" information ro5en
%o1n 6 e8posure t6pe:
)i/ t#e total amount of outstan%in" e8posures securitise% 6 t#e institution* separatel6
for tra%itional an% s6nt#etic securitisations an% securitisations for 1#ic# t#e
institution acts onl6 as sponsorE
)ii/ t#e a""re"ate amount of on;alance s#eet securitisation positions retaine% or
purc#ase% an% off;alance s#eet securitisation e8posuresE
)iii/ t#e a""re"ate amount of assets a1aitin" securitisationE
)iv/ for securitise% facilities su!ect to t#e earl6 amortisation treatment* t#e a""re"ate
%ra1n e8posures attriute% to t#e ori"inatorNs an% investorsN interests respectivel6*
t#e a""re"ate capital re&uirements incurre% 6 t#e institution a"ainst t#e ori"inatorNs
interest an% t#e a""re"ate capital re&uirements incurre% 6 t#e institution a"ainst t#e
investorNs s#ares of %ra1n alances an% un%ra1n linesE
)v/ t#e amount of securitisation positions t#at are %e%ucte% from o1n fun%s or ris5;
1ei"#te% at 1-+. OE
)vi/ a summar6 of t#e securitisation activit6 of t#e current perio%* inclu%in" t#e amount
of e8posures securitise% an% reco"nise% "ain or loss on saleE
)o/ separatel6 for t#e tra%in" an% t#e non;tra%in" oo5* t#e follo1in" information:
)i/ t#e a""re"ate amount of securitisation positions retaine% or purc#ase% an% t#e
associate% capital re&uirements* ro5en %o1n et1een securitisation an% re;
securitisation e8posures an% furt#er ro5en %o1n into a meanin"ful numer of ris5;
1ei"#t or capital re&uirement an%s* for eac# capital re&uirements approac# use%E
)ii/ t#e a""re"ate amount of re;securitisation e8posures retaine% or purc#ase% ro5en
%o1n accor%in" to t#e e8posure efore an% after #e%"in"/insurance an% t#e e8posure
to financial "uarantors* ro5en %o1n accor%in" to "uarantor cre%it 1ort#iness
cate"ories or "uarantor nameE
)p/ for t#e non;tra%in" oo5 an% re"ar%in" e8posures securitise% 6 t#e institution* t#e amount
of impaire%/past %ue assets securitise% an% t#e losses reco"nise% 6 t#e institution %urin"
t#e current perio%* ot# ro5en %o1n 6 e8posure t6peE
)&/ for t#e tra%in" oo5* t#e total outstan%in" e8posures securitise% 6 t#e institution an%
su!ect to a capital re&uirement for mar5et ris5* ro5en %o1n into tra%itional/s6nt#etic an%
6 e8posure t6pe7@E
)r/ 1#ere applicale* 1#et#er t#e institution #as provi%e% support 1it#in t#e terms of ,rticle
-43)1/ an% t#e impact on o1n fun%s7
Article 43
5emuneration policy
17 0nstitutions s#all %isclose at least t#e follo1in" information* re"ar%in" t#e remuneration
polic6 an% practices of t#e institution for t#ose cate"ories of staff 1#ose professional
activities #ave a material impact on its ris5 profile:
)a/ information concernin" t#e %ecision;ma5in" process use% for %eterminin" t#e
remuneration polic6* as *ell as the nu!er of eetings held !# the ain !od#
overseeing reuneration during the finan$ial #ear inclu%in" if applicale*
information aout t#e composition an% t#e man%ate of a remuneration committee* t#e
e8ternal consultant 1#ose services #ave een use% for t#e %etermination of t#e
remuneration polic6 an% t#e role of t#e relevant sta5e#ol%ersE
)/ information on lin5 et1een pa6 an% performanceE
)c/ t#e most important %esi"n c#aracteristics of t#e remuneration s6stem* inclu%in"
information on t#e criteria use% for performance measurement an% ris5 a%!ustment*
%eferral polic6 an% vestin" criteriaE
($a) the ratios !et*een fi5ed and varia!le reuneration set in a$$ordan$e *ith Art3 >:
(4) (f) of (ire$tive33D2:4C ,C)( B/
)%/ information on t#e performance criteria on 1#ic# t#e entitlement to s#ares* options
or variale components of remuneration is ase%E
)e/ t#e main parameters an% rationale for an6 variale component sc#eme an% an6 ot#er
non;cas# enefitsE
)f/ a""re"ate &uantitative information on remuneration* ro5en %o1n 6 usiness areaE
)"/ a""re"ate &uantitative information on remuneration* ro5en %o1n 6 senior
mana"ement an% memers of staff 1#ose actions #ave a material impact on t#e ris5
profile of t#e institution* in%icatin" t#e follo1in":
)i/ t#e amounts of remuneration for t#e financial 6ear* split into fi8e% an% variale
remuneration* an% t#e numer of eneficiariesE
)ii/ t#e amounts an% forms of variale remuneration* split into cas#* s#ares* s#are;
lin5e% instruments an% ot#er t6pesE
)iii/ t#e amounts of outstan%in" %eferre% remuneration* split into veste% an%
unveste% portionsE
)iv/ t#e amounts of %eferre% remuneration a1ar%e% %urin" t#e financial 6ear* pai%
out an% re%uce% t#rou"# performance a%!ustmentsE
)v/ ne1 si"n;on an% severance pa6ments ma%e %urin" t#e financial 6ear* an% t#e
numer of eneficiaries of suc# pa6mentsE
)vi/ t#e amounts of severance pa6ments a1ar%e% %urin" t#e financial 6ear* numer
of eneficiaries an% #i"#est suc# a1ar% to a sin"le person7
)#/ t#e numer of in%ivi%uals ein" remunerate% $4R 1 million or more per financial
6ear* for reuneration !et*een E2) 4 illion and E2) @ illion ro5en %o1n
into pa6 an%s of $4R @::3::: and for reuneration of E2) @ illion and a!ove
!roken do*n into pa# !ands of E2) 4 illion3
(i) upon deand fro the Me!er "tate or $opetent authorit#, the total
reuneration for ea$h e!er of the Manageent !od# or senior anageent3
-7 3or institutions t#at are si"nificant in terms of t#eir siLe* internal or"anisation an% t#e
nature* scope an% t#e comple8it6 of t#eir activities* t#e &uantitative information referre% to
in t#is Arti$le s#all also e ma%e availale to t#e pulic at t#e level of e!ers of the
anageent !od# of t#e institution 1it#in t#e meanin" of ,rticle 13)1/ of Directive
Jinserte% 6 OPK and Arti$le >(4) of (ire$tive 2::BDC>DEC7
0nstitutions s#all compl6 1it# t#e re&uirements set out in t#is Arti$le in a manner t#at is
appropriate to t#eir siLe* internal or"anisation an% t#e nature* scope an% comple8it6 of t#eir
activities an% 1it#out pre!u%ice to Directive 9+/4=/$C7
Article 43"
7evera#e
17 0nstitutions s#all %isclose t#e follo1in" information re"ar%in" t#eir levera"e ratio as
%efine% in ,rticle 41= an% t#eir mana"ement of t#e ris5 of e8cessive levera"e as %efine% in
point )D/ of ,rticle 4)-/ of Directive Jinserte% 6 OPK3
)a/ t#e levera"e ratio and ho* the institution applies Arti$le B0@, paragraphs 2 and CE
)/ a rea5%o1n of t#e total e8posure measure as *ell as a re$on$iliation of the total
e5posure easure *ith the relevant inforation dis$losed in pu!lished finan$ial
stateents%
(!a) *here appli$a!le, the aount of dere$ognised fidu$iar# ites a$$ording to Arti$le
B4? paragraph 44E
)c/ a %escription of t#e processes use% to mana"e t#e ris5 of e8cessive levera"eE
)%/ a %escription of t#e factors t#at #a% an impact on t#e levera"e ratio %urin" t#e perio%
to 1#ic# t#e %isclose% levera"e ratio refers7
-7 $D, s#all %evelop %raft implementin" tec#nical stan%ar%s to %etermine t#e uniform
%isclosure template for t#e %isclosure referre% to in para"rap# 1 an% t#e instructions on
#o1 to use suc# template7
$D, s#all sumit t#ose %raft implementin" tec#nical stan%ar%s to t#e Commission 6 3.
<une -.147
Po1er is conferre% on t#e Commission to a%opt t#e implementin" tec#nical stan%ar%s
referre% to in t#e first supara"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticle
1+ of Re"ulation )$4/ Bo 1.93/-.1.7
Title III
@uli1:in5 re/uire0ents 1or t6e use o1 prti2ulr instru0ents
or 0et6o.olo5ies
Article 43%
0se of the '58 Approach to cre$it ris1
0nstitutions calculatin" t#e ris5;1ei"#te% e8posure amounts un%er t#e 0RD ,pproac# s#all %isclose
t#e follo1in" information
)a/ t#e competent aut#orit6(s permission of t#e approac# or approve% transitionE
)/ an e8planation an% revie1 of:
)i/ t#e structure of internal ratin" s6stems an% relation et1een internal an% e8ternal
ratin"sE
)ii/ t#e use of internal estimates ot#er t#an for calculatin" ris5;1ei"#te% e8posure
amounts in accor%ance 1it# Part 2#ree* 2itle 00* C#apter 3E
)iii/ t#e process for mana"in" an% reco"nisin" cre%it ris5 miti"ationE
)iv/ t#e control mec#anisms for ratin" s6stems inclu%in" a %escription of in%epen%ence*
accountailit6* an% ratin" s6stems revie1E
)c/ a %escription of t#e internal ratin"s process* provi%e% separatel6 for t#e follo1in" e8posure
classes:
)i/ central "overnments an% central an5sE
)ii/ institutionsE
)iii/ corporate* inclu%in" S9$s* specialise% len%in" an% purc#ase% corporate receivalesE
)iv/ retail* for eac# of t#e cate"ories of e8posures to 1#ic# t#e %ifferent correlations in
,rticle 149)1/ to 149)4/ correspon%E
)v/ e&uitiesE
)%/ t#e e8posure values for eac# of t#e e8posure classes specifie% in ,rticle 14-7 $8posures to
central "overnments an% central an5s* institutions an% corporates 1#ere institutions use
o1n estimates of FGDs or conversion factors for t#e calculation of ris5;1ei"#te% e8posure
amounts s#all e %isclose% separatel6 from e8posures for 1#ic# t#e institutions %o not use
suc# estimatesE
)e/ for eac# of t#e e8posure classes central "overnments an% central an5s* institutions*
corporate an% e&uit6* an% across a sufficient numer of oli"or "ra%es )inclu%in" %efault/
to allo1 for a meanin"ful %ifferentiation of cre%it ris5* institutions s#all %isclose:
)i/ t#e total e8posures* inclu%in" for t#e e8posure classes central "overnments an%
central an5s* institutions an% corporate* t#e sum of outstan%in" loans an% e8posure
values for un%ra1n commitmentsE an% for e&uities t#e outstan%in" amountE
)ii/ t#e e8posure;1ei"#te% avera"e ris5 1ei"#tE
)iii/ for t#e institutions usin" o1n estimates of conversion factors for t#e calculation of
ris5;1ei"#te% e8posure amounts* t#e amount of un%ra1n commitments an%
e8posure;1ei"#te% avera"e e8posure values for eac# e8posure classE
)f/ 3or t#e retail e8posure class an% for eac# of t#e cate"ories as %efine% un%er point )c/)iv/*
eit#er t#e %isclosures outline% un%er )e/ aove )if applicale* on a poole% asis/* or an
anal6sis of e8posures )outstan%in" loans an% e8posure values for un%ra1n commitments/
a"ainst a sufficient numer of $F "ra%es to allo1 for a meanin"ful %ifferentiation of cre%it
ris5 )if applicale* on a poole% asis/E
)"/ t#e actual specific cre%it ris5 a%!ustments in t#e prece%in" perio% for eac# e8posure class
)for retail* for eac# of t#e cate"ories as %efine% un%er point )c/)iv/ an% #o1 t#e6 %iffer
from past e8perienceE
)#/ a %escription of t#e factors t#at impacte% on t#e loss e8perience in t#e prece%in" perio%
)for e8ample* #as t#e institution e8perience% #i"#er t#an avera"e %efault rates* or #i"#er
t#an avera"e FGDs an% conversion factors/E
)i/ t#e institution(s estimates a"ainst actual outcomes over a lon"er perio%7 ,t a minimum* t#is
s#all inclu%e information on estimates of losses a"ainst actual losses in eac# e8posure class
)for retail* for eac# of t#e cate"ories as %efine% un%er point )c/)iv/ over a perio% sufficient
to allo1 for a meanin"ful assessment of t#e performance of t#e internal ratin" processes
for eac# e8posure class )for retail for eac# of t#e cate"ories as %efine% un%er point )c/)iv/7
?#ere appropriate* t#e institutions s#all furt#er %ecompose t#is to provi%e anal6sis of PD
an%* for t#e institutions usin" o1n estimates of FGDs an%/or conversion factors* FGD an%
conversion factor outcomes a"ainst estimates provi%e% in t#e &uantitative ris5 assessment
%isclosures aove7
)!/ for all e8posure classes specifie% in ,rticle 14- an% for eac# cate"or6 of e8posure to 1#ic#
t#e %ifferent correlations in ,rticle 149 )1/ to 149)4/ correspon%:
)i/ for t#e institutions usin" o1n FGD estimates for t#e calculation of ris5;1ei"#te%
e8posure amounts* t#e e8posure;1ei"#te% avera"e FGD an% PD in percenta"e for
eac# relevant "eo"rap#ical location of cre%it e8posuresE
)ii/ for t#e institutions t#at %o not use o1n FGD estimates* t#e e8posure;1ei"#te%
avera"e PD in percenta"e for eac# relevant "eo"rap#ical location of cre%it e8posures7
3or t#e purposes of point )c/* t#e %escription s#all inclu%e t#e t6pes of e8posure inclu%e% in t#e
e8posure class* t#e %efinitions* met#o%s an% %ata for estimation an% vali%ation of PD an%* if
applicale* FGD an% conversion factors* inclu%in" assumptions emplo6e% in t#e %erivation of t#ese
variales* an% t#e %escriptions of material %eviations from t#e %efinition of %efault as set out in
,rticle 1>4* inclu%in" t#e roa% se"ments affecte% 6 suc# %eviations7
3or t#e purposes of point )!/* t#e relevant "eo"rap#ical location of cre%it e8posures means
e8posures in t#e 9emer States in 1#ic# t#e institution #as een aut#orise% an% 9emer States or
t#ir% countries in 1#ic# institutions carr6 out activities t#rou"# a ranc# or a susi%iar67
Article 43&
0se of cre$it ris1 miti#ation techniques
2#e institutions appl6in" cre%it ris5 miti"ation tec#ni&ues s#all %isclose t#e follo1in" information:
)a/ t#e policies an% processes for* an% an in%ication of t#e e8tent to 1#ic# t#e entit6 ma5es use
of* on; an% off;alance s#eet nettin"E
)/ t#e policies an% processes for collateral valuation an% mana"ementE
)c/ a %escription of t#e main t6pes of collateral ta5en 6 t#e institutionE
)%/ t#e main t6pes of "uarantor an% cre%it %erivative counterpart6 an% t#eir cre%it1ort#inessE
)e/ information aout mar5et or cre%it ris5 concentrations 1it#in t#e cre%it miti"ation ta5enE
)f/ for institutions calculatin" ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise%
,pproac# or t#e 0RD ,pproac#* ut not provi%in" o1n estimates of FGDs or conversion
factors in respect of t#e e8posure class* separatel6 for eac# e8posure class* t#e total
e8posure value )after* 1#ere applicale* on; or off;alance s#eet nettin"/ t#at is covere% \
after t#e application of volatilit6 a%!ustments \ 6 eli"ile financial collateral* an% ot#er
eli"ile collateralE
)"/ for institutions calculatin" ris5;1ei"#te% e8posure amounts un%er t#e Stan%ar%ise%
,pproac# or t#e 0RD ,pproac#* separatel6 for eac# e8posure class* t#e total e8posure
)after* 1#ere applicale* on; or off;alance s#eet nettin"/ t#at is covere% 6 "uarantees or
cre%it %erivatives7 3or t#e e&uit6 e8posure class* t#is re&uirement applies to eac# of t#e
approac#es provi%e% in ,rticle 1+.7
Article 43(
0se of the A$vance$ -easurement Approaches to operational ris1
2#e institutions usin" t#e ,%vance% 9easurement ,pproac#es set out in ,rticles 31. to 313 for t#e
calculation of t#eir o1n fun%s re&uirements for operational ris5 s#all %isclose a %escription of t#e
use of insurances an% ot#er ris5 transfer mec#anisms for t#e purpose of miti"ation of t#is ris57
Article 44*
0se of 'nternal -ar1et 5is1 -o$els
0nstitutions calculatin" t#eir capital re&uirements in accor%ance 1it# ,rticle 3+- s#all %isclose t#e
follo1in" information:
)a/ for eac# su;portfolio covere%:
)i/ t#e c#aracteristics of t#e mo%els use%E
)ii/ 1#ere applicale* for t#e internal mo%els for incremental %efault an% mi"ration ris5
an% for correlation tra%in"* t#e met#o%olo"ies use% an% t#e ris5s measure% t#rou"#
t#e use of an internal mo%el inclu%in" a %escription of t#e approac# use% 6 t#e
institution to %etermine li&ui%it6 #oriLons* t#e met#o%olo"ies use% to ac#ieve a
capital assessment t#at is consistent 1it# t#e re&uire% soun%ness stan%ar% an% t#e
approac#es use% in t#e vali%ation of t#e mo%elE
)iii/ a %escription of stress testin" applie% to t#e su;portfolioE
)iv/ a %escription of t#e approac#es use% for ac5;testin" an% vali%atin" t#e accurac6 an%
consistenc6 of t#e internal mo%els an% odelling processesE
)/ t#e scope of permission 6 t#e competent aut#orit6E
)c/ a %escription of t#e e8tent an% met#o%olo"ies for compliance 1it# t#e re&uirements set out
in ,rticles 99 an% 1..E
)%/ t#e #i"#est* t#e lo1est an% t#e mean of t#e follo1in":
)i/ t#e %ail6 value;at;ris5 measures over t#e reportin" perio% an% as per t#e perio% en%E
)ii/ t#e stresse% value;at;ris5 measures over t#e reportin" perio% an% as per t#e perio%
en%E
)iii/ t#e ris5 numers for incremental %efault an% mi"ration ris5 an% for t#e specific ris5
of t#e correlation tra%in" portfolio over t#e reportin" perio% an% as per t#e perio%;
en%E
)e/ t#e elements of t#e o1n fun%s re&uirement as specifie% in ,rticle 3+3E
)f/ t#e 1ei"#te% avera"e li&ui%it6 #oriLon for eac# su;portfolio covere% 6 t#e internal
mo%els for incremental %efault an% mi"ration ris5 an% for correlation tra%in"E
)"/ a comparison of t#e %ail6 en%;of;%a6 value;at;ris5 measures to t#e one;%a6 c#an"es of t#e
portfolioNs value 6 t#e en% of t#e suse&uent usiness %a6 to"et#er 1it# an anal6sis of
an6 important overs#ootin" %urin" t#e reportin" perio%7
PART NINE
$ELE>ATE$ AN$ I*PLE*ENTIN> ACT?
,rticle 441
Dele"ate% ,cts
2#e Commission s#all e empo1ere% to a%opt %ele"ate% acts in accor%ance 1it# ,rticle 44+*
concernin" t#e follo1in" aspects:
)a/ clarification of t#e %efinitions set out in ,rticles 4* --* 13>* 148* 188* -3>* -=>* -94* 3>1
an% 4.. to ensure uniform application of t#is Re"ulation 3
)/ clarification of t#e %efinitions set out in ,rticles 4* --* 13>* 148* 188* -3>* -=>* -94* 3>1
an% 4.. in or%er to ta5e account* in t#e application of t#is Re"ulation, of %evelopments on
financial mar5ets3
)c/ amen%ment of t#e list of e8posure classes in ,rticles 1.> an% 14- in or%er to ta5e account
of %evelopments on financial mar5etsE
)%/ t#e amount specifie% in point c of ,rticle 118* ,rticle 14-)+/)a/* ,rticle 148)4/ an% ,rticle
1+8)4/* to ta5e into account t#e effects of inflationE
)e/ t#e list an% classification of the off;alance s#eet items in ,nne8es 0 an% 00, in order to
take a$$ount of developents on finan$ial arkets'
)f/ a%!ustment of t#e cate"ories of investment firms in ,rticle 9.)1/ an% ,rticle 91)1/ to ta5e
account of %evelopments on financial mar5etsE
)"/ clarification of t#e re&uirement lai% %o1n in ,rticle 9- to ensure uniform application of
t#is Re"ulation7
(ga) developents or odifi$ations to the international standards for e5posures to a $entral
$ounterpart# *ould 9ustif# an aendent to the o*n funds re6uireents as set out in
arti$les 2>@ to C::a of this )egulation and Arti$les @:a to @:d of )egulation (E2)
?BAD2:42%
)#/ a clarification of the ters referred to in the e8emptions provi%e% for in ,rticle 389E
A
)!/ t#e mo%ification of t#e capital measure an% t#e total e8posure measure of t#e levera"e ratio
referre% to in ,rticle 41=)-/ in or%er to correct an6 s#ortcomin"s %iscovere% on t#e asis of
t#e reportin" referre% to in ,rticle 41>)1/ efore t#e levera"e ratio #as to e pulis#e% 6
institutions as set out in ,rticle 43=)1/)a/7
A
C3 EBA shall onitor the o*n fund re6uireents for $redit valuation ad9ustent risk and
!# 4 Eanuar# 2:4@ EBA shall su!it a report to the Coission3 &n parti$ular, the
report shall assess'
i) the treatent of CMA risk as a stand=alone $harge versus an integrated $oponent
of the arket risk frae*ork
ii) the s$ope of the CMA risk $harge in$luding the e5eption in arti$le B?4a%
iii) eligi!le hedges%
iv) $al$ulation of $apital re6uireents of CMA risk%
-n the !asis of this report and *here the findings are that su$h a$tion is ne$essar# the
Coission shall also !e epo*ered to adopt a delegated a$t in a$$ordan$e *ith Arti$le BB@ to
aend the provisions other than arti$le C02(Ca) in Arti$les C04 to C0@ $on$erning those ites3
Article 442
Technical a$4ustments an$ corrections
2#e Commission s#all e empo1ere% to a%opt %ele"ate% acts in accor%ance 1it# ,rticle 44+* to
ma5e tec#nical a%!ustment an% corrections of non;essential elements in t#e follo1in" provisions in
or%er to ta5e account of ne* %evelopments in ne1 financial pro%ucts or a$tivities* to ma5e
a%!ustments to %evelopments after t#e a%option of t#is Re"ulation in ot#er $4 le"islative acts on
financial services an% accountin" inclu%in" accountin" stan%ar%s ase% on Re"ulation Bo7 )$4/
1=.+/2::2:
)a/ t#e o1n fun%s re&uirements for cre%it ris5 lai% %o1n in ,rticles 1.= to 1-9* an% in ,rticles
138 to 18>E
)/ t#e effects of cre%it ris5 miti"ation in accor%ance 1it# ,rticles 189 to -3= E
)c/ t#e o1n fun%s re&uirements for securitisation lai% %o1n in ,rticles -38 to -=1E
)%/ t#e o1n fun%s re&uirements for counterpart6 cre%it ris5s in accor%ance 1it# articles -=> to
3..aE
)e/ t#e o1n fun%s re&uirements for operational ris5 lai% %o1n in ,rticles 3.4 to 313E
)f/ t#e o1n fun%s re&uirements for mar5et ris5 lai% %o1n in ,rticles 314 to 3=>E
)"/ t#e o1n fun%s re&uirements for settlement Ris5 lai% %o1n in ,rticles 3=8 an% 3=9E
)#/ t#e o1n fun%s re&uirements for cre%it valuation a%!ustment ris5 lai% %o1n in ,rticles 3>3*
3>4 an% 3>+E
)i/ Part 21o an% ,rticle 9+ onl# as a result of %evelopments in accountin" stan%ar%s or
re&uirements 1#ic# ta5e account of 4nion le"islation A7
Article 443a
Ma$ro=prudential or s#stei$ risk identified at the level of a Me!er "tate
:3 Me!er "tates shall designate the authorit# in $harge of the appli$ation of this Arti$le3
+his authorit# shall !e the $opetent authorit# or the designated authorit#3
43 &f the authorit# deterined a$$ording to paragraph : identifies $hanges in the intensit#
of a$ro=prudential or s#stei$ risk in the finan$ial s#ste *ith the potential to have
serious negative $onse6uen$es to the finan$ial s#ste and the real e$ono# in a spe$ifi$
Me!er "tate and *hi$h the authorit# deterined a$$ording to paragraph : $onsiders
*ould !etter !e addressed !# eans of stri$ter national easures, it shall notif# the
European .arliaent, the Coission, the Coun$il, the E")B and EBA of that fa$t
and su!it relevant 6uantitative or 6ualitative eviden$e of all of the follo*ing'
a) the $hanges in the intensit# of a$ro=prudential or s#stei$ risk%
! the reasons *h# su$h $hanges $ould pose a threat to finan$ial sta!ilit# at national
level%
!e) a 9ustifi$ation of *h# Arti$les 44> and 4?: of this )egulation and Arti$les >A, >>a,
4::, 4::a, 42Bd, and 42? of (ire$tive ,inserted !# -./ $annot ade6uatel# address
the identified a$ro=prudential or s#stei$ risk, taking a$$ount of the relative
effe$tiveness of these easures3
$) draft national easures for doesti$all# authorised institutions, or a su!set of
those institutions, intended to itigate the $hanges in the intensit# of risk and
$on$erning'
(i) the level of o*n funds laid do*n in Arti$le A0%
(ii) the re6uireents for large e5posures laid do*n in Arti$le CA4 and Arti$le
CAB to C>2%
(iii) the pu!li$ dis$losure re6uireents laid do*n in arti$les B4A to BB:% or
(iv) the level of the $onservation !uffer as set out in Arti$le 42C of (ire$tive
,inserted !# -./3
(v) Li6uidit# re6uireents as set out in .art "i5
(vi) )isk *eights for targeting asset !u!!les in the residential and $oer$ial
propert# se$tor3
(vii) &ntra finan$ial se$tor e5posures
d) an e5planation as to *h# su$h draft easures are deeed !# the authorit#
deterined a$$ording to paragraph : to !e suita!le, effe$tive and proportionate to
address the situation% and
e) an assessent of the likel# positive or negative ipa$t of the easures on the
single arket !ased on inforation *hi$h is availa!le to the Me!er "tate3
4a3 ;hen authorised to appl# national easures in a$$ordan$e *ith this Arti$le, the
authorities deterined in a$$ordan$e *ith paragraph : shall provide relevant $opetent
authorities in other $ountries *ith all relevant inforation3
23 +he po*er to adopt an ipleenting a$t to re9e$t the proposed national easures
referred to in paragraph 4 is $onferred on the Coun$il, a$ting !# 6ualified a9orit#, on
proposal fro the Coission3
;ithin one onth of re$eiving the notifi$ation referred to in paragraph 4, the E")B and
the EBA shall provide their opinions on the points entioned in paragraph 4 to the
Coission, the Coun$il and the Me!er "tate in 6uestion3
+aking utost a$$ount of the opinions entioned a!ove and if there is ro!ust, strong
and detailed eviden$e that the easure *ill have a negative ipa$t on the single arket
that out*eighs the finan$ial sta!ilit# !enefits resulting for a redu$tion in the s#stei$
risks identified, the Coission a#, *ithin one onth, propose to the Coun$il an
ipleenting a$t to re9e$t the proposed national easures3
&n the a!sen$e of a Coission proposal *ithin that period of one onth, the Me!er
"tate a# iediatel# adopt the easures for a period of up to t*o #ears or until the
a$ro=prudential or s#stei$ risk $eases to e5ist if that o$$urs sooner3
+he Coun$il shall de$ide on the proposal !# the Coission *ithin one onth after
re$eipt of the proposal and state its reasons for re9e$ting or not the national easures3
+he Coun$il shall onl# re9e$t the proposed national easures if it $onsiders that the
follo*ing $onditions are not $oplied *ith'
a) the $hanges in the intensit# of a$ro=prudential or s#stei$ risk are of su$h
nature as to pose risk to finan$ial sta!ilit# at national level%
!) Arti$les 44> and 4?: of this )egulation and Arti$les >A, >>a, 4::, 4::a, 42Bd,
and 42? of (ire$tive ,inserted !# -./ $annot ade6uatel# address the
identified a$ro=prudential or s#stei$ risk, a$$ount taken of the relative
effe$tiveness of these easures%
$) the proposed national easures are ore suita!le to address the identified
a$ro=prudential or s#stei$ risk and do not entail disproportionate adverse
effe$ts on the *hole or parts of the finan$ial s#ste in other Me!er "tates
or of the 2nion as a *hole, thus foring or $reating an o!sta$le to the
fun$tioning of the internal arket%
d) the issue $on$erns onl# one Me!er "tate% and
e) the risks have not alread# !een addressed !# other easures in this
)egulation or in (ire$tive ,inserted !# -./
+he assessent of the Coun$il shall take a$$ount of the opinion of the E")B and EBA
and shall !e !ased on the eviden$e presented in a$$ordan$e *ith paragraph 4 !# the
authorit# deterined a$$ording to paragraph :3
&n the a!sen$e of a Coun$il de$ision to re9e$t the proposed national easures *ithin one
onth after re$eipt of the proposal !# the Coission, the Me!er "tate a# adopt the
easures for a period of up to t*o #ears or until the a$ro=prudential or s#stei$ risk
$eases to e5ist if that o$$urs sooner3
2a3 -ther Me!er "tates a# re$ognise the easure set in a$$ordan$e *ith this Arti$le and
appl# the easures to doesti$all# authorised !ran$hes lo$ated in the Me!er "tate
authorised to appl# the easures3
2!3 &f Me!er "tates re$ognise the easures set in a$$ordan$e *ith this arti$le, the# shall
notif# the Coission, the Coun$il, EBA, the E")B and the Me!er "tate authorised
to appl# the easures3
2$3 ;hen de$iding *hether to re$ognise the easures set in a$$ordan$e *ith this Arti$le,
the Me!er "tate shall take into $onsideration the $riteria set in paragraph 23
2d3 +he Me!er "tate authorised to appl# the easures a# ask the E")B to issue a
re$oendation as referred to in Arti$le 4? of )egulation (E2) Fo3 4:>2D2:4: to one or
ore Me!er "tates *hi$h do not re$ognise the easures3
C3 Before the e5pir# of the authorisation issued in a$$ordan$e *ith paragraph 2, the
Me!er "tate shall, in $onsultation *ith the E")B and EBA, revie* the situation and
a# a$$ordingl# adopt, in a$$ordan$e *ith the pro$edure referred to in paragraph 2, a
ne* de$ision for the e5tension of the period of appli$ation of national easures for one
additional #ear ea$h tie3 After the first e5tension, the Coission shall in $onsultation
*ith the E")B and EBA revie* at least ever# #ear the situation3
C53 Fot*ithstanding the pro$edure as set out in paragraph 4a to C, Me!er "tates shall !e
allo*ed to in$rease the risk *eights !e#ond those provided in the )egulation !# up to 2@
J, for those e5posures identified in paragraph 4($) (vi) and (vii) a!ove and tighten the
large e5posure liit provided in Arti$le CAB !# up to 4@J for a period of up to t*o #ears
or until the a$ro=prudential or s#stei$ risk $eases to e5ist if that o$$urs sooner,
provided that the $onditions and notifi$ation re6uireents in paragraph 4 are et3
Arti$le BBC!
Pru$ential requirements
43 +he Coission shall !e epo*ered to adopt delegated a$ts in a$$ordan$e *ith Arti$le
BB@, to ipose, for a period of one #ear, stri$ter prudential re6uireents for e5posures
*here this is ne$essar# to address $hanges in the intensit# of i$ro=prudential and
a$ro=prudential risks *hi$h arise fro arket developents in the 2nion or outside
the 2nion affe$ting all Me!er "tates, and *here the instruents of this )egulation
and the (ire$tive , inserted !# -./ are not suffi$ient to address these risks, in parti$ular
upon the re$oendation or opinion of the E")B or EBA, $on$erning
(a) At#e level of o1n fun%s lai% %o1n in ,rticle 8>E
(!) the re6uireents for large e5posures laid do*n in Arti$le CA4 and Arti$le CAB to
C>2
($) the pu!li$ dis$losure re6uireents laid do*n in arti$les B4A to BB:3
A
2#is %ele"ation of po1er s#all e su!ect to t#e proce%ure referre% to in ,rticle BB@3
+he Coission, assisted !# the E")B shall, at least on an annual !asis, su!it to the European
.arliaent and the Coun$il, a report on arket developents potentiall# re6uiring the use of
Arti$le BBCB3
Article 444
7iqui$ity
17 2#e Commission s#all e empo1ere% to a%opt a %ele"ate% act in accor%ance 1it# ,rticle
44+ to specif6 in %etail t#e "eneral re&uirement set out in ,rticle B:4(4)3 +he delegated a$t
adopted a$$ording to this provision s#all e ase% on t#e items to e reporte% accor%in" to
Part Si8* 2itle 00 and Anne5 &&&, s#all A specif6 un%er 1#ic# circumstances competent
aut#orities #ave to impose specific in; an% outflo1 levels on cre%it institutions in or%er to
capture specific ris5s to 1#ic# t#e6 are e8pose% and shall respe$t the thresholds set out in
paragraph 4a3
4a3 +he Li6uidit# $overage re6uireent referred to in Arti$le B:4 shall !e introdu$ed in
a$$ordan$e *ith the follo*ing phasing=in'
i) ?:J of the LC) in 2:4@%
ii) 0:J as fro 4 Eanuar# 2:4?%
iii) A:J as fro 4 Eanuar# 2:40%
iv) 4::J as fro 4 Eanuar# 2:4A3%
1or this purpose the Coission shall take into a$$ount the reports referred to in paragraphs 4
and 2 of Arti$le BA4 and international standards developed !# international fora as *ell as
European spe$ifi$ities3
+he Coission shall adopt the delegated a$t referred to in paragraph 4 no later than C: Eune
2:4B3 &t shall enter into for$e !# C4 (e$e!er 2:4B at the latest, !ut shall not appl# !efore 4st
Eanuar# 2:4@3
43 EBA shall, after $onsulting the E")B, !# C: Eune 2:4? report to the Coission on
*hether the phase=in of the li6uidit# $overage re6uireent as spe$ified in Arti$le
BBB(4a) should !e odified3 "u$h anal#sis shall take due a$$ount of arket and
international regulator# developents as *ell as European spe$ifi$ities3
EBA shall in its report assess in parti$ular a deferred introdu$tion of the 4::J
iniu !inding standard, until 4 Eanuar# 2:4>3 +he report shall take into a$$ount the
annual reports referred to in Arti$le BA4(4), relevant arket data and the
re$oendations of all Me!er "tate $opetent authorities3
A
23 ;here ne$essar# to address arket and other developents, the Coission shall !e
epo*ered to adopt a delegated a$t in a$$ordan$e *ith Arti$le BB@ to alter the phase=in
spe$ified in Arti$le BBB and defer until 2:4> the introdu$tion of a 4::J !inding
iniu standard for the li6uidit# $overage re6uireent set out in Arti$le B:4(4) and to
appl# in 2:4A a >:J !inding iniu standard for the li6uidit# $overage re6uireent3
1or the purposes of assessing the ne$essit# of deferral the Coission shall take into
a$$ount the report and assessent referred to in paragraph 43
A delegated a$t adopted in a$$ordan$e *ith this Arti$le shall not appl# !efore 4st
Eanuar# 2:4A and shall enter into for$e !# C:th Eune 2:40 at the latest3
Article 44
E,ercise of the $ele#ation
17 2#e po1er to a%opt %ele"ate% acts is conferre% on t#e Commission su!ect to t#e
con%itions lai% %o1n in t#is ,rticle7
-7 2#e %ele"ation of po1ers referre% to in ,rticles 441 to 444 s#all e conferre% for an
in%eterminate perio% of time from t#e %ate referre% to in ,rticle 4887
37 2#e %ele"ation of po1er referre% to in ,rticles 441 to 444 ma6 e revo5e% at an6 time 6
t#e $uropean Parliament or 6 t#e Council7 , %ecision of revocation s#all put an en% to t#e
%ele"ation of t#e po1er specifie% in t#at %ecision7 0t s#all ta5e effect t#e %a6 follo1in" t#e
pulication of t#e %ecision in t#e Official <ournal of t#e $uropean 4nion or at a later %ate
specifie% t#erein7 0t s#all not affect t#e vali%it6 of t#e %ele"ate% acts alrea%6 in force7
47 ,s soon as it a%opts a %ele"ate% act* t#e Commission s#all notif6 it simultaneousl6 to t#e
$uropean Parliament an% to t#e Council7
+7 , %ele"ate% act a%opte% pursuant to ,rticles 441 to 444 s#all enter into force onl6 if no
o!ection #as een e8presse% 6 t#e $uropean Parliament or t#e Council 1it#in a perio% of
C onths of notification of t#at act to t#e $uropean Parliament an% t#e Council or if*
efore t#e e8pir6 of t#at perio%* t#e $uropean Parliament an% t#e Council #ave ot#
informe% t#e Commission t#at t#e6 1ill not o!ect7 2#at perio% s#all e e8ten%e% 6 C
onths at t#e initiative of t#e $uropean Parliament or t#e Council7
6
Art3 BB@a ne*
-!9e$tions to regulator# te$hni$al standards
;here the Coission adopts a regulator# te$hni$al standard pursuant to this )egulation *hi$h
is the sae as the draft regulator# te$hni$al standard su!itted !# the EBA, the period during
*hi$h the European .arliaent and the Coun$il a# o!9e$t to that regulator# te$hni$al standard
shall !e one onth fro the date of notifi$ation3 At the initiative of the European .arliaent or
the Coun$il that period shall !e e5tended !# one onth3 B# *a# of derogation fro the se$ond
su!paragraph of Arti$le 4C(4) of )egulation (E2) Fo3 4:>CD2:4:, the period during *hi$h the
European .arliaent and the Coun$il a# o!9e$t to that )+" a# !e further e5tended !# one
onth, *here ne$essar#3
Article 44%
European 8an1in# 2ommittee
17 3or t#e a%option of implementin" acts* t#e Commission s#all e assiste% 6 t#e $uropean
Dan5in" Committee estalis#e% 6 Commission Decision -..4/1./$C7 2#at committee
s#all e a committee 1it#in t#e meanin" of ,rticle 3)-/ of Re"ulation )$4/ Bo 18-/-.117
-7 ?#ere reference is ma%e to t#is para"rap#* ,rticle + of Re"ulation )$4/ Bo7 18-/-.11
s#all appl67
PART TEN
TRAN?ITIONAL PRO,I?ION?, REPORT?, RE,IEC?
AN$ A*EN$*ENT?
Title I Trnsitionl
pro3isions
C6pter 1
O<n 1un.s re/uire0ents, unrelise. 5ins n. losses 0esure. t 1ir
3lue n. .e.u2tions
?ECTION 1
OCN FUN$? RE@UIRE*ENT?
Article 44&
Hwn fun$s requirements
17 D6 1a6 of %ero"ation from points )a/ an% )/ of ,rticle 8>)1/ At#e follo1in" o1n fun%s
re&uirements shall appl# at all ties during the period fro the date of appli$ation of
this )egulation to C4 (e$e!er 2:4BI
A
:a/ a Common $&uit6 2ier 1 capital ratio of a level t#at falls 1it#in a ran"e of 4 O to 47+
OE
)!/ a 2ier 1 capital ratio of a level t#at falls 1it#in a ran"e of @3@ O to =O7
-7 Competent aut#orities s#all:
)a/ %etermine t#e levels of t#e Common $&uit6 2ier 1 an% 2ier 1 capital ratios in t#e
ran"es specifie% in Apara"rap# 1 t#at institutions s#all eet or e5$eedE
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
C3 &nstitutions shall eet or e5$eed the levels of the Coon E6uit# +ier 4 and +ier 4
$apital ratios referred to in paragraph 23
A
Arti$le BBAa ne*
1irst tie appli$ation of &1)"
B# *a# of derogation fro Arti$le 24a(2), $opetent authorities shall grant institutions *hi$h
are re6uired to effe$t the valuation of assets and off=!alan$e=sheet ites and the deterination of
o*n funds in a$$ordan$e *ith &nternational A$$ounting "tandards as appli$a!le under
)egulation (EC) Fo 4?:?D2::2 for the first tie a lead tie of 2B onths for the ipleentation
of the ne$essar# internal pro$esses and te$hni$al re6uireents3
?ECTION 2
UNREALI?E$ >AIN? AN$ LO??E? *EA?URE$ AT FAIR ,ALUE
Article 44(
0nrealise$ losses measure$ at fair value
17 D6 1a6 of %ero"ation from ,rticle 3-* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1> institutions s#all inclu%e in t#e calculation of t#eir
Common $&uit6 2ier 1 items onl6 t#e applicale percenta"e of unrealise% losses related to
assets or lia!ilities measure% at fair value* and reported on the !alan$e sheet, e8clu%in"
t#ose referre% to in ,rticle 3. and all other unrealised losses reported as part of the profit
and loss a$$ount3
-7 2#e applicale percenta"e for t#e purposes of para"rap# 1 s#all fall 1it#in follo1in"
ran"es:
A
)/ -. O to 1.. O %urin" t#e perio% from the date of appli$ation to 31 Decemer -.14E
)c/ 4. O to 1.. O %urin" t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)%/ =. O to 1.. O %urin" t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E an%
)e/ 8. O to 1.. O for t#e perio% from1 <anuar6 -.1> to 31 Decemer -.1>7
B# *a# of derogation fro paragraph 4, the $opetent authorities a#, in $ases *here su$h
treatent *as applied !efore the date of appli$ation of this )egulation, allo* institutions not to
in$lude in an# eleent of o*n funds unrealised gains or losses on e5posures to $entral
governents $lassified in the HAvaila!le for "aleI $ategor# of E2=endorsed &A" C>3
+he treatent laid do*n in the first su!paragraph shall !e applied until the Coission has
adopted a regulation on the !asis of )egulation 4?:?D2::2 endorsing the &1)" repla$ing &A" C>3
37 Competent aut#orities s#all:
)a/ %etermine t#e applicale percenta"e in t#e ran"es specifie% in points )!/ to )e/ of
para"rap# -E
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
Article 4*
0nrealise$ #ains measure$ at fair value
17 D6 1a6 of %ero"ation from ,rticle 3-* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1>* institutions s#all Aremove from t#eir Common
$&uit6 2ier 1 items t#e applicale percenta"e of unrealise% "ains related to assets or
lia!ilities measure% at fair value and reported on the !alan$e sheet* e8clu%in" t#ose
referre% to in ,rticle C: and all other unrealised gains *ith the e5$eption of those related
to investent properties reported as part of the profit and loss a$$ount3 2#e resultin"
resi%ual amount s#all not e remove% from Common $&uit6 2ier 1 items7
-7 3or t#e purposes of para"rap# 1* t#e applicale percenta"e s#all e 4:: O %urin" t#e
perio% from the date of appli$ation of this )egulation to 31 Decemer 2:4B, an% s#all*
after t#at %ate* fall 1it#in t#e follo1in" ran"es:
A
)/ ?: O to 4:: O %urin" t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)c/ B: O to 4:: O %urin" t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E
)%/ 2: O to 4:: O for t#e perio% from 1 <anuar6 -.1> to 31 Decemer -.1>7
As of 4 Eanuar# 2:4@, *here under Arti$le BB> a $opetent authorit# re6uires
institutions to in$lude in the $al$ulation of Coon E6uit# +ier 4 $apital
A
(e) 4::J of their unreali<ed losses easured at fair value, that $opetent authorit#
a# also perit institutions to in$lude in that $al$ulation 4::J of their unreali<ed
gains at fair value3
(f) Copetent authorities a# not set an appli$a!le per$entage of unreali<ed gains
under paragraph 2 that e5$eeds the appli$a!le per$entage of unreali<ed losses set
in a$$ordan$e *ith Arti$le BB>3
47 Competent aut#orities s#all:
)a/ %etermine t#e applicale percenta"e of unrealise% "ains in t#e ran"es specifie% in
points )!/ to )%/ of para"rap# - t#at is not remove% from Common $&uit6 2ier
1 capitalE
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
B# *a# of derogation fro Arti$le C: point ($), during the period fro 4 Eanuar# 2:4C to C4
(e$e!er 2:40, institutions shall in$lude in their o*n funds the appli$a!le per$entage as
spe$ified in Arti$le B@A of the fair value gains and losses fro derivative lia!ilities arising fro
the institutionGs o*n $redit risk3
?ECTION 3
$E$UCTION?
?UB9?ECTION 1
$E$UCTION? FRO* CO**ON E@UITA TIER 1 ITE*?
Article 41
De$uctions from 2ommon Equity Tier 1 items
17 D6 1a6 of %ero"ation from ,rticle 33)1/* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1>* t#e follo1in" s#all appl6:
)a/ institutions s#all %e%uct from Common $&uit6 2ier 1 items t#e applicale percenta"e
specifie% in ,rticle 4+8 of t#e amounts re&uire% to e %e%ucte% pursuant to points )a/
to )#/ of ,rticle 33)1/* e8clu%in" %eferre% ta8 assets t#at rel6 on future profitailit6
an% arise from temporar6 %ifferencesE
)/ institutions s#all appl6 t#e relevant provisions lai% %o1n in ,rticle 4+3 to t#e
resi%ual amounts of items re&uire% to e %e%ucte% pursuant to points )a/ to )#/ of
,rticle 33)1/* e8clu%in" %eferre% ta8 assets t#at rel6 on future profitailit6 an% arise
from temporar6 %ifferencesE
)c/ institutions s#all %e%uct from Common $&uit6 2ier 1 items t#e applicale percenta"e
specifie% in ,rticle 4+8 of t#e total amount re&uire% to e %e%ucte% pursuant to
points )c/ an% )i/ of ,rticle 33)1/ after appl6in" ,rticle 4+-E
)%/ institutions s#all appl6 t#e re&uirements lai% %o1n in ,rticle 4+3)4/ or ,rticle
4+3)1./* as applicale* to t#e total resi%ual amount of items re&uire% to e %e%ucte%
pursuant to points )c/ an% )i/ of ,rticle 33)1/ after appl6in" ,rticle 4+-7
-7 0nstitutions s#all %etermine t#e portion of t#e total resi%ual amount referre% to in point )%/
of para"rap# 1* t#at is su!ect to ,rticle 4+3)4/* 6 %ivi%in" t#e amount specifie% in point
)a/ 6 t#e amount specifie% in point )/:
)a/ t#e amount of %eferre% ta8 assets t#at are %epen%ent on future profitailit6 an% arise
from temporar6 %ifferences referre% to in point )a/ of ,rticle 4+-)-/E
)/ t#e sum of t#e amounts referre% to in points )a/ an% )/ of ,rticle 4+-)-/7
37 0nstitutions s#all %etermine t#e portion of t#e total resi%ual amount referre% to point )%/ of
para"rap# 1 t#at is su!ect to ,rticle 4+3)1./ 6 %ivi%in" t#e amount specifie% in point )a/
6 t#e amount specifie% in point )/:
)a/ t#e amount of %irect an% in%irect #ol%in"s of t#e Common $&uit6 2ier 1 instruments
referre% to in point )/ of ,rticle 4+-)-/E
)/ t#e sum of t#e amounts referre% to in points )a/ an% )/ of ,rticle 4+-)-/7
Article 42
E,emption from $e$uction from 2ommon Equity Tier 1 items
17 3or t#e purposes of t#is ,rticle* relevant Common $&uit6 2ier 1 items s#all comprise t#e
Common $&uit6 2ier 1 items of t#e institution calculate% after appl6in" t#e provisions of
Arti$les 2> to C2 an% ma5in" t#e %e%uctions pursuant to points )a/ to )#/ A* )5/(ii) to (v)
an% )l/ of ,rticle 33)1/* e8clu%in" %eferre% ta8 assets t#at rel6 on future profitailit6 an%
arise from temporar6 %ifferences7
-7 D6 1a6 of %ero"ation from ,rticle 4+)1/* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1>* institutions s#all not %e%uct t#e items liste% in
points )a/ an% )/ 1#ic# in a""re"ate are e&ual to or less t#an 1+ O of relevant Common
$&uit6 2ier 1 items of t#e institution:
)a/ %eferre% ta8 assets t#at are %epen%ent on future profitailit6 an% arise from
temporar6 %ifferences an% in a""re"ate are e&ual to or less t#an 1. O of relevant
Common $&uit6 2ier 1 itemsE
)/ 1#ere an institution #as a si"nificant investment in a finan$ial se$tor entit6* t#e
%irect, in%irect and s#ntheti$ #ol%in"s 6 t#e institution of t#e Common $&uit6 2ier
1 instruments of t#at entit6 t#at in a""re"ate are e&ual to or less t#an 1. O of
relevant Common $&uit6 2ier 1 items7
37 D6 1a6 of %ero"ation from ,rticle 4+)-/* t#e items e8empt from %e%uction pursuant to
para"rap# - s#all e ris5 1ei"#te% at -+. O7 2#e items referre% to in point )/ of para"rap#
- s#all e su!ect to t#e re&uirements of 2itle 0R of Part 2#ree* as applicale7
Arti$le B@2a
E5eption fro (edu$tion of E6uit# Holdings in &nsuran$e Copanies fro
Coon E6uit# +ier 4 &tes
43 B# *a# of derogation fro Arti$le B?, paragraph 4, during the period fro the date of
appli$ation of this )egulation to C4 (e$e!er 2:22, $opetent authorities a# perit
institutions to not dedu$t e6uit# holdings in insuran$e undertakings, reinsuran$e
undertakings and insuran$e holding $opanies *here the follo*ing $onditions are et'
(a) the $onditions laid do*n in points (a), ($) and (e) of Arti$le B?(4)%
(!) the $opetent authorities are satisfied *ith the level of risk $ontrol and finan$ial
anal#sis pro$edures spe$ifi$all# adopted !# the institution in order to supervise the
investent in the undertaking or holding $opan#%
($) the e6uit# holdings of the institution in the insuran$e undertaking, reinsuran$e
undertaking or insuran$e holding $opan# do not e5$eed 4@J of the Coon
E6uit# +ier 4 instruents issued !# that insuran$e entit# as of C4 (e$e!er 2:42
and during the period fro 4 Eanuar# 2:4C to C4 (e$e!er 2:22%
(d) the aount of the e6uit# holding *hi$h is not dedu$ted does not e5$eed the
aount held in the Coon E6uit# +ier 4 instruents in the insuran$e
undertaking, reinsuran$e undertaking or insuran$e holding $opan# as of C4
(e$e!er 2:423
23 +he e6uit# holdings *hi$h are not dedu$ted pursuant to paragraph 4 shall 6ualif# as
e5posures and !e risk *eighted !# C0:J3
Article 43
'tems not $e$ucte$ from 2ommon Equity Tier 1
43 B# *a# of derogation fro point ($) of Arti$le C: and points )a/ to )i/ of ,rticle 33)1/*
%urin" t#e perio% from the date of appli$ation of this )egulation to 31 Decemer -.1>*
institutions s#all appl6 t#is ,rticle to t#e resi%ual amounts of items referre% to in Arti$le
B@:a and points )/ an% )%/ of ,rticle 4+1)1/, as appli$a!le3
4a3 +he residual aount of the valuation ad9ustents to derivative lia!ilities arising fro
the institutionGs o*n $redit risk are not dedu$ted3
-7 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of losses of t#e current
financial 6ear referre% to in point )a/ of ,rticle 33)1/ A
)a/ losses t#at are material are %e%ucte% from 2ier 1 itemsE
)/ losses t#at are not material are not %e%ucte%7
37 0nstitutions s#all %e%uct t#e resi%ual amount of t#e intan"ile assets referre% to in point )/
of ,rticle 33)1/)/ from 2ier 1 items7
47 2#e resi%ual amount of t#e %eferre% ta8 assets referre% to in point )c/ of ,rticle 33)1/ s#all
not e %e%ucte% an% s#all e su!ect to a ris5 1ei"#t of . O7
+7 2#e resi%ual amount of t#e items referre% to in point )%/ of ,rticle 33)1/ s#all e %e%ucte%
#alf from 2ier 1 items an% #alf from 2ier - items7
=7 2#e resi%ual amount of t#e assets of a %efine% enefit pension fun% referre% to in point )e/
of ,rticle 33)1/ s#all not e %e%ucte% from an6 element of o1n fun%s an% s#all e inclu%e%
in Common $&uit6 2ier 1 items to t#e e8tent t#at amount 1oul% #ave een reco"nise% as
ori"inal o1n fun%s accor%in" to t#e national transposition measures for points )a/ to )ca/ of
,rticle +> of Directive -..=/48/$C7
>7 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of #ol%in"s of o1n Common
$&uit6 2ier 1 instruments referre% to in point )f/ of ,rticle 33)1/:
)a/ t#e amount of %irect #ol%in"s is %e%ucte% from 2ier 1 itemsE
)/ t#e amount of in%irect and s#ntheti$ #ol%in"s* inclu%in" o1n Common $&uit6 2ier 1
instruments t#at an institution coul% e oli"e% to purc#ase 6 virtue of an e8istin"
or contin"ent contractual oli"ation is not %e%ucte% an% is su!ect to a ris5 1ei"#t in
accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree an% to t#e re&uirements lai%
%o1n in 2itle 0R of Part 2#ree* as applicale7
87 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of #ol%in"s of Common
$&uit6 2ier 1 instruments of a finan$ial se$tor entit6 1#ere t#e institution #as reciprocal
cross #ol%in"s 1it# t#at entit6 referre% to in point )"/ of ,rticle 33)1/:
)a/ 1#ere an institution %oes not #ave a si"nificant investment in t#at finan$ial se$tor
entit6* t#e amount of its #ol%in" of t#e Common $&uit6 2ier 1 instruments of t#at
entit6 is treate% as fallin" un%er point )#/ of ,rticle 33)1/E
)/ 1#ere an institution #as a si"nificant investment in t#at finan$ial se$tor entit6* t#e
amount of its #ol%in"s of Common $&uit6 2ier 1 instruments of t#at entit6 is treate%
as fallin" un%er point )i/ of ,rticle 33)1/7
97 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amounts of items referre% to in point
)#/ of ,rticle 33)1/:
)a/ t#e amounts re&uire% to e %e%ucte% t#at relate to %irect #ol%in"s are %e%ucte% #alf
from 2ier 1 items an% #alf from 2ier - itemsE
)/ t#e amounts t#at relate to in%irect and s#ntheti$ #ol%in"s are not %e%ucte% an% are
su!ect to a ris5 1ei"#ts in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree
an% to t#e re&uirements lai% %o1n in 2itle 0R of Part 2#ree* as applicaleE
1.7 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amounts of t#e items referre% to in
point )i/ of ,rticle 33)1/:
)a/ t#e amounts re&uire% to e %e%ucte% t#at relate to %irect #ol%in"s are %e%ucte% #alf
from 2ier 1 items an% #alf from 2ier - itemsE
)/ t#e amounts t#at relate to in%irect and s#ntheti$ #ol%in"s are not %e%ucte% an% are
su!ect to ris5 1ei"#ts in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree an%
to t#e re&uirements lai% %o1n in 2itle 0R of Part 2#ree* as applicale7
Arti$le B@Ca
&ntrodu$tion of aendents to &A" 4>
43 B# *a# of derogation fro Arti$le B?4 during the period fro the date of appli$ation of
this )egulation until C4 (e$e!er 2:4A, $opetent authorities a# perit institutions
that prepare their a$$ounts in $onforit# *ith the international a$$ounting standards
adopted in a$$ordan$e *ith the pro$edure laid do*n in Arti$le ?(2) of )egulation (EC)
Fo 4?:?D2::2 to appl# the follo*ing treatent'
&nstitutions shall add to their Coon E6uit# +ier 4 the appli$a!le aount a$$ording to
paragraph 2 or 2a as appli$a!le ultiplied !# the fa$tor a$$ording to paragraph C3
23 +he appli$a!le aount shall !e $al$ulated !# dedu$ting fro the su a$$ording to (i)
the su a$$ording to (ii)'
(i) &nstitutions shall deterine the values of the assets of their defined !enefit pension
funds or plans, as appli$a!le, a$$ording to Coission )egulation (EC) Fo
442?D2::A as the# stood !efore the entr# into for$e of Coission )egulation
(E2) Fo B0@D2:423 &nstitutions shall then dedu$t fro the values of these assets
the values of the o!ligations under the sae funds or plans deterined a$$ording
to the sae a$$ounting rules3
(ii) &nstitutions shall deterine the values of the assets of their defined pension funds
or plans, as appli$a!le, a$$ording to the rules set out in Coission )egulation
(EC) Fo 442?D2::A as aended3 &nstitutions shall then dedu$t fro the values of
these assets, the values of the o!ligations under the sae funds or plans
deterined a$$ording to the sae a$$ounting rules3
2a3 +he aount deterined a$$ording *ith paragraph 2 shall !e liited to the aount not
re6uired to !e dedu$ted fro o*n funds, prior to the date of appli$ation of this
)egulation, under national transposition easures of (ire$tive 2::?DBADEC, insofar as
those national transposition easures *ould !e eligi!le for the treatent in arti$le B?4
in the $on$erned Me!er "tate3
C3 +he follo*ing fa$tors appl#'
(a) 4 in the period fro the date of appli$ation of this )egulation to C4 (e$e!er
2:4B%
(!) :3A in the period fro 4 Eanuar# 2:4@ to C4 (e$e!er 2:4@%
($) :3? in the period fro 4 Eanuar# 2:4? to C4 (e$e!er 2:4?%
(d) :3B in the period fro 4 Eanuar# 2:40 toC4 (e$e!er 2:40%
(e) :32 in the period fro 4 Eanuar# 2:4A to C4 (e$e!er 2:4A%
B3 &nstitutions shall dis$lose the values of assets and lia!ilities a$$ording to paragraph 2 in
their pu!lished finan$ial stateents3
?UB9?ECTION 2
$E$UCTION? FRO* A$$ITIONAL TIER 1 ITE*?
Article 44
De$uctions from A$$itional Tier 1 items
D6 1a6 of %ero"ation from ,rticle +3* %urin" t#e perio% from the date of appli$ation of this
)egulation to 31 Decemer -.1>* t#e follo1in" s#all appl6:
)a/ institutions s#all %e%uct from ,%%itional 2ier 1 items t#e applicale percenta"e specifie% in
,rticle 4+8 of t#e amounts re&uire% to e %e%ucte% pursuant to ,rticle +3E
)/ institutions s#all appl6 t#e re&uirements lai% %o1n in ,rticle 4++ to t#e resi%ual amounts
of t#e items re&uire% to e %e%ucte% pursuant to ,rticle +37
Article 4
'tems not $e$ucte$ from A$$itional Tier 1 items
17 D6 1a6 of %ero"ation from ,rticle +3* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1>* t#e re&uirements lai% %o1n in t#is ,rticle s#all
appl6 to t#e resi%ual amounts referre% to in point )/ of ,rticle 4+47
-7 0nstitutions s#all appl6 t#e follo1in" to resi%ual amount of t#e items referre% to in point )a/
of ,rticle +3:
)a/ %irect #ol%in"s of o1n ,%%itional 2ier 1 instruent are %e%ucte% at oo5 value from
2ier 1 itemsE
A
)c/ in%irect and s#ntheti$ #ol%in"s of o1n ,%%itional 2ier 1 instruments* inclu%in" o1n
,%%itional 2ier 1 instruments t#at an institution coul% e oli"e% to purc#ase 6
virtue of an e8istin" or contin"ent contractual oli"ation* are not %e%ucte% an% are
ris5 1ei"#te% in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree an% su!ect
to t#e re&uirements of 2itle 0R of Part 2#ree* as applicale7
37 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of t#e items referre% to in
point )/ of ,rticle +3:
)a/ 1#ere an institution %oes not #ave a si"nificant investment in a finan$ial se$tor
entit6 1it# 1#ic# it #as reciprocal cross #ol%in"s* t#e amount of its %irect, in%irect
and s#ntheti$ #ol%in"s of t#ose ,%%itional 2ier 1 instruments of t#at entit6 is treate%
as fallin" 1it#in point )c/ of ,rticle +3E
)/ 1#ere t#e institution #as a si"nificant investment in a finan$ial se$tor entit6 1it#
1#ic# it #as reciprocal cross #ol%in"s* t#e amount of its %irect, in%irect and s#ntheti$
#ol%in"s of t#ose ,%%itional 2ier 1 instruments of t#at entit6 is treate% as fallin"
1it#in point )%/ of ,rticle +37
47 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of t#e items referre% to in
points )c/ an% )%/ of ,rticle +3:
)a/ t#e amount relatin" to %irect #ol%in"s re&uire% to e %e%ucte% in accor%ance 1it#
points )c/ an% )%/ of ,rticle +3 are %e%ucte% #alf from 2ier 1 items an% #alf from
2ier - itemsE
)/ t#e amount relatin" to in%irect and s#ntheti$ #ol%in"s re&uire% to e %e%ucte% in
accor%ance 1it# points )c/ an% )%/ of ,rticle +3 s#all not e %e%ucte% an% s#all e
su!ect to a ris5 1ei"#t in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree
an% to t#e re&uirements of 2itle 0R of Part 2#ree* as applicale7
?UB9?ECTION 3
$E$UCTION? FRO* TIER 2 ITE*?
Article 4"
De$uctions from Tier 2 items
17 D6 1a6 of %ero"ation from ,rticle =3* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1>* t#e follo1in" s#all appl6:
)a/ institutions s#all %e%uct from 2ier - items t#e applicale percenta"e specifie% in
,rticle 4+8 of t#e amounts re&uire% to e %e%ucte% pursuant to ,rticle =3E
)/ 0nstitutions s#all appl6 t#e re&uirements lai% %o1n in ,rticle 4+> to t#e resi%ual
amounts re&uire% to e %e%ucte% pursuant to ,rticle =37
Article 4%
De$uctions from Tier 2 items
17 D6 1a6 of %ero"ation from ,rticle =3* %urin" t#e perio% from the date of appli$ation of
this )egulation to 31 Decemer -.1>* t#e re&uirements lai% %o1n in t#is ,rticle s#all
appl6 to t#e resi%ual amounts referre% to in point )/ of ,rticle 4+=7
-7 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of items referre% to in point )a/
of ,rticle =3:
)a/ %irect #ol%in"s of o1n 2ier - instruments Aare %e%ucte% at oo5 value from 2ier -
itemsE
)/ %irect #ol%in"s of o1n 2ier - instruments t#at are not s#ares are not %e%ucte% an% are
ris5 1ei"#te% in accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree an% su!ect
to t#e re&uirements of 2itle 0R of Part 2#ree* as applicaleE
)c/ in%irect and s#ntheti$ #ol%in"s of o1n 2ier - instruments* inclu%in" o1n 2ier -
instruments t#at an institution coul% e oli"e% to purc#ase 6 virtue of an e8istin"
or contin"ent contractual oli"ation are not %e%ucte% an% are ris5 1ei"#te% in
accor%ance 1it# C#apter - or 3 of 2itle 00 of Part 2#ree an% su!ect to t#e
re&uirements of 2itle 0R of Part 2#ree* as applicale7
37 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of t#e items referre% to in
point )/ of ,rticle =3:
)a/ 1#ere an institution %oes not #ave a si"nificant investment in a finan$ial se$tor
entit6 1it# 1#ic# it #as reciprocal cross #ol%in"s* t#e amount of its %irect, in%irect
and s#ntheti$ #ol%in"s of t#e 2ier - instruments of t#at entit6 is treate% as fallin"
1it#in point )c/ of ,rticle =3E
)/ 1#ere t#e institution #as a si"nificant investment in a finan$ial se$tor entit6 1it#
1#ic# it #as reciprocal cross #ol%in"s* t#e amount of %irect, in%irect and s#ntheti$
#ol%in"s of t#e 2ier - instruments of t#at finan$ial se$tor entit6 are treate% as fallin"
1it#in point )%/ of ,rticle =37
47 0nstitutions s#all appl6 t#e follo1in" to t#e resi%ual amount of t#e items referre% to in
points )c/ an% )%/ of ,rticle =3:
)a/ t#e amount relatin" to %irect #ol%in"s t#at is re&uire% to e %e%ucte% in accor%ance
1it# points )c/ an% )%/ of ,rticle =3 is %e%ucte% #alf from 2ier 1 items an% #alf from
2ier - itemsE
)/ t#e amount relatin" to in%irect and s#ntheti$ #ol%in"s t#at is re&uire% to e %e%ucte%
in accor%ance 1it# points )c/ an% )%/ of ,rticle =3 is not e %e%ucte% an% are su!ect
to a ris5 1ei"#t un%er C#apter - or 3 of 2itle 00 of Part 2#ree an% t#e re&uirements
lai% %o1n in 2itle 0R of Part 2#ree* as applicale7
?UB9?ECTION '
APPLICABLE PERCENTA>E? FOR $E$UCTION
Article 4&
Applicable percenta#es for $e$uction from 2ommon Equity Tier 13 A$$itional Tier 1 an$ Tier 2
items
17 2#e applicale percenta"e for t#e purposes of paragraph @ of Arti$le B@:, points )a/ an%
)c/ of ,rticle 4+1)1/* point )a/ of ,rticle 4+4 an% point )a/ of ,rticle 4+= s#all fall 1it#in
t#e follo1in" ran"es:
A
)/ -. O to 1.. O for t#e perio% from the date of appli$ation of this )egulation to 31
Decemer -.14E
)c/ 4. O to 1.. O for t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)%/ =. O to 1.. O for t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E
)e/ 8. O to 1.. O for t#e perio% from 1 <anuar6 -.1> to 31 Decemer -.1>7
4a3 B# *a# of derogation fro paragraph 4, for the ites referred in point ($) of arti$le
CC(4) that e5isted prior to the date of appli$ation of this )egulation, the appli$a!le
per$entage for the purpose of point ($) of Arti$le B@4(4) shall fall *ithin the follo*ing
ranges'
(a) : J to 4:: J for the period fro the entr# into for$e of this )egulation to one #ear
after the date of appli$ation of this )egulation%
(!) 4: J to 4:: J for the period fro one #ear after the entr# into for$e of this
)egulation to t*o #ears after the date of appli$ation of this )egulation%
($) 2: J to 4:: J for the period fro t*o #ears after the entr# into for$e of this
)egulation to three #ears after the date of appli$ation of this )egulation%
(d) C: J to 4:: J for the period fro three #ears after the entr# into for$e of this
)egulation to four #ears after the date of appli$ation of this )egulation%
(e) B: J to 4:: J for the period fro four #ears after the date of appli$ation of this
)egulation to five #ears after the date of appli$ation of this )egulation%
(f) @: J to 4:: J for the period fro five #ears after the date of appli$ation of this
)egulation to si5 #ears after the date of appli$ation of this )egulation%
(g) ?: J to 4:: J for the period fro si5 #ears after the date of appli$ation of this
)egulation to seven #ears after the date of appli$ation of this )egulation%
(h) 0: J to 4:: J for the period fro seven #ears after the date of appli$ation of this
)egulation to eight #ears after the date of appli$ation of this )egulation%
(i) A: J to 4:: J for the period fro eight #ears after the date of appli$ation of this
)egulation to nine #ears after the date of appli$ation of this )egulation%3
(9) >: J to 4:: J for the period fro nine #ears after the entr# into for$e of this
regulation to ten #ears after the entr# into for$e of this )egulation%3
-7 Competent aut#orities s#all:
)a/ %etermine an applicale percenta"e in t#e ran"es specifie% in para"rap# 1 and 4a for
eac# of t#e follo1in" dedu$tions:
)i/ t#e individual dedu$tions re6uired pursuant to Apoints )a/ to )#/ of ,rticle
33)1/* e8clu%in" %eferre% ta8 assets t#at rel6 on future profitailit6 an% arise
from temporar6 %ifferencesE
)ii/ the aggregate aount of %eferre% ta8 assets t#at rel6 on future profitailit6 an%
arise from temporar6 %ifferences an% t#e items referre% to in point )i/ of ,rticle
33)1/ that is re6uired to !e dedu$ted pursuant to Arti$le B@E
)iii/ ea$h dedu$tion re6uired pursuant to Apoints )!/ to )%/ of ,rticle +3E
)iv/ ea$h dedu$tion re6uired pursuant to Apoints )!/ to )%/ of ,rticle =3 A
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
?ECTION '
*INORITA INTERE?T AN$ A$$ITIONAL TIER 1 AN$ TIER 2 IN?TRU*ENT? I??UE$ BA
?UB?I$IARIE?
Article 4(
5eco#nition in consoli$ate$ 2ommon Equity Tier 1 capital of instruments an$ items that $o not
qualify as minority interests
17 D6 1a6 of %ero"ation from 2itle 000 of Part 21o* %urin" t#e perio% from the date of
appli$ation of this )egulation to 31 Decemer -.1>* reco"nition in consoli%ate% o1n
fun%s of t#e Aitems t#at 1oul% &ualif6 as consoli%ate% reserves in accor%ance 1it#
national transposition measures pursuant to ,rticle =+ of Directive -..=/48/$C t#at %o not
&ualif6 as consoli%ate% Common $&uit6 2ier 1 capital for an6 of t#e follo1in" reasons
s#all e %etermine% 6 t#e competent aut#orities in accor%ance 1it# para"rap#s - an% 3:
)a/ t#e instrument %oes not &ualif6 as a Common $&uit6 2ier 1 instrument* an% t#e
relate% retaine% earnin"s an% s#are premium accounts conse&uentl6 %o not &ualif6 as
consoli%ate% Common $&uit6 2ier 1 itemsE
)/ as a result of para"rap# - of ,rticle >=E
)c/ ecause t#e susi%iar6 is not an institution or an entit6 t#at is su!ect 6 virtue of
applicale national la1 to t#e re&uirements of t#is Re"ulation an% Directive Jinserte%
6 OPKE
)%/ ecause t#e susi%iar6 is not inclu%e% full6 in t#e consoli%ation pursuant to C#apter
- of 2itle 00 of Part One7
-7 2#e applicale percenta"e of t#e items referre% to in para"rap# 1 t#at 1oul% #ave &ualifie%
as consoli%ate% reserves in accor%ance 1it# t#e national transposition measures for ,rticle
=+ of Directive -..=/48/$C s#all &ualif6 as consoli%ate% Common $&uit6 2ier 1 capital7
37 3or t#e purposes of para"rap# -* t#e applicale percenta"es s#all fall 1it#in t#e follo1in"
ran"es:
A
)/ . O to 8. O for t#e perio% from the date of appli$ation of this )egulation to 31
Decemer -.14E
)c/ . O to =. O for t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)%/ . O to 4. O for t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E
)e/ . O to -.O for t#e perio% from 1 <anuar6 -.1> to 31 Decemer -.1>7
47 Competent aut#orities s#all:
)a/ %etermine t#e applicale percenta"e in t#e ran"es specifie% in para"rap# 3E
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
Article 4"*
5eco#nition of in consoli$ate$ own fun$s of minority interests an$ qualifyin# A$$itional Tier 1 an$
Tier 2 capital
17 D6 1a6 of %ero"ation from point )/ of ,rticle >9* point )/ of ,rticle 8. an% point )/ of
,rticle 8-* %urin" t#e perio% from the date of appli$ation of this )egulation to 31
Decemer -.1>* t#e percenta"es referre% to in t#ose Arti$les s#all e multiplie% 6 an
applicale factor7
-7 3or t#e purposes of para"rap# 1* t#e applicale factor s#all fall 1it#in t#e follo1in"
ran"es:
A
)/ .7- to 1 in t#e perio% from the date of appli$ation of this )egulation to 31 Decemer
-.14E
)c/ .74 to 1 in t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)%/ .7= to 1 in t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E an%
)e/ .78 to 1 in t#e perio% from 1 <anuar6 -.1> to 31 Decemer -.1>7
37 Competent aut#orities s#all:
)a/ %etermine t#e value of t#e applicale factor in t#e ran"es specifie% in para"rap# -E
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
?ECTION 7
A$$ITIONAL FILTER? AN$ $E$UCTION?
Article 4"1
A$$itional filters an$ $e$uctions
17 D6 1a6 of %ero"ation from ,rticles -9 to 33* +3 an% =3* %urin" t#e perio% fro the date of
appli$ation of this )egulation to 31 Decemer -.1>* institutions s#all ma5e a%!ustments
to inclu%e in or %e%uct from Common $&uit6 2ier 1 items* 2ier 1 items* 2ier - items or
o1n fun%s items t#e applicale percenta"e of filters or %e%uctions re&uire% un%er national
transposition measures for ,rticles +>, ?4, ?C, ?Ca, ?B an% == of Directive -..=/48/$C*
an% for ,rticles 13 an% 1= of Directive -..=/49/$C* an% 1#ic# are not re&uire% in
accor%ance 1it# Part 21o3
4a3 B# *a# of derogation fro Arti$les CC(4)(i) and B?(4) and (C), during the period fro
the date of appli$ation of this )egulation to C4 (e$e!er 2:4B, the $opetent
authorities a# re6uire or perit institutions to appl# the ethods referred to in Arti$le
B?(4) *here the re6uireents laid do*n in points (!) and (e) of Arti$le B?(4) are not et,
rather than the dedu$tion re6uired pursuant to Arti$le CC(4)3 &n su$h $ases, the
proportion of holdings of the o*n funds instruents of a finan$ial se$tor entit# in *hi$h
the parent undertaking has a signifi$ant investent that is not re6uired to !e dedu$ted
in a$$ordan$e *ith Arti$le B?(4) shall !e deterined !# the appli$a!le per$entage
referred to in paragraph 2a3 +he aount that is not dedu$ted shall !e su!9e$t to the
re6uireents of Arti$le B?(Ca), as appli$a!le7
-7 3or t#e purposes of para"rap# 1* t#e applicale percenta"e s#all fall 1it#in t#e follo1in"
ran"es:
A
)/ . O to 8. O for t#e perio% from the date of appli$ation of this )egulation to 31
Decemer -.14E
)c/ . O to =. O for t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)%/ . O to 4. O for t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E A
)e/ . O to -. O for t#e perio% from 1 <anuar6 -.1> to 31 Decemer -.1>7
2a3 1or the purpose of paragraph 4a, the appli$a!le per$entage shall fall !et*een : J and
@: J for the period fro the date of appli$ation of this )egulation to C4 (e$e!er 2:4B%
37 3or eac# filter or %e%uction referre% to in para"rap# 4 and 4a, competent aut#orities s#all:
)a/ %etermine t#e applicale percenta"es in t#e ran"es specifie% in para"rap# - and 2aE
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
47 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions accor%in"
to 1#ic# competent aut#orities s#all %etermine 1#et#er a%!ustments ma%e to o1n fun%s* or
elements t#ereof* in accor%ance 1it# national transposition measures for Directive
-..=/48/$C or Directive -..=/49/$C t#at are not inclu%e% in Part 21o s#oul% for t#e
purposes of t#is ,rticle e ma%e to Common $&uit6 2ier 1 items* ,%%itional 2ier 1 items*
2ier 1 items* 2ier - items or o1n fun%s7
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the date of entr# into for$e of this )egulation
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ures lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
Arti$le B?4a
"$ope of appli$ation for derivatives transa$tions *ith pension funds
&n respe$t of those transa$tions referred to in Arti$le A> of )egulation ,?BAD2:42/ and entered
into *ith pension s$hee arrangeents as defined in Arti$le 2 of that )egulation, institutions
shall not $al$ulate o*n funds re6uireents for CMA risk as provided for in Arti$le C02 Ca($) of
the )egulation
C6pter 2
>rn.1t6erin5 o1 2pitl instru0ents
?ECTION 1
IN?TRU*ENT? CON?TITUTIN> ?TATE AI$
Article 4"2
!ran$fatherin# of State ai$ instruments
17 D6 1a6 of %ero"ation from ,rticles -4 to ->* 48* 49* +9 an% =. %urin" t#e perio% from the
date of appli$ation of this )egulation to 31 Decemer -.1>* t#is ,rticle applies to capital
instruments and ites 1#ere t#e follo1in" con%itions are met:
)a/ t#e instruments 1ere issue% prior to the date of appli$ation of this )egulationE
A
(!) the instruents *ere issued *ithin the $onte5t of a re$apitalisation easures
pursuant to "tate aid=rules3 &nsofar as part of the instruents are privatel#
su!s$ri!ed, the# ust !e issued prior to C: Eune 2:42 and in $on9un$tion *ith
those parts that are su!s$ri!ed !# the "tate%
)c/ t#e instruments 1ere consi%ere% compatile 1it# t#e internal mar5et 6 t#e
Commission un%er ,rticle 1.> 23$47
(d) in the $ase the instruents are su!s$ri!ed !# !oth the "tate and private investors,
*here there is a partl# redeption of the instruents su!s$ri!ed !# the "tate, a
$orresponding share of the privatel# su!s$ri!ed part of the instruents shall !e
grandfathered a$$ording to Arti$le B?C3 ;hen all the instruents su!s$ri!ed !#
the "tate have !een redeeed, the reaining instruents su!s$ri!ed !# private
investors shall !e grandfathered a$$ording to Arti$le B?C3
23 &nstruents that 6ualified in a$$ordan$e *ith the national transposition easures for
point (a) of Arti$le @0 of (ire$tive 2::?DBADEC shall 6ualif# as Coon E6uit# +ier 4
instruents not*ithstanding either of the follo*ing'
(a) the $onditions laid do*n in Arti$le 2? are not et%
(!) the instruents *ere issued !# an undertaking referred to in Arti$le 2@ and the
$onditions laid do*n in Arti$les 2?, or Arti$le 20 as appli$a!le, are not et3
2a3 &nstruents referred to in point ($) of paragraph 4 that do not 6ualif# under national
transposition easures for point (a) of Arti$le @0 of (ire$tive 2::?DBADEC shall 6ualif#
as Coon E6uit# +ier 4 instruents not*ithstanding the re6uireents of points (a) or
(!) of paragraph 2 of this Arti$le not !eing et, provided that the re6uireents of
paragraph ? are et3
&nstruents that 6ualif# as Coon E6uit# +ier 4 pursuant to the first su!=paragraph
a# not 6ualif# as Additional +ier 4 instruents or +ier 2 instruents under paragraph
Ca or @3
37 0nstruments t#at &ualifie% in accor%ance 1it# t#e national transposition measures for point
)ca/ of ,rticle +> an% for ,rticle ==)1/ of Directive -..=/48/$C s#all &ualif6 as ,%%itional
2ier 1 instruments not1it#stan%in" t#e con%itions lai% %o1n in ,rticle 49)1/ not ein" met7
Ca3 &nstruents referred to in point ($) of paragraph 4 that do not 6ualif# under the national
transposition easures for point ($a) of Arti$le @0 of (ire$tive 2::?DBADEC shall 6ualif#
as Additional +ier 4 instruents not*ithstanding the $onditions laid do*n in Arti$le
B>(4) not !eing et, provided that the re6uireents of paragraph ? are et3
&nstruents that 6ualif# as Additional +ier 4 instruents pursuant to the first su!=
paragraph a# not 6ualif# as Coon E6uit# +ier 4 instruents or +ier 2 instruents
under paragraph 2a or @3
47 0tems t#at &ualifie% in accor%ance 1it# national transposition measures for points )f/* )"/ or
)#/ of ,rticle +> an% for ,rticle ==)1/ of Directive -..=/48/$C s#all &ualif6 as 2ier -
instruments not1it#stan%in" t#e items not ein" referre% to in ,rticle +9 or t#e con%itions
lai% %o1n in ,rticle =. not ein" met7
@3 &nstruents referred to in point ($) of paragraph 4 that do not 6ualif# under the national
transposition easures for points (f), (g) or (h) of Arti$le @0 and for Arti$le ??(4) of
(ire$tive 2::?DBADEC shall 6ualif# as +ier 2 instruents not*ithstanding the ites not
!eing referred to in Arti$le @> or the $onditions laid do*n in Arti$le ?: not !eing et,
provided the $onditions of paragraph ? are et3
&nstruents that 6ualif# as +ier 2 instruents pursuant to the first su!=paragraph a#
not 6ualif# as Coon E6uit# +ier 4 instruents or Additional +ier 4 instruents
under paragraph 2a or Ca3
?3 &nstruents referred to paragraphs 2a, Ca and @ a# 6ualif# as o*n funds instruents
referred to in those paragraphs onl# *here the $ondition in paragraph 4a is et and
*here the# are issued !# institutions that are in$orporated in a Me!er "tate that is
su!9e$t to an E$onoi$ Ad9ustent .rograe, and the issuan$e of those instruents
is agreed or eligi!le under that prograe3
?ECTION 2
IN?TRU*ENT? NOT CON?TITUTIN> ?TATE AI$
?UB9?ECTION 1
>RAN$FATHERIN> ELI>IBILITA AN$ LI*IT?
Article 4"3
Eli#ibility for #ran$fatherin# of items that qualifie$ as own fun$s un$er national transposition
measures for Directive 2**"<4&<E2
17 2#is ,rticle s#all appl6 onl6 to instruments and ites t#at 1ere issue% or *ere eligi!le as
o*n funds prior to C4 (e$e!er -.11 an% are not t#ose referre% to in ,rticle 4=-)1/7
-7 D6 1a6 of %ero"ation from ,rticles -4 to ->* 48* 49* +9 an% =.* t#is ,rticle s#all appl6
%urin" t#e perio% from the date of appli$ation of this )egulation to 31 Decemer -.-17
37 Su!ect to t#e limit specifie% in ,rticle 4=4)-/* capital 1it#in t#e meanin" of ,rticle -- of
Directive 8=/3=+/$C* an% t#e relate% s#are premium accounts* t#at &ualifie% as ori"inal
o1n fun%s un%er t#e national transposition measures for point )a/ of ,rticle +> of Directive
-..=/48/$C s#all &ualif6 as Common $&uit6 2ier 1 items not1it#stan%in" t#at capital not
meetin" t#e con%itions lai% %o1n in ,rticles 2?, or ,rticle -> as applicale7
47 Su!ect to t#e limit specifie% ,rticle 4=4)3/* instruments* an% t#e relate% s#are premium
accounts* t#at &ualifie% as ori"inal o1n fun%s un%er national transposition measures for
point )ca/ of ,rticle +> an% ,rticle 1+4)8/ an% )9/ of Directive -..=/48/s#all &ualif6 as
,%%itional 2ier 1 items* not1it#stan%in" t#e con%itions lai% %o1n in ,rticle 49 not ein"
met7
+7 Su!ect to t#e limits specifie% in ,rticle 4=4)4/* items* an% t#e relate% s#are premium
accounts* t#at &ualifie% un%er national transposition measures for points (e), )f/* )"/ or )#/
of ,rticle +> of Directive -..=/48/$C s#all &ualif6 as 2ier - items* not1it#stan%in" t#ose
items not ein" inclu%e% in ,rticle +9 or t#e con%itions lai% %o1n in ,rticle =. not ein"
met7
Arti$le 2?Ca
Eligi!ilit# for in$lusion in the Coon E6uit# +ier 4 of share preiu a$$ounts related to ites
that 6ualified as o*n funds under national transposition easures for (ire$tive 2::?DBADEC
43 +his Arti$le shall appl# onl# to instruents that *ere issued prior to C4 (e$e!er 2:4:
and are not those referred to in Arti$le B?2(4)3
23 "hare preiu a$$ounts related to $apital *ithin the eaning of Arti$le 22 of (ire$tive
A?DC?@DEC, that 6ualified as original o*n funds under the national transposition
easures for point (a) of Arti$le @0 of (ire$tive 2::?DBADEC shall 6ualif# as Coon
E6uit# +ier 4 ites if the# eet the $onditions laid do*n in points (i) and (9) of Arti$les
2?3
Article 4"4
7imits for #ran$fatherin# of items within 2ommon Equity Tier 13 A$$itional Tier 1 an$ Tier 2 items
17 Durin" t#e perio% from the date of appli$ation of this )egulation to 31 Decemer -.-1*
t#e e8tent to 1#ic# instruments and ites referre% to in ,rticle 4=3 s#all &ualif6 as o1n
fun%s s#all e limite% in accor%ance 1it# t#is ,rticle7
-7 2#e amount of items referre% to in ,rticle 4=3)3/ t#at s#all &ualif6 as Common $&uit6
2ier 1 items is limite% to t#e applicale percenta"e of t#e sum of t#e amounts specifie% in
points )a/ an% )/:
)a/ t#e nominal amount of capital referre% to in ,rticle 4=3)3/ t#at 1ere in issue on 31
Decemer -.1-E
)/ t#e s#are premium accounts relate% to t#e items referre% to in point )a/7
37 2#e amount of items referre% to in ,rticle 4=3)4/ t#at s#all &ualif6 as ,%%itional 2ier 1
items is limite% to t#e applicale percenta"e multiplie% 6 t#e result of sutractin" from t#e
sum of t#e amounts specifie% in points )a/ an% )/ t#e sum of t#e amounts specifie% in
points )c/ to )f/:
)a/ t#e nominal amount of instruments referre% to in ,rticle 4=3)4/* t#at remaine% in
issue on 31 Decemer -.1-E
)/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )a/E
)c/ t#e amount of instruments referre% to in ,rticle 4=3)4/ 1#ic# on 31 Decemer -.1-
A e8cee%e% t#e limits specifie% in t#e national transposition measures for point )a/ of
,rticle ==)1/ an% ,rticle ==)1a/ of Directive -..=/48/$CE
)%/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )c/E
)e/ t#e nominal amount of instruments referre% to ,rticle 4=3)4/ t#at 1ere in issue on 31
Decemer -.1- ut %o not &ualif6 as ,%%itional 2ier 1 instruments pursuant to
,rticle 4=>)4/E
)f/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )e/7
47 2#e amount of items referre% to in ,rticle 4=3)+/ t#at s#all &ualif6 as 2ier - items is
limite% to t#e applicale percenta"e of t#e result of sutractin" from t#e sum of t#e
amounts specifie% in points )a/ to )%/ t#e sum of amounts specifie% in points )e/ to )#/:
)a/ t#e nominal amount of instruments referre% to in ,rticle 4=3)+/ t#at remaine% in
issue on 31 Decemer -.1-E
)/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )a/E
)c/ t#e nominal amount of suor%inate% loan capital t#at remaine% in issue on 31
Decemer* re%uce% 6 t#e amount re&uire% pursuant to national transposition
measures for point )c/ of ,rticle =4)3/ of Directive -..=/48/$CE
)%/ t#e nominal amount of items referre% to in ,rticle 4=3)+/* ot#er t#an t#e instruments
an% suor%inate% loan capital referre% to in points )a/ an% )c/ of t#is para"rap#* t#at
1ere in issue on 31 Decemer -.1-E
)e/ t#e nominal amount of instruments an% items referre% to in ,rticle 4=3)+/ t#at 1ere
in issue on 31 Decemer -.1- t#at e8cee%e% t#e limits specifie% in t#e national
transposition measures for point )a/ of ,rticle ==)1/ of Directive -..=/48/ECE
)f/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )e/E
)"/ t#e nominal amount of instruments referre% to in ,rticle 4=3)+/ t#at 1ere in issue on
31 Decemer -.1- t#at %o not &ualif6 as 2ier - items pursuant to ,rticle 4=8)4/E
)#/ t#e s#are premium accounts relate% to t#e instruments referre% to in point )"/7
+7 3or t#e purposes of t#is ,rticle* t#e applicale percenta"es referre% to in para"rap#s - to 4
s#all fall 1it#in t#e follo1in" ran"es:
A
)/ ?: O to 8. O %urin" t#e perio% from the date of appli$ation of this )egulation to 31
Decemer -.14E
)c/ B: O to >. O %urin" t#e perio% from 1 <anuar6 -.1+ to 31 Decemer -.1+E
)%/ 2: O to =. O %urin" t#e perio% from 1 <anuar6 -.1= to 31 Decemer -.1=E
)e/ . O to +. O %urin" t#e perio% from 1 <anuar6 -.1> to 31 Decemer -.1>E
)f/ . O to 4. O %urin" t#e perio% from 1 <anuar6 -.18 to 31 Decemer -.18E
)"/ . O to 3. O %urin" t#e perio% from 1 <anuar6 -.19 to 31 Decemer -.19E
)#/ . O to -. O %urin" t#e perio% from 1 <anuar6 -.-. to 31 Decemer -.-.E
)i/ . O to 1. O %urin" t#e perio% from 1 <anuar6 -.-1 to 31 Decemer -.-17
=7 Competent aut#orities s#all:
)a/ %etermine t#e applicale percenta"es in t#e ran"es specifie% in para"rap# +E
)/ pulis# t#e %etermination ma%e in accor%ance 1it# point )a/7
Article 4"
'tems e,clu$e$ from #ran$fatherin# in 2ommon Equity Tier 1 or A$$itional Tier 1 items in other
elements of own fun$s
17 D6 1a6 of %ero"ation from ,rticles 48* 49* +9 an% =.* %urin" t#e perio% from the date of
appli$ation of this )egulation to 31 Decemer -.-1* institutions ma6 treat as items
referre% to in ,rticle 4=3)4/* capital* an% t#e relate% s#are premium accounts* referre% to in
,rticle 4=3)3/ t#at are e8clu%e% from Common $&uit6 2ier 1 items ecause t#e6 e8cee%
t#e applicale percenta"e specifie% in ,rticle 4=4)-/* to t#e e8tent t#at t#e inclusion of t#at
capital an% t#e relate% s#are premium accounts* %oes not e8cee% t#e applicale percenta"e
limit referre% to in ,rticle 4=4)3/7
-7 D6 1a6 of %ero"ation from ,rticles 48* 49* +9 an% =.* %urin" t#e perio% from the date of
appli$ation of this )egulation to 31 Decemer -.-1* institutions ma6 treat t#e follo1in"
as items referre% to in ,rticle 4=3)+/* to t#e e8tent t#at t#eir inclusion %oes not e8cee% t#e
applicale percenta"e limit referre% to in ,rticle 4=4)4/:
)a/ capital* an% t#e relate% s#are premium accounts* referre% to in ,rticle 4=3)3/ t#at are
e8clu%e% from Common $&uit6 2ier 1 items ecause t#e6 e8cee% t#e applicale
percenta"e specifie% in ,rticle 4=4)-/E
)/ instruments* an% t#e relate% s#are premium accounts* referre% to in ,rticle 4=3)4/
t#at e8cee% t#e applicale percenta"e referre% to in ,rticle 4=4)3/7
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions for
treatin" o1n fun%s instruments referre% to in para"rap#s 1 an% - as fallin" un%er ,rticle
4=4)4/ or 4=4)+/ %urin" t#e perio% from the date of appli$ation of this )egulation to 31
Decemer -.-17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission *ithin one
onth of the entr# into for$e of this )egulation7
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
Article 4""
Amortisation of items #ran$fathere$ as Tier 2 items
2#e items referre% to ,rticle 4=3)+/ t#at &ualif6 as 2ier - items referred to in ,rticle 4=3)+/ or
,rticle 4=4)B/ s#all e su!ect to t#e re&uirements lai% %o1n in ,rticle =17
A
?UB9?ECTION 2
INCLU?ION OF IN?TRU*ENT? CITH A CALL AN$ INCENTI,E TO RE$EE* IN
A$$ITIONAL TIER 1 AN$ TIER 2 ITE*?
Article 4"%
=ybri$ instruments with a call an$ incentive to re$eem
17 D6 1a6 of %ero"ation from ,rticle 48 an% 49* %urin" t#e perio% from the date of
appli$ation of this )egulation to 31 Decemer -.-1* instruments referre% to in ,rticle
4=3)4/ t#at Ainclu%e in t#eir terms an% con%itions a call 1it# an incentive for t#em to e
re%eeme% 6 t#e institution s#all e su!ect to t#e re&uirements lai% %o1n in para"rap#s -
to >7
-7 2#e instruments s#all &ualif6 as ,%%itional 2ier 1 instruments provi%e% t#e follo1in"
con%itions are met:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 prior to 1
<anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e callE
)c/ t#e con%itions lai% %o1n in ,rticle 49 are met from 1 <anuar6 -.137
37 2#e instruments s#all &ualif6 as ,%%itional 2ier 1 instruments *ith their re$ognition
redu$ed in accor%ance 1it# ,rticle 4=3)4/ until t#e %ate of t#eir effective maturit6 an%
t#ereafter shall &ualif6 as ,%%itional 2ier 1 items 1it#out limit provi%e%:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 on or after
1 <anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
instrumentsE
)c/ t#e con%itions lai% %o1n in ,rticle 49 are met from t#e %ate of t#e effective maturit6
of t#e instruments7
47 2#e instruments s#all not &ualif6 as ,%%itional 2ier 1 instruments* an% s#all not e su!ect
to ,rticle 4=3)4/* from the date of appli$ation of this )egulation 1#ere t#e follo1in"
con%itions are met:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem et1een C4
(e$e!er 2011 an% 1 <anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
instrumentsE
)c/ t#e con%itions lai% %o1n in ,rticle 49 are not met from t#e %ate of t#e effective
maturit6 of t#e instruments7
+7 2#e instruments s#all &ualif6 as ,%%itional 2ier 1 instruments *ith their re$ognition
redu$ed in accor%ance 1it# ,rticle 4=3)4/ until t#e %ate of t#eir effective maturit6* an%
s#all not &ualif6 as ,%%itional 2ier 1 instruments t#ereafter* 1#ere t#e follo1in"
con%itions are met:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem on or after 1
<anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
instrumentsE
)c/ t#e con%itions lai% %o1n in ,rticle 49 are not met from t#e %ate of t#e effective
maturit6 of t#e instruments7
=7 2#e instruments s#all &ualif6 as ,%%itional 2ier 1 instruments in accor%ance 1it# ,rticle
4=3)4/ 1#ere t#e follo1in" con%itions are met:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 prior to or
on C4 (e$e!er -.11E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
instrumentsE
)c/ t#e con%itions lai% %o1n in ,rticle 49 1ere not met from t#e %ate of t#e effective
maturit6 of t#e instruments7
Article 4"&
Tier 2 items with an incentive to re$eem
17 D6 1a6 of %ero"ation from ,rticles +9 an% =.* %urin" t#e perio% from the date of
appli$ation of this )egulation to 31 Decemer -.-1* items referre% to in ,rticle 4=3)+/
t#at &ualifie% un%er t#e national transposition measures for points )f/ Aor )#/ of ,rticle +>
of Directive -..=/48/$C an% inclu%e in t#eir terms an% con%itions a call 1it# an incentive
for t#em to e re%eeme% 6 t#e institution s#all e su!ect to t#e re&uirements lai% %o1n in
para"rap#s - to >7
-7 2#e items s#all &ualif6 as 2ier - instruments provi%e%:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 prior to 1
<anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e callE
)c/ from 1 <anuar6 -.13 t#e con%itions lai% %o1n in ,rticle =. are met7
37 2#e items s#all &ualif6 as 2ier - items in accor%ance 1it# ,rticle 4=3)+/ until t#e %ate of
t#eir effective maturit6* an% s#all &ualif6 t#ereafter as 2ier - items 1it#out limit* provi%e%
t#e follo1in" con%itions are met:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 on or after
1 <anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
itemsE
)c/ t#e con%itions lai% %o1n in ,rticle =. are met from t#e %ate of t#e effective maturit6
of t#e items7
47 2#e items s#all not &ualif6 as 2ier - items from 1 <anuar6 -.13 1#ere t#e follo1in"
con%itions are met:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 et1een
C4 (e$e!er -.11 an% 1 <anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
itemsE
)c/ t#e con%itions lai% %o1n in ,rticle =. are not met from t#e %ate of t#e effective
maturit6 of t#e items7
+7 2#e items s#all &ualif6 as 2ier - items *ith their re$ognition redu$ed in accor%ance 1it#
,rticle 4=3)+/ until t#e %ate of t#eir effective maturit6* an% s#all not &ualif6 as 2ier -
items t#ereafter* 1#ere:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem on or after 1
<anuar6 -.13E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#eir effective maturit6E
)c/ t#e con%itions set out in ,rticle =. are not met from t#e %ate of effective maturit6 of
t#e items7
=7 2#e items s#all &ualif6 as 2ier - items in accor%ance 1it# ,rticle 4=3)+/ 1#ere:
)a/ t#e institution 1as ale to e8ercise a call 1it# an incentive to re%eem onl6 prior to or
on C4 (e$e!er -.11E
)/ t#e institution %i% not e8ercise t#e call on t#e %ate of t#e effective maturit6 of t#e
itemsE
)c/ t#e con%itions lai% %o1n in ,rticle =. are not met from t#e %ate of t#e effective
maturit6 of t#e items7
Article 4"(
Effective maturity
3or t#e purposes of ,rticles 4=> an% 4=8* effective maturit6 s#all e %etermine% as follo1s:
)a/ for t#e items referre% to in para"rap#s 3an% + of t#ose ,rticles* it is t#e %ate of t#e first call
1it# an incentive to re%eem occurrin" on or after 1 <anuar6 -.13E
)/ for t#e items referre% to in para"rap# 4 of t#ose ,rticles* it is t#e %ate of t#e first call 1it#
an incentive to re%eem occurrin" et1een C4 (e$e!er -.11 an% 1 <anuar6 -.13E
)c/ for t#e items referre% to in para"rap# = of t#ose ,rticles* it is t#e %ate of t#e first call 1it#
an incentive to re%eem prior to C4 (e$e!er -.117
C6pter 3
Trnsitionl pro3isions 1or .is2losure o1 o<n 1un.s
Article 4%*
Disclosure of own fun$s
17 0nstitutions s#all appl6 this Arti$le %urin" t#e perio% from the date of appli$ation of this
)egulation to 31 Decemer -.-17
-7 Durin" t#e perio% from the date of appli$ation of this )egulation to 31 Decemer -.1+*
institutions s#all %isclose t#e e8tent to 1#ic# t#e level of Common $&uit6 2ier 1 capital
an% 2ier 1 capital e8cee% t#e re&uirements lai% %o1n in ,rticle 4487
37 Durin" t#e perio% from the date of appli$ation of this )egulation to 31 Decemer -.1>*
institutions s#all %isclose t#e follo1in" a%%itional information aout t#eir o1n fun%s:
)a/ t#e nature an% effect on Common $&uit6 2ier 1 capital* ,%%itional 2ier 1 capital*
2ier - capital an% o1n fun%s of t#e in%ivi%ual filters an% %e%uctions applie% in
accor%ance 1it# ,rticles 449 to 4+-* 4+4* 4+= an% 4+9E
)/ t#e amounts of minorit6 interests an% ,%%itional 2ier 1 an% 2ier - instruments* an%
relate% retaine% earnin"s an% s#are premium accounts* issue% 6 susi%iaries t#at are
inclu%e% in consoli%ate% Common $&uit6 2ier 1 capital* ,%%itional 2ier 1 capital*
2ier - capital an% o1n fun%s in accor%ance 1it# Section 4 of C#apter 1E
)c/ t#e effect on Common $&uit6 2ier 1 capital* ,%%itional 2ier 1 capital* 2ier - capital
an% o1n fun%s of t#e in%ivi%ual filters an% %e%uctions applie% in accor%ance 1it#
,rticle 4=1E
)%/ t#e nature an% amount of items t#at &ualif6 as Common $&uit6 2ier 1 items* 2ier 1
items an% 2ier - items 6 virtue of appl6in" t#e %ero"ations specifie% in Section - of
C#apter -7
47 Durin" t#e perio% from the date of appli$ation of this )egulation to 31 Decemer -.-1*
institutions s#all %isclose t#e amount of instruments t#at &ualif6 as Common $&uit6 2ier 1
instruments* ,%%itional 2ier 1 instruments an% 2ier - instruments 6 virtue of appl6in"
,rticle 4=37
F
EBA shall develop draft ipleenting te$hni$al standards to spe$if# unifor teplates for the
dis$losure under this Arti$le3 +he teplates shall in$lude the ites listed in Arti$le B2B,
paragraph 4, points (a), (!), (d), and (e), as odified !# Chapters 4 and 2 of this title3
EBA shall su!it those te$hni$al standards to the Coission *ithin one onth of the date of
entr# into for$e of this )egulation3
.o*er is $onferred on the Coission to adopt the ipleenting te$hni$al standards referred to
in the first su!paragraph in a$$ordan$e *ith the pro$edure laid do*n in Arti$le 4@ of )egulation
(E2) Fo 4:>CD2:4:3
C6pter '
Lr5e e=posures, o<n 1un.s re/uire0ents, le3er5e n. t6e Bsel I
1loor
Article 4%1
Transitional provisions for lar#e e,posures
17 2#e provisions on lar"e e8posures as lai% %o1n in ,rticles 3>= to 39- s#all not appl6 to
investment firms 1#ose main usiness consists e8clusivel6 of t#e provision of investment
services or activities in relation to t#e financial instruments set out in points +* =* >* 9 an%
1. of Section C of ,nne8 0 to Directive -..4/39/$C an% to 1#om Directive 93/--/$$C %i%
not appl6 on 31 Decemer -..=7 2#is e8emption is availale until 31 Decemer -.14 or
t#e %ate of entr6 into force of an6 amen%ments pursuant to para"rap# -* 1#ic#ever is t#e
earlier7
-7 D6 31 Decemer -.14* t#e Commission s#all* on t#e asis of pulic consultations an% in
t#e li"#t of %iscussions 1it# t#e competent aut#orities* report to t#e Parliament an% t#e
Council on:
)a/ an appropriate re"ime for t#e pru%ential supervision of investment firms 1#ose main
usiness consists e8clusivel6 of t#e provision of investment services or activities in
relation to t#e commo%it6 %erivatives or %erivatives contracts set out in points +* =* >*
9 an% 1. of Section C of ,nne8 0 to Directive -..4/39/$CE
)/ t#e %esirailit6 of amen%in" Directive -..4/39/$C to create a furt#er cate"or6 of
investment firm 1#ose main usiness consists e8clusivel6 of t#e provision of
investment services or activities in relation to t#e financial instruments set out in
points +* =* >* 9 an% 1. of Section C of ,nne8 0 to Directive -..4/39/$C relatin" to
ener"6 supplies7
On t#e asis of t#is report* t#e Commission ma6 sumit proposals for amen%ments to t#is
Re"ulation7
C3 B# *a# of derogation fro arti$le CA> (2) the follo*ing shall appl# for a transitional
period until the entr# into for$e of an# legislative proposal follo*ing the revie* in
a$$ordan$e *ith Arti$le B0> !ut not e5$eeding fifteen #ears'
Me!er "tates or $opetent authorities a# full# or partiall# e5ept the follo*ing
e5posures fro the appli$ation of Arti$le CAB(4)'
(a) $overed !onds falling *ithin the ters Arti$le 42B(4), Arti$le 42B(2) and 42B(@)%
(!) asset ites $onstituting $lais on regional governents or lo$al authorities of
Me!er "tates *here those $lais *ould !e assigned a 2: J risk *eight under
.art +hree, +itle &&, Chapter 2 and other e5posures to or guaranteed !# those
regional governents or lo$al authorities, $lais on *hi$h *ould !e assigned a 2:
J risk *eight under .art +hree, +itle &&, Chapter 2%
($) e5posures, in$luding parti$ipations or other kinds of holdings, in$urred !# an
institution to its parent undertaking, to other su!sidiaries of that parent
undertaking or to its o*n su!sidiaries, in so far as those undertakings are $overed
!# the supervision on a $onsolidated !asis to *hi$h the institution itself is su!9e$t,
in a$$ordan$e *ith this )egulation, (ire$tive 2::2DA0DEC or *ith e6uivalent
standards in for$e in a third $ountr#% e5posures that do not eet these $riteria,
*hether or not e5epted fro Arti$le CAB(4) shall !e treated as e5posures to a
third part#%
(d) asset ites $onstituting $lais on and other e5posures, in$luding parti$ipations or
other kinds of holdings, to regional or $entral $redit institutions *ith *hi$h the
$redit institution is asso$iated in a net*ork in a$$ordan$e *ith legal or statutor#
provisions and *hi$h are responsi!le, under those provisions, for $ash=$learing
operations *ithin the net*ork%
(e) asset ites $onstituting $lais on and other e5posures to $redit institutions
in$urred !# $redit institutions, one of *hi$h operates on a non=$opetitive !asis
and provides or guarantees loans under legislative prograes or its statutes, to
proote spe$ified se$tors of the e$ono# under soe for of governent
oversight and restri$tions on the use of the loans, provided that the respe$tive
e5posures arise fro su$h loans that are passed on to the !enefi$iaries via $redit
institutions or fro the guarantees of these loans%
(f) asset ites $onstituting $lais on and other e5posures to institutions, provided that
those e5posures do not $onstitute su$h institutions7 o*n funds, do not last longer
than the follo*ing !usiness da# and are not denoinated in a a9or trading
$urren$#%
(g) asset ites $onstituting $lais on $entral !anks in the for of re6uired iniu
reserves held at those $entral !anks *hi$h are denoinated in their national
$urren$ies%
(h) asset ites $onstituting $lais on $entral governents in the for of statutor#
li6uidit# re6uireents held in governent se$urities *hi$h are denoinated and
funded in their national $urren$ies provided that, at the dis$retion of the
$opetent authorit#, the $redit assessent of those $entral governents assigned
!# a noinated ECA& is investent grade%
(i) @: J of ediuDlo* risk off=!alan$e=sheet do$uentar# $redits and of
ediuDlo* risk off=!alan$e sheet undra*n $redit fa$ilities referred to in Anne5 &
and su!9e$t to the $opetent authoritiesG agreeent, A: J of guarantees other
than loan guarantees *hi$h have a legal or regulator# !asis and are given for their
e!ers !# utual guarantee s$hees possessing the status of $redit institutions%
(9) legall# re6uired guarantees used *hen a ortgage loan finan$ed !# issuing
ortgage !onds is paid to the ortgage !orro*er !efore the final registration of
the ortgage in the land register, provided the guarantee is not used as redu$ing
the risk in $al$ulating the risk= *eighted e5posure aounts%
(k) assets ites $onstituting $lais on and other e5posures to re$ognised e5$hanges3
Arti$le B04a
+ransitional provisions for large e5posures
43 B# *a# of derogation fro arti$le B (2C) ($), eligi!le $apital a# in$lude +ier 2 $apital
up to the follo*ing'
(a) 4:: J of +ier 4 $apital during the period fro 4 Eanuar# 2:4B to C4 (e$e!er
2:4B%
(!) 0@ J of +ier 4 $apital during the period fro 4 Eanuar# 2:4@ to C4 (e$e!er
2:4@%
($) @: J of +ier 4 $apital during the period fro 4 Eanuar# 2:4? to C4 (e$e!er
2:4?%
Article 4%2
+reatent of e6uit# e5posures un$er the '58 approach
17 D6 1a6 of %ero"ation from C#apter 3 of Part 2#ree* until 31 Decemer -.1>* t#e
competent aut#orit6 ma6 e8empt from t#e 0RD treatment certain cate"ories of e&uit6
e8posures #el% 6 institutions an% $4 susi%iaries of institutions in t#at 9emer State as
at 31 Decemer -..>7 2#e competent aut#orit6 s#all pulis# t#e cate"ories of e&uit6
e8posures 1#ic# enefit from t#is treatment in accor%ance 1it# ,rticle 133 of Directive
Jinserte% 6 OPK7
2#e e8empte% position s#all e measure% as t#e numer of s#ares as at 31 Decemer -..>
an% an6 a%%itional s#are arisin" %irectl6 as a result of o1nin" t#ose #ol%in"s* provi%e%
t#e6 %o not increase t#e proportional s#are of o1ners#ip in a portfolio compan67
0f an ac&uisition increases t#e proportional s#are of o1ners#ip in a specific #ol%in" t#e
e8cee%in" Part of t#e #ol%in" s#all not e su!ect to t#e e8emption7 Bor s#all t#e
e8emption appl6 to #ol%in"s t#at 1ere ori"inall6 su!ect to t#e e8emption* ut #ave een
sol% an% t#en ou"#t ac57
$&uit6 e8posures su!ect to t#is provision s#all e su!ect to t#e capital re&uirements
calculate% in accor%ance 1it# t#e Stan%ar%ise% ,pproac# un%er Part 000* 2itle -* C#apter 00
an% t#e re&uirements set out in 2itle 0R of Part 2#ree* as applicale7
Competent aut#orities s#all notif6 t#e Commission an% $D, of t#e implementation of t#is
para"rap#7
-7 0n t#e calculation of ris5 1ei"#te% e8posure amounts for t#e purposes of ,rticle 1.9)4/*
until 31 Decemer -.1+ t#e same ris5 1ei"#t s#all e assi"ne% in relation to e8posures to
t#e central "overnments or central an5s of 9emer States %enominate% an% fun%e% in t#e
%omestic currenc6 of an6 9emer State as 1oul% e applie% to suc# e8posures
%enominate% an% fun%e% in t#eir %omestic currenc67
37 $D, s#all %evelop %raft re"ulator6 tec#nical stan%ar%s to specif6 t#e con%itions accor%in"
to 1#ic# 9emer States s#all affor% t#e e8emption referre% to in para"rap# 17
$D, s#all sumit t#ose %raft re"ulator6 tec#nical stan%ar%s to t#e Commission 6 1
<anuar6 2:4B7
Po1er is %ele"ate% to t#e Commission to a%opt t#e re"ulator6 tec#nical stan%ar%s referre%
to in t#e first su;para"rap# in accor%ance 1it# t#e proce%ure lai% %o1n in ,rticles 1. to
14 of Re"ulation )$4/ Bo 1.93/-.1.7
Article 4%3
Hwn fun$s requirements for covere$ bon$s
17 4ntil 31 Decemer 2:40 $opetent authorities a# *aive in full or in part t#e 1. O limit
for senior units issue% 6 3renc# 3on%s Communs %e Crcances or 6 Asecuritisation
entities *hi$h are e6uivalent to 1ren$h 1onds Couns de CrZan$es lai% %o1n in
points )%/ an% )e/ of ,rticle 1-4)1/ A* provi%e% t#at:
)a/ t#e securitise% resi%ential or commercial immovale propert6 e8posures 1ere
ori"inate% 6 a memer of t#e same consoli%ate% "roup of 1#ic# t#e issuer of t#e
covere% on%s is Aa memer* or 6 an entit6 affiliate% to t#e same central o%6 to
1#ic# t#e issuer of t#e covere% on%s is Aaffiliate%* 1#ere t#at common "roup
memers#ip or affiliation s#all e %etermine% at t#e time t#e senior units are ma%e
collateral for covere% on%sE
)/ a memer of t#e same consoli%ate% "roup of 1#ic# t#e issuer of t#e covere% on%s is
Aa memer* or an entit6 affiliate% to t#e same central o%6 to 1#ic# t#e issuer of t#e
covere% on%s is Aaffiliate%* retains t#e 1#ole first loss tranc#e supportin" t#ose
senior units7
A
23 4ntil 31 Decemer -.14* for t#e purposes of point )c/ of ,rticle 1-4)1/* institutions( senior
unsecure% e8posures 1#ic# &ualifie% for a -.O ris5 1ei"#t un%er national la1 efore t#e
entr6 into force of t#is re"ulation s#all e consi%ere% to &ualif6 for cre%it &ualit6 step 17
C3 4ntil 31 Decemer -.14* for t#e purposes of ,rticle 1-4)B/* institutions( senior unsecure%
e8posures A1#ic# &ualifie% for a -.O ris5 1ei"#t un%er national la1 efore t#e entr6 into
force of t#is re"ulation s#all e consi%ere% to &ualif6 for a -.O ris5 1ei"#t7
Arti$le B0Ca
-*n funds re6uireents for e5posures to CC.s
43 2p until 4@ onths after the date of entr# into for$e of the latest of the eleven regulator#
te$hni$al standards referred to at the end of the first su!paragraph of Arti$le A>(C) of
)egulation (E2) ?BAD2:42, or until a de$ision is ade under Arti$le 4B of that
regulation on the authorisation of the CC., *hi$hever date is earlier, an institution a#
$onsider that CC. to !e a KCC., provided that the $ondition laid do*n in the first part
of that su!paragraph has !een et3
23 2p until 4@ onths after the date of entr# into for$e of the latest of the ten regulator#
te$hni$al standards referred to at the end of the se$ond su!paragraph of Arti$le A>(C) of
)egulation (E2) ?BAD2:42, or until a de$ision is ade under Arti$le 2@ of that
regulation on the re$ognition of the CC. esta!lished in a third $ountr#, *hi$hever date
is earlier, an institution a# $onsider that CC. to !e a KCC.,
2a3 +he Coission a# adopt an ipleenting a$t under Arti$le @ of )egulation (E2) Fo
4A2D2:44 to e5tending the transitional provisions in paragraphs 4 and 2 !# a further ?
onths, in e5$eptional $ir$ustan$es *here it is ne$essar# and proportionate to avoid
disruption to international finan$ial arkets3
C3 2p until the deadlines defined in paragraphs 4 and 2, as appli$a!le, *here a CC. does
not have a default fund and it does not have in pla$e a !inding arrangeent *ith its
$learing e!ers that allo*s it to use all or part of the initial argin re$eived fro its
$learing e!ers as if the# *ere pre=funded $ontri!utions, an institution shall su!stitute
the right forula for $al$ulating the o*n funds re6uireent (S
i
) in Arti$le 2>Aa(2) *ith
the follo*ing one'
*here
&M
i
N the initial argin posted to the CC. !# $learing e!er i
&MN the total aount of initial argin $ouni$ated to the institution !# the CC.%
Article 4%4
E,emption for 2ommo$ities $ealers
17 2#e provisions on capital re&uirements as set out in t#is Re"ulation s#all not appl6 to
investment firms 1#ose main usiness consists e8clusivel6 of t#e provision of investment
services or activities in relation to t#e financial instruments set out in points +* =* >* 9 an%
1. of Section C of ,nne8 0 to Directive -..4/39/$C an% to 1#om Directive 93/--/$$C %i%
not appl6 on 31 Decemer -..=7
2#is e8emption s#all appl6 until 31 Decemer 2:40 or t#e %ate of entr6 into force of an6
mo%ifications pursuant to para"rap#s - an% 3* 1#ic#ever is t#e earlier7
-7 D6 31 Decemer 2:4@, t#e Commission s#all* on t#e asis of pulic consultations an% in
t#e li"#t of %iscussions 1it# t#e competent aut#orities* report to t#e Parliament an% t#e
Council on:
)a/ an appropriate re"ime for t#e pru%ential supervision of investment firms 1#ose main
usiness consists e8clusivel6 of t#e provision of investment services or activities in
relation to t#e commo%it6 %erivatives or %erivatives contracts set out in points +* =* >*
9 an% 1. of Section C of ,nne8 0 to Directive -..4/39/$CE
)/ t#e %esirailit6 of amen%in" Directive -..4/39/$C to create a furt#er cate"or6 of
investment firm 1#ose main usiness consists e8clusivel6 of t#e provision of
investment services or activities in relation to t#e financial instruments set out in
points +* =* >* 9 an% 1. of Section C of ,nne8 0 to Directive -..4/39/$C relatin" to
ener"6 supplies* inclu%in" electricit6* coal* "as an% oil7
37 On t#e asis of t#e report referre% to in para"rap# -* t#e Commission ma6 sumit
proposals for amen%ments to t#is re"ulation7
Article 4%
7evera#e
17 D6 1a6 of %ero"ation from ,rticle 41= an% 41>* %urin" t#e perio% et1een the date of
appli$ation of this )egulation an% 31 Decemer -.-1* institutions s#all calculate an%
report t#e levera"e ratio 6 usin" ot# of t#e follo1in" as t#e capital measure:
)a/ 2ier 1 capital E
)/ 2ier 1 capital* su!ect to t#e %ero"ations lai% %o1n in C#apters 4 and 2 of t#is 2itle7
-7 D6 1a6 of %ero"ation from ,rticle 43=)1/* institutions ma6 c#oose 1#et#er to %isclose t#e
information on t#e levera"e ratio ase% on eit#er !ust one or ot# of t#e %efinitions of t#e
capital measure specifie% in points )a/ an% )/ of para"rap# 17 ?#ere institutions c#an"e
t#eir %ecision on 1#ic# levera"e ratio to %isclose* t#e first %isclosure t#at occurs after suc#
c#an"e s#all contain a reconciliation of t#e information on all levera"e ratios %isclose% up
to t#e moment of t#e c#an"e7
37 D6 1a6 of %ero"ation from ,rticle 41=)-/* %urin" t#e perio% from the date of appli$ation
of this )egulation to 31 Decemer -.1>* competent aut#orities ma6 permit institutions to
calculate t#e en%;of;&uarter levera"e ratio 1#ere t#e6 consi%er t#at institutions ma6 not
#ave %ata of sufficientl6 "oo% &ualit6 to calculate a levera"e ratio t#at is an arit#metic
mean of t#e mont#l6 levera"e ratios over a &uarter7
Arti$le B0?
+ransitional provisions X Basel & floor
17 4ntil 31 Decemer 2:40,institutions calculatin" ris5;1ei"#te% e8posure amounts in
accor%ance 1it# Part 2#ree* 2itle 00* C#apter 3 an% institutions usin" t#e ,%vance%
9easurement ,pproac#es as specifie% in Part 2#ree* 2itle 000* C#apter 4 for t#e calculation
of t#eir o1n fun%s re&uirements for operational ris5 s#all meet ot# of t#e follo1in"
re&uirements:
)a/ the# s#all #ol% o1n fun%s as re&uire% 6 Arti$le A0E
A
(!) +he# shall hold o*n funds *hi$h are at all ties ore than or e6ual to A: J of the
total iniu aount of o*n funds that the institution *ould !e re6uired to hold
under Arti$le B of (ire$tive >CD?DEEC of 4@ Mar$h 4>>C on the $apital ade6ua$#
of investent firs and $redit institutions as that (ire$tive and (ire$tive
2:::D42DEC stood prior to 4 Eanuar# 2::03
4a3 "u!9e$t to the approval of the $opetent authorit#, the aount referred to in point (!) of
paragraph 4 a# !e repla$ed !# a re6uireent to hold o*n funds *hi$h are at all ties
ore than or e6ual to A: J of the o*n funds that the institution *ould !e re6uired to
hold under Arti$le A0 $al$ulating risk *eighted e5posure aounts in a$$ordan$e *ith
.art +hree, +itle &&, Chapter 2, and .art +hree, +itle &&&, Chapter 2 or C, as appli$a!le,
instead of in a$$ordan$e *ith .art +hree, +itle &&, Chapter C, or .art +hree, +itle &&&,
Chapter B, as appli$a!le3
4!3 A $redit institution a# appl# paragraph 4a onl# if it started to use the &)B approa$h or
the Advan$ed Measureents Approa$hes for the $al$ulation of its $apital re6uireents
on or after 4 Eanuar# 2:4:3
4$3 Coplian$e *ith the re6uireents of paragraphs 4 (!) shall !e on the !asis of aounts
of o*n funds full# ad9usted to refle$t differen$es in the $al$ulation of o*n funds under
(ire$tive 2:::D42DEC and (ire$tive >CD?DEEC as those (ire$tives stood prior to 4
Eanuar# 2::0 and the $al$ulation of o*n funds under this )egulation deriving fro the
separate treatments of e5pe$ted loss and une5pe$ted loss under .art +hree, +itle &&,
Chapter C, of this )egulation3
-7 2#e competent aut#orities ma6* after #avin" consulte% $D,* 1aive t#e application of
para"rap# 1)/ to institutions provi%e% t#at all t#e re&uirements for t#e 0nternal Ratin"s
Dase% ,pproac# set out in Part 2#ree* 2itle 00* C#apter 3* Section = or t#e &ualif6in"
criteria for t#e use of t#e ,%vance% 9easurement ,pproac# set out in Part 2#ree* 2itle 000*
C#apter 4, as appli$a!le, are met7
2a3 +he Coission shall !# 4 Eanuar# 2:40 su!it a report to the European .arliaent
and the Coun$il on *hether it is appropriate to e5tend the appli$ation of the floor
!e#ond C4 (e$e!er 2:40 to ensure that there is a !a$kstop to internal odels, taking
into a$$ount international developents and internationall# agreed standards3 ;here
appropriate the report shall !e a$$opanied !# a separate legislative proposal3
Arti$le B0?a
Capital re6uireents dedu$tion for $redit risk on e5posures to sall and ediu si<ed
enterprises
43 Capital re6uireents for $redit risk on e5posures to sall and ediu si<ed enterprises
shall !e ultiplied !# the fa$tor :30?4>3
23 1or the purpose of the present arti$le'
the e5posure shall !e in$luded either in the retail or in the $orporates or se$ured !#
ortgages on iova!le propert# $lasses3 E5posures in default shall !e e5$luded3
(a) a sall and ediu si<ed enterprise is defined in a$$ordan$e *ith the
)e$oendation 2::CDC?4DEC adopted !# the European Coission on ? Ma#
2::C $on$erning the definition of i$ro, sall and ediu=si<ed enterprises3
Aong the $riteria listed in arti$le 2 of the Anne5 to the )e$oendation
entioned a!ove onl# the annual turnover shall !e taken into a$$ount%
(!) the total aount o*ed to the institution and parent undertakings and its
su!sidiaries, in$luding an# e5posure in default, !# the o!ligor $lient or group of
$onne$ted $lients, !ut e5$luding $lais or $ontingent $lais se$ured on residential
propert# $ollateral, shall not, to the kno*ledge of the institution, e5$eed E2) 43@
illion3 +he institution shall take reasona!le steps to a$6uire this kno*ledge3
C3 &nstitutions shall report to $opetent authorities ever# C onths on the total aount of
e5posures to sall and ediu si<ed enterprises $al$ulated in a$$ordan$e *ith
paragraph 2 of the present arti$le3
B3 +he Coission shall *ithin C? onths after the entr# into for$e of this )egulation,
report on the ipa$t of the o*n funds re6uireents laid do*n in this )egulation on
lending to sall and ediu=si<ed enterprises and natural persons and shall su!it this
report to the European .arliaent and the Coun$il, and, if appropriate, a legislative
proposal3
@3 1or the purpose of paragraph B, EBA shall report the follo*ing to the Coission'
(a) anal#sis of the evolution of the lending trends and $onditions for sall and
ediu si<ed enterprises over the period referred to in the previous paragraph%
(!) anal#sis of effe$tive riskiness of 2nion sall and ediu si<ed enterprises over a
full e$onoi$ $#$le%
($) the $onsisten$# of o*n funds re6uireents laid do*n in this )egulation for $redit
risk on e5posures to sall and ediu si<ed enterprises *ith the out$oes of the
anal#sis under point a) and !)3
Title II Reports n.
re3ie<s
Article 4%%
2yclicality of capital requirements
2#e Commission* in cooperation 1it# $D,* $SRD an% t#e 9emer States* an% ta5in" into account
t#e contriution of t#e $uropean Central Dan5* s#all perio%icall6 monitor 1#et#er t#is Re"ulation
ta5en as a 1#ole* to"et#er 1it# Directive Jinserte% 6 OPK #as si"nificant effects on t#e economic
c6cle an%* in t#e li"#t of t#at e8amination* s#all consi%er 1#et#er an6 reme%ial measures are
!ustifie%7 D6 31 Decemer -.13* t#e $D, s#all report to t#e Commission if an% #o1 met#o%olo"ies
of institutions un%er t#e 0RD ,pproac# s#oul% conver"e 1it# a vie1 to more comparale capital
re&uirements 1#ile miti"atin" pro;c6clicalit67
Dase% on t#at anal6sis an% ta5in" into account t#e contriution of t#e $uropean Central Dan5* t#e
Commission s#all %ra1 up a iennial report an% sumit it to t#e $uropean Parliament an% to t#e
Council* to"et#er 1it# an6 appropriate proposals7 Contriutions from cre%it ta5in" an% cre%it
len%in" parties s#all e a%e&uatel6 ac5no1le%"e% 1#en t#e report is %ra1n up7
B# C4 (e$e!er 2:4B the Coission shall revie* and report on the appli$ation of Arti$le C: ($)
and shall su!it this report to the European .arliaent and the Coun$il and, if appropriate, a
legislative proposal3
;ith respe$t to the potential eliination of the Arti$le C: ($) and its potential appli$ation at the
2nion level, the revie* shall in parti$ular ensure that suffi$ient safeguards are in pla$e to ensure
finan$ial sta!ilit# in all Me!er states3
Article 4%&
Hwn fun$s requirements for e,posures in the form of covere$ bon$s
43 2#e Commission s#all* 6 31 Decemer 2:4B an% after consultin" t#e $D,* report to t#e
Parliament an% t#e Council* to"et#er 1it# an6 appropriate proposals* on 1#et#er t#e ris5
1ei"#ts lai% %o1n in ,rticle 1-4 an% t#e o1n fun%s re&uirements for specific ris5 in
,rticle 3-+)C/ are a%e&uate for all t#e instruments t#at &ualif6 for t#ese treatments an%
1#et#er t#e criteria in ,rticle 1-4 are appropriate3
4a3 +he report and the proposals referred to in paragraph 4 shall have regard to'
(a) the e5tent to *hi$h the $urrent regulator# $apital re6uireents appli$a!le to
$overed !onds ade6uatel# differentiate !et*een varian$es in the $redit 6ualit# of
$overed !onds and the $ollateral against *hi$h the# are se$ured, in$luding the
e5tent of variations a$ross Me!er "tates%
!) the transparen$# of the $overed !ond arket and the e5tent to *hi$h this fa$ilitates
$oprehensive internal anal#sis !# investors in respe$t of the $redit risk of $overed
!onds and the $ollateral against *hi$h the# are se$ured and the asset segregation
in $ase of the issuerGs insolven$#3 +his shall take into a$$ount the itigating
effe$ts of the underl#ing stri$t national legal frae*ork a$$ording to Art3 42B
C)) and Art3 @2(B) 2C&+" on the overall $redit 6ualit# of a $overed !ond and its
ipli$ations on the level of transparen$# needed !# investors% and
($) the e5tent to *hi$h $overed !ond issuan$e !# a $redit institution ipa$ts on the
$redit risk to *hi$h other $reditors of the issuing institution are e5posed3
23 +he Coission shall, !# C4 (e$e!er 2:4B and after $onsulting the EBA, report to the
.arliaent and the Coun$il on *hether loans se$ured !# air$rafts (air$raft liens) and
*hether residential loans se$ured !# a guarantee, !ut not se$ured !# a registered
ortgage, should under $ertain $onditions !e $onsidered as an eligi!le asset a$$ording
to Arti$le 42B3
C3 +he Coission shall, !# C4 (e$e!er 2:4?, revie* the appropriateness of the
derogation set out in Arti$le B0C and, if relevant, the appropriateness of e5tending
siilar treatent to an# other for of $overed !ond3 &n the light of that revie*, the
Coission a#, if appropriate, adopt delegated a$ts in a$$ordan$e *ith Arti$le BB@ to
ake that derogation peranent or ake legislative proposals to e5tend it to other fors
of $overed !onds3
Arti$le B0Aa
Capital instruents su!s$ri!ed !# pu!li$ authorities in eergen$# situations
+he Coission shall, !# C4 (e$e!er 2:4? and after $onsulting *ith EBA, report to the
.arliaent and the Coun$il, together *ith an# appropriate proposals, *hether the treatent set
out in Arti$le 2Aa needs to !e odified or reoved3
Arti$le B0A!
)evie* of long ter finan$ing
B# C4st (e$e!er 2:4B, the Coission shall report to .arliaent and Coun$il, together *ith
an# appropriate proposals, a!out the appropriateness of the re6uireents of this regulation in
light of the need to ensure ade6uate levels of funding for all fors of long ter finan$ing for the
e$ono#, in$luding $riti$al infrastru$ture pro9e$ts in the European 2nion in the field of
transport, energ# and $ouni$ations3
Arti$le B0A$
Credit risk X definition of default
EBA shall, !# C4 (e$e!er 2:40, report to the Coission on ho* repla$ing >: da#s !# 4A:
da#s past due, as provided in Arti$le 40B(4) (!) ipa$ts risk=*eighted e5posure aounts and the
appropriateness of the $ontinuation of this provision !e#ond C4 (e$e!er 2:4>3
-n the !asis of this )eport, the Coission a# su!it proposals for aendents to this
)egulation3
Article 4%(
7ar#e e,posures
D6 31 Decemer 2:4@ t#e Commission s#all revie1 an% report on t#e application of ,rticle
389)1/)!/ an% 389)-;3 inclu%in" 1#et#er e8emptions in ,rticle 389)-/ s#oul% e %iscretionar6* an%
s#all sumit t#is report to t#e $uropean Parliament an% t#e Council an%* if appropriate* a le"islative
proposal7
?it# respect to t#e potential elimination of t#e national %iscretion un%er ,rticle 389)-/)c/ an% its
potential application at t#e 4nion level* t#e revie1 s#all in particular ta5e into account t#e
efficienc6 of "roupNs ris5 mana"ement 1#ile ensurin" t#at sufficient safe"uar%s are in place to
ensure financial stailit6 in all 9emer states in 1#ic# an entit6 of a "roup is incorporate%7
Article 4&*
7evel of application
17 D6 31 Decemer 2:4B, t#e Commission s#all revie1 an% report on t#e application of Part
One* 2itle 00* an% ,rticle 1.8)=/ an% 1.8)>/ an% s#all sumit t#is report to t#e $uropean
Parliament an% t#e Council* an%* if appropriate* a le"islative proposal7
-7 D6 31 Decemer 2:4@, t#e Commission s#all report on 1#et#er an% #o1 t#e li&ui%it6
covera"e re&uirement lai% %o1n in .art "i5 s#oul% appl6 to investment firms an% s#all*
after consultin" $D,* sumit t#is report to t#e $uropean Parliament an% t#e Council* an%*
if appropriate* a le"islative proposal7
B# C4 (e$e!er 2:4@ the Coission shall, on the !asis of $onsultation *ith EBA and E"MA
and in the light of dis$ussions *ith the $opetent authorities, report to the .arliaent and
Coun$il on an appropriate regie for the prudential supervision of investent firs referred to
in Arti$le B(A)3 ;here appropriate the report shall !e follo*ed !# a legislative proposal3
Article 4&1
7iqui$ity requirements
17 $D, s#all monitor an% evaluate t#e reports ma%e in accor%ance 1it# ,rticle 4.3)1/* across
currencies an% across %ifferent usiness mo%els7 $D, s#all* Aafter consultin" t#e $SRD*
non=finan$ial end=users, the !anking industr#, $opetent authorities and national
Central Banks annuall6 an% for t#e first time 6 31 Decemer -.13 report to t#e
Commission on 1#et#er a specification of t#e "eneral li&ui%it6 covera"e re&uirement in
.art "i5 ase% on t#e ites to !e reported a$$ording to Part Si8 2itle 00 and Anne5 &&&*
consi%ere% eit#er in%ivi%uall6 or cumulativel6* is li5el6 to #ave a material %etrimental
impact on t#e usiness an% ris5 profile of 4nion institutions or on the sta!ilit# and orderl#
fun$tioning of financial mar5ets or on t#e econom6 an% the sta!ilit# of the suppl# of an5
len%in"* 1it# a particular focus on len%in" to small an% me%ium enterprises an% on tra%e
financin"* inclu%in" len%in" un%er official e8port cre%it insurance sc#emes7
"u$h anal#sis should take due a$$ount of arkets and international regulator#
developents as *ell as of the intera$tions of this ratio *ith other prudential
re6uireents under the present regulation su$h as the risk $apital ratios and the
leverage ratios3
+he European .arliaent and the Coun$il shall !e given the opportunit# to state their
vie*s on this report3
$D, s#all in its report assess the follo*ing in parti$ular:
)a/ providing mec#anisms restrictin" t#e value of li&ui%it6 inflo1s, in parti$ular *ith a
vie* to deterining an appropriate inflo* $ap and the $onditions for its
appli$ation, taking into a$$ount different !usiness odels in$luding pass through
finan$ing, fa$toring, leasing, $overed !onds, ortgages, issuan$e of $overed
!onds, and the e5tent to *hi$h this $ap should !e odified or reoved to $ater for
the spe$ifi$ities of spe$ialised finan$ingE
)/ t#e $ali!ration of inflo*s and outflo1s referred to in .art "i5, +itle &&, in
parti$ular under Arti$les B4:(0) and B4C (2)3
A
($a) providing e$haniss restri$ting the $overage of li6uidit# re6uireents !# $ertain
$ategories of li6uid assets% in parti$ular assessing the appropriate iniu
per$entage for li6uid assets referred to in points (a) to ($) of paragraph 4 of Arti$le
B:B to the total of li6uid assets, testing a threshold of ?:J and taking into a$$ount
international regulator# developents3 Assets o*ed and due or $alla!le *ithin C:
$alendar da#s should not $ount to*ards the liit unless the assets have !een
o!tained against $ollateral that also 6ualifies under points (a) to ($) of paragraph 4
of Arti$le B:B3
(e) providing for spe$ifi$ lo*er outflo* andDor higher inflo* rates for intra=group
flo*s3 +he report shall spe$if# under *hi$h $onditions su$h spe$ifi$ in= or outflo*
rates *ould !e 9ustified fro a prudential point of vie* and shall set out the high
level outline of a ethodolog# using o!9e$tive $riteria and paraeters in order to
deterine spe$ifi$ levels of inflo*s and outflo*s !et*een the institution and the
$ounterpart# *hen the# are not esta!lished in the sae Me!er "tate%
(f!) the $ali!ration of the dra*=do*n rates appli$a!le to the undra*n $oitted $redit
and li6uidit# fa$ilities that fall under paragraphs C and B of Arti$le B423 &n
parti$ular, the EBA shall test a dra*=do*n rate of 4::J3
(f$) the definition of retail deposit as referred to in Arti$le B::(2), in parti$ular the
appropriateness of introdu$ing a threshold on deposits of natural persons%
(fd) the need to introdu$e a ne* retail deposit $ategor# *ith a lo*er outflo* in the light
of the spe$ifi$ $hara$teristi$s of su$h deposits that $ould 9ustif# a lo*er outflo*
rate and taking into a$$ount international developents%I
(g) derogations fro re6uireents on the $oposition of the li6uid assets institutions
*ill !e re6uired to hold, *here in a given $urren$# the institutionsG $olle$tive
9ustified needs for li6uid assets are e5$eeding the availa!ilit# of those li6uid assets
and $onditions su$h derogations should !e su!9e$t to%
(ga) the definition of "hariGah $opliant finan$ial produ$ts as an alternative to assets
that *ould 6ualif# as li6uid assets for the purposes of Arti$le B:B, for the use of
"hariGah $opliant !anks3
(h) the definition of $ir$ustan$es of stress, in$luding prin$iples for the use of the
sto$k of li6uid assets and the ne$essar# supervisor# rea$tions under *hi$h
institutions *ould !e a!le to use their li6uid assets to eet li6uidit# outflo*s and
ho* to address non=$oplian$e%
(i) the definition of esta!lished operational relationship for non=finan$ial $ustoer as
referred to in Arti$le B4:(B)$)3
(ia) the $ali!ration of the outflo* rate appli$a!le to $orrespondent !anking and prie
!rokerage servi$es as referred to in Arti$le B4:(B), su!para C3
(9) e$haniss for the grandfathering of governent guaranteed !onds issued to
$redit institutions as part of 8overnent support easures *ith E2 state aid
approval, su$h as !onds issued !# the Fational Asset Manageent Agen$#
(FAMA) in &reland and !# the "panish Asset Manageent Copan# in "pain,
designed to reove pro!le assets fro the !alan$e sheets of $redit institutions, as
assets of e5treel# high li6uidit# and $redit 6ualit# until at least (e$e!er 2:2C3
-7 $D, s#all after $onsulting the E"MA and the ECB* 6 31 Decemer -.13* report to t#e
Commission on appropriate uniform %efinitions of #i"# an% of e8tremel6 #i"# li&ui%it6 an%
cre%it &ualit6 of transferale assets for the purposes of ,rticle 4.4 and appropriate
hair$uts for assets that *ould 6ualif# as li6uid assets for the purposes of Arti$le B:B,
*ith the e5$eption of assets referred to in Arti$le B:B(4) (a) to ($)3
+he European .arliaent and the Coun$il shall !e given the opportunit# to state their
vie*s on this report3
+he report shall also $onsider (i) other $ategories of assets, in parti$ular )MB" of high
li6uidit# and $redit 6ualit#, (ii) other $ategories of $entral !ank eligi!le se$urities or
loans, for e5aple lo$al governent !onds and $oer$ial paper and (iii) other non=
$entral !ank eligi!le !ut trada!le assets, for e5aple e6uities listed on a re$ognised
e5$hange, gold, a9or inde5 linked e6uit# instruents, guaranteed !onds, $overed
!onds, $orporate !onds and funds !ased on the a!ove assets3
+he report shall $onsider *hether, and if, to *hat e5tent stand!# $redit fa$ilities referred
to in letter (e) of Arti$le B:B(4)(a4) should !e in$luded as li6uid assets in light of
international developent and taking into a$$ount European spe$ifi$ities, in$luding the
*a# onetar# poli$# is perfored in the E23
$D, s#all in particular test t#e a%e&uac6 of t#e follo1in" criteria an% t#e appropriate
levels for suc# %efinitions:
)a/ minimum tra%e volume of t#e assets
)/ minimum outstan%in" volume of t#e assets
)c/ transparent pricin" an% post;tra%e information
)%/ cre%it &ualit6 steps referre% to in .art C, +itle &&, Chapter 2%
)e/ proven recor% of price stailit6
)f/ avera"e volume tra%e% an% avera"e tra%e siLe
)"/ ma8imum i%/as5 sprea%
)#/ remainin" time to maturit6
)i/ minimum turnover ratio
EBA shall furtherore report a!out the appropriateness of treating assets referred to in
Arti$le B:B(4)($) as e6uivalent to assets of e5treel# high li6uidit# and $redit 6ualit#3
B# C4 Eanuar# 2:4B, EBA shall furtherore report on the follo*ing'
(i) unifor definitions of high and e5treel# high li6uidit# and $redit 6ualit#%
(ii) the possi!le unintended $onse6uen$es of the definition of li6uid assets on the $ondu$t of
onetar# poli$# operation and the e5tent to *hi$h'
X a list of li6uid assets that is dis$onne$ted fro the list of $entral !ank eligi!le
assets a# in$entivise institutions to su!it eligi!le assets *hi$h are not in$luded
in the definition of li6uid assets in refinan$ing operations%
X li6uidit# regulation a# disin$entivise institutions to lend or !orro* on the
unse$ured one# arket and *hether this a# lead to 6uestion the targeting of
E-F&A in onetar# poli$# ipleentation%
X the introdu$tion of the LC) a# ake it ore diffi$ult for $entral !anks to ensure
pri$e sta!ilit# !# using the e5isting onetar# poli$# frae*ork and instruents3
(iii) the operational re6uireents for the holdings of li6uid assets, as referred in art3 B:@(4)
points ($) to (g), in line *ith international regulator# developents3
Arti$le BA4a
Fet "ta!le 1unding )e6uireents
43 D6 31 Decemer -.1+* $D, s#all report to t#e Commission, !ased on the ites to !e
reported a$$ording to .art "i5 +itle &&&, on 1#et#er an% #o1 it 1oul% e appropriate to
ensure t#at institutions use stale sources of fun%in"* inclu%in" an assessment of t#e impact
on t#e usiness an% ris5 profile of 4nion institutions or on financial mar5ets or t#e
econom6 an% an5 len%in"* 1it# a particular focus on len%in" to small an% me%ium
enterprises an% on tra%e financin"* inclu%in" len%in" un%er official e8port cre%it insurance
sc#emes and pass through finan$ing odels, in$luding at$h funded ortgage lending3
&n parti$ular EBA shall anal#se the ipa$t of sta!le sour$es of funding on the
refinan$ing stru$tures of different !anking odels in Europe3
23 B# C4 (e$e!er 2:4@, EBA shall also report to the Coission, !ased on the ites to
!e reported a$$ording to .art "i5 +itle &&& and in a$$ordan$e *ith the unifor reporting
forats referred to in point (a) of paragraph C of Arti$le B:C and after $onsulting the
E")B, on ethodologies for deterining the aount of sta!le funding availa!le to and
re6uired !# institutions and on appropriate unifor definitions for $al$ulating su$h a
net sta!le funding re6uireent, e5aining in parti$ular the follo*ing'
(a) the $ategories and *eightings applied to sour$es of sta!le funding in Arti$le B4B
paragraph 4%
(!) the $ategories and *eightings applied to deterine the re6uireent for sta!le
funding in Arti$le B4@ paragraph 4%
($) the treatent of $ontingent o!ligations su!9e$t to national supervisor# dis$retion
referred to in Arti$le B4@ paragraph 4 point (i)%
(d) ethodologies shall provide in$entives and disin$entives as appropriate to
en$ourage a ore sta!le longer ter funding of assets, !usiness a$tivities,
investent and funding of institutions%
(e) +he need to develop different ethodologies for different t#pes of institutions3
3D B: 31 $e2e0Her 2016, t6e Co00ission s6ll, if appropriate3 an$ ta1in# into account the
reports referre$ to in para#raphs 1 an$ 23 an$ ta1in# full account of the $iversity of the
European ban1in# sector3 suH0it F le5islti3e proposl to t6e Europen Prli0ent
n. the Coun2il on how to ensure that institutions use stable sources of fun$in#+
Article 4&2
7evera#e
17 Based on the results of the report in paragraph 2, the Commission s#all sumit 6 31
Decemer -.1= a report on t#e impact an% effectiveness of t#e levera"e ratio to t#e
$uropean Parliament an% t#e Council7
23 ?#ere appropriate* t#e report s#all e accompanie% 6 a le"islative proposal on t#e
intro%uction of an appropriate nu!er of levels of t#e levera"e ratio t#at institutions
follo*ing different !usiness odels 1oul% e re&uire% to meet* su""estin" an a%e&uate
caliration for t#ose levels an% an6 appropriate a%!ustments to t#e capital measure an% t#e
total e8posure measure as %efine% in ,rticle 41=, together *ith an# $onne$ted fle5i!ilit#
easures if ne$essar#, in$luding appropriate aendents to Arti$le BBCa to introdu$e
the leverage ratio *ithin the s$ope of easures in$luded in that arti$le3
-7 3or t#e purposes of para"rap# 1* t#e $D, s#all report to t#e Commission 6 31 Octoer
-.1= on at least t#e follo1in":
)a:) ;hether the leverage ratio frae*ork provided !# this )egulation and Arti$les A@
and >B of the (ire$tive ,inserted !# -./ is the appropriate tool to suppress the risk
of e5$essive leverage on the part of the institutions in a satisfa$tor# anner and
degree%
(=a) on identif#ing !usiness odels that refle$t the overall risk profiles of the
institutions and on introdu$ing differentiated levels of the leverage ratio for those
!usiness odels3
(a/ 1#et#er t#e re&uirements lai% out in ,rticles >+ an% 8+ of Directive Jinserte% 6 OPK
in accor%ance 1it# ,rticles >- an% 9- of Directive Jinserte% 6 OPK for a%%ressin"
t#e ris5 of e8cessive levera"e are suffi$ient to ensure soun% mana"ement of t#is ris5
6 institutions an%* if not* 1#ic# furt#er enhan$eents are needed in or%er to ensure
t#ese o!ectivesE
)/ 1#et#er ' an% if so* 1#ic# ; c#an"es to t#e calculation met#o%olo"6 %etaile% in
,rticle 41= 1oul% e necessar6 to ensure t#at t#e levera"e ratio can e use% as an
appropriate in%icator of an institutionNs ris5 of e8cessive levera"eE
)c/ 1#et#er* in t#e conte8t of t#e calculation of t#e total e8posure measure of t#e
levera"e ratio* t#e e8posure value of items liste% in ,nne8 00 A%etermine% 6 usin"
t#e Ori"inal $8posure 9et#o% %iffers in a material 1a6 from t#e e8posure value
%etermine% 6 usin" t#e 9ar5;to;9ar5et 9et#o%E
)%/ 1#et#er usin" eit#er o1n fun%s or Common $&uit6 2ier 1 capital as t#e capital
measure of t#e levera"e ratio coul% e more appropriate for t#e inten%e% purpose of
trac5in" t#e ris5 of e8cessive levera"e an%* if so* 1#at 1oul% e t#e appropriate
caliration of t#e levera"e ratioE
)e/ 1#et#er t#e Aconversion factor referred to in point (a) of Arti$le B4?(A) for
undra*n $redit fa$ilities, *hi$h a# !e $an$elled uncon%itionall6 at an# tie
*ithout noti$e, is appropriatel6 conservative ase% on t#e evi%ence collecte% %urin"
t#e oservation perio%E
)f/ 1#et#er t#e fre&uenc6 an% format of t#e %isclosure of items referre% to in ,rticle 43=
are a%e&uateE
)"/ *hat *ould !e the appropriate level for the leverage ratio for ea$h of the !usiness
odels indentified a$$ording to point (=a)3
(ga) 1#et#er a range for ea$h level of t#e levera"e ratio should !e definedE
)#/ 1#et#er intro%ucin" t#e levera"e ratio as a re&uirement for institutions 1oul%
necessitate an6 c#an"es to t#e levera"e ratio frame1or5 provi%e% 6 t#is Re"ulation
an%* if so* 1#ic# onesE
)i/ 1#et#er intro%ucin" t#e levera"e ratio as a re&uirement for institutions 1oul%
effectivel6 constrain t#e ris5 of e8cessive levera"e on t#e part of t#ose institutions,
an%* if so* 1#et#er t#e level for t#e levera"e ratio s#oul% e t#e same for all
institutions or s#oul% !e deterined a$$ording to the risk profile and !usiness
odel as *ell as the si<e of institutions and, *ith regard to this, *hi$h a%%itional
calirations or transition period 1oul% e re&uire%7
37 2#e report referre% to in para"rap# - s#all cover at least t#e perio% from the date of
appli$ation of this )egulation until 3. <une -.1= an% s#all ta5e account of at least t#e
follo1in":
)a/ t#e impact of intro%ucin" t#e levera"e ratio* %etermine% in accor%ance 1it# ,rticle
41=* as a re&uirement t#at institutions 1oul% #ave to meet on:
)i/ financial mar5ets in "eneral an% mar5ets for repurc#ase transactions*
%erivatives an% covere% on%s in particularE
)ii/ t#e roustness of institutionsE
)iii/ usiness mo%els an% alance;s#eet structures of institutionsE in parti$ular as
regards lo*=risk areas of !usiness, su$h as prootional $redit !# pu!li$
developent !anks, uni$ipal loans, finan$ing of residential propert# and
other lo*=risk areas regulated under national la*%
)iv/ t#e mi"ration of e8posures to entities 1#ic# are not su!ect to pru%ential
supervisionE
)v/ financial innovation* in particular t#e %evelopment of instruments 1it#
eme%%e% levera"eE
)vi/ institutions( ris5;ta5in" e#aviourE
)vii/ clearin"* settlement an% custo%6 activities and the operation of a $entral
$ounterpart#E
)viii/ c6clicalit6 of t#e capital measure an% t#e total e8posure measure of t#e
levera"e ratioE
)i8/ an5 len%in"* 1it# a particular focus on len%in" to small an% me%ium
enterprises, lo$al authorities, regional governents and pu!li$ se$tor entities
an% on tra%e financin"* inclu%in" len%in" un%er official e8port cre%it insurance
sc#emesE
)/ t#e interaction of t#e levera"e ratio 1it# t#e ris5;ase% o1n fun%s re&uirements an%
t#e li&ui%it6 re&uirements as specifie% in t#is Re"ulationE
)c/ t#e impact of accountin" %ifferences et1een accountin" stan%ar%s applicale un%er
Re"ulation )$C/ Bo 1=.=/-..-* accountin" stan%ar%s applicale un%er Directive
8=/=3+/$C an% ot#er appli$a!le a$$ounting frae*ork and other relevant
accountin" frae*orks on t#e comparailit6 of t#e levera"e ratio7
Article 4&3
E,posures to transferre$ cre$it ris1
D6 31 Decemer -.13 t#e Commission s#all report to t#e $uropean Parliament an% t#e Council on
t#e application an% effectiveness of t#e provisions of Part 3ive in t#e li"#t of international mar5et
%evelopments7
43 B# Eune 2:4B, the European Coission shall, after $onsulting E")B and EBA, revie*
*hether the a$ro=prudential regulation $ontained on this )egulation and the (ire$tive
, inserted !# -./ is suffi$ient to itigate s#stei$ risks in se$tors, regions and e!er
states in the European union in$luding assessing%
i) *hether the $urrent a$ro=prudential tools in this )egulation and the (ire$tive
,&nserted !# -./ are effe$tive, effi$ient and transparent
iii) *hether the $overage and the possi!le degrees of overlap !et*een different a$ro=
prudential tools for targeting siilar risks in this )egulation and the (ire$tive
,&nserted !# -./ are ade6uate and, if appropriate, propose ne* a$ro=prudential
regulation3
iv) ho* internationall# agreed standards for s#stei$ institutions intera$ts *ith the
provisions in this )egulation and the (ire$tive ,inserted !# -./ and, if
appropriate, propose ne* regulation taking into a$$ount these internationall#
agreed standards3
B# C4 (e$e!er 2:4B the Coission shall !ased on the $onsulting *ith E")B and EBA report
to the European .arliaent and Coun$il on this assessent and *here appropriate su!it a
legislative proposal to the European .arliaent and Coun$il3
Article 4&4
2ounterparty 2re$it 5is1 an$ the Hri#inal E,posure -etho$
D6 31 Decemer -.1= t#e Commission s#all revie1 an% report on t#e application of ,rticle ->.
an% s#all sumit t#is report to t#e $uropean Parliament an% t#e Council* an%* if appropriate* a
le"islative proposal7
6
Art3 BABa X Monitoring and evaluation
43 EBA, together *ith E"MA shall ake a report on the fun$tioning of this )egulation
*ith the related o!ligations under EM&), no later than t*elve onths after entr# into
for$e of this )egulation and in parti$ular *ith regard to institutions operating a $entral
$ounterpart#, in order to avoid dupli$ation of re6uireents for derivative transa$tions
and there!# avoid in$reased regulator# risk and in$reased $osts for onitoring !#
$opetent authorities3
23 EBA shall onitor and evaluate the operation of the provisions for o*n funds
re6uireents for e5posures to a $entral $ounterpart# as set out in "e$tion > of Chapter ?
of +itle && of .art +hree3 B# 4 Eanuar# 2:4@ EBA shall report to the Coission on the
ipa$t and effe$tiveness of su$h provisions3
C3 B# C4 (e$e!er 2:4? the Coission shall revie* and report on the re$on$iliation of
this )egulation *ith the related o!ligations under EM&), the o*n funds re6uireents as
set out in "e$tion > of Chapter ? of +itle && of .art +hree and shall su!it this report to
the European .arliaent and the Coun$il, and, if appropriate, a legislative proposal3
A
Arti$le BA@a
Long ter finan$ing
+he Coission shall report on the ipa$t of this regulation on en$ouraging long=ter
investents in gro*th prooting infrastru$ture !# C4st (e$e!er 2:4@3
Article 4&"
Definition of eli#ible capital
D6 31 Decemer 2:4B t#e Commission s#all revie1 an% report on t#e appropriateness of t#e
%efinition of eli"ile capital ein" applie% for t#e purposes of 2itle 0R of Part 21o an% Part 3our
an% s#all sumit t#is report to t#e $uropean Parliament an% t#e Council* an%* if appropriate* a
le"islative proposal7
Arti$le BA?a
)evie* on Capital instruents *hi$h a# !e *ritten do*n or $onverted at the point of non=
via!ilit#
B# C4 (e$e!er 2:4@, the Coission shall revie* and report on *hether this )egulation
should $ontain a re6uireent that Additional +ier 4 or +ier 2 $apital instruents ust !e *ritten
do*n in the event of a deterination that the institution is no longer via!le3 +he $oission
shall su!it that report to the European .arliaent and Coun$il, a$$opanied *here
appropriate !# a legislative proposal3
Arti$le BA?!
(edu$tion of defined !enefit pension fund assets fro Coon E6uit# +ier 4 ites
EBA shall prepare !# C: Eune 2:4B, a report on *hether revised &A" 4> as endorsed !# the
European Coission and *hi$h enters into for$e on 4 Eanuar#2:4C, in $on9un$tion *ith the
dedu$tion on net pension assets as set out in Arti$le CC, point (e) and $hanges in the net pension
lia!ilities lead to undue volatilit# of institutions7 o*n funds3
+aking into a$$ount the EBA report, the Coission shall prepare !# C4 (e$e!er 2:4B, a
report to the Coun$il and European .arliaent on the a!ove issue3 ;here appropriate this report
shall !e a$$opanied !# a legislative proposal !# the European Coission to introdu$e a
treatent ad9usting defined net !enefit pension fund assets or lia!ilities for the $al$ulation of
o*n funds3
+itle &&&
Aendents
Arti$le BA?$
Aendents to )egulation (E2) ?BAD2:42
)egulation (E2) ?BAD2:42 is aended as follo*s'
(4) the follo*ing te5t is added in +itle &M'
"CHA.+E) B
Cal$ulations and reporting for the purposes of )egulation ,inserted !# -./
Arti$le @:a
Cal$ulation of S
CC.
43 1or the purposes of Arti$le 2>Aa of )egulation ,inserted !# -./, *here a CC.
has re$eived the notifi$ation referred to in Arti$le 2>@(2!) of that )egulation, it
shall $al$ulate S
CC.
as spe$ified in paragraph 2 for all $ontra$ts and transa$tions
it $lears for all its $learing e!ers falling *ithin the $overage of the given
default fund3
23 A CC. shall $al$ulate the h#potheti$al $apital (S
CC.
) as follo*s'
*here'
EB)M
i
N e5posure value !efore risk itigation that is e6ual to the e5posure
value of the CC. to $learing e!er i arising fro all the $ontra$ts
and transa$tions *ith that $learing e!er, $al$ulated *ithout
taking into a$$ount the $ollateral posted !# that $learing e!er%
&M
i
N the initial argin posted to the CC. !# $learing e!er i%
(1
i
N the pre=funded $ontri!ution of $learing e!er i%
); N a risk *eight of 2:J%
$apital ratioN AJ3
C3 A CC. shall undertake the $al$ulation re6uired !# paragraph 2 at least 6uarterl#
or ore fre6uentl# *here re6uired !# the $opetent authorities of those of its
$learing e!ers *hi$h are institutions3
B3 EBA shall develop draft ipleenting te$hni$al standards to spe$if# the
follo*ing for the purpose of paragraph C'
23 (a) the fre6uen$# and dates of the $al$ulation laid do*n in paragraph
2%
C3 (!) the situations in *hi$h the $opetent authorit# of an institution
a$ting as a $learing e!er a# re6uire higher fre6uen$ies of $al$ulation
and reporting than the ones set out in point (a)3
EBA shall su!it those draft ipleenting te$hni$al standards to the
Coission !# 4 Eanuar# 2:4B3
.o*er is $onferred on the Coission to adopt the ipleenting te$hni$al
standards referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure
laid do*n in Arti$le 4@ of )egulation (E2) Fo 4:>CD2:4:37
Arti$le @:!
8eneral rules for the $al$ulation of S
CC.
1or the purposes of the $al$ulation laid do*n in Arti$le @:a(2), the follo*ing shall appl#'
(a) a CC. shall $al$ulate the value of the e5posures it has to its $learing e!ers as
follo*s'
B3 (i) for e5posures arising fro $ontra$ts and transa$tions listed in
Arti$le 2>@(4) (a) and (d)
(ii) for e5posures arising fro $ontra$ts and transa$tions listed in Arti$le
2>@(4)(!), ($) and (e) of )egulation ,inserted !# -./ it shall $al$ulate the
in a$$ordan$e *ith the 1inan$ial Collateral Coprehensive Method
spe$ified in Arti$le 24A of that )egulation *ith supervisor# volatilit#
ad9ustents, spe$ified in Arti$les 24A and 24>% the e5$eption a$$ording to
Arti$le 20>(2), senten$e 2 point (i), does not appl#%
@3 (iii) for e5posures arising fro transa$tions referred to in Arti$le
2>@a(4), point (a) of )egulation ,inserted !# -./ it shall $al$ulated the in
a$$ordan$e *ith .art +hree, +itle M of that )egulation3
(aa) for institutions that fall under the s$ope of )egulation ,inserted !# -./ the
netting sets are the sae as those defined under .art &&&, +itle && of that
)egulation3
(!) *hen $al$ulating the values referred to in point (a), the CC. shall su!tra$t fro
its e5posures the $ollateral posted !# its $learing e!ers, appropriatel# redu$ed
!# the supervisor# volatilit# ad9ustents in a$$ordan$e *ith the 1inan$ial
Collateral Coprehensive Method spe$ified in Arti$le 24> of that )egulation%
($) a CC. shall $al$ulate its se$urities finan$ing transa$tion e5posures to its
$learing e!ers in a$$ordan$e *ith the 1inan$ial Collateral Coprehensive
ethod, *ith supervisor# volatilit# ad9ustents, spe$ified in Arti$les 24A and 24>%
(d) *here a CC. has e5posures to one or ore CC.s it shall treat an# su$h
e5posures as if the# *ere e5posures to $learing e!ers and in$lude an# argin
or pre=funded $ontri!utions re$eived fro those CC.s in the $al$ulation of S
CC.
%
?3 (e) *here a CC. has in pla$e a !inding $ontra$tual arrangeent *ith its
$learing e!ers that allo*s it to use all or part of the initial argin re$eived
fro its $learing e!ers as if the# *ere pre=funded $ontri!utions, the CC.
shall $onsider that initial argin as prefunded $ontri!utions for the purposes of
the $al$ulation in paragraph 4 and not as initial argin%
(f) *hen appl#ing the Mark=to=Market Method, a CC. shall repla$e the forula in
point ($)(ii) of Arti$le 2>2(4) of )egulation ,inserted !# -./ *ith the follo*ing
one'
03 %
A3 *here the nuerator of F8) is $al$ulated a$$ording to Arti$le 2?>(4) of
)egulation ,inserted !# -./ and 9ust !efore the variation argin is a$tuall#
e5$hanged at the end of the settleent period, and the denoinator is the gross
repla$eent $ost3
(fa) *hen appl#ing the Mark=to=Market Method as set out in Arti$le 2?> of
)egulation ,inserted !# -./, a CC. shall repla$e the forula in point ($)(ii) of
Arti$le 2>2(4) of )egulation ,inserted !# -./ *ith the follo*ing one'
>3 %
4:3 *here the nuerator of F8) is $al$ulated a$$ording Arti$le 2?>(4) of
)egulation ,inserted !# -./ and 9ust !efore variation argins are a$tuall#
e5$hanged at the end of the settleent period, and the denoinator is gross
repla$eent $ost
(g) *here a CC. $annot $al$ulate the value of F8) as defined in point ($)(ii) of
Arti$le 2>2(4) of )egulation ,inserted !# -./, it shall do the follo*ing'
443 (i) notif# those of its $learing e!ers *hi$h are institutions and their
$opetent authorities a!out its ina!ilit# to $al$ulate F8) and the reasons
*h# it is una!le to $arr# out the $al$ulation%
423 (ii) for a period of C onths, it a# use a value of F8) of :3C to
perfor the $al$ulation of .CE
red
spe$ified in point (f)%
4C3 (h) *here, at the end of the period spe$ified in point (ii) of point (g), the CC.
*ould still !e una!le to $al$ulate the value of F8), it shall do the follo*ing'
4B3 (i) stop $al$ulating SCC.%
4@3 (ii) notif# those of its $learing e!ers *hi$h are institutions and their
$opetent authorities that it has stopped $al$ulating S
CC.
%
(i) for the purpose of $al$ulating the potential future e5posure for options and
s*aptions in a$$ordan$e *ith the Mark=to=Market Method spe$ified in Arti$le
2?> of )egulation ,inserted !# -./, a CC. shall ultipl# the notional aount of
the $ontra$t !# the a!solute value of the optionGs delta (
? p
) as defined in
point (a) of Arti$le 20B(4) of )egulation ,inserted !# -./%
4?3 (9) *here a CC. has ore than one default fund, it shall $arr# out the
$al$ulation laid do*n in Arti$le @:a(2) for ea$h default fund separatel#3
Arti$le @:$
)eporting of inforation
403 43 1or the purposes of Arti$le 2>Aa of )egulation ,inserted !# -./, a CC.
shall report the follo*ing inforation to those of its $learing e!ers *hi$h are
institutions and to their $opetent authorities3
4A3 (a) the h#potheti$al $apital (S
CC.
)%
4>3 (!) the su of pre=funded $ontri!utions ((1
CM
)%
2:3 ($) the aount of its pre=funded finan$ial resour$es that it is re6uired
to use = !# la* or due to a $ontra$tual agreeent *ith its $learing e!ers
= to $over its losses follo*ing the default of one or ore of its $learing
e!ers !efore using the default fund $ontri!utions of the reaining
$learing e!ers ((1
CC.
)%
243 (d) the total nu!er of its $learing e!ers (F)%
223 (f) the $on$entration fa$tor ([), as defined in Arti$le @:d%
2C3 (g) the su of all of the $ontra$tuall# $oitted $ontri!utions ( D+
c
)3
2B3 ;here the CC. has ore than one default fund, it shall report the
inforation in the first su!paragraph for ea$h default fund separatel#3
2@3 23 +he CC. shall notif# those of its $learing e!ers *hi$h are institutions
at least 6uarterl# or ore fre6uentl# *here re6uired !# the $opetent authorities
of those $learing e!ers3
2?3 C3 EBA shall develop ipleenting te$hni$al standards to spe$if# the
follo*ing'
2-
203 (a) the unifor teplate for the purpose of the reporting spe$ified in
paragraph 4%
2A3 (!) the fre6uen$# and dates of the reporting spe$ified in paragraph 2%
2>3 ($) the situations in *hi$h the $opetent authorit# of an institution
a$ting as a $learing e!er a# re6uire higher fre6uen$ies of reporting
than the ones set out in point (!)3
EBA shall su!it those draft ipleenting te$hni$al standards to the
Coission !# 4 Eanuar# 2:4B3
.o*er is $onferred on the Coission to adopt the ipleenting te$hni$al
standards referred to in the first su!paragraph in a$$ordan$e *ith the pro$edure
laid do*n in Arti$le 4@ of )egulation (E2) Fo 4:>CD2:4:3
Arti$le @:d
Cal$ulation of spe$ifi$ ites to !e reported !# the CC.
C:3 1or the purposes of Arti$le @:$, the follo*ing shall appl#
C43 (a) *here the rules of a CC. foresee that it shall use part or all of its finan$ial
resour$es in parallel to the pre=funded $ontri!utions of its $learing e!ers in a
anner that akes those resour$es e6uivalent to pre=funded $ontri!utions of a
$learing e!er in ters of ho* the# a!sor! the losses in$urred !# the CC. in
$ase of the default or insolven$# of one or ore of its $learing e!ers, the CC.
shall add the $orresponding aount of those resour$es to (1
CM
%
C23 (!) *here the rules of a CC. foresee that it shall use part or all of its finan$ial
resour$es to $over its losses due to the default of one or ore of its $learing
e!ers after it has depleted its default fund, !ut !efore it $alls on the
$ontra$tuall# $oitted $ontri!utions of its $learing e!ers, the CC. shall add
the $orresponding aount of those additional finan$ial resour$es ( D+
a
) to the
total aount of pre=funded $ontri!utions ((1) as follo*s'
D+ D+
22P
+ D+
2-
+ D+
22P
3
22P
a
($) a CC. shall $al$ulate the $on$entration fa$tor ([) a$$ording to the follo*ing
forula'
*here'
.CE
red,i
N the redu$ed figure for potential future $redit e5posure for all $ontra$ts and
transa$tion of a CC. *ith $learing e!er i%.CE
red,4
N the redu$ed
figure for potential future $redit e5posure for all $ontra$ts and transa$tion
of a CC. *ith the $learing e!er that has the largest .CE
red
value%
.CE
red,2
N the redu$ed figure for potential future $redit e5posure for all $ontra$ts and
transa$tion of a CC. *ith the $learing e!er that has the se$ond largest
.CE
red
value3"3
(2) in Arti$le A>, the follo*ing paragraph is added'
7@a3 2p until 4@ onths after the date of entr# into for$e of the latest of the eleven
regulator# te$hni$al standards referred to at the end of the first su!paragraph of
Arti$le A>(C), or until a de$ision is ade under Arti$le 4B of that regulation on the
authorisation of the CC., that CC. shall appl# the treatent spe$ified in the third
su!paragraph3
2p until 4@ onths after the date of entr# into for$e of the latest of the eleven regulator#
te$hni$al standards referred to at the end of the se$ond su!paragraph of Arti$le A>(C), or
until a de$ision is ade under Arti$le 2@ of that regulation on the re$ognition of the CC.,
*hi$hever date is earlier, that CC. shall appl# the treatent spe$ified in the third
su!paragraph3"3
PART ELE,EN
FINAL PRO,I?ION?
6
Article 4&&
43 2#is Re"ulation s#all enter into force on t#e %a6 follo1in" t#at of its pulication in t#e
Hfficial .ournal of the European 0nion7
4a3 +his )egulation shall appl# fro ,4Eanuar# 2:4B if the pu!li$ation o$$urs !efore the C:
Eune 2:4C= or 4 Eul# 2:4B= if the pu!li$ation o$$urs !et*een 4st of Eul# and C4
(e$e!er 2:4C (O)/,*ith the e5$eption of'
a) Arti$les 0(2a), 4> and BC?(4), *hi$h shall appl# fro 4 Eanuar# 2:4@%
!) Arti$le B:4a(4), *hi$h shall appl# fro 4 Eanuar# 2:4?%
$) the provisions of this )egulation that re6uire the E"As to su!it to the
Coission draft ipleenting te$hni$al standards or draft regulator# te$hni$al
standards and the provisions of this )egulation that epo*er the Coission to
adopt delegated a$ts or ipleenting a$ts, *hi$h shall appl# fro the date of entr#
into for$e of this )egulation3
(O) O< please insert t#e relevant %ate calculate% on t#e asis of t#e correct pulication %ate7
2#is Re"ulation s#all e in%in" in its entiret6 an% %irectl6 applicale in all 9emer States7
A
ANNE- I
Classification of Off;alance;s#eet items
3ull ris5:
i7 Guarantees #avin" t#e c#aracter of cre%it sustitutes* )e7"7 "uarantees for t#e "oo% pa6ment
of cre%it facilities/*
ii Cre%it %erivatives*
iii7 ,cceptances
iv7 $n%orsements on ills not earin" t#e name of anot#er institution*
v7 2ransactions 1it# recourse )e7"7 factorin"* invoice %iscount facilities/*
vi7 0rrevocale stan%6 letters of cre%it #avin" t#e c#aracter of cre%it sustitutes*
vii ,ssets purc#ase% un%er outri"#t for1ar% purc#ase a"reements*
viii7 3or1ar% %eposits*
i87 2#e unpai% portion of partl6;pai% s#ares an% securities*
87 ,sset sale an% repurc#ase a"reements as %efine% in ,rticle 1-)3/ an% )+/ of Directive
8=/=3+/$$C*
8i7 Ot#er items also carr6in" full ris57
-7 9e%ium ris5:
)a/ 2ra%e finance Off;alance s#eet items
)i/ Documentar6 cre%its issue% or confirme% )see also (9e%ium/lo1 ris5(/*
)/ Ot#er Off alance s#eet items:
)i/ S#ippin" "uarantees * customs an% ta8 on%s
)ii/ 4n%ra1n cre%it facilities )a"reements to len%* purc#ase securities* provi%e "uarantees or
acceptance facilities/ 1it# an ori"inal maturit6 of more t#an one 6ear*
)iii/ Bote issuance facilities )B03s/ an% revolvin" un%er1ritin" facilities )R43s/*
)iv/ Ot#er items also carr6in" me%ium ris5 an% as communicate% to $D,7
37 9e%ium/lo1 ris5:
)a/ 2ra%e finance Off;alance s#eet items
)i/ Documentar6 cre%its in 1#ic# un%erl6in" s#ipment acts as collateral an% ot#er self;
li&ui%atin" transactions*
)ii/ ?arranties )inclu%in" ten%er an% performance on%s an% associate% a%vance pa6ment an%
retention "uarantees/ an% "uarantees not #avin" t#e c#aracter of cre%it sustitutes
(iii) &rrevo$a!le stand!# letters of $redit not having the $hara$ter of $redit su!stitutes3
)/ Ot#er off alance s#eet items
)i/ 4n%ra1n cre%it facilities 1#ic# comprise a"reements to len%* purc#ase securities* provi%e
"uarantees or acceptance facilities 1it# an ori"inal maturit6 of up to an% inclu%in" one 6ear 1#ic#
ma6 not e cancelle% uncon%itionall6 at an6 time 1it#out notice or t#at %o not effectivel6 provi%e
for automatic cancellation %ue to %eterioration in a orro1er(s cre%it1ort#iness*
)ii/ Ot#er items also carr6in" me%ium/lo1 ris5 an% as communicate% to $D,7
Fo1 ris5:
)i/ 4n%ra1n cre%it facilities comprisin" a"reements to len%* purc#ase securities* provi%e
"uarantees or acceptance facilities 1#ic# ma6 e cancelle% uncon%itionall6 at an6 time 1it#out
notice* or t#at %o effectivel6 provi%e for automatic cancellation %ue to %eterioration in a orro1er(s
cre%it1ort#iness7 Retail cre%it lines ma6 e consi%ere% as uncon%itionall6 cancellale if t#e terms
permit t#e institution to cancel t#em to t#e full e8tent allo1ale un%er consumer protection an%
relate% le"islationE an%
)ii/ 4n%ra1n cre%it facilities for ten%er an% performance "uarantees 1#ic# ma6 e cancelle%
uncon%itionall6 at an6 time 1it#out notice* or t#at %o effectivel6 provi%e for automatic cancellation
%ue to %eterioration in a orro1er(s cre%it1ort#inessE an%
)iii/ Ot#er items also carr6in" lo1 ris5 an% as communicate% to $D,7
ANNE- II
26pes of %erivatives
17 0nterest;rate contracts:
)a/ sin"le;currenc6 interest rate s1apsE
)/ asis;s1apsE
)c/ for1ar% rate a"reementsE
)%/ interest;rate futuresE
)e/ interest;rate options purc#ase%E
)f/ ot#er contracts of similar nature7
-7 3orei"n;e8c#an"e contracts an% contracts concernin" "ol%:
)a/ cross;currenc6 interest;rate s1apsE
)/ for1ar% forei"n;e8c#an"e contractsE
)c/ currenc6 futuresE
)%/ currenc6 options purc#ase%E
)e/ ot#er contracts of a similar natureE
)f/ contracts of a nature similar to )a/ to )e/ concernin" "ol%7
37 Contracts of a nature similar to t#ose in points 1)a/ to )e/ an% -)a/ to )%/ concernin" ot#er
reference items or in%ices7 2#is inclu%es as a minimum all instruments specifie% in points 4 to >* 9
an% 1. of Section C of ,nne8 0 to Directive -..4/39/$C not ot#er1ise inclu%e% in points 1 or -7
ANNE- III
0tems su!ect to supplementar6 reportin" of li&ui% assets
17 cas#E
-7 central an5 e8posures* to t#e e8tent t#at t#ese e8posures can e %ra1n %o1n in times of
stressE
37 transferale securities representin" claims on or claims "uarantee% 6 soverei"ns* central
an5s* non;central "overnment pulic sector entities* re"ions 1it# fiscal autonom6 to raise an%
collect ta8es an% local aut#orities* t#e Dan5 for 0nternational Settlements* t#e 0nternational
9onetar6 3un%* t#e $uropean Commission* or multilateral %evelopment an5s an% satisf6in" all of
t#e follo1in" con%itions:
)a/ t#e6 are assi"ne% a .O ris5;1ei"#t un%er C#apter -* 2itle 00 of Part 3E
)/ t#e6 are not an oli"ation of an institution or an6 of its affiliate% entities7
47 transferale securities ot#er t#an t#ose referre% to in point )3/ representin" claims on or
claims "uarantee% 6 soverei"ns or central an5s issue% in %omestic currencies 6 t#e soverei"n or
central an5 in t#e currenc6 an% countr6 in 1#ic# t#e li&ui%it6 ris5 is ein" ta5en or issue% in
forei"n currencies* to t#e e8tent t#at #ol%in" of suc# %et matc#es t#e li&ui%it6 nee%s of t#e an5Ns
operations in t#at t#ir% countr6E
+7 transferale securities representin" claims on or claims "uarantee% 6 soverei"ns* central
an5s* non;central "overnment pulic sector entities* re"ions 1it# fiscal autonom6 to raise an%
collect ta8es an% local aut#orities* or multilateral %evelopment an5s an% satisf6in" all of t#e
follo1in" con%itions7
)a/ t#e6 are assi"ne% a -.O ris5;1ei"#t un%er C#apter -* 2itle 00 of Part 3E
)/ t#e6 are not an oli"ation of an institution or an6 of its affiliate% entities7
=7 transferale securities ot#er t#an t#ose referre% to in points )3/ to )+/ t#at &ualif6 for a -.O
or etter ris5 1ei"#t un%er C#apter -* 2itle 00 of Part 3 or are internall6 rate% as #avin" an
e&uivalent cre%it &ualit6* an% fulfil an6 of t#e follo1in" con%itions:
)a/ t#e6 %o not represent a claim on an SSP$* an institution or an6 of its affiliate% entitiesE
)/ t#e6 are on%s eli"ile for t#e treatment set out in ,rticle 1-4)3/ or )4/E
)c/ t#e6 are on%s as %efine% in ,rticle +-)4/ of Directive -..9/=+/$C ot#er t#an t#ose referre%
to in )/7
>7 transferale securities ot#er t#an t#ose referre% to in points )3/ to )=/ t#at &ualif6 for a +.O
or etter ris5 1ei"#t un%er C#apter -* 2itle 00 of Part 3 or are internall6 rate% as #avin" an
e&uivalent cre%it &ualit6* an% fulfil an6 of t#e follo1in" con%itions:
)a/ t#e6 %o not represent a claim on an SSP$* an institution or an6 of its affiliate% entitiesE
87 transferale securities ot#er t#an t#ose referre% to in points )3/ to )>/ t#at &ualif6 for a 3+O
or etter ris5 1ei"#t un%er C#apter -* 2itle 00 of Part 3 or are internall6 rate% as #avin" an
e&uivalent cre%it &ualit6* an% are full6 an% completel6 secure% 6 mort"a"es on resi%ential propert6
in accor%ance 1it# ,rticle 1-. of t#is re"ulation7
97 stan%6 cre%it facilities "rante% 6 central an5s 1it#in t#e scope of monetar6 polic6 to t#e
e8tent t#at t#ese facilities are not collateralise% 6 li&ui% assets an% e8clu%in" emer"enc6 li&ui%it6
assistance7
1.7 le"al or statutor6 minimum %eposits 1it# t#e central cre%it institution an% ot#er statutor6 or
contractuall6 availale li&ui% fun%in" from t#e central cre%it institution or institutions t#at are
memers of t#e net1or5 referre% to in ,rticle 1.8 )>/* or eli"ile for t#e 1aiver provi%e% in ,rticle
9* to t#e e8tent t#at t#is fun%in" is not collateralise% 6 li&ui% assets* if t#e cre%it institution is
associate% in a net1or5 in accor%ance 1it# le"al or statutor6 provisions*
117 e8c#an"e tra%e%* centrall6 cleare% common e&uit6 s#ares* t#at are a constituent of a ma!or
stoc5 in%e8* %enominate% in t#e %omestic currenc6 of t#e memer state an% not issue% 6 an
institution or an6 of its affiliates7
1-7 "ol%* liste% on a reco"nise% e8c#an"e* #el% on an allocate% asis
,ll items 1it# t#e e8ception of 1 an% - must satisf6 t#e follo1in" con%itions:
)a/ t#e6 are tra%e% in simple repurc#ase a"reements or cas# mar5ets c#aracteriLe% 6 a lo1
level of concentrationE
)/ t#e6 #ave a proven recor% as a reliale source of li&ui%it6 6 eit#er repurc#ase a"reement or
sale even %urin" stresse% mar5et con%itionsE
)c/ t#e6 are unencumere%7
I
8439/13
DQPG
SO/psc 1-4+
EN
8439/13 SO/psc 1247
EN
DQPG
ANNE- ,
Correltion tHle
T6is Re5ultion $ire2ti3e 2006"'&"EC $ire2ti3e 2006"'("EC
,rticle 1
,rticle -
,rticle 3
,rticle 4)1/* )3/;)+/* )1./* )1=/;
)--/* )-4;38/* )4-/* )4>/* )=./*
)=1/* )=3/* )==/* )=>/* )>1/* )>-/
,rticle 4
,rt 4)=/* )>/* )+=/* )81/ ,rticle 3
,rticle 4)-/* )9/* )11/;)1+/* )-3/*
)4./* )41/* )48/* )++/* )+>/* )+9/*
)=-/* )=4/* )=+/* )=8/* )=9/* )>./*
)>3/;)8./* )8-/;)8=/
,rticle 4)+./ ,rticle >>
,rticle 4 ,rticle 3)1/m
,rticle 4 ,rticle 3)1/o
,rticle 4 ,rticle 3)1/e
,rticle 4 ,rticle 4)14/
,rticle 4 ,rticle 4)1=/
,rticle 4 ,rticle 4)4/ ,rticle 3)3/c
,rticle 4 ,rticle 4)+/
,rticle +)1/ ,rticle =8)1/
,rticle +)-/ ,rticle =8)-/
,rticle +)3/ ,rticle =8)3/
,rticle +)4/
,rticle +)+/
,rticle =)1/ ,rticle =9)1/
,rticle =)-/ ,rticle =9)-/
,rticle =)3/ ,rticle =9)3/
,rticle >)1/
,rticle >)-/
,rticle >)3/
,rticle 8)1/ ,rticle >.)1/
,rticle 8)-/ ,rticle >.)-/
,rticle 8)3/ ,rticle >.)3/
,rticle 9 ,rticle 3)1/
,rticle 1.)1/ ,rticle >1)1/
,rticle 1.)-/ ,rticle >1)-/
,rticle 1.)3/
,rticle 1.)4/
,rticle 11
,rticle 1-)1/ ,rticle >-)1/
,rticle 1-)-/ ,rticle >-)-/
,rticle 1-)3/ ,rticle >-)3/
,rticle 1-)4/
,rticle 13)1/ ,rticle >3)3/
,rticle 13)-/
,rticle 13)3/
,rticle 14 ,rticle --)1/
,rticle 1+)1/ ,rticle -3
,rticle 1+)-/
,rticle 1+)3/
,rticle 1=)1/;)3/ ,rticle 133)1/
,rticle 1=)4/ ,rticle 133)-/
,rticle 1=)+/ ,rticle 133)3/
,rticle 1=)=/ ,rticle 134)1/
,rticle 1=)>/
,rticle 1=)8/ ,rticle 134)-/
,rticle 1>)1/ ,rticle >3)1/
,rticle 1>)-/
,rticle 1>)3/
,rticle 18)1/
,rticle 18)-/
,rticle 18)3/
,rticle 18)4/
,rticle 18)+/
,rticle 18)=/
,rticle 18)>/
,rticle 19)1/
,rticle 19)-/
,rticle 19)3/
,rticle 19)4/
,rticle -. ,rticle >3)-/
,rticle -1 ,rticle 3)1/ -7 Supara"rap#
,rticle --
,rticle -3
,rticle -4
,rticle -+
,rticle -=
,rticle ->
,rticle -8
,rticle -9
,rticle 3.
,rticle 31
,rticle 3-
,rticle 33
,rticle 34
,rticle 3+
,rticle 3=
,rticle 3>
,rticle 38
,rticle 39
,rticle 4.
,rticle 41
,rticle 4-
,rticle 43
,rticle 44
,rticle 4+
,rticle 4=
,rticle 4>
,rticle 48
,rticle 49
,rticle +.
,rticle +1
,rticle +-
,rticle +3
,rticle +4
,rticle ++
,rticle +=
,rticle +>
,rticle +8
,rticle +9
,rticle =.
,rticle =1
,rticle =-
,rticle =3
,rticle =4
,rticle =+
,rticle ==
,rticle =>
,rticle =8
,rticle =9
,rticle >.
,rticle >1
,rticle >-
,rticle >3
,rticle >4
,rticle >+
,rticle >=
,rticle >>
,rticle >8
,rticle >9
,rticle 8.
,rticle 81
,rticle 8-
,rticle 83
,rticle 84)1/ an% )-/ ,rticle 1-.
,rticle 84)3/
,rticle 84)4/
,rticle 8+
,rticle 8=
,rticle 8>
,rticle 88)1/;)4/ ,rticle 1.)1/;)4/
,rticle 88)+/
,rticle 89 ,rticle 18)-/;)4/
,rticle 9.
,rticle 91
,rticle 9-
,rticle 93 ,rticle -4
,rticle 94 ,rticle >4)1/
,rticle 9+)1/ ,rticle >4)-/
,rticle 9+)-/
,rticle 9=)1/
,rticle 9=)-/
,rticle 9=)3/
,rticle 9>)1/ ,rticle 11)1/
,rticle 9>)-/ ,rticle 11)3/
,rticle 9>)3/ ,rticle 11)4/
,rticle 9>)4/ ,nne8 R00* Part C* point 1
,rticle 98 ,nne8 R00* Part ,* point 1
,rticle 99)1/ ,nne8 R00* Part D* point 1
,rticle 99)-/ ,nne8 R00* Part D* point -
,rticle 1..)1/ ,rticle 33)1/
,rticle 1..)-/;)1./ ,nne8 R00* Part D* points 1;9
,rticle 1..)11/;)13/ ,nne8 R00* Part D* points 11;13
,rticle 1.1 ,nne8 R00* Part C* points 1;3
,rticle 1.- ,rticle >=
,rticle 1.3)1/ ,rticle 91
,rticle 1.3)-/
,rticle 1.4 ,rticle 94
,rticle 1.+
,rticle 1.= ,rticle >8)1/;)3/
,rticle 1.> ,rticle >9)1/
,rticle 1.8)1/ ,rticle 8.)1/
,rticle 1.8)-/ ,rticle 8.)-/
,rticle 1.8)3/ ,rticle 8.)4/
,rticle 1.8)4/ ,rticle 8.)+/
,rticle 1.8)+/ ,rticle 8.)=/
,rticle 1.8)=/ ,rticle 8.)>/
,rticle 1.8)>/ ,rticle 8.)8/
,rticle 1.8)8/
,rticle 1.9 ,nne8 R0* Part 0* points 1;+
,rticle 11.)1/
,rticle 11.)-/;)+/ ,nne8 R0* Part 0* points 8;11
,rticle 111)1/
,rticle 111)-/
,rticle 111)3/
,rticle 111)4/
,rticle 111)+/ ,nne8 R0* Part 0* point 1+
,rticle 111)=/ ,nne8 R0* Part 0* point 1>
,rticle 11-)1/ ,nne8 R0* Part 0* point 18 an%
19
,rticle 11-)-/ ,nne8 R0* Part 0* point -.
,rticle 11-)3/ ,nne8 R0* Part 0* point -1
,rticle 113 ,nne8 R0* Part 0* point --
,rticle 114)1/
,rticle 114)-/ ,nne8 R0* Part 0* points 3> an%
38
,rticle 114)3/ ,nne8 R0* Part 0* point 4.
,rticle 114)4/
,rticle 114)+/
,rticle 11+)1/ ,nne8 R0* Part 0* point -9
,rticle 11+)-/ ,nne8 R0* Part 0* point 31
,rticle 11+)3/ ,nne8 R0* Part 0* points 33;3=
,rticle 11=)1/ ,nne8 R0* Part 0* point -=
,rticle 11=)-/ ,nne8 R0* Part 0* point -+
,rticle 11=)3/ ,nne8 R0* Part 0* point ->
,rticle 11> ,nne8 R0* Part 0* points 41 an%
4-
,rticle 118 ,rticle >9)-/* >9)3/ an% ,nne8
R0* Part 0* point 43
,rticle 119)1/ ,nne8 R0* Part 0* point 44
,rticle 119)-/
,rticle 119)3/
,rticle 1-.)1/;)3/ ,nne8 R0* Part 0* points 4+;49
,rticle 1-.)4/
,rticle 1-1)1/ an% )-/ ,nne8 R0* Part 0* points +1;++
,rticle 1-1)3/ an% )4/ ,nne8 R0* Part 0* points +8 an%
+9
,rticle 1--)1/ an% )-/ ,nne8 R0* Part 0* points =1 an%
=-
,rticle 1--)3/ an% )4/ ,nne8 R0* Part 0* points =4 an%
=+
,rticle 1-3)1/ ,nne8 R0* Part 0* points == an%
>=
,rticle 1-3)-/ ,nne8 R0* Part 0* point ==
,rticle 1-3)3/
,rticle 1-4)1/ ,nne8 R0* Part 0* point =8*
para"rap#s 1 an% -
,rticle 1-4)-/ ,nne8 R0* Part 0* point =9
,rticle 1-4)3/ ,nne8 R0* Part 0* point >1
,rticle 1-4)4/ ,nne8 R0* Part 0* point >.
,rticle 1-4)+/
,rticle 1-+ ,nne8 R0* Part 0* point >-
,rticle 1-= ,nne8 R0* Part 0* point >3
,rticle 1->)1/ ,nne8 R0* Part 0* point >4
,rticle 1->)-/ ,nne8 R0* Part 0* point >+
,rticle 1->)3/ ,nne8 R0* Part 0* points >> an%
>8
,rticle 1->)4/ ,nne8 R0* Part 0* point >9
,rticle 1->)+/ ,nne8 R0* Part 0* point 8. an%
point 81
,rticle 1-8)1/ ,nne8 R0* Part 0* point 8=
,rticle 1-8)-/
,rticle 1-8)3/
,rticle 1-9)1/;)3/ ,nne8 R0* Part 0* points 8-;84
,rticle 1-9)4/;)>/ ,nne8 R0* Part 0* points 8>;9.
,rticle 13. ,rticle 81)1/* )-/ an% )4/
,rticle 131)1/ ,rticle 8-)1/
,rticle 131)-/ ,nne8 R0* Part -* points 1-;1=
,rticle 131)3/ ,rticle 1+.)3/
,rticle 13-)1/ ,nne8 R0* Part 0* point =
,rticle 13-)-/ ,nne8 R0* Part 0* point >
,rticle 13-)3/
,rticle 133 ,nne8 R0* Part 000* points 1;>
,rticle 134 ,nne8 R0* Part 000* points 8;1>
,rticle 13+)1/
,rticle 13+)-/
,rticle 13=
,rticle 13>)1/
,rticle 13>)-/
,rticle 138)1/ ,rticle 84 )1/ an% ,nne8 R00*
Part 4* point 1
,rticle 138)1/ ,rticle 84)-/
,rticle 138)1/ ,rticle 84)3/
,rticle 138)1/ ,rticle 84)4/
,rticle 138)1/
,rticle 139
,rticle 14.
,rticle 141
,rticle 14-)1/ ,rticle 8=)9/
,rticle 14-)-/;)9/ ,rticle 8=)1/;)8/
,rticle 143)1/ ,rticle 8+)1/
,rticle 143)-/ ,rticle 8+)-/
,rticle 143)3/
,rticle 143)4/ ,rticle 8+)3/
,rticle 143)+/
,rticle 143)1/
,rticle 144 ,rticle 8+)4/ an% )+/
,rticle 14+)1/ ,rticle 89)1/
,rticle 14+)-/ ,rticle 89)-/
,rticle 14+)3/
,rticle 14+)4/
,rticle 14= ,rticle 8>)1/;)1./
,rticle 14>)1/ an% )-/ ,rticle 8>)11/
,rticle 14>)3/ an% )4/ ,rticle 8>)1-/
,rticle 14>)+/
,rticle 148)1/ ,nne8 R00* Part 0* point 3
,rticle 148)-/
,rticle 148)3/;)8/ ,nne8 R00* Part 0* points 4;9
,rticle 148)9/
,rticle 149 ,nne8 R00* Part 0* points 1.;1=
,rticle 1+.)1/ ,nne8 R00* Part 0* points 1> an%
18
,rticle 1+.)-/ ,nne8 R00* Part 0* points 19 to
-1
,rticle 1+.)3/ ,nne8 R00* Part 0* points -- to
-4
,rticle 1+.)4/ ,nne8 R00* Part 0* points -+ to
-=
,rticle 1+1
,rticle 1+- ,nne8 R00* Part 0* point ->
,rticle 1+3)1/ ,nne8 R00* Part 0* point -8
,rticle 1+3)-/;)+/
,rticle 1+4)1/ ,rticle 88)-/
,rticle 1+4)-/ ,rticle 88)3/
,rticle 1+4)3/ ,rticle 88)4/
,rticle 1+4)4/ ,rticle 88)=/
,rticle 1+4)+/ ,nne8 R00* Part 0* point 3.
,rticle 1+4)=/ ,nne8 R00* Part 0* point 31
,rticle 1+4)>/ ,nne8 R00* Part 0* point 3-
,rticle 1+4)8/ ,nne8 R00* Part 0* point 33
,rticle 1+4)9/ ,nne8 R00* Part 0* point 34
,rticle 1+4)1./ ,nne8 R00* Part 0* point 3+
,rticle 1+4)11/
,rticle 1++ ,nne8 R00* Part 0* point 3=
,rticle 1+=)1/ ,nne8 R00* Part 00* point -
,rticle 1+=)-/ ,nne8 R00* Part 00* point 3
,rticle 1+=)3/ ,nne8 R00* Part 00* point 4
,rticle 1+=)4/ ,nne8 R00* Part 00* point +
,rticle 1+=)+/ ,nne8 R00* Part 00* point =
,rticle 1+= )=/ ,nne8 R00* Part 00* point >
,rticle 1+=)>/ ,nne8 R00* Part 00* point >
,rticle 1+>)1/ ,nne8 R00* Part 00* point 8
,rticle 1+>)-/ ,nne8 R00* Part 00* point 9
,rticle 1+>)3/ ,nne8 R00* Part 00* point 1.
,rticle 1+>)4/ ,nne8 R00* Part 00* point 11
,rticle 1+8)1/ ,nne8 R00* Part 00* point 1-
,rticle 1+8)-/ ,nne8 R00* Part 00* point 13
,rticle 1+8)3/ ,nne8 R00* Part 00* point 14
,rticle 1+8)4/ ,nne8 R00* Part 00* point 1+
,rticle 1+8)+/ ,nne8 R00* Part 00* point 1=
,rticle 1+9)1/ ,nne8 R00* Part 00* point 1>
,rticle 1+9)-/ ,nne8 R00* Part 00* point 18
,rticle 1+9)3/ ,nne8 R00* Part 00* point 19
,rticle 1+9)4/ ,nne8 R00* Part 00* point -.
,rticle 1=.)1/ ,nne8 R00* Part 00* point -1
,rticle 1=.)-/ ,nne8 R00* Part 00* point --
,rticle 1=.)3/ ,nne8 R00* Part 00* point -3
,rticle 1=.)4/
,rticle 1=1)1/ ,nne8 R00* Part 00* point -4
,rticle 1=1)-/ ,nne8 R00* Part 00* point -+ an%
-=
,rticle 1=1)3/ ,nne8 R00* Part 00* point ->
,rticle 1=-)1/ ,nne8 R00* Part 000* point 1
,rticle 1=-)-/ ,nne8 R00* Part 000* point -
,rticle 1=-)3/ ,nne8 R00* Part 000* point 3
,rticle 1=-)4/ ,nne8 R00* Part 000* point 4
,rticle 1=-)+/ ,nne8 R00* Part 000* point +
,rticle 1=-)=/ ,nne8 R00* Part 000* point =
,rticle 1=-)>/ ,nne8 R00* Part 000* point >
,rticle 1=-)8/ ,nne8 R00* Part 000* point 9
,rticle 1=-)9/ ,nne8 R00* Part 000* point 1.
,rticle 1=-)1./ ,nne8 R00* Part 000* point 11
,rticle 1=3)1/ ,nne8 R00* Part 000* point 1-
,rticle 1=3)-/
,rticle 1=4 ,nne8 R00* Part 000* point 13
,rticle 1=+)1/ ,nne8 R00* Part 0R* point 1
,rticle 1=+)-/ ,nne8 R00* Part 0R* point -
,rticle 1=+)3/ ,nne8 R00* Part 0R* point 3
,rticle 1==)1/ ,nne8 R00* Part 0R* point +;
,rticle 1==)-/ ,nne8 R00* Part 0R* point 1-
,rticle 1==)3/ ,nne8 R00* Part 0R* points 13;
1+
,rticle 1==)4/ ,nne8 R00* Part 0R* point 1=
,rticle 1=>)1/ ,nne8 R00* Part 0R* point 1>
,rticle 1=>)-/ ,nne8 R00* Part 0R* point 18
,rticle 1=8)1/ ,nne8 R00* Part 0R* point 19;-3
,rticle 1=8)-/ ,nne8 R00* Part 0R* point -4
,rticle 1=8)3/ ,nne8 R00* Part 0R* point -+
,rticle 1=9)1/ ,nne8 R00* Part 0R* points-=;-8
,rticle 1=9)-/ ,nne8 R00* Part 0R* point -9
,rticle 1=9)3/
,rticle 1>. ,nne8 R00* Part 0R* point 3.
,rticle 1>1)1/ ,nne8 R00* Part 0R* point 31
,rticle 1>1)-/ ,nne8 R00* Part 0R* point 3-
,rticle 1>1)3/ ,nne8 R00* Part 0R* point 33
,rticle 1>1)4/ ,nne8 R00* Part 0R* point 34
,rticle 1>1)+/ ,nne8 R00* Part 0R* point 3+
,rticle 1>-)1/ ,nne8 R00* Part 0R* point 3=
,rticle 1>-)-/ ,nne8 R00* Part 0R* point 3> 1st
supara"rap#
,rticle 1>-)3/ ,nne8 R00* Part 0R* point 3>
-n% supara"rap#
,rticle 1>-)4/ ,nne8 R00* Part 0R* point 38
,rticle 1>-)+/ ,nne8 R00* Part 0R* point 39
,rticle 1>3)1/ ,nne8 R00* Part 0R* point 4.
,rticle 1>3)-/ ,nne8 R00* Part 0R* point 41
,rticle 1>3)3/ ,nne8 R00* Part 0R* point 4-
,rticle 1>4)1/ ,nne8 R00* Part 0R* point 44
,rticle 1>4)-/ ,nne8 R00* Part 0R* point 4+
,rticle 1>4)3/ ,nne8 R00* Part 0R* point 4=
,rticle 1>4)4/ ,nne8 R00* Part 0R* point 4>
,rticle 1>4)+/
,rticle 1>4)=/
,rticle 1>+)1/ ,nne8 R00* Part 0R* points 43
an% 49;+=
,rticle 1>+)-/ ,nne8 R00* Part 0R* point +>
,rticle 1>=)1/ ,nne8 R00* Part 0R* points +9;
==
,rticle 1>=)-/ ,nne8 R00* Part 0R* points =>;
>-
,rticle 1>=)3/
,rticle 1>>)1/ ,nne8 R00* Part 0R* points >3;
81
,rticle 1>>)-/ ,nne8 R00* Part 0R* point 8-
,rticle 1>>)3/ ,nne8 R00* Part 0R* points 83;
8=
,rticle 1>8)1/ ,nne8 R00* Part 0R* points 8>;
9-
,rticle 1>8)-/ ,nne8 R00* Part 0R* point 93
,rticle 1>8)3/ ,nne8 R00* Part 0R* points 94
an% 9+
,rticle 1>8)4/
,rticle 1>9)1/ ,nne8 R00* Part 0R* points 98;
1..
,rticle 1>9)-/ ,nne8 R00* Part 0R* points 1.1
an% 1.-
,rticle 1>9)3/ ,nne8 R00* Part 0R* point 1.3
an% point 1.4
,rticle 1>9)4/ ,nne8 R00* Part 0R* point 9=
,rticle 1>9)+/ ,nne8 R00* Part 0R* point 9>
,rticle 1>9)=/
,rticle 18.)1/
,rticle 18.)-/ ,nne8 R00* Part 0R* point 1.+
,rticle 18.)3/ ,nne8 R00* Part 0R* point 1.=
,rticle 18.)4/ ,nne8 R00* Part 0R* point 1.>
,rticle 18.)+/ ,nne8 R00* Part 0R* point 1.8
,rticle 18.)=/ ,nne8 R00* Part 0R* point 1.9
,rticle 181 ,nne8 R00* Part 0R* points 11.;
114
,rticle 18- ,nne8 R00* Part 0R* point 11+
,rticle 183 ,nne8 R00* Part 0R* point 11=
,rticle 184 ,nne8 R00* Part 0R* points 11>;
1-3
,rticle 18+)1/ ,nne8 R00* Part 0R* point 1-4
,rticle 18+)-/ ,nne8 R00* Part 0R* points 1-+
an% 1-=
,rticle 18+)3/ ,nne8 R00* Part 0R* point 1->
,rticle 18+)4/
,rticle 18=)1/ ,nne8 R00* Part 0R* point 1-8
,rticle 18=)-/ ,nne8 R00* Part 0R* point 1-9
,rticle 18> ,nne8 R00* Part 0R* point 131
,rticle 188 ,rticle 9. an% ,nne8 R000* Part
1* point -
,rticle 189)1/ ,rticle 93 )-/
,rticle 189)-/ ,rticle 93 )3/
,rticle 189)3/ ,nne8 R000* Part 000* point 1
,rticle 189)4/ ,nne8 R000* Part 000* point -
,rticle 189)+/ ,nne8 R000* Part R* point 1 an%
point -
,rticle 189)=/
,rticle 19.)1/ ,rticle 9-)1/
,rticle 19.)-/ ,rticle 9-)-/
,rticle 19.)3/ ,rticle 9-)3/
,rticle 19.)4/ ,rticle 9-)4/
,rticle 19.)+/ ,rticle 9-)+/
,rticle 19.)=/ ,rticle 9-)=/
,rticle 19.)>/ ,nne8 R000* Part 00* point 1
,rticle 19.)8/ ,nne8 R000* Part 00* point -
,rticle 19.)9/
,rticle 19.)1./
,rticle 191 ,nne8 R000* Part 0* points 3 an%
4
,rticle 19- ,nne8 R000* Part 0* point +
,rticle 193)1/ ,nne8 R000* Part 0* point >
,rticle 193)-/ ,nne8 R000* Part 0* point 8
,rticle 193)3/ ,nne8 R000* Part 0* point 9
,rticle 193)4/ ,nne8 R000* Part 0* point 1.
,rticle 193)+/;)9/
,rticle 194)1/ ,nne8 R000* Part 0* point 11
,rticle 194)-/
,rticle 19+)1/ ,nne8 R000* Part 0* point 1-
,rticle 19+)-/ ,nne8 R000* Part 0* points13 to
1>
,rticle 19+)3/ ,nne8 R000* Part 0* point -.
,rticle 19+)4/ ,nne8 R000* Part 0* point -1
,rticle 19+)+/ ,nne8 R000* Part 0* point --
,rticle 19+)=/;)1./
,rticle 19= ,nne8 R000* Part 0* points -3;-+
,rticle 19>)1/ ,nne8 R000* Part 0* point -=
,rticle 19>)-/ ,nne8 R000* Part 0* point ->
,rticle 198 ,nne8 R000* Part 0* point -9
,rticle 199)1/ ,nne8 R000* Part 0* point 3. an%
point 31
,rticle 199)-/ ,nne8 R000* Part 0* point 3-
,rticle -.. ,nne8 R000* Part 00* point 3
,rticle -.1 ,nne8 R000* Part 00* points 4 to
+
,rticle -.-)1/ ,nne8 R000* Part 00* point =
,rticle -.-)-/ ,nne8 R000* Part 00* point =a
,rticle -.-)3/ ,nne8 R000* Part 00* point =
,rticle -.-)4/ ,nne8 R000* Part 00* point =c
,rticle -.-)+/ ,nne8 R000* Part 00* point >
,rticle -.3)1/ ,nne8 R000* Part 00* point 8
,rticle -.3)-/ ,nne8 R000* Part 00* point 8)a/
,rticle -.3)3/ ,nne8 R000* Part 00* point 8)/
,rticle -.3)4/ ,nne8 R000* Part 00* point 8)c /
,rticle -.3)+/ ,nne8 R000* Part 00* point 8)%/
,rticle -.4)1/
,rticle -.4)-/ ,nne8 R000* Part 00* point 9)a/
,rticle -.4)3/ ,nne8 R000* Part 00* point 9)/
,rticle -.+ ,nne8 R000* Part 00* point 1.
,rticle -.= ,nne8 R000* Part 00* point 11
,rticle -.>)1/ ,nne8 R000* Part 00* point 1-
,rticle -.>)-/ ,nne8 R000* Part 00* point 13
,rticle -.8 )1/ ,nne8 R000* Part 00* point 14
,rticle -.8)-/ ,nne8 R000* Part 00* point 1+
,rticle -.8)3/
,rticle -.9)1/ ,nne8 R000* Part 00* point 1=
,rticle -.9)-/ ,nne8 R000* Part 00* point 1>
,rticle -.9)3/
,rticle -1.)1/ ,nne8 R000* Part 00* point 18
,rticle -1.)-/ ,nne8 R000* Part 00* point 19
,rticle -11)1/ ,nne8 R000* Part 00* point -.
,rticle -11)-/ ,nne8 R000* Part 00* point -1
,rticle -1-)1/ ,nne8 R000* Part 00* point --
,rticle -1-)-/
,rticle -1-)3/
,rticle -13 ,nne8 R000* Part 000* point 3
,rticle -14 ,nne8 R000* Part 000* point 4
,rticle -1+)1/ ,nne8 R000* Part 000* point +
,rticle -1+)-/ ,nne8 R000* Part 000* points =;1.
,rticle -1+)3/ ,nne8 R000* Part 000* point 11
,rticle -1+)4/ ,nne8 R000* Part 000* points --
an% -3
,rticle -1+)+/
,rticle -1=)1/ ,nne8 R000* Part 000* point 1-;
1+
,rticle -1=)-/ ,nne8 R000* Part 000* point 1=
,rticle -1=)3/ ,nne8 R000* Part 000* point 1>
,rticle -1=)4/ ,nne8 R000* Part 000* points 18
an% 19
,rticle -1=)+/ ,nne8 R000* Part 000* points -.
an% -1
,rticle -1=)=/ ,nne8 R000* Part 000* points --
an% -3
,rticle -1=)>/;)9/
,rticle -1>)1/ ,nne8 R000* Part 000* point -4
,rticle -1>)-/ ,nne8 R000* Part 000* point -+
,rticle -1>)3/ ,nne8 R000* Part 000* point -=
,rticle -1>)4/ ,nne8 R000* Part 000* point ->
,rticle -1>)+/ ,nne8 R000* Part 000* point -8
,rticle -1>)=/ ,nne8 R000* Part 000* point -9
,rticle -1>)>/
,rticle -18)1/ ,nne8 R000* Part 000* points 3.;
3-
,rticle -18)-/ ,nne8 R000* Part 000* point 33
,rticle -18)3/ ,nne8 R000* Part 000* point 34;
3+
,rticle -18)4/;)>/
,rticle -19)1/ ,nne8 R000* Part 000* point 3=
,rticle -19)-/ ,nne8 R000* Part 000* points 3>;
4.
,rticle -19)3/;)=/
,rticle --.)1/ ,nne8 R000* Part 000* points 4-;
4=
,rticle --.)-/ ,nne8 R000* Part 000* points 4>;
+-
,rticle --.)3/ ,nne8 R000* Part 000* points +3;
+=
,rticle --1 ,nne8 R000* Part 000* point +>
,rticle ---)1/ ,nne8 R000* Part 000* point +8
,rticle ---)-/
,rticle ---)3/
,rticle --3)1/ ,nne8 R000* Part 000* point =.
,rticle --3)-/ ,nne8 R000* Part 000* point =1
,rticle --4)1/ ,nne8 R000* Part 000* points =-;
=+
,rticle --4)-/ ,nne8 R000* Part 000* point ==
,rticle --4)3/ ,nne8 R000* Part 000* point =>
,rticle --+)1/ ,nne8 R000* Part 000* points =8;
>1
,rticle --+)-/ ,nne8 R000* Part 000* point >-
,rticle --+)3/ ,nne8 R000* Part 000* points >3
an% >4
,rticle --=)1/ ,nne8 R000* Part 000* point >=
,rticle --=)-/ ,nne8 R000* Part 000* point >>
,rticle --=)3/ ,nne8 R000* Part 000* point >8
,rticle -->)1/ ,nne8 R000* Part 000* point >9
,rticle -->)-/ ,nne8 R000* Part 000* point 8.
,rticle -->)3/ ,nne8 R000* Part 000* point 8.a
,rticle -->)4/ ,nne8 R000* Part 000* points 81;
8-
,rticle --8)1/ ,nne8 R000* Part 000* point 83
,rticle --8)-/ ,nne8 R000* Part 000* point 83
,rticle --8)3/ ,nne8 R000* Part 000* point 84
,rticle --8)4/ ,nne8 R000* Part 000* point 8+
,rticle --9 ,nne8 R000* Part 000* point 8=
,rticle -3.)1/ ,nne8 R000* Part 000* point 8>
,rticle -3.)-/ ,nne8 R000* Part 000* point 88
,rticle -3.)3/ ,nne8 R000* Part 000* point 89
,rticle -31)1/ ,nne8 R000* Part 000* point 9.
,rticle -31)-/ ,nne8 R000* Part 000* point 91
,rticle -31)3/ ,nne8 R000* Part 000* point 9-
,rticle -3-)1/ ,nne8 R000* Part 0R* point 1
,rticle -3-)-/ ,nne8 R000* Part 0R* point -
,rticle -33)1/ ,nne8 R000* Part 0R* point 3
,rticle -33)-/ ,nne8 R000* Part 0R* point 4
,rticle -33)3/ ,nne8 R000* Part 0R* point +
,rticle -34)1/ ,nne8 R000* Part 0R* point =
,rticle -34)-/ ,nne8 R000* Part 0R* point >
,rticle -34)3/ ,nne8 R000* Part 0R* point 8
,rticle -3+ ,nne8 R000* Part R0* point 1
,rticle -3= ,nne8 R000* Part R0* point -
,rticle -3>)1/ to )9/ ,nne8 0G* Part 0* point 1
,rticle -3>)1./ ,rticle 4 point 3>
,rticle -3>)11/ ,rticle 4 point 38
,rticle -3>)1-/ ,rticle 4 point 41
,rticle -3>)13/
,rticle -3>)14/
,rticle -38)1/ ,nne8 0G* Part 00* point 1
,rticle -38)-/ ,nne8 0G* Part 00* point 1a
,rticle -38)3/ ,nne8 0G* Part 00* point 1
,rticle -38)4/ ,nne8 0G* Part 00* point 1c
,rticle -38)+/ ,nne8 0G* Part 00* point 1%
,rticle -38)=/
,rticle -39)1/ ,nne8 0G* Part 00* point -
,rticle -39)-/ ,nne8 0G* Part 00* point -a
,rticle -39)3/ ,nne8 0G* Part 00* point -
,rticle -39)4/ ,nne8 0G* Part 00* point -c
,rticle -39)+/ ,nne8 0G* Part 00* point -%
,rticle -39)=/
,rticle -4.)1/ ,rticle 9+ )1/
,rticle -4.)-/ ,rticle 9+ )-/
,rticle -4.)3/ ,rticle 9= )-/
,rticle -4.)4/ ,rticle 9= )3/
,rticle -4.)+/ ,rticle 9= )4/
,rticle -4.)=/
,rticle -41)1/ ,nne8 0G* Part 0R* points - an%
3
,rticle -41)-/ ,nne8 0G* Part 0R* point +
,rticle -41)3/ ,nne8 0G* Part 0R* point +
,rticle -4-)1/ ,nne8 0G* Part 0R* point =.
,rticle -4-)-/ ,nne8 0G* Part 0R* point =1
,rticle -4-)3/
,rticle -4-)4/
,rticle -43)1/ ,rticle 1.1)1/
,rticle -43)-/ ,rticle 1.1 )-/
,rticle -43)3/
,rticle -44 ,nne8 0G* Part 00* points 3 an%
4
,rticle -4+ ,nne8 0G* Part 00* points +;>
,rticle -4= ,nne8 0G* Part 0R* point =;>
,rticle -4> ,nne8 0G* Part 0R* point 8
,rticle -48)1/ ,nne8 0G* Part 0R* point 9;1.
,rticle -48)-/ ,nne8 0G* Part 0R* point 1.
)c#an"e/
,rticle -49 ,nne8 0G* Part 0R* point 11;1-
,rticle -+.)1/ ,nne8 0G* Part 0R* point 13
,rticle -+.)-/ ,nne8 0G* Part 0R* point 1+
,rticle -+1)1/ ,rticle 1..
,rticle -+1)-/ ,nne8 0G* Part 0R* point 1>;-.
,rticle -+1)3/ ,nne8 0G* Part 0R* point -1
,rticle -+1)4/ ,nne8 0G* Part 0R* points --;-3
,rticle -+1)+/ ,nne8 0G* Part 0R* point -4;-+
,rticle -+1)=/ ,nne8 0G* Part 0R* point -=;-9
,rticle -+1)>/ ,nne8 0G* Part 0R* point 3.
,rticle -+1)8/ ,nne8 0G* Part 0R* point 3-
,rticle -+1)9/ ,nne8 0G* Part 0R* point 33
,rticle -+- ,nne8 0G* Part 0R* point 34
,rticle -+3 ,nne8 0G* Part 0R* point 3+;3=
,rticle -+4)1/ ,nne8 0G* Part 0R* points 38* 39
an% 41
,rticle -+4)-/ ,nne8 0G* Part 0R* point 4-
,rticle -+4)3/ ,nne8 0G* Part 0R* point 43
,rticle -+4)4/ ,nne8 0G* Part 0R* point 44
,rticle -+4)+/
,rticle -++ ,nne8 0G* Part 0R* point 4+
,rticle -+=)1/ ,nne8 0G* Part 0R* point 4=;4>*
49
,rticle -+=)-/ ,nne8 0G* Part 0R* point +1
,rticle -+>)1/ ,nne8 0G* Part 0R* point +-
,rticle -+>)-/ ,nne8 0G* Part 0R* point +3
,rticle -+>)3/ ,nne8 0G* Part 0R* point +4
,rticle -+>)4/
,rticle -+8)1/ ,nne8 0G* Part 0R* point ++* +>
,rticle -+8)-/ ,nne8 0G* Part 0R* point +8
,rticle -+8)3/ ,nne8 0G* Part 0R* point +9
,rticle -+9)1/ ,nne8 0G* Part 0R* point =-
,rticle -+9)-/ ,nne8 0G* Part 0R* points=3;=+
,rticle -+9)3/ ,nne8 0G* Part 0R* points ==
an% =>
,rticle -+9)4/
,rticle -=.)1/ ,nne8 0G* Part 0R* point =8
,rticle -=.)-/ ,nne8 0G* Part 0R* point >.
,rticle -=.)3/ ,nne8 0G* Part 0R* point >1
)c#an"e/
,rticle -=1)1/ ,nne8 0G* Part 0R* point >-
,rticle -=1)-/ ,nne8 0G* Part 0R* point >3
,rticle -=1)3/ ,nne8 0G* Part 0R* point >4;>+
,rticle -=1)4/ ,nne8 0G* Part 0R* point >=
8439/13
DQPG
SO/psc 1->>
EN
8439/13 SO/psc 1279
EN
DQPG
,rticle -=-)1/ ,rticle 9>)1/
,rticle -=-)-/ ,rticle 9>)-/
,rticle -=-)3/ ,rticle 9>)3/
,rticle -=3 ,nne8 0G* Part 000* point 1
,rticle -=4 ,nne8 0G* Part 000* point -;>
,rticle -=+ ,rticle 98 )1/ an% ,nne8 0G*
Part 000* points 8 an% 9
,rticle -==)1/ C,D ,nne8 00* point +
,rticle -==)-/
,rticle -=>)1/ ,nne8 000* Part 0* point -
,rticle -=>)-/ ,nne8 000* Part 0* point 3
,rticle -=>)3/ ,nne8 000* Part 0* point 4
,rticle -=>)4/ ,nne8 000* Part 0* point +
,rticle -=>)+/ ,nne8 000* Part 0* point =
,rticle -=>)=/ ,nne8 000* Part 0* point >
,rticle -=>)>/ ,nne8 000* Part 0* point 8
,rticle -=>)8/ ,nne8 000* Part 0* point 9
,rticle -=>)9/ ,nne8 000* Part 0* point 1.
,rticle -=>)1./ ,nne8 000* Part 0* point 11
,rticle -=>)11/ ,nne8 000* Part 0* point 1-
,rticle -=>)1-/ ,nne8 000* Part 0* point 13
,rticle -=>)13/ ,nne8 000* Part 0* point 14
,rticle -=>)14/ ,nne8 000* Part 0* point 1+
,rticle -=>)1+/ ,nne8 000* Part 0* point 1=
,rticle -=>)1=/ ,nne8 000* Part 0* point 1>
,rticle -=>)1>/ ,nne8 000* Part 0* point 18
,rticle -=>)18/ ,nne8 000* Part 0* point 19
,rticle -=>)19/ ,nne8 000* Part 0* point -.
,rticle -=>)-./ ,nne8 000* Part 0* point -1
,rticle -=>)-1/ ,nne8 000* Part 0* point --
,rticle -=>)--/ ,nne8 000* Part 0* point -3
,rticle -=>)-3/ ,nne8 000* Part 0* point -=
,rticle -=>)-4/ ,nne8 000* Part 0* point ->
,rticle -=>)-+/ ,nne8 000* Part 0* point -8
,rticle -=>)-=/ ,nne8 000E Part R00* a
,rticle -=>)->/ ,nne8 000E Part R00* a
,rticle -=>)-8/;)31/
,rticle -=8)1/ ,nne8 000* Part 00* point 1
,rticle -=8)-/ ,nne8 000* Part 00* point -
,rticle -=8)3/ ,nne8 000* Part 00* point 3 1st
an% -n% su;para"rap#
,rticle -=8)4/ ,nne8 000* Part 00* point 3 3r%
su;para"rap#
,rticle -=8)+/ ,nne8 000* Part 00* point 4
,rticle -=8)=/ ,nne8 000* Part 00* point +
,rticle -=8)>/ ,nne8 000* Part 00* point >
,rticle -=8)8/ ,nne8 000* Part 00* point 8
,rticle -=9)1/ ,nne8 000* Part 000
,rticle -=9)-/ ,nne8 000* Part 000
,rticle -=9)3/ ,nne8 000* Part 000
,rticle ->.)1/ ,nne8 000* Part 0R
,rticle ->.)-/ ,nne8 000* Part 0R* footnote 4
,rticle ->1)1/ ,nne8 000* Part R* point 1
,rticle ->1)-/ ,nne8 000* Part R* point -
,rticle ->-)1/ ,nne8 000* Part R* point 3;4
,rticle ->-)-/ ,nne8 000* Part R* point +
,rticle ->-)3/
,rticle ->-)4/
,rticle ->3)1/
,rticle ->3)-/ ,nne8 000* Part R* point =
,rticle ->3)3/ ,nne8 000* Part R* point >
,rticle ->3)4/ ,nne8 000* Part R* point 8
,rticle ->4)1/ ,nne8 000* Part R* point 11
,rticle ->4)-/ ,nne8 000* Part R* point 1-
,rticle ->+)1/
,rticle ->+)-/ ,nne8 000* Part R* point 13
,rticle ->+)3/ ,nne8 000* Part R* point 14
,rticle ->=)1/
,rticle ->=)-/ ,nne8 000* Part R* point 1+
,rticle ->=)3/ ,nne8 000* Part R* point 1=
,rticle ->=)4/ ,nne8 000* Part R* point 1>
,rticle ->=)+/ ,nne8 000* Part R* point 18
,rticle ->=)=/ ,nne8 000* Part R* point 19
,rticle ->=)>/ ,nne8 000* Part R* point -.
,rticle ->=)8/ ,nne8 000* Part R* point -1
,rticle ->>)1/ ,nne8 000* Part R0* point 1
,rticle ->>)-/ ,nne8 000* Part R0* point -
,rticle ->>)3/ ,nne8 000* Part R0* point 3
,rticle ->>)4/ ,nne8 000* Part R0* point 4
,rticle ->>)+/
,rticle ->>)=/
,rticle ->8)1/ ,nne8 000* Part R0* point +
,rticle ->8)-/ ,nne8 000* Part R0* point =
,rticle ->8)3/ ,nne8 000* Part R0* point =
,rticle ->8)4/ ,nne8 000* Part R0* point >
,rticle ->8)+/ ,nne8 000* Part R0* point 8
,rticle ->8)=/ ,nne8 000* Part R0* point 9
,rticle ->8)>/ ,nne8 000* Part R0* point 1.
,rticle ->8)8/ ,nne8 000* Part R0* point 11
)c#an"e/
,rticle ->8)9/ ,nne8 000* Part R0* point 1-
,rticle ->8)1./ ,nne8 000* Part R0* point 13
,rticle ->8)11/ ,nne8 000* Part R0* point 14
,rticle ->8)1-/ ,nne8 000* Part R0* point 1+
,rticle ->8)13/
,rticle ->9)1/ ,nne8 000* Part R0* point 1=
,rticle ->9)-/;)>/
,rticle -8.)1/ ,nne8 000* Part R0* point 18 an%
-+
,rticle -8.)-/ ,nne8 000* Part R0* point 19
,rticle -8.)3/
,rticle -8.)4/ ,nne8 000* Part R0* point -.
,rticle -8.)+/ ,nne8 000* Part R0* point -1
,rticle -8.)=/ ,nne8 000* Part R0* point --
,rticle -8.)>/ ,nne8 000* Part R0* point -3
,rticle -8.)8/ ,nne8 000* Part R0* point -4
,rticle -81)1/ ,nne8 000* Part R0* point 1>
,rticle -81)-/
,rticle -81)3/
,rticle -81)4/
,rticle -8- ,nne8 000* Part R0* point -=
,rticle -83)1/ ,nne8 000* Part R0* point ->
,rticle -83)-/ ,nne8 000* Part R0* point -8
,rticle -83)3/
,rticle -83)4/ ,nne8 000* Part R0* point -9
,rticle -83)+/ ,nne8 000* Part R0* point 3.
,rticle -83)=/ ,nne8 000* Part R0* point 31
,rticle -84)1/ ,nne8 000* Part R0* point 3-
,rticle -84)-/ ,nne8 000* Part R0* point 33
,rticle -84)3/;)1./
,rticle -8+)1/ ,nne8 000* Part R0* point 34
,rticle -8+)-/ ,nne8 000* Part R0* point 3+
,rticle -8+)3/
,rticle -8+)4/
,rticle -8+)+/
,rticle -8+)=/
,rticle -8=)1/ ,nne8 000* Part R0* point 3=
,rticle -8=)-/
,rticle -8=)3/ ,nne8 000* Part R0* point 38
,rticle -8=)4/ ,nne8 000* Part R0* point 39
,rticle -8=)+/ ,nne8 000* Part R0* point 4.
,rticle -8=)=/ ,nne8 000* Part R0* point 41
,rticle -8=)>/
,rticle -8=)8/
,rticle -8=)9/
,rticle -8=)1./
,rticle -8>)1/ ,nne8 000* Part R0* point 4-
,rticle -8>)-/;)+/
,rticle -8>)=/ ,nne8 000* Part R0* point 4-
,rticle -88)1/
,rticle -88)-/
,rticle -88)3/
,rticle -89 ,nne8 000* Part R00* point a
,rticle -9.)1/
,rticle -9.)-/ ,nne8 000* Part R00* point +
,rticle -9.)3/
,rticle -91)1/ ,nne8 000* Part R00* point )iii/
,rticle -91)-/ ,nne8 000* Part R00* point )iv/
,rticle -91)3/ ,nne8 000* Part R00* point )v/
,rticle -91)4/ ,nne8 000* Part R00* point +t#
su;para"rap# )c/;)%/
,rticle -9-)1/ ,nne8 000* Part R00* point c/
,rticle -9-)-/ ,nne8 000* Part R00* point c/
,rticle -9-)3/ ,nne8 000* Part R00* point c/
,rticle -9-)4/
,rticle -93)1/
,rticle -93)-/ ,nne8 00* points >;11
,rticle -94)1/
,rticle -9+
,rticle -9=
,rticle -9>
,rticle -98
,rticle -99
,rticle 3..
,rticle 3.1)1/ ,rticle 1.4)=/
,rticle 3.1)-/ ,rticle 1.+)1/ an% 1.+)-/
,rticle 3.1)3/
,rticle 3.-)1/ ,rticle 1.-)-/ an% 1.-)3/
,rticle 3.-)-/
,rticle 3.3)3/ ,rticle 1.-)4/
,rticle 3.3)3/ ,nne8 G* Part 0R* point 1
,rticle 3.3)3/ ,nne8 G* Part 0R* point -
,rticle 3.3)4/
,rticle 3.3)+/
,rticle 3.4)1/ ,nne8 G* Part 0* point 1
,rticle 3.+)-/ ,nne8 G* Part 0* points -;4
,rticle 3.+)3/ ,nne8 G* Part 0* points +;=
,rticle 3.+)3/
,rticle 3.=)1/ ,rticle 1.4 )1/
,rticle 3.=)-/ ,nne8 G* Part 00* point 1* first
sentence
,rticle 3.=)3/ ,nne8 G* Part 00* point 1*
secon% sentence
,rticle 3.=)4/ ,nne8 G* Part 00* point -
,rticle 3.>)1/ ,nne8 G* Part 00* point 4
,rticle 3.>)-/
,rticle 3.>)3/
,rticle 3.8)1/ ,nne8 G* Part 00* points +;>
,rticle 3.8)-/ ,nne8 G* Part 00* points 1. an%
11
,rticle 3.9 ,nne8 G* Part 00* point 1-
,rticle 31. ,nne8 G* Part 000* points 1;>
,rticle 311)1/ ,nne8 G* Part 000* point 1
,rticle 311)-/ ,nne8 G* Part 000* points 8;1-
,rticle 311)3/ ,nne8 G* Part 000* points 13;18
,rticle 311)4/ ,nne8 G* Part 000* point 19
,rticle 311)+/ ,nne8 G* Part 000* point -.
,rticle 311)=/ ,nne8 G* Part 000* points -1;-4
,rticle 311)>/
,rticle 31-)1/ ,nne8 G* Part 000* point -+
,rticle 31-)-/ ,nne8 G* Part 000* point -=
,rticle 31-)3/ ,nne8 G* Part 000* point ->
,rticle 31-)4/ ,nne8 G* Part 000* point -8
,rticle 31-)+/ ,nne8 G* Part 000* point -9
,rticle 313 ,nne8 G* Part R
,rticle 314)1/ ,rticle -=
,rticle 314)-/ ,rticle -=
,rticle 314)3/
,rticle 31+
,rticle 31=)1/ ,nne8 0 point 1
,rticle 31=)-/ ,nne8 0 point -
,rticle 31=)3/ ,nne8 0 point 3
,rticle 31>)1/ ,nne8 0 point 4
,rticle 31>)-/
,rticle 318)1/ ,nne8 0 point +
,rticle 318)-/
,rticle 319 ,nne8 0 point >
,rticle 3-.)1/ ,nne8 0 point 9
,rticle 3-.)-/ ,nne8 0 point 1.
,rticle 3-1)1/ ,nne8 0 point 8
,rticle 3-1)-/ ,nne8 0 point 8
,rticle 3-- ,nne8 0 point 11
,rticle 3-3 ,nne8 0 point 13
,rticle 3-4 ,nne8 0 point 14
,rticle 3-+)1/ ,nne8 0 point 14
,rticle 3-+)-/ ,nne8 0 point 14
,rticle 3-+)3/ ,nne8 0 point 14
,rticle 3-+)4/ ,rticle 19)1/
,rticle 3-=)1/ ,nne8 0 point 1=a
,rticle 3-=)-/ ,nne8 0 point 1=a
,rticle 3-=)3/ ,nne8 0 point 1=a
,rticle 3-=)4/ ,nne8 0 point 1=a
,rticle 3-=)4/ ,nne8 0 point 1=a
,rticle 3->)1/ ,nne8 0 point 14a
,rticle 3->)-/ ,nne8 0 point 14
,rticle 3->)3/ ,nne8 0 point 14c
,rticle 3->)4/ ,nne8 0 point 14a
,rticle 3-8)1/ ,nne8 0 point 1>
,rticle 3-8)-/ ,nne8 0 point 18
,rticle 3-8)3/ ,nne8 0 point 19
,rticle 3-8)4/ ,nne8 0 point -.
,rticle 3-8)+/ ,nne8 0 point -1
,rticle 3-8)=/ ,nne8 0 point --
,rticle 3-8)>/ ,nne8 0 point -3
,rticle 3-8)8/ ,nne8 0 point -4
,rticle 3-8)9/ ,nne8 0 point -+
,rticle 3-9)1/ ,nne8 0 point -=
,rticle 3-9)-/ ,nne8 0 point ->
,rticle 3-9)3/ ,nne8 0 point -8
,rticle 3-9)4/ ,nne8 0 point -9
,rticle 3-9)+/ ,nne8 0 point 3.
,rticle 3-9)=/ ,nne8 0 point 31
,rticle 3-9)>/ ,nne8 0 point 3-
,rticle 33.)1/ ,nne8 0 point 33
,rticle 33.)-/ ,nne8 0 point 33
,rticle 33.)3/
I ,rticle 331 I ,nne8 0 point 34
8439/13 SO/psc 1-89
DQPG
EN
,rticle 33- ,nne8 0 point 3=
,rticle 333)1/
,rticle 333)-/ ,nne8 0 point 3>
,rticle 333)3/ ,nne8 0 point 38
,rticle 334)1/ ,nne8 0 point 41
,rticle 334)-/ ,nne8 0 point 41
,rticle 33+)1/ ,nne8 0 point 4-
,rticle 33+)-/
,rticle 33+)3/ ,nne8 0 point 43
,rticle 33+)4/ ,nne8 0 point 44
,rticle 33+)+/ ,nne8 0 point 4+
,rticle 33+)=/ ,nne8 0 point 4=
,rticle 33= ,nne8 0 point 8
,rticle 33>)1/ ,nne8 0 points 48;49
,rticle 33>)-/ ,nne8 0 point +.
,rticle 338 ,nne8 0 point +1
,rticle 339)1/ ,nne8 0 point +3
,rticle 339)-/ ,nne8 0 point +4
,rticle 339)3/ ,nne8 0 point ++
,rticle 339)4/ ,nne8 0 point +=
,rticle 34. ,nne8 000 point 1
,rticle 341)1/ ,nne8 000 point - an% point -)4/
,rticle 341)-/ ,nne8 000 point -)-/
,rticle 341)3/ ,nne8 000 point -)1/
,rticle 341)4/ ,nne8 000 point -)-/
,rticle 341)+/
,rticle 34-)1/ ,nne8 000 point -)1/
,rticle 34-)-/ ,nne8 000 point -)1/
,rticle 34-)3/ ,nne8 000 point -)1/
,rticle 343)1/ ,nne8 000 point 3)1/
8439/13 SO/psc 1-9.
DQPG
EN
,rticle 343)-/ ,nne8 000 point 3)-/
,rticle 343)3/ ,nne8 000 point 3)-/
8439/13 SO/psc 1-91
DQPG
EN
,rticle 343)4/
,rticle 344
,rticle 34+
,rticle 34=)1/ ,nne8 0R point 1
,rticle 34=)-/ ,nne8 0R point -
,rticle 34=)3/ ,nne8 0R point 3
,rticle 34=)4/ ,nne8 0R point 4
,rticle 34=)+/ ,nne8 0R point =
,rticle 34>)1/ ,nne8 0R point 8
,rticle 34>)-/ ,nne8 0R point 9
,rticle 34>)3/ ,nne8 0R point 1.
,rticle 34>)4/ ,nne8 0R point 1-
,rticle 348)1/ ,nne8 0R point 13
,rticle 348)-/ ,nne8 0R point 14
,rticle 348)3/ ,nne8 0R point 1+
,rticle 348)4/ ,nne8 0R point 1=
,rticle 348)+/ ,nne8 0R point 1>
,rticle 348)=/ ,nne8 0R point 18
,rticle 349)1/ ,nne8 0R point 19
,rticle 349)-/ ,nne8 0R point -.
,rticle 3+. ,nne8 0R point -1
,rticle 3+1
,rticle 3+-)1/ ,nne8 R point 1
,rticle 3+-)-/
,rticle 3+-)3/
,rticle 3+3)1/ ,nne8 R point 1.
,rticle 3+3)-/
,rticle 3+3)3/
,rticle 3+4)1/ ,nne8 R point 1.
,rticle 3+4)-/ ,nne8 R point 1.a
8439/13 SO/psc 1-9-
DQPG
EN
I ,rticle 3++)1/ I ,nne8 V point 7
8439/13 SO/psc 1-93
DQPG
EN
,rticle 3++)-/ ,nne8 R point 8
,rticle 3++)3/ ,nne8 R point 9
,rticle 3++)4/ ,nne8 R point 1.
,rticle 3++)+/ ,nne8 R point 8
,rticle 3+=)1/ ,nne8 R point 11
,rticle 3+=)-/ ,nne8 R point 1-
,rticle 3+=)3/ ,nne8 R point 1-
,rticle 3+>)1/ ,nne8 R point -
,rticle 3+>)-/ ,nne8 R point -
,rticle 3+>)3/ ,nne8 R point +
,rticle 3+>)4/
,rticle 3+8)1/ ,nne8 R point 3
,rticle 3+8)-/
,rticle 3+9)1/ ,nne8 R point +
,rticle 3=.)1/ ,nne8 R point +
,rticle 3=.)-/
,rticle 3=1 ,nne8 R point +a
,rticle 3=- ,nne8 R point +
,rticle 3=3)1/ ,nne8 R point +c
,rticle 3=3)-/ ,nne8 R point +%
,rticle 3=3)3/ ,nne8 R point +%
,rticle 3=3)4/ ,nne8 R point +%
,rticle 3=3)+/ ,nne8 R point +%
,rticle 3=3)=/ ,nne8 R point +%
,rticle 3=3)>/
,rticle 3=4)1/ ,nne8 R point +a
,rticle 3=4)-/ ,nne8 R point +e
,rticle 3=+)1/ ,nne8 R point +f
,rticle 3=+)-/ ,nne8 R point +"
,rticle 3=+)3/ ,nne8 R point +#
8439/13 SO/psc 1-94
DQPG
EN
I ,rticle 3=+)4/ I ,nne8 R point +#
8439/13 SO/psc 1-9+
DQPG
EN
8439/13 SO/psc 1297
EN
DQPG
,rticle 3=+)+/ ,nne8 R point +i
,rticle 3=+)=/ ,nne8 R point +
,rticle 3== ,nne8 R point +!
,rticle 3=>
,rticle 3=>)4/ ,nne8 R point +l
,rticle 3=>)+/ ,nne8 R point +l
,rticle 3=>)=/ ,nne8 R point +l
,rticle 3=8 ,nne8 00 point 1
,rticle 3=9)1/ ,nne8 00 point -
,rticle 3=9)-/ ,nne8 00 point 3
,rticle 3=9)3/
,rticle 3>. ,nne8 00 point 4
,rticle 3>1
,rticle 3>-
,rticle 3>3
,rticle 3>4
,rticle 3>+
,rticle 3>= ,rticle -8)1/
,rticle 3>>
,rticle 3>8
,rticle 3>9)1/ ,rticle 1.=)1/
,rticle 3>9)-/ ,rticle 1.=)1/
,rticle 3>9)3/ ,rticle -9)1/
,rticle 3>9)4/ ,rticle 3.)1/
,rticle 3>9)+/ ,rticle -9)-/
,rticle 3>9)=/ ,rticle 1.=)-/
,rticle 3>9)>/ ,rticle 1.=)3/
,rticle 3>9)8/
,rticle 38. ,rticle 1.>
,rticle 381 ,rticle 1.8
,rticle 38- ,rticle 1.9
,rticle 383)1/ ,rticle 11.)1/
,rticle 383)-/ ,rticle 11.)-/
,rticle 384)1/ ,rticle 111)1/
,rticle 384)-/ ,rticle 111)4/
,rticle 384)3/ ,rticle 3.)4/
,rticle 384)4/ ,rticle 31
,rticle 38+
,rticle 38=)1/ ,nne8 R0* point 1
,rticle 38=)-/ ,nne8 R0* point -
,rticle 38=)3/ ,nne8 R0* point 3
,rticle 38> ,rticle 3-)1/
,rticle 388)1/ ,rticle 11-)1/
,rticle 388)-/ ,rticle 11-)-/
,rticle 388)3/ ,rticle 11-)3/
,rticle 388)4/
,rticle 389)1/ ,rticle 113)3/
,rticle 389)-/ ,rticle 113)4/
,rticle 39.)1/ ,rticle 114)1/
,rticle 39.)-/ ,rticle 114)-/
,rticle 39.)3/ ,rticle 114)3/
,rticle 391)1/ ,rticle 11+)1/
,rticle 391)-/ ,rticle 11+)-/
,rticle 39-)1/ ,rticle 11>)1/
,rticle 39-)-/ ,rticle 11>)-/
,rticle 393
,rticle 394)1/ ,rticle 1--a)1/
,rticle 394)-/ ,rticle 1--a)-/
,rticle 394)3/ ,rticle 1--a)3/
,rticle 394)4/ ,rticle 1--a)4/
,rticle 39+
,rticle 39=
,rticle 39>
,rticle 398
,rticle 399
,rticle 4..
,rticle 4.1
,rticle 4.-
,rticle 4.3
,rticle 4.4
,rticle 4.+
,rticle 4.=
,rticle 4.>
,rticle 4.8
,rticle 4.9
,rticle 41.
,rticle 411
,rticle 41-
,rticle 413
,rticle 414
,rticle 41+
,rticle 41=
,rticle 41>
,rticle 418)1/ ,rticle 14+)1/
,rticle 418)-/ ,rticle 14+)-/
,rticle 418)3/ ,rticle 14+)3/
,rticle 418)4/ ,rticle 14+)4/
,rticle 419)1/ ,nne8 G00* Part 0* point 1 an%
,rticle 14=)1/
,rticle 419)-/ ,rticle 14=)-/ an% ,nne8 G00*
Part 0* points - an% 3
,rticle 419)3/ ,rticle 14=)3/
,rticle 4-. ,rticle 14> an% ,nne8 G00* Part
0* point 4
,rticle 4-1)1/ ,rticle 148
,rticle 4-1)-/
,rticle 4--)1/ ,nne8 G00* Part 00* point 1
,rticle 4--)-/
,rticle 4-3 ,nne8 G00* Part 00* point -
,rticle 4-4
,rticle 4-+ ,nne8 G00* Part 00* points 4* 8
,rticle 4-= ,nne8 G00* Part 00* point +
,rticle 4->
,rticle 4-8 ,nne8 G00* Part 00* point =
,rticle 4-9 ,nne8 G00* Part 00* point >
,rticle 43. ,nne8 G00* Part 00* point 9
,rticle 431 ,nne8 G00* Part 00* point 11
,rticle 43- ,nne8 G00* Part 00* point 1-
,rticle 433 ,nne8 G00* Part 00* point 13
,rticle 434 ,nne8 G00* Part 00* point 14
,rticle 43+)1/ ,nne8 G00* Part 00* point 1+
,rticle 43+)-/
,rticle 43=
,rticle 43> ,nne8 G00* Part 000* point 1
,rticle 438 ,nne8 G00* Part 000* point -
,rticle 439 ,nne8 G00* Part 000* point 3
,rticle 44.
,rticle 441* supara"rap# 1 ,rticle 1+.)1/ ,rticle 41
,rticle 441* supara"rap# -
,rticle 44-
,rticle 443
,rticle 444
,rticle 44+)1/ ,rticle 1+1a
,rticle 44+)-/ ,rticle 1+1a
,rticle 44+)3/ ,rticle 1+1a
,rticle 44+)4/
,rticle 44+)+/
,rticle 44=
,rticle 44>
,rticle 448
,rticle 4+9
,rticle 4+.
,rticle 4+1
,rticle 4+-
,rticle 4+3
,rticle 4+4
,rticle 4++
,rticle 4+=
,rticle 4+>
,rticle 4+8
,rticle 4+9
,rticle 4=.
,rticle 4=1
,rticle 4=-
,rticle 4=3
,rticle 4=4
,rticle 4=+
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,rticle 4=>
,rticle 4=8
,rticle 4=9
,rticle 4>.
,rticle 4>1
,rticle 4>-
,rticle 4>3
,rticle 4>4
,rticle 4>+
,rticle 4>= ,rticle 1+-)+/
,rticle 4>>
,rticle 4>8
,rticle 4>9
,rticle 48.
,rticle 481
,rticle 48-
,rticle 483
,rticle 484
,rticle 48+
,rticle 48=
,rticle 48>
,rticle 488
,nne8 0 ,nne8 00
,nne8 00 ,nne8 0R
,nne8 000
,nne8 0R* Part 1 ,rticle 1+-)+/ an% ,rticle 1
points 14 to 19 of Directive
-.../1-/$C
,nne8 0R* Part - ,rticle 1+-)+/ an% ,rticle 4- of
Directive -.../1-/$C
,nne8 0R* Part 3 ,rticle 1+-)+/ an% ,rticle 43 of
Directive -.../1-/$C
,nne8 0R* Part 4 ,rticle 1+-)+/ an% ,rticle 44 of
Directive -.../1-/$C
,nne8 0R* Part + ,rticle 1+-)+/ an% ,rticle 4+ of
Directive -.../1-/$C
,nne8 0R* Part = ,rticle 1+-)+/ an% ,rticle 4= of
Directive -.../1-/$C