Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) (Text with EEA relevance)
Modified by
- Commission Directive 2007/18/ECof 27 March 2007amending Directive 2006/48/EC of the European Parliament and of the Council as regards the exclusion or inclusion of certain institutions from its scope of application and the treatment of exposures to multilateral development banks(Text with EEA relevance), 307L0018, March 28, 2007
the central banks of Member States, post office giro institutions, in Belgium, the "Institut de Réescompte et de Garantie/Herdiscontering- en Waarborginstituut", in Denmark, the "Dansk Eksportfinansieringsfond", the "Danmarks Skibskredit A/S" and the "KommuneKredit", in Germany, the "Kreditanstalt für Wiederaufbau", undertakings which are recognised under the "Wohnungsgemeinnützigkeitsgesetz" as bodies of State housing policy and are not mainly engaged in banking transactions, and undertakings recognised under that law as non-profit housing undertakings, in Greece, the "Ταμείο Παρακαταθηκών και Δανείων" (Tamio Parakatathikon kai Danion), in Spain, the "Instituto de Crédito Oficial", in France, the "Caisse des dépôts et consignations", in Ireland, credit unions and the friendly societies, in Italy, the "Cassa depositi e prestiti", in Latvia, the "krājaizdevu sabiedrības", undertakings that are recognised under the "krājaizdevu sabiedrību likums" as cooperative undertakings rendering financial services solely to their members, in Lithuania, the "kredito unijos" other than the "Centrinė kredito unija", in Hungary, the "Magyar Fejlesztési Bank Rt." and the "Magyar Export-Import Bank Rt.", in the Netherlands, the "Nederlandse Investeringsbank voor Ontwikkelingslanden NV", the "NV Noordelijke Ontwikkelingsmaatschappij", the "NV Industriebank Limburgs Instituut voor Ontwikkeling en Financiering" and the "Overijsselse Ontwikkelingsmaatschappij NV", in Austria, undertakings recognised as housing associations in the public interest and the "Österreichische Kontrollbank AG", in Poland, the "Spółdzielcze Kasy Oszczędnościowo — Kreditowe" and the "Bank Gospodarstwa Krajowego", in Portugal, "Caixas Económicas" existing on 1 January 1986 with the exception of those incorporated as limited companies and of the "Caixa Económica Montepio Geral",in Finland, the "Teollisen yhteistyön rahasto Oy/Fonden för industriellt samarbete AB", and the "Finnvera Oyj/Finnvera Abp", in Sweden, the "Svenska Skeppshypotekskassan", in the United Kingdom, the National Savings Bank, the Commonwealth Development Finance Company Ltd, the Agricultural Mortgage Corporation Ltd, the Scottish Agricultural Securities Corporation Ltd, the Crown Agents for overseas governments and administrations, credit unions and municipal banks.
(a) the commitments of the central body and affiliated institutions are joint and several liabilities or the commitments of its affiliated institutions are entirely guaranteed by the central body; (b) the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts; and (c) the management of the central body is empowered to issue instructions to the management of the affiliated institutions.
(1) "credit institution" means: (a) an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or (b) an electronic money institution within the meaning of Directive 2000/46/EC Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (OJ L 275, 27.10.2000, p. 39 ).
(2) "authorisation" means an instrument issued in any form by the authorities by which the right to carry on the business of a credit institution is granted; (3) "branch" means a place of business which forms a legally dependent Part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions; (4) "competent authorities" means the national authorities which are empowered by law or regulation to supervise credit institutions; (5) "financial institution" means an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to carry on one or more of the activities listed in points 2 to 12 of Annex I; (6) "institutions", for the purposes of Sections 2 and 3 of Title V, Chapter 2, means institutions as defined in Article 3(1)(c) of Directive 2006/49/EC; (7) "home Member State" means the Member State in which a credit institution has been authorised in accordance with Articles 6 to 9 and 11 to 14; (8) "host Member State" means the Member State in which a credit institution has a branch or in which it provides services; (9) "control" means the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; (10) "participation" for the purposes of points (o) and (p) of Article 57, Articles 71 to 73 and Title V, Chapter 4 means participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companiesOJ L 222, 14.8.1978, p. 11 . Directive as last amended by Directive 2003/51/EC.(11) "qualifying holding" means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking; (12) "parent undertaking" means: (a) a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or (b) for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5 and Chapter 4, a parent undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking;
(13) "subsidiary" means: (a) a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or (b) for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5, and Chapter 4 a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence.
All subsidiaries of subsidiary undertakings shall also be considered subsidiaries of the undertaking that is their original parent; (14) "parent credit institution in a Member State" means a credit institution which has a credit institution or a financial institution as a subsidiary or which holds a participation in such an institution, and which is not itself a subsidiary of another credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State; (15) "parent financial holding company in a Member State" means a financial holding company which is not itself a subsidiary of a credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State; (16) "EU parent credit institution" means a parent credit institution in a Member State which is not a subsidiary of another credit institution authorised in any Member State, or of a financial holding company set up in any Member State; (17) "EU parent financial holding company" means a parent financial holding company in a Member State which is not a subsidiary of a credit institution authorised in any Member State or of another financial holding company set up in any Member State; (18) "public sector entities" means non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non‐commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision; (19) "financial holding company" means a financial institution, the subsidiary undertakings of which are either exclusively or mainly credit institutions or financial institutions, at least one of such subsidiaries being a credit institution, and which is not a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (OJ L 35, 11.2.2003, p. 1 ). Directive as amended by Directive 2005/1/EC.(20) "mixed-activity holding company" means a parent undertaking, other than a financial holding company or a credit institution or a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC, the subsidiaries of which include at least one credit institution; (21) "ancillary services undertaking" means an undertaking the principal activity of which consists in owning or managing property, managing data-processing services, or any other similar activity which is ancillary to the principal activity of one or more credit institutions; (22) "operational risk" means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk; (23) "central banks" include the European Central Bank unless otherwise indicated; (24) "dilution risk" means the risk that an amount receivable is reduced through cash or non‐cash credits to the obligor; (25) "probability of default" means the probability of default of a counterparty over a one year period; (26) "loss", for the purposes of Title V, Chapter 2, Section 3, means economic loss, including material discount effects, and material direct and indirect costs associated with collecting on the instrument; (27) "loss given default (LGD)" means the ratio of the loss on an exposure due to the default of a counterparty to the amount outstanding at default; (28) "conversion factor" means the ratio of the currently undrawn amount of a commitment that will be drawn and outstanding at default to the currently undrawn amount of the commitment, the extent of the commitment shall be determined by the advised limit, unless the unadvised limit is higher; (29) "expected loss (EL)", for the purposes of Title V, Chapter 2, Section 3, shall mean the ratio of the amount expected to be lost on an exposure from a potential default of a counterparty or dilution over a one year period to the amount outstanding at default; (30) "credit risk mitigation" means a technique used by a credit institution to reduce the credit risk associated with an exposure or exposures which the credit institution continues to hold; (31) "funded credit protection" means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the right of the credit institution — in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the counterparty — to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the credit institution; (32) "unfunded credit protection" means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the undertaking of a third party to pay an amount in the event of the default of the borrower or on the occurrence of other specified credit events; (33) "repurchase transaction" means any transaction governed by an agreement falling within the definition of "repurchase agreement" or "reverse repurchase agreement" as defined in Article 3(1)(m) of Directive 2006/49/EC; (34) "securities or commodities lending or borrowing transaction" means any transaction falling within the definition of "securities or commodities lending" or "securities or commodities borrowing" as defined in Article 3(1)(n) of Directive 2006/49/EC; (35) "cash assimilated instrument" means a certificate of deposit or other similar instrument issued by the lending credit institution; (36) "securitisation" means a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having the following characteristics: (a) payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; and (b) the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme;
(37) "traditional securitisation" means a securitisation involving the economic transfer of the exposures being securitised to a securitisation special purpose entity which issues securities. This shall be accomplished by the transfer of ownership of the securitised exposures from the originator credit institution or through sub-participation. The securities issued do not represent payment obligations of the originator credit institution; (38) "synthetic securitisation" means a securitisation where the tranching is achieved by the use of credit derivatives or guarantees, and the pool of exposures is not removed from the balance sheet of the originator credit institution; (39) "tranche" means a contractually established segment of the credit risk associated with an exposure or number of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments; (40) "securitisation position" shall mean an exposure to a securitisation; (41) "originator" means either of the following: (a) an entity which, either itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised; or (b) an entity which purchases a third party's exposures onto its balance sheet and then securitises them;
(42) "sponsor" means a credit institution other than an originator credit institution that establishes and manages an asset-backed commercial paper programme or other securitisation scheme that purchases exposures from third party entities; (43) "credit enhancement" means a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection; (44) "securitisation special purpose entity (SSPE)" means a corporation trust or other entity, other than a credit institution, organised for carrying on a securitisation or securitisations, the activities of which are limited to those appropriate to accomplishing that objective, the structure of which is intended to isolate the obligations of the SSPE from those of the originator credit institution, and the holders of the beneficial interests in which have the right to pledge or exchange those interests without restriction; (45) "group of connected clients" means: (a) two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others; or (b) two or more natural or legal persons between whom there is no relationship of control as set out in point (a) but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties;
(46) "close links" means a situation in which two or more natural or legal persons are linked in any of the following ways: (a) participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking; (b) control; or (c) the fact that both or all are permanently linked to one and the same third person by a control relationship;
(47) "recognised exchanges" means exchanges which are recognised as such by the competent authorities and which meet the following conditions: (a) they function regularly; (b) they have rules, issued or approved by the appropriate authorities of the home country of the exchange, defining the conditions for the operation of the exchange, the conditions of access to the exchange as well as the conditions that shall be satisfied by a contract before it can effectively be dealt on the exchange; and (c) they have a clearing mechanism whereby contracts listed in Annex IV are subject to daily margin requirements which, in the opinion of the competent authorities, provide appropriate protection.
(a) the initial capital shall be no less than EUR 1 million; (b) the Member States concerned shall notify the Commission of their reasons for exercising this option; and (c) the name of each credit institution that does not have the minimum capital specified in paragraph 1 shall be annotated to that effect in the list referred to in Article 14.
(a) any credit institution which is a legal person and which, under its national law, has a registered office shall have its head office in the same Member State as its registered office; and (b) any other credit institution shall have its head office in the Member State which granted its authorisation and in which it actually carries on its business.
(a) the credit institution concerned is a subsidiary of a credit institution authorised in another Member State; (b) the credit institution concerned is a subsidiary of the parent undertaking of a credit institution authorised in another Member State; or (c) the credit institution concerned is controlled by the same persons, whether natural or legal, as control a credit institution authorised in another Member State.
(a) the credit institution concerned is a subsidiary of an insurance undertaking or investment firm authorised in the Community; (b) the credit institution concerned is a subsidiary of the parent undertaking of an insurance undertaking or investment firm authorised in the Community; or (c) the credit institution concerned is controlled by the same person, whether natural or legal, as controls an insurance undertaking or investment firm authorised in the Community.
(a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased to engage in business for more than six months, if the Member State concerned has made no provision for the authorisation to lapse in such cases; (b) has obtained the authorisation through false statements or any other irregular means; (c) no longer fulfils the conditions under which authorisation was granted; (d) no longer possesses sufficient own funds or can no longer be relied on to fulfil its obligations towards its creditors, and in particular no longer provides security for the assets entrusted to it; or (e) falls within one of the other cases where national law provides for withdrawal of authorisation.
(a) the parent undertaking or undertakings shall be authorised as credit institutions in the Member State by the law of which the financial institution is governed; (b) the activities in question shall actually be carried on within the territory of the same Member State; (c) the parent undertaking or undertakings shall hold 90 % or more of the voting rights attaching to shares in the capital of the financial institution; (d) the parent undertaking or undertakings shall satisfy the competent authorities regarding the prudent management of the financial institution and shall have declared, with the consent of the relevant home Member State competent authorities, that they jointly and severally guarantee the commitments entered into by the financial institution; and (e) the financial institution shall be effectively included, for the activities in question in particular, in the consolidated supervision of the parent undertaking, or of each of the parent undertakings, in accordance with Title V, Chapter 4, Section 1, in particular for the purposes of the minimum own funds requirements set out in Article 75 for the control of large exposures and for purposes of the limitation of holdings provided for in Articles 120 to 122.
(a) the Member State within the territory of which it plans to establish a branch; (b) a programme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the branch; (c) the address in the host Member State from which documents may be obtained; and (d) the names of those to be responsible for the management of the branch.
(a) credit institutions the parent undertakings of which have their head offices in a third country; or (b) credit institutions situated in third countries the parent undertakings of which, whether credit institutions or financial holding companies, have their head offices in the Community.
(a) that the competent authorities of the Member States are able to obtain the information necessary for the supervision, on the basis of their consolidated financial situations, of credit institutions or financial holding companies situated in the Community and which have as subsidiaries credit institutions or financial institutions situated outside the Community, or holding participation in such institutions; and (b) that the competent authorities of third countries are able to obtain the information necessary for the supervision of parent undertakings the head offices of which are situated within their territories and which have as subsidiaries credit institutions or financial institutions situated in one or more Member States or holding participation in such institutions.
(a) to check that the conditions governing the taking-up of the business of credit institutions are met and to facilitate monitoring, on a non-consolidated or consolidated basis, of the conduct of such business, especially with regard to the monitoring of liquidity, solvency, large exposures, and administrative and accounting procedures and internal control mechanisms; (b) to impose penalties; (c) in an administrative appeal against a decision of the competent authority; or (d) in court proceedings initiated pursuant to Article 55 or to special provisions provided for in this in other Directives adopted in the field of credit institutions.
(a) authorities entrusted with the public duty of supervising other financial organisations and insurance companies and the authorities responsible for the supervision of financial markets; (b) bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures; and (c) persons responsible for carrying out statutory audits of the accounts of credit institutions and other financial institutions;
(a) the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures; and (b) the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.
(a) the information shall be for the purpose of performing the supervisory task referred to in the first subparagraph; (b) information received in this context shall be subject to the conditions of professional secrecy specified in Article 44(1); and (c) where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.
(a) the information is for the purpose of performing the task referred to in the first subparagraph; (b) information received in this context is subject to the conditions of professional secrecy specified in Article 44(1); and (c) where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.
(a) central banks and other bodies with a similar function in their capacity as monetary authorities; and (b) where appropriate, to other public authorities responsible for overseeing payment systems.
(a) constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of credit institutions; (b) affect the continuous functioning of the credit institution; or (c) lead to refusal to certify the accounts or to the expression of reservations.
(a) capital within the meaning of Article 22 of Directive 86/635/EEC, in so far as it has been paid up, plus share premium accounts but excluding cumulative preferential shares; (b) reserves within the meaning of Article 23 of Directive 86/635/EEC and profits and losses brought forward as a result of the application of the final profit or loss; (c) funds for general banking risks within the meaning of Article 38 of Directive 86/635/EEC; (d) revaluation reserves within the meaning of Article 33 of Directive 78/660/EEC; (e) value adjustments within the meaning of Article 37(2) of Directive 86/635/EEC; (f) other items within the meaning of Article 63; (g) the commitments of the members of credit institutions set up as cooperative societies and the joint and several commitments of the borrowers of certain institutions organised as funds, as referred to in Article 64(1); and (h) fixed-term cumulative preferential shares and subordinated loan capital as referred to in Article 64(3).
(i) own shares at book value held by a credit institution; (j) intangible assets within the meaning of Article 4(9) ("Assets") of Directive 86/635/EEC; (k) material losses of the current financial year; (l) holdings in other credit and financial institutions amounting to more than 10 % of their capital; (m) subordinated claims and instruments referred to in Article 63 and Article 64(3) which a credit institution holds in respect of credit and financial institutions in which it has holdings exceeding 10 % of the capital in each case; (n) holdings in other credit and financial institutions of up to 10 % of their capital, the subordinated claims and the instruments referred to in Article 63 and Article 64(3) which a credit institution holds in respect of credit and financial institutions other than those referred to in points (l) and (m) in respect of the amount of the total of such holdings, subordinated claims and instruments which exceed 10 % of that credit institution's own funds calculated before the deduction of items in points (l) to (p); (o) participations within the meaning of Article 4(10) which a credit institution holds in: (i) insurance undertakings within the meaning of Article 6 of Directive 73/239/EEC First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ L 228, 16.8.1973, p. 3 ). Directive as last amended by Directive 2005/1/EC.Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (OJ L 345, 19.12.2002, p. 1 ). Directive as last amended by Directive 2005/1/EC.Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group (OJ L 330, 5.12.1998, p. 1 ). Directive as last amended by Directive 2005/1/EC.(ii) reinsurance undertakings within the meaning of Article 1(c) of Directive 98/78/EC, or (iii) insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC;
(p) each of the following items which the credit institution holds in respect of the entities defined in point (o) in which it holds a participation: (i) instruments referred to in Article 16(3) of Directive 73/239/EEC, and (ii) instruments referred to in Article 27(3) of Directive 2002/83/EC;
(q) for credit institutions calculating risk-weighted exposure amounts under Section 3, Subsection 2, negative amounts resulting from the calculation in Annex VII, Part 1, point 36 and expected loss amounts calculated in accordance with Annex VII, Part 1 points 32 and 33; and (r) the exposure amount of securitisation positions which receive a risk weight of 1250 % under Annex IX, Part 4, calculated in the manner there specified.
(a) they are freely available to the credit institution to cover normal banking risks where revenue or capital losses have not yet been identified; (b) their existence is disclosed in internal accounting records; and (c) their amount is determined by the management of the credit institution, verified by independent auditors, made known to the competent authorities and placed under the supervision of the latter.
(a) they may not be reimbursed on the bearer's initiative or without the prior agreement of the competent authority; (b) the debt agreement shall provide for the credit institution to have the option of deferring the payment of interest on the debt; (c) the lender's claims on the credit institution shall be wholly subordinated to those of all non-subordinated creditors; (d) the documents governing the issue of the securities shall provide for debt and unpaid interest to be such as to absorb losses, whilst leaving the credit institution in a position to continue trading; and (e) only fully paid-up amounts shall be taken into account.
(a) only fully paid-up funds may be taken into account; (b) the loans involved shall have an original maturity of at least five years, after which they may be repaid; (c) the extent to which they may rank as own funds shall be gradually reduced during at least the last five years before the repayment date; and (d) the loan agreement shall not include any clause providing that in specified circumstances, other than the winding-up of the credit institution, the debt shall become repayable before the agreed repayment date.
(a) any minority interests within the meaning of Article 21 of Directive 83/349/EEC, where the global integration method is used; (b) the first consolidation difference within the meaning of Articles 19, 30 and 31 of Directive 83/349/EEC; (c) the translation differences included in consolidated reserves in accordance with Article 39(6) of Directive 86/635/EEC; and (d) any difference resulting from the inclusion of certain participating interests in accordance with the method prescribed in Article 33 of Directive 83/349/EEC.
(a) the total of the items in points (d) to (h) may not exceed a maximum of 100 % of the items in points (a) plus (b) and (c) minus (i) to (k); and (b) the total of the items in points (g) to (h) may not exceed a maximum of 50 % of the items in points (a) plus (b) and (c) minus (i) to (k).
(a) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by its parent undertaking; (b) either the parent undertaking satisfies the competent authority regarding the prudent management of the subsidiary and has declared, with the consent of the competent authority, that it guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of negligible interest; (c) the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary; and (d) the parent undertaking holds more than 50 % of the voting rights attaching to shares in the capital of the subsidiary and/or has the right to appoint or remove a majority of the members of the management body of the subsidiary described in Article 11.
(a) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities to the parent credit institution in a Member State; and (b) the risk evaluation, measurement and control procedures relevant for consolidated supervision cover the parent credit institution in a Member State.
(a) criteria it applies to determine that there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities; (b) the number of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 3 and the number of these which incorporate subsidiaries in a third country; and (c) on an aggregate basis for the Member State: (i) the total amount of own funds on the consolidated basis of the parent credit institution in a Member State, which benefits from the exercise of the discretion laid down in paragraph 3, which are held in subsidiaries in a third country; (ii) the percentage of total own funds on the consolidated basis of parent credit institutions in a Member State which benefits from the exercise of the discretion laid down in paragraph 3, represented by own funds which are held in subsidiaries in a third country; and (iii) the percentage of total minimum own funds required under Article 75 on the consolidated basis of parent credit institutions in a Member State, which benefits from the exercise of the discretion laid down in paragraph 3, represented by own funds which are held in subsidiaries in a third country.
(a) the criteria it applies to determine that there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities; (b) the number of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 and the number of these which incorporate subsidiaries in a third country; and (c) on an aggregate basis for the Member State: (i) the total amount of own funds of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 which are held in subsidiaries in a third country; (ii) the percentage of total own funds of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 represented by own funds which are held in subsidiaries in a third country; and (iii) the percentage of total minimum own funds required under Article 75 of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 represented by own funds which are held in subsidiaries in a third country.
(a) where the undertaking concerned is situated in a third country where there are legal impediments to the transfer of the necessary information; (b) where, in the opinion of the competent authorities, the undertaking concerned is of negligible interest only with respect to the objectives of monitoring credit institutions and in any event where the balance-sheet total of the undertaking concerned is less than the smaller of the following two amounts: (i) EUR 10 million, or (ii) 1 % of the balance-sheet total of the parent undertaking or the undertaking that holds the participation,
(c) where, in the opinion of the competent authorities responsible for exercising supervision on a consolidated basis, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of credit institutions are concerned. If, in the cases referred to in point (b) of the first subparagraph, several undertakings meet the above criteria set out therein, they shall nevertheless be included in the consolidation where collectively they are of non-negligible interest with respect to the specified objectives.
(a) for credit risk and dilution risk in respect of all of their business activities with the exception of their trading book business and illiquid assets if deducted from own funds under Article 13(2)(d) of Directive 2006/49/EC, 8 % of the total of their risk-weighted exposure amounts calculated in accordance with Section 3; (b) in respect of their trading-book business, for position risk, settlement and counter‐party risk and, in so far as the limits laid down in Articles 111 to 117 are authorised to be exceeded, for large exposures exceeding such limits, the capital requirements determined in accordance with Article 18 and Chapter V, Section 4 of Directive 2006/49/EC; (c) in respect of all of their business activities, for foreign-exchange risk and for commodities risk, the capital requirements determined according to Article 18 of Directive 2006/49/EC; and (d) in respect of all of their business activities, for operational risk, the capital requirements determined in accordance with Section 4.
(a) claims or contingent claims on central governments or central banks; (b) claims or contingent claims on regional governments or local authorities; (c) claims or contingent claims on administrative bodies and non-commercial undertakings; (d) claims or contingent claims on multilateral development banks; (e) claims or contingent claims on international organisations; (f) claims or contingent claims on institutions; (g) claims or contingent claims on corporates; (h) retail claims or contingent retail claims; (i) claims or contingent claims secured on real estate property; (j) past due items; (k) items belonging to regulatory high-risk categories; (l) claims in the form of covered bonds; (m) securitisation positions; (n) short-term claims on institutions and corporate; (o) claims in the form of collective investment undertakings ("CIU"); or (p) other items.
(a) the exposure shall be either to an individual person or persons, or to a small or medium sized entity; (b) the exposure shall be one of a significant number of exposures with similar characteristics such that the risks associated with such lending are substantially reduced; and (c) the total amount owed to the credit institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding claims or contingent claims secured on residential real estate collateral, shall not, to the knowledge of the credit institution, exceed EUR 1 million. The credit institution shall take reasonable steps to acquire this knowledge.
(a) the counterparty is an institution or a financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements; (b) the counterparty is included in the same consolidation as the credit institution on a full basis; (c) the counterparty is subject to the same risk evaluation, measurement and control procedures as the credit institution; (d) the counterparty is established in the same Member State as the credit institution; and (e) there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities from the counterparty to the credit institution.
(a) the requirements set out in points (a), (d) and (e) of paragraph 7; (b) the credit institution and the counterparty have entered into a contractual or statutory liability arrangement which protects those institutions and in particular ensures their liquidity and solvency to avoid bankruptcy in case it becomes necessary (referred to below as an institutional protection scheme); (c) the arrangements ensure that the institutional protection scheme will be able to grant support necessary under its commitment from funds readily available to it; (d) the institutional protection scheme disposes of suitable and uniformly stipulated systems for the monitoring and classification of risk (which gives a complete overview of the risk situations of all the individual members and the institutional protection scheme as a whole) with corresponding possibilities to take influence; those systems shall suitably monitor defaulted exposures in accordance with Annex VII, Part 4, point 44; (e) the institutional protection scheme conducts its own risk review which is communicated to the individual members; (f) the institutional protection scheme draws up and publishes once in a year either, a consolidated report comprising the balance sheet, the profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole, or a report comprising the aggregated balance sheet, the aggregated profit‐and‐loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole; (g) members of the institutional protection scheme are obliged to give advance notice of at least 24 months if they wish to end the arrangements; (h) the multiple use of elements eligible for the calculation of own funds ("multiple gearing") as well as any inappropriate creation of own funds between the members of the institutional protection scheme shall be eliminated; (i) the institutional protection scheme shall be based on a broad membership of credit institutions of a predominantly homogeneous business profile; and (j) the adequacy of the systems referred to in point (d) is approved and monitored at regular intervals by the relevant competent authorities.
(a) the credit institution's rating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk; (b) internal ratings and default and loss estimates used in the calculation of capital requirements and associated systems and processes play an essential role in the risk management and decision-making process, and in the credit approval, internal capital allocation and corporate governance functions of the credit institution; (c) the credit institution has a credit risk control unit responsible for its rating systems that is appropriately independent and free from undue influence; (d) the credit institution collects and stores all relevant data to provide effective support to its credit risk measurement and management process; and (e) the credit institution documents its rating systems and the rationale for their design and validates its rating systems.
(a) claims or contingent claims on central governments and central banks; (b) claims or contingent claims on institutions; (c) claims or contingent claims on corporates; (d) retail claims or contingent retail claims; (e) equity claims; (f) securitisation positions; or (g) other non credit-obligation assets.
(a) exposures to regional governments, local authorities or public sector entities which are treated as exposures to central governments under Subsection 1; and (b) exposures to Multilateral Development Banks and International Organisations which attract a risk weight of 0 % under Subsection 1.
(a) exposures to regional governments and local authorities which are not treated as exposures to central governments under Subsection 1; (b) exposures to Public Sector Entities which are treated as exposures to institutions under the Subsection 1; and (c) exposures to Multilateral Development Banks which do not attract a 0 % risk weight under Subsection 1.
(a) they shall be either to an individual person or persons, or to a small or medium sized entity, provided in the latter case that the total amount owed to the credit institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding claims or contingent claims secured on residential real estate collateral, shall not, to the knowledge of the credit institution, which shall have taken reasonable steps to confirm the situation, exceed EUR 1 million; (b) they are treated by the credit institution in its risk management consistently over time and in a similar manner; (c) they are not managed just as individually as exposures in the corporate exposure class; and (d) they each represent one of a significant number of similarly managed exposures.
(a) non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer; and (b) debt exposures the economic substance of which is similar to the exposures specified in point (a).
(a) the exposure is to an entity which was created specifically to finance and/or operate physical assets; (b) the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate; and (c) the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.
(a) for exposures belonging to the exposure class referred to in point (e) of Article 86(1), the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange-traded and other equity exposures, it shall treat the exposures concerned as other equity exposures; (b) for all other underlying exposures, the approach set out in Subsection 1, subject to the following modifications: (i) the exposures are assigned to the appropriate exposure class and attributed the risk weight of the credit quality step immediately above the credit quality step that would normally be assigned to the exposure, and (ii) exposures assigned to the higher credit quality steps, to which a risk weight of 150 % would normally be attributed, are assigned a risk weight of 200 %.
(a) for exposures belonging to the exposure class referred to in point (e) of Article 86(1), the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange‐traded and other equity exposures, it shall treat the exposures concerned as other equity exposures; or (b) for all other underlying exposures, the approach set out in Subsection 1, subject to the following modifications: (i) the exposures are assigned to the appropriate exposure class and attributed the risk weight of the credit quality step immediately above the credit quality step that would normally be assigned to the exposure, and (ii) exposures assigned to the higher credit quality steps, to which a risk weight of 150 % would normally be attributed, are assigned a risk weight of 200 %.
(a) the exposure class referred to in point (a) of Article 86(1), where the number of material counterparties is limited and it would be unduly burdensome for the credit institution to implement a rating system for these counterparties; (b) the exposure class referred to in point (b) of Article 86(1), where the number of material counterparties is limited and it would be unduly burdensome for the credit institution to implement a rating system for these counterparties; (c) exposures in non-significant business units as well as exposure classes that are immaterial in terms of size and perceived risk profile; (d) exposures to central governments of the home Member State and to their regional governments, local authorities and administrative bodies, provided that: (i) there is no difference in risk between the exposures to that central government and those other exposures because of specific public arrangements, and (ii) exposures to the central government are assigned a 0 % risk weight under Subsection 1;
(e) exposures of a credit institution to a counterparty which is its parent undertaking, its subsidiary or a subsidiary of its parent undertaking provided that the counterparty is an institution or a financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC and exposures between credit institutions which meet the requirements set out in Article 80(8); (f) equity exposures to entities whose credit obligations qualify for a 0 % risk weight under Subsection 1 (including those publicly sponsored entities where a zero risk weight can be applied); (g) equity exposures incurred under legislative programmes to promote specified sectors of the economy that provide significant subsidies for the investment to the credit institution and involve some form of government oversight and restrictions on the equity investments. This exclusion is limited to an aggregate of 10 % of original own funds plus additional own funds; (h) the exposures identified in Annex VI, Part 1, point 40 meeting the conditions specified therein; or (i) State and State-reinsured guarantees pursuant to Annex VIII, Part 2, point 19.
(a) in the case of a traditional securitisation, exclude from its calculation of risk‐weighted exposure amounts, and, as relevant, expected loss amounts, the exposures which it has securitised; and (b) in the case of a synthetic securitisation, calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, in respect of the securitised exposures in accordance with Annex IX, Part 2.
(a) in the case of foreign exchange transactions, exposures incurred in the ordinary course of settlement during the 48 hours following payment; or (b) in the case of transactions for the purchase or sale of securities, exposures incurred in the ordinary course of settlement during the five working days following payment or delivery of the securities, whichever is the earlier.
(a) a credit institution, including its branches in third countries; and (b) any private or public undertaking, including its branches, which meets the definition of "credit institution" and has been authorised in a third country.
(a) reporting of all large exposures at least once a year, combined with reporting during the year of all new large exposures and any increases in existing large exposures of at least 20 % with respect to the previous communication; or (b) reporting of all large exposures at least four times a year.
(a) asset items constituting claims on central governments or central banks which, unsecured, would be assigned a 0 % risk weight under Articles 78 to 83; (b) asset items constituting claims on international organisations or multilateral development banks which, unsecured, would be assigned a 0 % risk weight under Articles 78 to 83; (c) asset items constituting claims carrying the explicit guarantees of central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity providing the guarantee would be assigned a 0 % risk weight under Articles 78 to 83; (d) other exposures attributable to, or guaranteed by, central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity to which the exposure is attributable or by which it is guaranteed would be assigned a 0 % risk weight under Articles 78 to 83; (e) asset items constituting claims on and other exposures to central governments or central banks not mentioned in point (a) which are denominated and, where applicable, funded in the national currencies of the borrowers; (f) asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of debt securities issued by central governments or central banks, international organisations, multilateral development banks, Member States' regional governments, local authorities or public sector entities, which securities constitute claims on their issuer which would be assigned a 0 % risk weighting under Articles 78 to 83; (g) asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of cash deposits placed with the lending credit institution or with a credit institution which is the parent undertaking or a subsidiary of the lending institution; (h) asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of certificates of deposit issued by the lending credit institution or by a credit institution which is the parent undertaking or a subsidiary of the lending credit institution and lodged with either of them; (i) asset items constituting claims on and other exposures to institutions, with a maturity of one year or less, but not constituting such institutions" own funds; (j) asset items constituting claims on and other exposures to those institutions which are not credit institutions but which fulfil the conditions referred to in Annex VI, Part 1, point 85, with a maturity of one year or less, and secured in accordance with the same point; (k) bills of trade and other similar bills, with a maturity of one year or less, bearing the signatures of other credit institutions; (l) covered bonds falling within the terms of Annex VI, Part 1, points 68 to 70; (m) pending subsequent coordination, holdings in the insurance companies referred to in Article 122(1) up to 40 % of the own funds of the credit institution acquiring such a holding; (n) asset items constituting claims on regional or central credit institutions with which the lending credit institution is associated in a network in accordance with legal or statutory provisions and which are responsible, under those provisions, for cash‐clearing operations within the network; (o) exposures secured, to the satisfaction of the competent authorities, by collateral in the form of securities other than those referred to in point (f); (p) loans secured, to the satisfaction of the competent authorities, by mortgages on residential property or by shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation and leasing transactions under which the lessor retains full ownership of the residential property leased for as long as the lessee has not exercised his option to purchase, in all cases up to 50 % of the value of the residential property concerned; (q) the following, where they would receive a 50 % risk weight under Articles 78 to 83, and only up to 50 % of the value of the property concerned: (i) exposures secured by mortgages on offices or other commercial premises, or by shares in Finnish housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of offices or other commercial premises; and (ii) exposures related to property leasing transactions concerning offices or other commercial premises;
for the purposes of point (ii), until 31 December 2011 , the competent authorities of each Member State may allow credit institutions to recognise 100 % of the value of the property concerned. At the end of this period, this treatment shall be reviewed. Member States shall inform the Commission of the use they make of this preferential treatment;(r) 50 % of the medium/low‐risk off‐balance‐sheet items referred to in Annex II; (s) subject to the competent authorities' agreement, guarantees other than loan guarantees which have a legal or regulatory basis and are given for their members by mutual guarantee schemes possessing the status of credit institutions, subject to a weighting of 20 % of their amount; and (t) the low‐risk off‐balance‐sheet items referred to in Annex II, to the extent that an agreement has been concluded with the client or group of connected clients under which the exposure may be incurred only if it has been ascertained that it will not cause the limits applicable under Article 111(1) to (3) to be exceeded.
(a) policies and procedures to address risks arising from maturity mismatches between exposures and any credit protection on those exposures; (b) policies and procedures in the event that a stress test indicates a lower realisable value of collateral than taken into account under paragraphs 1 and 2; and (c) policies and procedures relating to concentration risk arising from the application of credit risk mitigation techniques, and in particular large indirect credit exposures, for example to a single issuer of securities taken as collateral.
(a) treat the exposure as having been incurred to the guarantor rather than to the client; or (b) treat the exposure as having been incurred to the third party rather than to the client, if the exposure defined in Article 113(3)(o) is guaranteed by collateral under the conditions there laid down.
(a) where the guarantee is denominated in a currency different from that in which the exposure is denominated the amount of the exposure deemed to be covered will be calculated in accordance with the provisions on the treatment of currency mismatch for unfunded credit protection in Annex VIII; (b) a mismatch between the maturity of the exposure and the maturity of the protection will be treated in accordance with the provisions on the treatment of maturity mismatch in Annex VIII; and (c) partial coverage may be recognised in accordance with the treatment set out in Annex VIII.
(a) coordination of the gathering and dissemination of relevant or essential information in going concern and emergency situations; and (b) planning and coordination of supervisory activities in going concern as well as in emergency situations, including in relation to the activities in Article 124, in cooperation with the competent authorities involved.
(a) identification of the group structure of all major credit institutions in a group, as well as of the competent authorities of the credit institutions in the group; (b) procedures for the collection of information from the credit institutions in a group, and the verification of that information; (c) adverse developments in credit institutions or in other entities of a group, which could seriously affect the credit institutions; and (d) major sanctions and exceptional measures taken by competent authorities in accordance with this Directive, including the imposition of an additional capital charge under Article 136 and the imposition of any limitation on the use of the Advanced Measurement Approach for the calculation of the own funds requirements under Article 105.
(a) changes in the shareholder, organisational or management structure of credit institutions in a group, which require the approval or authorisation of competent authorities; and (b) major sanctions or exceptional measures taken by competent authorities, including the imposition of an additional capital charge under Article 136 and the imposition of any limitation on the use of the Advances Measurement Approaches for the calculation of the own funds requirements under Article 105.
(a) where, in the opinion of the competent authorities, a credit institution exercises a significant influence over one or more credit institutions or financial institutions, but without holding a participation or other capital ties in these institutions; and (b) where two or more credit institutions or financial institutions are placed under single management other than pursuant to a contract or clauses of their memoranda or Articles of association.
(a) obliging credit institutions to hold own funds in excess of the minimum level laid down in Article 75; (b) requiring the reinforcement of the arrangements, processes, mechanisms and strategies implemented to comply with Articles 22 and 123; (c) requiring credit institutions to apply a specific provisioning policy or treatment of assets in terms of own funds requirements; (d) restricting or limiting the business, operations or network of credit institutions; and (e) requiring the reduction of the risk inherent in the activities, products and systems of credit institutions.
(a) the texts of laws, regulations, administrative rules and general guidance adopted in their Member State in the field of prudential regulation; (b) the manner of exercise of the options and discretions available in Community legislation; (c) the general criteria and methodologies they use in the review and evaluation referred to in Article 124; and (d) without prejudice to the provisions laid down in Chapter 1, Section 2, aggregate statistical data on key aspects of the implementation of the prudential framework in each Member State.
(a) to make one or more of the disclosures referred to in Annex XII, Parts 2 and 3; (b) to publish one or more disclosures more frequently than annually, and to set deadlines for publication; (c) to use specific media and locations for disclosures other than the financial statements; and (d) to use specific means of verification for the disclosures not covered by statutory audit.
(a) clarification of the definitions in order to take account, in the application of this Directive, of developments on financial markets; (b) clarification of the definitions to ensure uniform application of this Directive; (c) the alignment of terminology on, and the framing of definitions in accordance with, subsequent acts on credit institutions and related matters; (d) technical adjustments to the list in Article 2; (e) alteration of the amount of initial capital prescribed in Article 9 to take account of developments in the economic and monetary field; (f) expansion of the content of the list referred to in Articles 23 and 24 and set out in Annex I or adaptation of the terminology used in that list to take account of developments on financial markets; (g) the areas in which the competent authorities shall exchange information as listed in Article 42; (h) technical adjustments in Articles 56 to 67 and in Article 74 as a result of developments in accounting standards or requirements which take account of Community legislation or with regard to convergence of supervisory practices; (i) amendment of the list of exposure classes in Articles 79 and 86 in order to take account of developments on financial markets; (j) the amount specified in Article 79(2)(c), Article 86(4)(a), Annex VII, Part 1, point 5 and Annex VII, Part 2, point 15 to take into account the effects of inflation; (k) the list and classification of off‐balance‐sheet items in Annexes II and IV and their treatment in the determination of exposure values for the purposes of Title V, Chapter 2, Section 3; or (l) adjustment of the provisions in Annexes V to XII in order to take account of developments on financial markets (in particular new financial products) or in accounting standards or requirements which take account of Community legislation, or with regard to convergence of supervisory practice.
(a) specification of the size of sudden and unexpected changes in the interest rates referred to in Article 124(5); (b) a temporary reduction in the minimum level of own funds laid down in Article 75 and/or the risk weights laid down in Title V, Chapter 2, Section 3 in order to take account of specific circumstances; (c) without prejudice to the report referred to in Article 119, clarification of exemptions provided for in Articles 111(4), 113, 115 and 116; (d) specification of the key aspects on which aggregate statistical data are to be disclosed under Article 144(1)(d); or (e) specification of the format, structure, contents list and annual publication date of the disclosures provided for in Article 144.
(a) the provisions of that Directive referred to in Articles 42 to 46 shall apply as they stood prior to 1 January 2007 ;(b) "risk‐adjusted value" as referred to in Article 42(1) of that Directive shall mean "risk‐weighted exposure amount"; (c) the figures produced by Article 42(2) of that Directive shall be considered risk‐weighted exposure amounts; (d) "credit derivatives" shall be included in the list of "Full risk" items in Annex II of that Directive; and (e) the treatment set out in Article 43(3) of that Directive shall apply to derivative instruments listed in Annex IV of that Directive whether on‐ or off‐balance sheet and the figures produced by the treatment set out in Annex III shall be considered risk‐weighted exposure amounts.
(a) Title V, Chapter 2, Section 3, Subsection 3 relating to the recognition of credit risk mitigation shall not apply; (b) Title V, Chapter 2, Section 3, Subsection 4 concerning the treatment of securitisation may be disapplied by competent authorities.
(a) money market instruments (cheques, bills, certificates of deposit, etc.); (b) foreign exchange; (c) financial futures and options; (d) exchange and interest‐rate instruments; or (e) transferable securities.
Guarantees having the character of credit substitutes, Credit derivatives, Acceptances, Endorsements on bills not bearing the name of another credit institution, Transactions with recourse, Irrevocable standby letters of credit having the character of credit substitutes, Assets purchased under outright forward purchase agreements, Forward forward deposits, The unpaid portion of partly‐paid shares and securities, Asset sale and repurchase agreements as defined in Article 12(3) and (5) of Directive 86/635/EEC, and Other items also carrying full risk.
Documentary credits issued and confirmed (see also "Medium/low risk"), Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes, Irrevocable standby letters of credit not having the character of credit substitutes, Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year, Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs), and Other items also carrying medium risk and as communicated to the Commission.
Documentary credits in which underlying shipment acts as collateral and other self‐liquidating transactions, Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness, and Other items also carrying medium/low risk and as communicated to the Commission.
Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation, and Other items also carrying low risk and as communicated to the Commission.
(i) the contracts listed in Annex IV, (ii) repurchase transactions, (iii) securities or commodities lending or borrowing transactions, (iv) margin lending transactions, and (v) long settlement transactions using the Internal Model Method as set out in Part 6.
| Residual maturity | Interest‐rate contracts | Contracts concerning foreign-exchange rates and gold | Contracts concerning equities | Contracts concerning precious metals except gold | Contracts concerning commodities other than precious metals |
|---|---|---|---|---|---|
| One year or less | 0 % | 1 % | 6 % | 7 % | 10 % |
| Over one year, not exceeding five years | 5 % | 8 % | 7 % | 12 % | |
| Over five years | 10 % | 8 % | 15 % |
| Residual maturity | Precious metals (except gold) | Base metals | Agricultural products (softs) | Other, including energy products |
|---|---|---|---|---|
| One year or less | 2 % | 3 % | 4 % | |
| Over one year, not exceeding five years | 5 % | 4 % | 5 % | 6 % |
| Over five years | 8 % | 9 % | 10 % |
| Original maturity | Interest-rate contracts | Contracts concerning foreign‐exchange rates and gold |
|---|---|---|
| One year or less | 2 % | |
| Over one year, not exceeding two years | 1 % | 5 % |
| Additional allowance for each additional year | 1 % | 3 % |
| Government referenced interest rates | Non‐government referenced interest rates | |
|---|---|---|
for equities, similar instruments are those of the same issuer. An equity index is treated as a separate issuer; for precious metals, similar instruments are those of the same metal. A precious metal index is treated as a separate precious metal; for electric power, similar instruments are those delivery rights and obligations that refer to the same peak or off‐peak load time interval within any 24‐hour interval; and for commodities, similar instruments are those of the same commodity. A commodity index is treated as a separate commodity.
| Hedging set categories | CCRM | |
|---|---|---|
| 1. | Interest Rates | |
| 2. | Interest Rates for risk positions from a reference debt instrument that underlies a credit default swap and to which a capital charge of | |
| 3. | Interest Rates for risk positions from a debt instrument or reference debt instrument to which a capital charge of more than | |
| 4. | Exchange Rates | |
| 5. | Electric Power | 4 % |
| 6. | Gold | 5 % |
| 7. | Equity | 7 % |
| 8. | Precious Metals (except gold) | |
| 9. | Other Commodities (excluding precious metals and electricity power) | 10 % |
| 10. | Underlying instruments of OTC derivatives that are not in any of the above categories | 10 % |
(a) Effective EPE without taking into account the margin agreement; (b) the threshold, if positive, under the margin agreement plus an add‐on that reflects the potential increase in exposure over the margin period of risk. The add‐on is computed as the expected increase in the netting set's exposure beginning from a current exposure of zero over the margin period of risk. A floor of five business days for netting sets consisting only of repo‐style transactions subject to daily remargining and daily mark‐to‐market, and ten business days for all other netting sets is imposed on the margin period of risk used for this purpose; or (c) if the model captures the effects of margining when estimating EE, the model's EE measure may be used directly in the equation in point 8 subject to the approval of the competent authorities.
(a) the adequacy of the documentation of the CCR management system and process; (b) the organisation of the CCR control unit; (c) the integration of CCR measures into daily risk management; (d) the approval process for risk pricing models and valuation systems used by front and back‐office personnel; (e) the validation of any significant change in the CCR measurement process; (f) the scope of CCR captured by the risk measurement model; (g) the integrity of the management information system; (h) the accuracy and completeness of CCR data; (i) the verification of the consistency, timeliness and reliability of data sources used to run models, including the independence of such data sources; (j) the accuracy and appropriateness of volatility and correlation assumptions; (k) the accuracy of valuation and risk transformation calculations; and (l) the verification of the model's accuracy through frequent back‐testing.
(a) the credit institution shall identify and manage its exposures to specific wrong‐way risk; (b) for exposures with a rising risk profile after one year, the credit institution shall compare on a regular basis the estimate of EPE over one year with EPE over the life of the exposure; and (c) for exposures with a residual maturity below one year, the credit institution shall compare on a regular basis the replacement cost (current exposure) and the realised exposure profile, and/or store data that would allow such a comparison.
(a) the qualitative validation requirements set out in Annex V to Directive 2006/49/EC; (b) interest rates, foreign exchange rates, equity prices, commodities, and other market risk factors shall be forecast over long time horizons for measuring CCR exposure. The performance of the forecasting model for market risk factors shall be validated over a long time horizon; (c) the pricing models used to calculate CCR exposure for a given scenario of future shocks to market risk factors shall be tested as Part of the model validation process. Pricing models for options shall account for the nonlinearity of option value with respect to market risk factors; (d) the EPE model shall capture transaction-specific information in order to aggregate exposures at the level of the netting set. A credit institution shall verify that transactions are assigned to the appropriate netting set within the model; (e) the EPE model shall also include transaction-specific information to capture the effects of margining. It shall take into account both the current amount of margin and margin that would be passed between counterparties in the future. Such a model shall account for the nature of margin agreements (unilateral or bilateral), the frequency of margin calls, the margin period of risk, the minimum threshold of unmargined exposure the credit institution is willing to accept, and the minimum transfer amount. Such a model shall either model the mark-to-market change in the value of collateral posted or apply the rules set out in Annex VIII; and (f) static, historical back-testing on representative counterparty portfolios shall be Part of the model validation process. At regular intervals, a credit institution shall conduct such back-testing on a number of representative counterparty portfolios (actual or hypothetical). These representative portfolios shall be chosen based on their sensitivity to the material risk factors and correlations to which the credit institution is exposed.
(a) Types of netting that competent authorities may recognise For the purpose of this Part, "counterparty" means any entity (including natural persons) that has the power to conclude a contractual netting agreement and "contractual cross product netting agreement" means a written bilateral agreement between a credit institution and a counterparty which creates a single legal obligation covering all included bilateral master agreements and transactions belonging to different product categories. Contractual cross product netting agreements do not cover netting other than on a bilateral basis. For the purposes of cross product netting, the following are considered different product categories: (i) repurchase transactions, reverse repurchase transactions, securities and commodities lending and borrowing transactions, (ii) margin lending transactions, and (iii) the contracts listed in Annex IV.
The competent authorities may recognise as risk-reducing the following types of contractual netting: (i) bilateral contracts for novation between a credit institution and its counterparty under which mutual claims and obligations are automatically amalgamated in such a way that this novation fixes one single net amount each time novation applies and thus creates a legally binding, single new contract extinguishing former contracts, (ii) other bilateral agreements between a credit institution and its counterparty, and (iii) contractual cross product netting agreements for credit institutions that have received approval by their competent authorities to use the method set out in Part 6, for transactions falling under the scope of that method. Netting across transactions entered by members of a group is not recognised for the purposes of calculating capital requirements.
(b) Conditions for recognition The competent authorities may recognise contractual netting as risk-reducing only under the following conditions: (i) a credit institution must have a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the credit institution would have a claim to receive or an obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions, (ii) a credit institution must have made available to the competent authorities written and reasoned legal opinions to the effect that, in the event of a legal challenge, the relevant courts and administrative authorities would, in the cases described under (i), find that the credit institution's claims and obligations would be limited to the net sum, as described in (i), under: the law of the jurisdiction in which the counterparty is incorporated and, if a foreign branch of an undertaking is involved, also under the law of the jurisdiction in which the branch is located, the law that governs the individual transactions included, and the law that governs any contract or agreement necessary to effect the contractual netting,
(iii) a credit institution must have procedures in place to ensure that the legal validity of its contractual netting is kept under review in the light of possible changes in the relevant laws, (iv) the credit institution maintains all required documentation in its files, (v) the effects of netting shall be factored into the credit institution's measurement of each counterparty's aggregate credit risk exposure and the credit institution manages its CCR on such a basis, and (vi) credit risk to each counterparty is aggregated to arrive at a single legal exposure across transactions. This aggregation shall be factored into credit limit purposes and internal capital purposes.
The competent authorities must be satisfied, if necessary after consulting the other competent authorities concerned, that the contractual netting is legally valid under the law of each of the relevant jurisdictions. If any of the competent authorities are not satisfied in that respect, the contractual netting agreement will not be recognised as risk-reducing for either of the counterparties. The competent authorities may accept reasoned legal opinions drawn up by types of contractual netting. No contract containing a provision which permits a non-defaulting counterparty to make limited payments only, or no payments at all, to the estate of the defaulter, even if the defaulter is a net creditor (a "walkaway" clause), may be recognised as risk-reducing. In addition, for contractual cross-product netting agreements the following criteria shall be met: (a) the net sum referred to in subpoint (b)(i) of this Part shall be the net sum of the positive and negative close out values of any included individual bilateral master agreement and of the positive and negative mark-to-market value of the individual transactions (the "Cross-Product Net Amount"); (b) the written and reasoned legal opinions referred to in subpoint (b)(ii) of this Part shall address the validity and enforceability of the entire contractual cross‐product netting agreement under its terms and the impact of the netting arrangement on the material provisions of any included individual bilateral master agreement. A legal opinion shall be generally recognised as such by the legal community in the Member State in which the credit institution is authorised or a memorandum of law that addresses all relevant issues in a reasoned manner; (c) the credit institution shall have procedures in place under subpoint (b)(iii) of this Part to verify that any transaction which is to be included in a netting set is covered by a legal opinion; and (d) taking into account the contractual cross product netting agreement, the credit institution shall continue to comply with the requirements for the recognition of bilateral netting and the requirements of Articles 90 to 93 for the recognition of credit risk mitigation, as applicable, with respect to each included individual bilateral master agreement and transaction.
(c) Effects of recognition Netting for the purposes of Parts 5 and 6 shall be recognised as set out therein. (i) Contracts for novation The single net amounts fixed by contracts for novation, rather than the gross amounts involved, may be weighted. Thus, in the application of Part 3, in: step (a): the current replacement cost, and in step (b): the notional principal amounts or underlying values
may be obtained taking account of the contract for novation. In the application of Part 4, in step (a) the notional principal amount may be calculated taking account of the contract for novation; the percentages of Table 3 must apply. (ii) Other netting agreements In application of Part 3: in step (a) the current replacement cost for the contracts included in a netting agreement may be obtained by taking account of the actual hypothetical net replacement cost which results from the agreement; in the case where netting leads to a net obligation for the credit institution calculating the net replacement cost, the current replacement cost is calculated as "0", and in step (b) the figure for potential future credit exposure for all contracts included in a netting agreement may be reduced according to the following formula: PCE red =0,4 * PCEgross +0,6 * NGR * PCEgross where: PCEred = the reduced figure for potential future credit exposure for all contracts with a given counterparty included in a legally valid bilateral netting agreement PCEgross = the sum of the figures for potential future credit exposure for all contracts with a given counterparty which are included in a legally valid bilateral netting agreement and are calculated by multiplying their notional principal amounts by the percentages set out in Table 1 NGR = "net-to-gross ratio": at the discretion of the competent authorities either: (i) separate calculation: the quotient of the net replacement cost for all contracts included in a legally valid bilateral netting agreement with a given counterparty (numerator) and the gross replacement cost for all contracts included in a legally valid bilateral netting agreement with that counterparty (denominator), or (ii) aggregate calculation: the quotient of the sum of the net replacement cost calculated on a bilateral basis for all counterparties taking into account the contracts included in legally valid netting agreements (numerator) and the gross replacement cost for all contracts included in legally valid netting agreements (denominator).
If Member States permit credit institutions a choice of methods, the method chosen is to be used consistently. For the calculation of the potential future credit exposure according to the above formula perfectly matching contracts included in the netting agreement may be taken into account as a single contract with a notional principal equivalent to the net receipts. Perfectly matching contracts are forward foreign-exchange contracts or similar contracts in which a notional principal is equivalent to cash flows if the cash flows fall due on the same value date and fully or partly in the same currency. In the application of Part 4, in step (a) perfectly matching contracts included in the netting agreement may be taken into account as a single contract with a notional principal equivalent to the net receipts, the notional principal amounts are multiplied by the percentages given in Table 3, and for all other contracts included in a netting agreement, the percentages applicable may be reduced as indicated in Table 6: Table 6 In the case of interest-rate contracts, credit institutions may, subject to the consent of their competent authorities, choose either original or residual maturity. Original maturity Interest-rate contracts Foreign-exchange contracts One year or less 0,35 %1,50 %More than one year but not more than two years 0,75 %3,75 %Additional allowance for each additional year 0,75 %2,25 %
(a) single-currency interest rate swaps; (b) basis-swaps; (c) forward rate agreements; (d) interest-rate futures; (e) interest-rate options purchased; and (f) other contracts of similar nature.
(a) cross-currency interest-rate swaps; (b) forward foreign-exchange contracts; (c) currency futures; (d) currency options purchased; (e) other contracts of a similar nature; and (f) contracts concerning gold of a nature similar to (a) to (e).
| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight | 0 % | 20 % | 50 % | 100 % | 100 % | 150 % |
(a) it is a consensus risk score from Export Credit Agencies participating in the OECD "Arrangement on Guidelines for Officially Supported Export Credits"; or (b) the Export Credit Agency publishes its credit assessments, and the Export Credit Agency subscribes to the OECD agreed methodology, and the credit assessment is associated with one of the eight minimum export insurance premiums (MEIP) that the OECD agreed methodology establishes.
| MEIP | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
|---|---|---|---|---|---|---|---|---|
| Risk weight | 0 % | 0 % | 20 % | 50 % | 100 % | 100 % | 100 % | 150 % |
(a) the International Bank for Reconstruction and Development; (b) the International Finance Corporation; (c) the Inter-American Development Bank; (d) the Asian Development Bank; (e) the African Development Bank; (f) the Council of Europe Development Bank; (g) the Nordic Investment Bank; (h) the Caribbean Development Bank; (i) the European Bank for Reconstruction and Development; (j) the European Investment Bank; (k) the European Investment Fund; (l) the Multilateral Investment Guarantee Agency; (m) the International Finance Facility for Immunisation; and (n) the Islamic Development Bank.
(a) the European Community; (b) the International Monetary Fund; (c) the Bank for International Settlements.
| Credit quality step to which central government is assigned | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight of exposure | 20 % | 50 % | 100 % | 100 % | 100 % | 150 % |
| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight | 20 % | 50 % | 50 % | 100 % | 100 % | 150 % |
| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight | 20 % | 20 % | 20 % | 50 % | 50 % | 150 % |
(a) the reserves are held in accordance with Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reservesOJ L 250, 2.10.2003, p. 10 .(b) in the event of the bankruptcy or insolvency of the institution where the reserves are held, the reserves are fully repaid to the credit institution in a timely manner and are not made available to meet other liabilities of the institution.
| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight | 20 % | 50 % | 100 % | 100 % | 150 % | 150 % |
(a) the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro‐economic factors affect both the value of the property and the performance of the borrower; (b) the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral; (c) the minimum requirements set out in Annex VIII, Part 2, point 8 and the valuation rules set out in Annex VIII, Part 3, points 62 to 65 are met; and (d) the value of the property exceeds the exposures by a substantial margin.
(a) the value of the property must not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro‐economic factors affect both the value of the property and the performance of the borrower; (b) the risk of the borrower must not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility must not materially depend on any cash flow generated by the underlying property serving as collateral; and (c) the minimum requirements set out in Annex VIII, Part 2, point 8, and the valuation rules set out in Annex VIII, Part 3, points 62 to 65 are met.
(a) 50 % of the market value of the property in question; (b) 50 % of the market value of the property or 60 % of the mortgage lending value, whichever is lower, in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions.
(a) losses stemming from lending collateralised by commercial real estate property up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage lending value (MLV)) do not exceed 0,3 % of the outstanding loans collateralised by commercial real estate property in any given year; and (b) overall losses stemming from lending collateralised by commercial real estate property must not exceed 0,5 % of the outstanding loans collateralised by commercial real estate property in any given year.
(a) 150 %, if value adjustments are less than 20 % of the unsecured part of the exposure gross of value adjustments; and (b) 100 %, if value adjustments are no less than 20 % of the unsecured part of the exposure gross of value adjustments.
(a) 100 %, if value adjustments are no less than 20 % of the exposure value gross of value adjustments; and (b) 50 %, if value adjustments are no less than 50 % of the exposure value gross of value adjustments.
(a) exposures to or guaranteed by central governments, central banks, public sector entities, regional governments and local authorities in the EU; (b) exposures to or guaranteed by non-EU central governments, non-EU central banks, multilateral development banks, international organisations that qualify for the credit quality step 1 as set out in this Annex, and exposures to or guaranteed by non-EU public sector entities, non-EU regional governments and non-EU local authorities that are risk weighted as exposures to institutions or central governments and central banks according to points 8, 9, 14 or 15 respectively and that qualify for the credit quality step 1 as set out in this Annex, and exposures in the sense of this point that qualify as a minimum for the credit quality step 2 as set out in this Annex, provided that they do not exceed 20 % of the nominal amount of outstanding covered bonds of issuing institutions; (c) exposures to institutions that qualify for the credit quality step 1 as set out in this Annex. The total exposure of this kind shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing credit institution. Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by real estate to the holders of covered bonds shall not be comprised by the 15 % limit. Exposures to institutions in the EU with a maturity not exceeding 100 days shall not be comprised by the step 1 requirement but those institutions must as a minimum qualify for credit quality step 2 as set out in this Annex; (d) loans secured by residential real estate or shares in Finnish residential housing companies as referred to in point 46 up to the lesser of the principal amount of the liens that are combined with any prior liens and 80 % of the value of the pledged properties or by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of a Member State securitising residential real estate exposures provided that at least 90 % of the assets of such Fonds Communs de Créances or of equivalent securitisation entities governed by the laws of a Member State are composed of mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 80 % of the value of the pledged properties and the units qualify for the credit quality step 1 as set out in this Annex where such units do not exceed 20 % of the nominal amount of the outstanding issue. Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the 90 % limit; (e) loans secured by commercial real estate or shares in Finnish housing companies as referred to in point 52 up to the lesser of the principal amount of the liens that are combined with any prior liens and 60 % of the value of the pledged properties or by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of a Member State securitising commercial real estate exposures provided that, at least, 90 % of the assets of such Fonds Communs de Créances or of equivalent securitisation entities governed by the laws of a Member State are composed of mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 60 % of the value of the pledged properties and the units qualify for the credit quality step 1 as set out in this Annex where such units do not exceed 20 % of the nominal amount of the outstanding issue. The competent authorities may recognise loans secured by commercial real estate as eligible where the Loan to Value ratio of 60 % is exceeded up to a maximum level of 70 % if the value of the total assets pledged as collateral for the covered bonds exceed the nominal amount outstanding on the covered bond by at least 10 %, and the bondholders' claim meets the legal certainty requirements set out in Annex VIII. The bondholders' claim must take priority over all other claims on the collateral.Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the 90 % limit; or (f) loans secured by ships where only liens that are combined with any prior liens within 60 % of the value of the pledged ship.
(a) if the exposures to the institution are assigned a risk weight of 20 %, the covered bond shall be assigned a risk weight of 10 %; (b) if the exposures to the institution are assigned a risk weight of 50 %, the covered bond shall be assigned a risk weight of 20 %; (c) if the exposures to the institution are assigned a risk weight of 100 %, the covered bond shall be assigned a risk weight of 50 %; and (d) if the exposures to the institution are assigned a risk weight of 150 %, the covered bond shall be assigned a risk weight of 100 %.
| Credit Quality Step | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight | 20 % | 50 % | 100 % | 150 % | 150 % | 150 % |
| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
|---|---|---|---|---|---|---|
| Risk weight | 20 % | 50 % | 100 % | 100 % | 150 % | 150 % |
(a) the CIU is managed by a company which is subject to supervision in a Member State or, subject to approval of the credit institution's competent authority, if: (i) the CIU is managed by a company which is subject to supervision that is considered equivalent to that laid down in Community law; and (ii) cooperation between competent authorities is sufficiently ensured;
(b) the CIU's prospectus or equivalent document includes: (i) the categories of assets in which the CIU is authorised to invest; and (ii) if investment limits apply, the relative limits and the methodologies to calculate them; and
(c) the business of the CIU is reported on at least an annual basis to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period.
(a) ownership and organisation structure of the ECAI; (b) financial resources of the ECAI; (c) staffing and expertise of the ECAI; and (d) corporate governance of the ECAI.
(a) the back-testing must be established for at least one year; (b) the regularity of the review process by the ECAI must be monitored by the competent authorities; and (c) the competent authorities must be able to receive from the ECAI the extent of its contacts with the senior management of the entities which it rates.
(a) market share of the ECAI; (b) revenues generated by the ECAI, and more in general financial resources of the ECAI; (c) whether there is any pricing on the basis of the rating; and (d) at least two credit institutions use the ECAI's individual credit assessment for bond issuing and/or assessing credit risks.
for defaulted exposures where credit institutions apply the LGD values set out in Part 2, point 8, RW shall be 0; and for defaulted exposures where credit institutions use own estimates of LGDs, RW shall be Max{0, 12.5 *(LGD-EL BE )};
| Remaining Maturity | Category 1 | Category 2 | Category 3 | Category 4 | Category 5 |
|---|---|---|---|---|---|
| Less than | 50 % | 70 % | 115 % | 250 % | 0 % |
| Equal or more than | 70 % | 90 % | 115 % | 250 % | 0 % |
(a) The exposures are to individuals; (b) The exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the credit institution. (In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the credit institution.). Undrawn commitments may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation; (c) The maximum exposure to a single individual in the sub-portfolio is EUR 100000 or less;(d) The credit institution can demonstrate that the use of the correlation of this point is limited to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands. Competent authorities shall review the relative volatility of loss rates across the qualifying revolving retail sub-portfolios, as well the aggregate qualifying revolving retail portfolio, and intend to share information on the typical characteristics of qualifying revolving retail loss rates across jurisdictions; and (e) The competent authority concurs that treatment as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of the sub‐portfolio.
(a) The credit institution has purchased the receivables from unrelated, third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the credit institution itself; (b) The purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible; (c) The purchasing credit institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and (d) The portfolio of purchased receivables is sufficiently diversified.
Expected loss (EL) = PD × LGD. Expected loss amount = EL × exposure value.
| Remaining Maturity | Category 1 | Category 2 | Category 3 | Category 4 | Category 5 |
|---|---|---|---|---|---|
| Less than | 0 % | 8 % | 50 % | ||
| Equal to or more than | 8 % | 50 % |
Expected loss amount = EL × exposure value
Expected loss (EL) = 0,8 % for private equity exposures in sufficiently diversified portfolios Expected loss (EL) = 0,8 % for exchange traded equity exposures Expected loss (EL) = 2,4 % for all other equity exposures.
Expected loss (EL) = PD × LGD and Expected loss amount = EL × exposure value
Expected loss (EL) = PD × LGD and Expected loss amount = EL × exposure value
(a) Senior exposures without eligible collateral: 45 %; (b) Subordinated exposures without eligible collateral: 75 %; (c) Credit institutions may recognise funded and unfunded credit protection in the LGD in accordance with Articles 90 to 93; (d) Covered bonds as defined in Annex VI, Part 1, points 68 to 70 may be assigned an LGD value of 12,5 %; (e) For senior purchased corporate receivables exposures where a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4: 45 %; (f) For subordinated purchased corporate receivables exposures where a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4: 100 %; and (g) For dilution risk of purchased corporate receivables: 75 %. Until 31 December 2010 , covered bonds as defined in Annex VI, Part 1, points 68 to 70 may be assigned an LGD value of11,25 % if:assets as set out in Annex VI, Part 1, point 68(a) to (c) collateralising the bonds all qualify for credit quality step 1 as set out in that Annex; where assets set out in Annex VI, Part 1, point 68(d) and (e) are used as collateral, the respective upper limits laid down in each of those points is 10 % of the nominal amount of the outstanding issue; assets as set out in Annex VI, Part 1, point 68(f) are not used as collateral; or the covered bonds are the subject of a credit assessment by a nominated ECAI, and the ECAI places them in the most favourable category of credit assessment that the ECAI could make in respect of covered bonds. By 31 December 2010 , this derogation shall be reviewed and consequent to such review the Commission may make proposals in accordance with the procedure referred to in Article 151(2).
(a) For an instrument subject to a cash flow schedule, M shall be calculated according to the following formula: M = MAX 1; MIN Σ /t t * CF t Σ , 5t CF t where CF t denotes the cash flows (principal, interest payments and fees) contractually payable by the obligor in period t;(b) For derivatives subject to a master netting agreement, M shall be the weighted average remaining maturity of the exposure, where M shall be at least 1 year. The notional amount of each exposure shall be used for weighting the maturity; (c) For exposures arising from fully or nearly-fully collateralised derivative instruments (listed in Annex IV) transactions and fully or nearly-fully collateralised margin lending transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least 10 days. The notional amount of each transaction shall be used for weighting the maturity; (d) If a credit institution is permitted to use own PD estimates for purchased corporate receivables, for drawn amounts M shall equal the purchased receivables exposure weighted average maturity, where M shall be at least 90 days. This same value of M shall also be used for undrawn amounts under a committed purchase facility provided the facility contains effective covenants, early amortisation triggers, or other features that protect the purchasing credit institution against a significant deterioration in the quality of the future receivables it is required to purchase over the facility's term. Absent such effective protections, M for undrawn amounts shall be calculated as the sum of the longest-dated potential receivable under the purchase agreement and the remaining maturity of the purchase facility, where M shall be at least 90 days; (e) For any other instrument than those mentioned in this point or when a credit institution is not in a position to calculate M as set out in (a), M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least 1 year; (f) for credit institutions using the Internal Model Method set out in Annex III, Part 6 to calculate the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year according to the following formula: M =MIN Σ +k =1tk ≤1year EffectiveEE k * Δ t k * df k Σ tk >1year maturity EE k * Δ t k * df k Σ k =1tk ≤1year EffectiveEE k * Δ t k * df k where: df = the risk‐free discount factor for future time period t k and the remaining symbols are defined in Annex III, Part 6.Notwithstanding the first paragraph of point 13(f), a credit institution that uses an internal model to calculate a one-sided credit valuation adjustment (CVA) may use, subject to the approval of the competent authorities, the effective credit duration estimated by the internal model as M. Subject to paragraph 14, for netting sets in which all contracts have an original maturity of less than one year the formula in point (a) shall apply; and (g) for the purposes of Part 1, point 4, M shall be the effective maturity of the credit protection but at least 1 year.
fully or nearly-fully collateralised derivative instruments listed in Annex IV; fully or nearly-fully collateralised margin lending transactions; and repurchase transactions, securities or commodities lending or borrowing transactions
(a) 0,09 % for exchange traded equity exposures where the investment is part of a long‐term customer relationship;(b) 0,09 % for non-exchange traded equity exposures where the returns on the investment are based on regular and periodic cash flows not derived from capital gains;(c) 0,40 % for exchange traded equity exposures including other short positions as set out in part 1, point 20; and(d) 1,25 % for all other equity exposures including other short positions as set out in Part 1, point 20.
(a) for credit lines which are uncommitted, that are unconditionally cancellable at any time by the credit institution without prior notice, or that effectively provide for automatic cancellation due to deterioration in a borrower's credit worthiness, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, credit institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor. Undrawn retail credit lines may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation; (b) for short-term letters of credit arising from the movement of goods, a conversion factor of 20 % shall apply for both the issuing and confirming institutions; (c) for undrawn purchase commitments for revolving purchased receivables that are unconditionally cancellable or that effectively provide for automatic cancellation at any time by the institution without prior notice, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, credit institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor; (d) for other credit lines, note issuance facilities (NIFs), and revolving underwriting facilities (RUFs), a conversion factor of 75 % shall apply; and (e) credit institutions which meet the minimum requirements for the use of own estimates of conversion factors as specified in Part 4 may use their own estimates of conversion factors across different product types as mentioned in points (a) to (d), subject to approval of the competent authorities.
100 % if it is a full risk item, 50 % if it is a medium-risk item, 20 % if it is a medium/low-risk item, and 0 % if it is a low-risk item.
(a) For investments held at fair value with changes in value flowing directly through income and into own funds, the exposure value is the fair value presented in the balance sheet; (b) For investments held at fair value with changes in value not flowing through income but into a tax-adjusted separate component of equity, the exposure value is the fair value presented in the balance sheet; and (c) For investments held at cost or at the lower of cost or market, the exposure value is the cost or market value presented in the balance sheet.
(a) Obligor risk characteristics; (b) Transaction risk characteristics, including product or collateral types or both. Credit institutions shall explicitly address cases where several exposures benefit from the same collateral; and (c) Delinquency, unless the credit institution demonstrates to its competent authority that delinquency is not a material risk drivers for the exposure;
(a) The grade or pool definitions and criteria shall be sufficiently detailed to allow those charged with assigning ratings to consistently assign obligors or facilities posing similar risk to the same grade or pool. This consistency shall exist across lines of business, departments and geographic locations; (b) The documentation of the rating process shall allow third parties to understand the assignments of exposures to grades or pools, to replicate grade and pool assignments and to evaluate the appropriateness of the assignments to a grade or a pool; and (c) The criteria shall also be consistent with the credit institution's internal lending standards and its policies for handling troubled obligors and facilities.
(a) country transfer risk, this being dependent on whether the exposures are denominated in local or foreign currency; (b) where the treatment of associated guarantees to an exposure may be reflected in an adjusted assignment to an obligor grade; and (c) where consumer protection, bank secrecy or other legislation prohibit the exchange of client data.
(a) the credit institution shall demonstrate to its competent authority that the model has good predictive power and that capital requirements are not distorted as a result of its use. The input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases; (b) the credit institution shall have in place a process for vetting data inputs into the model, which includes an assessment of the accuracy, completeness and appropriateness of the data; (c) the credit institution shall demonstrate that the data used to build the model is representative of the population of the credit institution's actual obligors or exposures; (d) the credit institution shall have a regular cycle of model validation that includes monitoring of model performance and stability; review of model specification; and testing of model outputs against outcomes; and (e) the credit institution shall complement the statistical model by human judgement and human oversight to review model-based assignments and to ensure that the models are used appropriately. Review procedures shall aim at finding and limiting errors associated with model weaknesses. Human judgements shall take into account all relevant information not considered by the model. The credit institution shall document how human judgement and model results are to be combined.
(a) provide a detailed outline of the theory, assumptions and/or mathematical and empirical basis of the assignment of estimates to grades, individual obligors, exposures, or pools, and the data source(s) used to estimate the model; (b) establish a rigorous statistical process (including out-of-time and out-of-sample performance tests) for validating the model; and (c) indicate any circumstances under which the model does not work effectively.
(a) complete rating histories on obligors and recognised guarantors; (b) the dates the ratings were assigned; (c) the key data and methodology used to derive the rating; (d) the person responsible for the rating assignment; (e) the identity of obligors and exposures that defaulted; (f) the date and circumstances of such defaults; and (g) data on the PDs and realised default rates associated with rating grades and ratings migration;
(a) complete histories of data on the facility ratings and LGD and conversion factor estimates associated with each rating scale; (b) the dates the ratings were assigned and the estimates were done; (c) the key data and methodology used to derive the facility ratings and LGD and conversion factor estimates; (d) the person who assigned the facility rating and the person who provided LGD and conversion factor estimates; (e) data on the estimated and realised LGDs and conversion factors associated with each defaulted exposure; (f) data on the LGD of the exposure before and after evaluation of the effects of a guarantee/or credit derivative, for those credit institutions that reflect the credit risk mitigating effects of guarantees or credit derivatives through LGD; and (g) data on the components of loss for each defaulted exposure.
(a) data used in the process of allocating exposures to grades or pools; (b) data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures; (c) the identity of obligors and exposures that defaulted; (d) for defaulted exposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD and conversion factor; and (e) data on loss rates for qualifying revolving retail exposures.
(a) the credit institution considers that the obligor is unlikely to pay its credit obligations to the credit institution, the parent undertaking or any of its subsidiaries in full, without recourse by the credit institution to actions such as realising security (if held); (b) the obligor is past due more than 90 days on any material credit obligation to the credit institution, the parent undertaking or any of its subsidiaries.
(a) The credit institution puts the credit obligation on non-accrued status, (b) The credit institution makes a value adjustment resulting from a significant perceived decline in credit quality subsequent to the credit institution taking on the exposure, (c) The credit institution sells the credit obligation at a material credit-related economic loss, (d) The credit institution consents to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or (where relevant) fees. This includes, in the case of equity exposures assessed under a PD/LGD Approach, distressed restructuring of the equity itself, (e) The credit institution has filed for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the credit institution, the parent undertaking or any of its subsidiaries, and (f) The obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the credit institution, the parent undertaking or any of its subsidiaries.
(a) the rating systems and criteria of other credit institutions in the pool are similar with its own; (b) the pool is representative of the portfolio for which the pooled data is used; and (c) the pooled data is used consistently over time by the credit institution for its estimates.
(a) the credit institution's process of assigning exposures to grades or pools and the process used by the external data source; and (b) the credit institution's internal risk profile and the composition of the external data.
(a) the credit institution shall assess the correlation among the quality of the purchased receivables and the financial condition of both the seller and servicer, and have in place internal policies and procedures that provide adequate safeguards to protect against any contingencies, including the assignment of an internal risk rating for each seller and servicer; (b) the credit institution shall have clear and effective policies and procedures for determining seller and servicer eligibility. The credit institution or its agent shall conduct periodic reviews of sellers and servicers in order to verify the accuracy of reports from the seller or servicer, detect fraud or operational weaknesses, and verify the quality of the seller's credit policies and servicer's collection policies and procedures. The findings of these reviews shall be documented; (c) the credit institution shall assess the characteristics of the purchased receivables pools, including over-advances; history of the seller's arrears, bad debts, and bad debt allowances; payment terms, and potential contra accounts; (d) the credit institution shall have effective policies and procedures for monitoring on an aggregate basis single-obligor concentrations both within and across purchased receivables pools; and (e) the credit institution shall ensure that it receives from the servicer timely and sufficiently detailed reports of receivables ageings and dilutions to ensure compliance with the credit institution's eligibility criteria and advancing policies governing purchased receivables, and provide an effective means with which to monitor and confirm the seller's terms of sale and dilution.
(a) the estimate of potential loss shall be robust to adverse market movements relevant to the long-term risk profile of the credit institution's specific holdings. The data used to represent return distributions shall reflect the longest sample period for which data is available and meaningful in representing the risk profile of the credit institution's specific equity exposures. The data used shall be sufficient to provide conservative, statistically reliable and robust loss estimates that are not based purely on subjective or judgmental considerations. Credit institutions shall demonstrate to competent authorities that the shock employed provides a conservative estimate of potential losses over a relevant long-term market or business cycle. The credit institution shall combine empirical analysis of available data with adjustments based on a variety of factors in order to attain model outputs that achieve appropriate realism and conservatism. In constructing Value at Risk (VaR) models estimating potential quarterly losses, credit institutions may use quarterly data or convert shorter horizon period data to a quarterly equivalent using an analytically appropriate method supported by empirical evidence and through a well-developed and documented thought process and analysis. Such an approach shall be applied conservatively and consistently over time. Where only limited relevant data is available the credit institution shall add appropriate margins of conservatism; (b) the models used shall be able to capture adequately all of the material risks embodied in equity returns including both the general market risk and specific risk exposure of the credit institution's equity portfolio. The internal models shall adequately explain historical price variation, capture both the magnitude and changes in the composition of potential concentrations, and be robust to adverse market environments. The population of risk exposures represented in the data used for estimation shall be closely matched to or at least comparable with those of the credit institution's equity exposures; (c) the internal model shall be appropriate for the risk profile and complexity of a credit institution's equity portfolio. Where a credit institution has material holdings with values that are highly non-linear in nature the internal models shall be designed to capture appropriately the risks associated with such instruments; (d) mapping of individual positions to proxies, market indices, and risk factors shall be plausible, intuitive, and conceptually sound; (e) credit institutions shall demonstrate through empirical analyses the appropriateness of risk factors, including their ability to cover both general and specific risk; (f) the estimates of the return volatility of equity exposures shall incorporate relevant and available data, information, and methods. Independently reviewed internal data or data from external sources (including pooled data) shall be used; and (g) a rigorous and comprehensive stress-testing programme shall be in place;
(a) full integration of the internal model into the overall management information systems of the credit institution and in the management of the non-trading book equity portfolio. Internal models shall be fully integrated into the credit institution's risk management infrastructure if they are particularly used inmeasuring and assessing equity portfolio performance (including the risk‐adjusted performance), allocating economic capital to equity exposures and evaluating overall capital adequacy and the investment management process; (b) established management systems, procedures, and control functions for ensuring the periodic and independent review of all elements of the internal modelling process, including approval of model revisions, vetting of model inputs, and review of model results, such as direct verification of risk computations. These reviews shall assess the accuracy, completeness, and appropriateness of model inputs and results and focus on both finding and limiting potential errors associated with known weaknesses and identifying unknown model weaknesses. Such reviews may be conducted by an internal independent unit, or by an independent external third party; (c) adequate systems and procedures for monitoring investment limits and the risk exposures of equity exposures; (d) the units responsible for the design and application of the model shall be functionally independent from the units responsible for managing individual investments; and (e) parties responsible for any aspect of the modelling process shall be adequately qualified. Management shall allocate sufficient skilled and competent resources to the modelling function.
(a) testing and monitoring grades and pools; (b) production and analysis of summary reports from the credit institution's rating systems; (c) implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas; (d) reviewing and documenting any changes to the rating process, including the reasons for the changes; (e) reviewing the rating criteria to evaluate if they remain predictive of risk. Changes to the rating process, criteria or individual rating parameters shall be documented and retained; (f) active participation in the design or selection, implementation and validation of models used in the rating process; (g) oversight and supervision of models used in the rating process; and (h) ongoing review and alterations to models used in the rating process.
(a) production of information relevant to testing and monitoring grades and pools; (b) production of summary reports from the credit institution's rating systems; (c) production of information relevant to review of the rating criteria to evaluate if they remain predictive of risk; (d) documentation of changes to the rating process, criteria or individual rating parameters; and (e) production of information relevant to ongoing review and alterations to models used in the rating process.
"Secured lending transaction" shall mean any transaction giving rise to an exposure secured by collateral which does not include a provision conferring upon the credit institution the right to receive margin frequently. "Capital market-driven transaction" shall mean any transaction giving rise to an exposure secured by collateral which includes a provision conferring upon the credit institution the right to receive margin frequently.
(a) cash on deposit with, or cash assimilated instruments held by, the lending credit institution; (b) debt securities issued by central governments or central banks, which securities have a credit assessment by an ECAI or export credit agency recognised as eligible for the purposes of Articles 78 to 83 which has been determined by the competent authority to be associated with credit quality step 4 or above under the rules for the risk weighting of exposures to central governments and central banks under Articles 78 to 83; (c) debt securities issued by institutions, which securities have a credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to credit institutions under Articles 78 to 83; (d) debt securities issued by other entities, which securities have a credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; (e) debt securities with a short-term credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of short term exposures under Articles 78 to 83; (f) equities or convertible bonds that are included in a main index; and (g) gold.
(i) debt securities issued by regional governments or local authorities, exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83; (ii) debt securities issued by public sector entities which are treated as exposures to central governments in accordance with point 15 of Part 1 of Annex VI; (iii) debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under Articles 78 to 83; and (iv) debt securities issued by international organisations which are assigned a 0 % risk weight under Articles 78 to 83.
(i) debt securities issued by regional governments or local authorities other than those exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83; (ii) debt securities issued by public sector entities, exposures to which are treated as exposures to credit institutions under Articles 78 to 83; and (iii) debt securities issued by multilateral development banks other than those to which a 0 % risk weight is assigned under Articles 78 to 83.
(a) they are listed on a recognised exchange; (b) they qualify as senior debt; (c) all other rated issues by the issuing institution of the same seniority have a credit assessment by an eligible ECAI which has been determined by the competent authorities to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to institutions or short term exposures under Articles 78 to 83; (d) the lending credit institution has no information to suggest that the issue would justify a credit assessment below that indicated in (c); and (e) the credit institution can demonstrate to the competent authorities that the market liquidity of the instrument is sufficient for these purposes.
(a) they have a daily public price quote; and (b) the collective investment undertaking is limited to investing in instruments that are eligible for recognition under points 7 and 8.
(a) equities or convertible bonds not included in a main index but traded on a recognised exchange; and (b) units in collective investment undertakings if the following conditions are met: (i) they have a daily public price quote; and (ii) the collective investment undertaking is limited to investing in instruments that are eligible for recognition under point 7 and 8 and the items mentioned in point (a) of this point.
The use (or potential use) by a collective investment undertaking of derivative instruments to hedge permitted investments shall not prevent units in that undertaking from being eligible.
(a) the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro‐economic factors affect both the value of the property and the performance of the borrower; and (b) the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral.
(a) losses stemming from loans collateralised by commercial real estate property up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by commercial real estate property in any given year; and(b) overall losses stemming from loans collateralised by commercial real estate property do not exceed 0,5 % of the outstanding loans collateralised by commercial real estate property in any given year.
(a) the existence of liquid markets for disposal of the collateral in an expeditious and economically efficient manner; and (b) the existence of well-established publicly available market prices for the collateral. The credit institution must be able to demonstrate that there is no evidence that the net prices it receives when collateral is realised deviates significantly from these market prices.
(a) central governments and central banks; (b) regional governments or local authorities; (c) multilateral development banks; (d) international organisations exposures to which a 0 % risk weight under Articles 78 to 83 is assigned; (e) public sector entities, claims on which are treated by the competent authorities as claims on institutions or central governments under Articles 78 to 83; (f) institutions; and (g) other corporate entities, including parent, subsidiary and affiliate corporate entities of the credit institution, that: (i) have a credit assessment by a recognised ECAI which has been determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; and (ii) in the case of credit institutions calculating risk‐weighted exposure amounts and expected loss amounts under Articles 84 to 89, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporate under Articles 78 to 83.
the protection provider has sufficient expertise in providing unfunded credit protection; the protection provider is regulated in a manner equivalent to the rules laid down in this Directive, or had, at the time the credit protection was provided, a credit assessment by a recognised ECAI which had been determined by the competent authorities to be associated with credit quality step 3, or above, under the rules for the risk weighting of exposures to corporate under Articles 78 to 83; the protection provider had, at the time the credit protection was provided, or for any period of time thereafter, an internal rating with a PD equivalent to or lower than that associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; and the provider has an internal rating with a PD equivalent to or lower than that associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83.
(a) credit default swaps; (b) total return swaps; and (c) credit linked notes to the extent of their cash funding.
(a) they must be legally effective and enforceable in all relevant jurisdictions, including in the event of the insolvency or bankruptcy of a counterparty; (b) the credit institution must be able to determine at any time those assets and liabilities that are subject to the on-balance sheet netting agreement; (c) the credit institution must monitor and control the risks associated with the termination of the credit protection; and (d) the credit institution must monitor and control the relevant exposures on a net basis.
(a) be legally effective and enforceable in all relevant jurisdictions, including in the event of the bankruptcy or insolvency of the counterparty; (b) give the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement upon the event of default, including in the event of the bankruptcy or insolvency of the counterparty; and (c) provide for the netting of gains and losses on transactions closed out under a master agreement so that a single net amount is owed by one party to the other.
(a) Low correlation The credit quality of the obligor and the value of the collateral must not have a material positive correlation. Securities issued by the obligor, or any related group entity, are not eligible. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Annex VI, Part 1, points 68 to 70 may be recognised as eligible when they are posted as collateral for repurchase transactions, provided that the first paragraph of this point is complied with. (b) Legal certainty Credit institutions shall fulfil any contractual and statutory requirements in respect of, and take all steps necessary to ensure, the enforceability of the collateral arrangements under the law applicable to their interest in the collateral. Credit institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions. They shall re‐conduct such review as necessary to ensure continuing enforceability. (c) Operational requirements The collateral arrangements shall be properly documented, with a clear and robust procedure for the timely liquidation of collateral. Credit institutions shall employ robust procedures and processes to control risks arising from the use of collateral — including risks of failed or reduced credit protection, valuation risks, risks associated with the termination of the credit protection, concentration risk arising from the use of collateral and the interaction with the credit institution's overall risk profile. The credit institution shall have documented policies and practices concerning the types and amounts of collateral accepted. Credit institutions shall calculate the market value of the collateral, and revalue it accordingly, with a minimum frequency of once every six months and whenever the credit institution has reason to believe that there has occurred a significant decrease in its market value. Where the collateral is held by a third party, credit institutions must take reasonable steps to ensure that the third party segregates the collateral from its own assets.
(a) Legal certainty The mortgage or charge shall be enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement, and the mortgage or charge shall be properly filed on a timely basis. The arrangements shall reflect a perfected lien (i.e. all legal requirements for establishing the pledge shall been fulfilled). The protection agreement and the legal process underpinning it shall enable the credit institution to realise the value of the protection within a reasonable timeframe. (b) Monitoring of property values The value of the property shall be monitored on a frequent basis and at a minimum once every year for commercial real estate and once every three years for residential real estate. More frequent monitoring shall be carried out where the market is subject to significant changes in conditions. Statistical methods may be used to monitor the value of the property and to identify property that needs revaluation. The property valuation shall be reviewed by an independent valuer when information indicates that the value of the property may have declined materially relative to general market prices. For loans exceeding EUR 3 million or 5 % of the own funds of the credit institution, the property valuation shall be reviewed by an independent valuer at least every three years. "Independent valuer" shall mean a person who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process. (c) Documentation The types of residential and commercial real estate accepted by the credit institution and its lending policies in this regard shall be clearly documented. (d) Insurance The credit institution shall have procedures to monitor that the property taken as protection is adequately insured against damage.
(a) Legal certainty (i) The legal mechanism by which the collateral is provided shall be robust and effective and ensure that the lender has clear rights over the proceeds; (ii) Credit institutions must take all steps necessary to fulfil local requirements in respect of the enforceability of security interest. There shall be a framework which allows the lender to have a first priority claim over the collateral subject to national discretion to allow such claims to be subject to the claims of preferential creditors provided for in legislative or implementing provisions; (iii) Credit institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions; and (iv) The collateral arrangements must be properly documented, with a clear and robust procedure for the timely collection of collateral. Credit institution's procedures shall ensure that any legal conditions required for declaring the default of the borrower and timely collection of collateral are observed. In the event of the borrower's financial distress or default, the credit institution shall have legal authority to sell or assign the receivables to other parties without consent of the receivables obligors.
(b) Risk management (i) The credit institution must have a sound process for determining the credit risk associated with the receivables. Such a process shall include, among other things, analyses of the borrower's business and industry and the types of customers with whom the borrower does business. Where the credit institution relies on the borrower to ascertain the credit risk of the customers, the credit institution must review the borrower's credit practices to ascertain their soundness and credibility; (ii) The margin between the amount of the exposure and the value of the receivables must reflect all appropriate factors, including the cost of collection, concentration within the receivables pool pledged by an individual borrower, and potential concentration risk within the credit institution's total exposures beyond that controlled by the credit institution's general methodology. The credit institution must maintain a continuous monitoring process appropriate to the receivables. Additionally, compliance with loan covenants, environmental restrictions, and other legal requirements shall be reviewed on a regular basis; (iii) The receivables pledged by a borrower shall be diversified and not be unduly correlated with the borrower. Where there is material positive correlation, the attendant risks shall be taken into account in the setting of margins for the collateral pool as a whole; (iv) Receivables from affiliates of the borrower (including subsidiaries and employees) shall not be recognised as risk mitigants; and (v) The credit institution shall have a documented process for collecting receivable payments in distressed situations. The requisite facilities for collection shall be in place, even when the credit institution normally looks to the borrower for collections.
(a) the collateral arrangement shall be legally effective and enforceable in all relevant jurisdictions and shall enable the credit institution to realise the value of the property within a reasonable timeframe; (b) with the sole exception of permissible prior claims referred to in point 9(a)(ii), only first liens on, or charges over, collateral are permissible. As such, the credit institution shall have priority over all other lenders to the realised proceeds of the collateral; (c) the value of the property shall be monitored on a frequent basis and at a minimum once every year. More frequent monitoring shall be required where the market is subject to significant changes in conditions; (d) the loan agreement shall include detailed descriptions of the collateral plus detailed specifications of the manner and frequency of revaluation; (e) the types of physical collateral accepted by the credit institution and policies and practices in respect of the appropriate amount of each type of collateral relative to the exposure amount shall be clearly documented in internal credit policies and procedures available for examination; (f) the credit institution's credit policies with regard to the transaction structure shall address appropriate collateral requirements relative to the exposure amount, the ability to liquidate the collateral readily, the ability to establish objectively a price or market value, the frequency with which the value can readily be obtained (including a professional appraisal or valuation), and the volatility or a proxy of the volatility of the value of the collateral; (g) both initial valuation and revaluation shall take fully into account any deterioration or obsolescence of the collateral. Particular attention must be paid in valuation and revaluation to the effects of the passage of time on fashion- or date-sensitive collateral; (h) the credit institution must have the right to physically inspect the property. It shall have policies and procedures addressing its exercise of the right to physical inspection; and (i) the credit institution must have procedures to monitor that the property taken as protection is adequately insured against damage.
(a) the conditions set out in points 8 or 10 as appropriate for the recognition as collateral of the type of property leased shall be met; (b) there shall be robust risk management on the part of the lessor with respect to the use to which the leased asset is put, its age and the planned duration of its use, including appropriate monitoring of the value of the security; (c) there shall be in place a robust legal framework establishing the lessor's legal ownership of the asset and its ability to exercise its rights as owner in a timely fashion; and (d) where this has not already been ascertained in calculating the LGD level, the difference between the value of the unamortised amount and the market value of the security must not be so large as to overstate the credit risk mitigation attributed to the leased assets.
(a) the borrower's claim against the third party institution is openly pledged or assigned to the lending credit institution and such pledge or assignment is legally effective and enforceable in all relevant jurisdictions; (b) the third party institution is notified of the pledge or assignment; (c) as a result of the notification, the third party institution is able to make payments solely to the lending credit institution or to other parties with the lending credit institution's consent; and (d) the pledge or assignment is unconditional and irrevocable.
(a) the company providing the life insurance may be recognised as an eligible unfunded credit protection provider under Part 1, point 26; (b) the life insurance policy is openly pledged or assigned to the lending credit institution; (c) the company providing the life insurance is notified of the pledge or assignment and as a result may not pay amounts payable under the contract without the consent of the lending credit institution; (d) the declared surrender value of the policy is non-reducible; (e) the lending credit institution must have the right to cancel the policy and receive the surrender value in a timely way in the event of the default of the borrower; (f) the lending credit institution is informed of any non-payments under the policy by the policy-holder; (g) the credit protection must be provided for the maturity of the loan. Where this is not possible because the insurance relationship ends before the loan relationship expires, the credit institution must ensure that the amount deriving from the insurance contract serves the credit institution as security until the end of the duration of the credit agreement; and (h) the pledge or assignment must be legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.
(a) the credit protection shall be direct; (b) the extent of the credit protection shall be clearly defined and incontrovertible; (c) the credit protection contract shall not contain any clause, the fulfilment of which is outside the direct control of the lender, that: (i) would allow the protection provider unilaterally to cancel the protection; (ii) would increase the effective cost of protection as a result of deteriorating credit quality of the protected exposure; (iii) could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due; or (iv) could allow the maturity of the credit protection to be reduced by the protection provider; and
(d) it must be legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.
(a) the counter‐guarantee covers all credit risk elements of the claim; (b) both the original guarantee and the counter‐guarantee meet the requirements for guarantees set out in points 14, 15 and 18, except that the counter‐guarantee need not be direct; and (c) the competent authority is satisfied that the cover is robust and that nothing in the historical evidence suggests that the coverage of the counter‐guarantee is less than effectively equivalent to that of a direct guarantee by the entity in question.
(a) on the qualifying default of and/or non-payment by the counterparty, the lending credit institution shall have the right to pursue, in a timely manner, the guarantor for any monies due under the claim in respect of which the protection is provided. Payment by the guarantor shall not be subject to the lending credit institution first having to pursue the obligor. In the case of unfunded credit protection covering residential mortgage loans, the requirements in point 14(c)(iii) and in the first subparagraph of this point have only to be satisfied within 24 months; (b) the guarantee shall be an explicitly documented obligation assumed by the guarantor; and (c) subject to the following sentence, the guarantee shall cover all types of payments the obligor is expected to make in respect of the claim. Where certain types of payment are excluded from the guarantee, the recognised value of the guarantee shall be adjusted to reflect the limited coverage.
(a) the lending credit institution has the right to obtain in a timely manner a provisional payment by the guarantor calculated to represent a robust estimate of the amount of the economic loss, including losses resulting from the non‐payment of interest and other types of payment which the borrower is obliged to make, likely to be incurred by the lending credit institution proportional to the coverage of the guarantee; or (b) the lending credit institution can demonstrate that the loss-protecting effects of the guarantee, including losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment.
(a) subject to point (b), the credit events specified under the credit derivative shall at a minimum include: (i) the failure to pay the amounts due under the terms of the underlying obligation that are in effect at the time of such failure (with a grace period that is closely in line with or shorter than the grace period in the underlying obligation); (ii) the bankruptcy, insolvency or inability of the obligor to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due, and analogous events; and (iii) the restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that results in a credit loss event (i.e. value adjustment or other similar debit to the profit and loss account);
(b) where the credit events specified under the credit derivative do not include restructuring of the underlying obligation as described in point (a)(iii), the credit protection may nonetheless be recognised subject to a reduction in the recognised value as specified in point 83 of Part 3; (c) in the case of credit derivatives allowing for cash settlement, a robust valuation process shall be in place in order to estimate loss reliably. There shall be a clearly specified period for obtaining post-credit-event valuations of the underlying obligation; (d) if the protection purchaser's right and ability to transfer the underlying obligation to the protection provider is required for settlement, the terms of the underlying obligation shall provide that any required consent to such transfer may not be unreasonably withheld; and (e) the identity of the parties responsible for determining whether a credit event has occurred shall be clearly defined. This determination shall not be the sole responsibility of the protection provider. The protection buyer shall have the right/ability to inform the protection provider of the occurrence of a credit event.
(a) the reference obligation or the obligation used for purposes of determining whether a credit event has occurred, as the case may be, ranks pari passu with or is junior to the underlying obligation; and (b) the underlying obligation and the reference obligation or the obligation used for purposes of determining whether a credit event has occurred, as the case may be, share the same obligor (i.e., the same legal entity) and there are in place legally enforceable cross-default or cross-acceleration clauses.
(a) the underlying obligation shall be to: a corporate exposure as defined in Article 86, excluding insurance and reinsurance undertakings; an exposure to a regional government, local authority or Public Sector Entity which is not treated as an exposure to a central government or a central bank according to Article 86; or an exposure to a small or medium sized entity, classified as a retail exposure according to Article 86(4);
(b) the underlying obligors shall not be members of the same group as the protection provider; (c) the exposure shall be hedged by one of the following instruments: single-name unfunded credit derivatives or single-name guarantees, first-to-default basket products — the treatment shall be applied to the asset within the basket with the lowest risk‐weighted exposure amount, or n th -to-default basket products — the protection obtained is only eligible for consideration under this framework if eligible (n-1)th default protection has also be obtained or where (n-1) of the assets within the basket has/have already defaulted. Where this is the case the treatment shall be applied to the asset within the basket with the lowest risk‐weighted exposure amount;
(d) the credit protection meets the requirements set out in points 14, 15, 18, 20 and 21; (e) the risk weight that is associated with the exposure prior to the application of the treatment in Annex VII, Part 1, point 4, does not already factor in any aspect of the credit protection; (f) a credit institution shall have the right and expectation to receive payment from the protection provider without having to take legal action in order to pursue the counterparty for payment. To the extent possible, a credit institution shall take steps to satisfy itself that the protection provider is willing to pay promptly should a credit event occur; (g) the purchased credit protection shall absorb all credit losses incurred on the hedged portion of an exposure that arise due to the occurrence of credit events outlined in the contract; (h) if the payout structure provides for physical settlement, then there shall be legal certainty with respect to the deliverability of a loan, bond, or contingent liability. If a credit institution intends to deliver an obligation other than the underlying exposure, it shall ensure that the deliverable obligation is sufficiently liquid so that the credit institution would have the ability to purchase it for delivery in accordance with the contract; (i) the terms and conditions of credit protection arrangements shall be legally confirmed in writing by both the protection provider and the credit institution; (j) credit institutions shall have a process in place to detect excessive correlation between the creditworthiness of a protection provider and the obligor of the underlying exposure due to their performance being dependent on common factors beyond the systematic risk factor; and (k) in the case of protection against dilution risk, the seller of purchased receivables shall not be a member of the same group as the protection provider.
(a) the internal risk‐measurement model used for calculation of potential price volatility for the transactions is closely integrated into the daily risk‐management process of the credit institution and serves as the basis for reporting risk exposures to senior management of the credit institution; (b) the credit institution has a risk control unit that is independent from business trading units and reports directly to senior management. The unit must be responsible for designing and implementing the credit institution's risk‐management system. It shall produce and analyse daily reports on the output of the risk‐measurement model and on the appropriate measures to be taken in terms of position limits; (c) the daily reports produced by the risk‐control unit are reviewed by a level of management with sufficient authority to enforce reductions of positions taken and of overall risk exposure; (d) the credit institution has sufficient staff skilled in the use of sophisticated models in the risk control unit; (e) the credit institution has established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of the risk‐measurement system; (f) the credit institution's models have a proven track record of reasonable accuracy in measuring risks demonstrated through the back-testing of its output using at least one year of data; (g) the credit institution frequently conducts a rigorous programme of stress testing and the results of these tests are reviewed by senior management and reflected in the policies and limits it sets; (h) the credit institution must conduct, as Part of its regular internal auditing process, an independent review of its risk‐measurement system. This review must include both the activities of the business trading units and of the independent risk‐control unit; (i) at least once a year, the credit institution must conduct a review of its risk‐management system; and (j) the internal model shall meet the requirements set out in Annex III, Part 6, points 40 to 42.
(a) at least daily calculation of the potential change in value; (b) a 99th percentile, one-tailed confidence interval; (c) a 5-day equivalent liquidation period, except in the case of transactions other than securities repurchase transactions or securities lending or borrowing transactions where a 10-day equivalent liquidation period shall be used; (d) an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility; and (e) three-monthly data set updates.
(a) debt securities issued by regional governments or local authorities exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83; (b) debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under or by virtue of Articles 78 to 83; and (c) debt securities issued by international organisations which are assigned a 0 % risk weight under Articles 78 to 83.
(a) the collateral is cash on deposit or a cash assimilated instrument; or (b) the collateral is in the form of debt securities issued by central governments or central banks eligible for a 0 % risk weight under Articles 78 to 83, and its market value has been discounted by 20 %. For the purposes of this point "debt securities issued by central governments or central banks" shall to include those indicated under point 28.
, where a| Credit quality step with which the credit assessment of the debt security is associated | Residual Maturity | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(b) | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(c) and (d) | ||||
|---|---|---|---|---|---|---|---|
| 20-day liquidation period ( %) | 10-day liquidation period ( %) | 5-day liquidation period ( %) | 20-day liquidation period ( %) | 10-day liquidation period ( %) | 5-day liquidation period ( %) | ||
| 1 | ≤ 1 year | 1 | |||||
| >1 ≤ 5 years | 2 | 4 | |||||
| > 5 years | 4 | 8 | |||||
| 2-3 | ≤ 1 year | 1 | 2 | ||||
| >1 ≤ 5 years | 3 | 6 | |||||
| > 5 years | 6 | 12 | |||||
| 4 | ≤ 1 year | 15 | N/A | N/A | N/A | ||
| >1 ≤ 5 years | 15 | N/A | N/A | N/A | |||
| > 5 years | 15 | N/A | N/A | N/A | |||
| Credit quality step with which the credit assessment of a short term debt security is associated | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(b) with short-term credit assessments | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(c) and (d) with short-term credit assessments | ||||
|---|---|---|---|---|---|---|
| 20-day liquidation period ( %) | 10-day liquidation period ( %) | 5-day liquidation period ( %) | 20-day liquidation period ( %) | 10-day liquidation period ( %) | 5-day liquidation period ( %) | |
| 1 | 1 | |||||
| 2-3 | 1 | 2 | ||||
| Other collateral or exposure types | |||
|---|---|---|---|
| 20-day liquidation period ( %) | 10-day liquidation period ( %) | 5-day liquidation period ( %) | |
| Main Index Equities, Main Index Convertible Bonds | 15 | ||
| Other Equities or Convertible Bonds listed on a recognised exchange | 25 | ||
| Cash | 0 | 0 | 0 |
| Gold | 15 | ||
| Volatility adjustment for currency mismatch | ||
|---|---|---|
| 20‐day liquidation period ( %) | 10‐day liquidation period ( %) | 5‐day liquidation period) |
| 8 | ||
(a) the integration of estimated volatility adjustments into daily risk management; (b) the validation of any significant change in the process for the estimation of volatility adjustments; (c) the verification of the consistency, timeliness and reliability of data sources used to run the system for the estimation of volatility adjustments, including the independence of such data sources; and (d) the accuracy and appropriateness of the volatility assumptions.
(a) Both the exposure and the collateral are cash or debt securities issued by central governments or central banks within the meaning of Part 1, point 7(b) and eligible for a 0 % risk weight under Articles 78 to 83, (b) Both the exposure and the collateral are denominated in the same currency, (c) Either the maturity of the transaction is no more than one day or both the exposure and the collateral are subject to daily marking-to-market or daily remargining, (d) It is considered that the time between the last marking-to-market before a failure to remargin by the counterparty and the liquidation of the collateral shall be no more than four business days, (e) The transaction is settled across a settlement system proven for that type of transaction, (f) The documentation covering the agreement is standard market documentation for repurchase transactions or securities lending or borrowing transactions in the securities concerned, (g) The transaction is governed by documentation specifying that if the counterparty fails to satisfy an obligation to deliver cash or securities or to deliver margin or otherwise defaults, then the transaction is immediately terminable, and (h) The counterparty is considered a "core market participant" by the competent authorities. Core market participants shall include the following entities: the entities mentioned in point 7(b) of Part 1 exposures to which are assigned a 0 % risk weight under Articles 78 to 83; institutions; other financial companies (including insurance companies) exposures to which are assigned a 20 % risk weight under Articles 78 to 83 or which, in the case of credit institutions calculating risk‐weighted exposure amounts and expected loss amounts under Articles 83 to 89, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83 regulated collective investment undertakings that are subject to capital or leverage requirements; regulated pension funds; and recognised clearing organisations.
| LGD* for senior claims or contingent claims | LGD* for subordinated claims or contingent claims | Required minimum collateralisation level of the exposure (C*) | Required minimum collateralisation level of the exposure (C | |
|---|---|---|---|---|
| Receivables | 35 % | 65 % | 0 % | 125 % |
| Residential real estate/commercial real estate | 35 % | 65 % | 30 % | 140 % |
| Other collateral | 40 % | 70 % | 30 % | 140 % |
(a) allow credit institutions to assign a 30 % LGD for senior exposures in the form of Commercial Real Estate leasing; (b) allow credit institutions to assign a 35 % LGD for senior exposures in the form of equipment leasing; and (c) allow credit institutions to assign a 30 % LGD for senior exposures secured by residential or commercial real estate. At the end of this period, this derogation shall be reviewed.
(a) losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by that form of real estate property in any given year; and (b) overall losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively do not exceed 0,5 % of the outstanding loans collateralised by that form of real estate property in any given year.
(a) where the instrument will be repurchased at its face value, the value of the protection shall be that amount; (b) where the instrument will be repurchased at market price, the value of the protection shall be the value of the instrument valued in the same way as the debt securities specified in Part 1, point 8.
(a) where the amount that the protection provider has undertaken to pay is not higher than the exposure value, the value of the credit protection calculated under the first sentence of this point shall be reduced by 40 %; or (b) where the amount that the protection provider has undertaken to pay is higher than the exposure value, the value of the credit protection shall be no higher than 60 % of the exposure value.
(a) the original maturity of the protection is less than 1 year; or (b) the exposure is a short term exposure specified by the competent authorities as being subject to a one–day floor rather than a one-year floor in respect of the maturity value (M) under Annex VII, Part 2, point 14.
"Excess spread" means finance charge collections and other fee income received in respect of the securitised exposures net of costs and expenses; "Clean-up call option" means a contractual option for the originator to repurchase or extinguish the securitisation positions before all of the underlying exposures have been repaid, when the amount of outstanding exposures falls below a specified level; "Liquidity facility" means the securitisation position arising from a contractual agreement to provide funding to ensure timeliness of cash flows to investors; "Kirb" means 8 % of the risk‐weighted exposure amounts that would be calculated under Articles 84 to 89 in respect of the securitised exposures, had they not been securitised, plus the amount of expected losses associated with those exposures calculated under those Articles; "Ratings based method" means the method of calculating risk‐weighted exposure amounts for securitisation positions in accordance with Part 4, points 46 to 51; "Supervisory formula method" means the method of calculating risk‐weighted exposure amounts for securitisation positions in accordance with Part 4, points 52 to 54; "Unrated position" means a securitisation position which does not have an eligible credit assessment by an eligible ECAI as defined in Article 97; "Rated position" means a securitisation position which has an eligible credit assessment by an eligible ECAI as defined in Article 97; and "Asset-backed commercial paper (ABCP) programme" means a programme of securitisations the securities issued by which predominantly take the form of commercial paper with an original maturity of one year or less.
(a) The securitisation documentation reflects the economic substance of the transaction; (b) The securitised exposures are put beyond the reach of the originator credit institution and its creditors, including in bankruptcy and receivership. This shall be supported by the opinion of qualified legal counsel; (c) The securities issued do not represent payment obligations of the originator credit institution; (d) The transferee is a securitisation special-purpose entity (SSPE); (e) The originator credit institution does not maintain effective or indirect control over the transferred exposures. An originator shall be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator credit institution's retention of servicing rights or obligations in respect of the exposures shall not of itself constitute indirect control of the exposures; (f) Where there is a clean-up call option, the following conditions are satisfied: (i) The clean-up call option is exercisable at the discretion of the originator credit institution; (ii) The clean-up call option may only be exercised when 10 % or less of the original value of the exposures securitised remains unamortised; and (iii) The clean-up call option is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement; and
(g) The securitisation documentation does not contain clauses that (i) other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures; or (ii) increase the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool.
(a) The securitisation documentation reflects the economic substance of the transaction; (b) The credit protection by which the credit risk is transferred complies with the eligibility and other requirements under Articles 90 to 93 for the recognition of such credit protection. For the purposes of this point, special purpose entities shall not be recognised as eligible unfunded protection providers; (c) The instruments used to transfer credit risk do not contain terms or conditions that: (i) impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs; (ii) allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures; (iii) other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution; (iv) increase the credit institutions' cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool; and
(d) An opinion is obtained from qualified legal counsel confirming the enforceability of the credit protection in all relevant jurisdictions.
(a) There shall be no mismatch between the types of payments reflected in the credit assessment and the types of payment to which the credit institution is entitled under the contract giving rise to the securitisation position in question; and (b) The credit assessments shall be available publicly to the market. Credit assessments are considered to be publicly available only if they have been published in a publicly accessible forum and they are included in the ECAI's transition matrix. Credit assessments that are made available only to a limited number of entities shall not be considered to be publicly available.
(a) where a credit institution calculates risk-weighted exposure amounts under points 6 to 36, the exposure value of an on-balance sheet securitisation position shall be its balance sheet value; (b) where a credit institution calculates risk-weighted exposure amounts under points 37 to 76, the exposure value of an on-balance sheet securitisation position shall be measured gross of value adjustments; and (c) the exposure value of an off-balance sheet securitisation position shall be its nominal value multiplied by a conversion figure as prescribed in this Annex. This conversion figure shall be 100 % unless otherwise specified.
| Credit quality step | 1 | 2 | 3 | 4 | 5 and below |
|---|---|---|---|---|---|
| Risk weight | 20 % | 50 % | 100 % | 350 % |
| Credit quality step | 1 | 2 | 3 | All other credit assessments |
|---|---|---|---|---|
| Risk weight | 20 % | 50 % | 100 % |
(a) in a tranche which is economically in a second loss position or better in the securitisation and the first loss tranche must provide meaningful credit enhancement to the second loss tranche; (b) of a quality the equivalent of investment grade or better; and (c) held by a credit institution which does not hold a position in the first loss tranche.
(a) The liquidity facility documentation shall clearly identify and limit the circumstances under which the facility may be drawn; (b) It shall not be possible for the facility to be drawn so as to provide credit support by covering losses already incurred at the time of draw — for example, by providing liquidity in respect of exposures in default at the time of draw or by acquiring assets at more than fair value; (c) The facility shall not be used to provide permanent or regular funding for the securitisation; (d) Repayment of draws on the facility shall not be subordinated to the claims of investors other than to claims arising in respect of interest rate or currency derivative contracts, fees or other such payments, nor be subject to waiver or deferral; (e) It shall not be possible for the facility to be drawn after all applicable credit enhancements from which the liquidity facility would benefit are exhausted; and (f) The facility must include a provision that results in an automatic reduction in the amount that can be drawn by the amount of exposures that are in default, where "default" has the meaning given to it under Articles 84 to 89, or where the pool of securitised exposures consists of rated instruments, that terminates the facility if the average quality of the pool falls below investment grade.
(a) securitisations of revolving exposures whereby investors remain fully exposed to all future draws by borrowers so that the risk on the underlying facilities does not return to the originator credit institution even after an early amortisation event has occurred, and (b) securitisations where any early amortisation provision is solely triggered by events not related to the performance of the securitised assets or the originator credit institution, such as material changes in tax laws or regulations.
(a) the risk-weighted exposure amounts calculated in respect of its positions in the investors' interest; and (b) the risk-weighted exposure amounts that would be calculated in respect of the securitised exposures by a credit institution holding the exposures as if they had not been securitised in an amount equal to the investors' interest.
(a) the originator credit institution has an appropriate capital/liquidity plan in place to ensure that it has sufficient capital and liquidity available in the event of an early amortisation; (b) throughout the duration of the transaction there is pro-rata sharing between the originator's interest and the investor's interest of payments of interest and principal, expenses, losses and recoveries based on the balance of receivables outstanding at one or more reference points during each month; (c) the amortisation period is considered sufficient for 90 % of the total debt (originator's and investors' interest) outstanding at the beginning of the early amortisation period to have been repaid or recognised as in default; and (d) the speed of repayment is no more rapid than would be achieved by straight-line amortisation over the period set out in point (c).
| Securitisations subject to a controlled early amortisation provision | Securitisations subject to a non-controlled early amortisation provision | |
|---|---|---|
| 3 months average excess spread | Conversion figure | Conversion figure |
| Above level A | 0 % | 0 % |
| Level A | 1 % | 5 % |
| Level B | 2 % | 15 % |
| Level C | 10 % | 50 % |
| Level D | 20 % | 100 % |
| Level E | 40 % | 100 % |
(a) the reference positions must be subordinate in all respects to the unrated securitisationposition; (b) the maturity of the reference positions must be equal to or longer than that of the unrated position in question; and (c) on an ongoing basis, any inferred rating must be updated to reflect any changes in the credit assessment of the reference positions.
(a) positions in the commercial paper issued from the ABCP programme shall be rated positions; (b) the credit institution shall satisfy the competent authorities that its internal assessment of the credit quality of the position reflects the publicly available assessment methodology of one or more eligible ECAIs, for the rating of securities backed by the exposures of the type securitised; (c) the ECAIs, the methodology of which shall be reflected as required by the point (b), shall include those ECAIs which have provided an external rating for the commercial paper issued from the ABCP programme. Quantitative elements, such as stress factors, used in assessing the position to a particular credit quality must be at least as conservative as those used in the relevant assessment methodology of the ECAIs in question; (d) in developing its internal assessment methodology the credit institution shall take into consideration relevant published ratings methodologies of the eligible ECAIs that rate the commercial paper of the ABCP programme. This consideration shall be documented by the credit institution and updated regularly, as outlined in point (g); (e) the credit institution's internal assessment methodology shall include rating grades. There shall be a correspondence between such rating grades and the credit assessments of eligible ECAIs. This correspondence shall be explicitly documented; (f) the internal assessment methodology shall be used in the credit institution's internal risk management processes, including its decision making, management information and capital allocation processes; (g) internal or external auditors, an ECAI, or the credit institution's internal credit review or risk management function shall perform regular reviews of the internal assessment process and the quality of the internal assessments of the credit quality of the credit institution's exposures to an ABCP programme. If the credit institution's internal audit, credit review, or risk management functions perform the review, then these functions shall be independent of the ABCP programme business line, as well as the customer relationship; (h) the credit institution shall track the performance of its internal ratings over time to evaluate the performance of its internal assessment methodology and shall make adjustments, as necessary, to that methodology when the performance of the exposures routinely diverges from that indicated by the internal ratings; (i) the ABCP programme shall incorporate underwriting standards in the form of credit and investment guidelines. In deciding on an asset purchase, the ABCP programme administrator shall consider the type of asset being purchased, the type and monetary value of the exposures arising from the provision of liquidity facilities and credit enhancements, the loss distribution, and the legal and economic isolation of the transferred assets from the entity selling the assets. A credit analysis of the asset seller's risk profile shall be performed and shall include analysis of past and expected future financial performance, current market position, expected future competitiveness, leverage, cash flow, interest coverage and debt rating. In addition, a review of the seller's underwriting standards, servicing capabilities, and collection processes shall be performed; (j) the ABCP programme's underwriting standards shall establish minimum asset eligibility criteria that, in particular: (i) exclude the purchase of assets that are significantly past due or defaulted; (ii) limit excess concentration to individual obligor or geographic area; and (iii) limits the tenor of the assets to be purchased;
(k) the ABCP programme shall have collections policies and processes that take into account the operational capability and credit quality of the servicer. The ABCP programme shall mitigate seller/servicer risk through various methods, such as triggers based on current credit quality that would preclude commingling of funds; (l) the aggregated estimate of loss on an asset pool that the ABCP programme is considering purchasing must take into account all sources of potential risk, such as credit and dilution risk. If the seller-provided credit enhancement is sized based only on credit-related losses, then a separate reserve shall be established for dilution risk, if dilution risk is material for the particular exposure pool. In addition, in sizing the required enhancement level, the program shall review several years of historical information, including losses, delinquencies, dilutions, and the turnover rate of the receivables; and (m) the ABCP programme shall incorporate structural features — for example wind down triggers — into the purchase of exposures in order to mitigate potential credit deterioration of the underlying portfolio.
| Credit Quality Step (CQS) | Risk weight | ||
|---|---|---|---|
| A | B | C | |
| CQS 1 | 7 % | 12 % | 20 % |
| CQS 2 | 8 % | 15 % | 25 % |
| CQS 3 | 10 % | 18 % | 35 % |
| CQS 4 | 12 % | 20 % | 35 % |
| CQS 5 | 20 % | 35 % | 35 % |
| CQS 6 | 35 % | 50 % | 50 % |
| CQS 7 | 60 % | 75 % | 75 % |
| CQS 8 | 100 % | 100 % | 100 % |
| CQS 9 | 250 % | 250 % | 250 % |
| CQS 10 | 425 % | 425 % | 425 % |
| CQS 11 | 650 % | 650 % | 650 % |
| Below CQS 11 | |||
| Credit Quality Step (CQS) | Risk weight | ||
|---|---|---|---|
| A | B | C | |
| CQS 1 | 7 % | 12 % | 20 % |
| CQS 2 | 12 % | 20 % | 35 % |
| CQS 3 | 60 % | 75 % | 75 % |
| All other credit assessments | |||
(a) the competent authority is satisfied that this is justified due to the loss absorption qualities of subordinate tranches in the securitisation; and (b) either the position has an external credit assessment which has been determined to be associated with credit quality step 1 in Table 4 or 5 or, if it is unrated, requirements (a) to (c) in point 42 are satisfied where "reference positions" are taken to mean positions in the subordinate tranche which would receive a risk weight of 7 % under point 46.
(a) the exposure value of that notional Part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation; plus (b) the exposure value of that Part of the pool of undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation, the proportion of which to the total amount of such undrawn amounts is the same as the proportion of the exposure value described in point (a) to the exposure value of the pool of drawn amounts sold into the securitisation.
(a) the exposure value of the position may be derived from the risk-weighted exposure amounts taking into account any reductions made in accordance with points 72 and 73; (b) the calculation of the exposure value may reflect eligible funded protection in a manner consistent with the methodology prescribed in points 60 to 67; and (c) where the Supervisory Formula Method is used to calculate risk-weighted exposure amounts and L < KIRBR and [L+T] > KIRBR the position may be treated as two positions with L equal to KIRBR for the more senior of the positions.
(a) Realised profits/losses from the sale of non-trading book items; (b) Income from extraordinary or irregular items; (c) Income derived from insurance. When revaluation of trading items is part of the profit and loss statement, revaluation could be included. When Article 36 (2) of Directive 86/635/EEC is applied, revaluation booked in the profit and loss account should be included.
| Business line | List of activities | Percentage |
|---|---|---|
| Corporate finance | 18 % | |
| Trading and sales | 18 % | |
| 12 % | ||
| Commercial banking | 15 % | |
| 12 % | ||
| Payment and settlement | 18 % | |
| Agency services | Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management | 15 % |
| Asset management | 12 % |
(a) all activities must be mapped into the business lines in a mutually exclusive and jointly exhaustive manner; (b) any activity which cannot be readily mapped into the business line framework, but which represents an ancillary function to an activity included in the framework, must be allocated to the business line it supports. If more than one business line is supported through the ancillary activity, an objective‐mapping criterion must be used; (c) if an activity cannot be mapped into a particular business line then the business line yielding the highest percentage must be used. The same business line equally applies to any associated ancillary activity; (d) credit institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain, for instance by using a treatment based on internal transfer costs between the two business lines; (e) the mapping of activities into business lines for operational risk capital purposes must be consistent with the categories used for credit and market risks; (f) senior management is responsible for the mapping policy under the control of the governing bodies of the credit institution; and (g) the mapping process to business lines must be subject to independent review.
(a) Credit institutions shall have a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. They shall identify their exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review. (b) The operational risk assessment system must be closely integrated into the risk management processes of the credit institution. Its output must be an integral Part of the process of monitoring and controlling the credit institution's operational risk profile. (c) Credit institutions shall implement a system of management reporting that provides operational risk reports to relevant functions within the credit institution. Credit institutions shall have procedures for taking appropriate action according to the information within the management reports.
(a) verifying that the internal validation processes are operating in a satisfactory manner; (b) making sure that data flows and processes associated with the risk measurement system are transparent and accessible.
(a) the insurance policy must have an initial term of no less than one year. For policies with a residual term of less than one year, the credit institution must make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100 % haircut for policies with a residual term of 90 days or less; (b) the insurance policy has a minimum notice period for cancellation of the contract of 90 days; (c) the insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed credit institution, that preclude the credit institution receiver or liquidator, from recovering for damages suffered or expenses incurred by the credit institution, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the credit institution; provided that the insurance policy may exclude any fine, penalty, or punitive damages resulting from actions by the competent authorities; (d) the risk mitigation calculations must reflect the insurance coverage in a manner that is transparent in its relationship to, and consistent with, the actual likelihood and impact of loss used in the overall determination of operational risk capital; (e) the insurance is provided by a third party entity. In the case of insurance through captives and affiliates, the exposure has to be laid off to an independent third party entity, for example through re-insurance, that meets the eligibility criteria; and (f) the framework for recognising insurance is well reasoned and documented.
(a) the residual term of an insurance policy, where less than one year, as noted above; (b) a policy's cancellation terms, where less than one year; and (c) the uncertainty of payment as well as mismatches in coverage of insurance policies.
(a) all operational risks of the credit institution are captured. The competent authority shall be satisfied with the methodology used to cover different activities, geographical locations, legal structures or other relevant divisions determined on an internal basis; and (b) the qualifying criteria set out in Parts 2 and 3 are fulfilled for the Part of activities covered by the Standardised Approach and Advanced Measurement Approaches respectively.
(a) on the date of implementation of an Advanced Measurement Approach, a significant part of the credit institution's operational risks are captured by the Advanced Measurement Approach; and (b) the credit institution takes a commitment to roll out the Advanced Measurement Approach across a material Part of its operations within a time schedule agreed with its competent authorities.
| Event-Type Category | Definition |
|---|---|
| Internal fraud | Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/discrimination events, which involves at least one internal party |
| External fraud | Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party |
| Employment Practices and Workplace Safety | Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity/discrimination events |
| Clients, Products & Business Practices | Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product |
| Damage to Physical Assets | Losses arising from loss or damage to physical assets from natural disaster or other events |
| Business disruption and system failures | Losses arising from disruption of business or system failures |
| Execution, Delivery & Process Management | Losses from failed transaction processing or process management, from relations with trade counterparties and vendors |
(a) the results of the stress test carried out by the credit institutions applying an IRB approach; (b) the exposure to and management of concentration risk by the credit institutions, including their compliance with the requirements laid down in Articles 108 to 118; (c) the robustness, suitability and manner of application of the policies and procedures implemented by credit institutions for the management of the residual risk associated with the use of recognized credit risk mitigation techniques; (d) the extent to which the own funds held by a credit institution in respect of assets which it has securitised are adequate having regard to the economic substance of the transaction, including the degree of risk transfer achieved; (e) the exposure to and management of liquidity risk by the credit institutions; (f) the impact of diversification effects and how such effects are factored into the risk measurement system; and (g) the results of stress tests carried out by institutions using an internal model to calculate market risk capital requirements under Annex V to Directive 2006/49/EC.
(a) the strategies and processes to manage those risks; (b) the structure and organisation of the relevant risk management function or other appropriate arrangements; (c) the scope and nature of risk reporting and measurement systems; and (d) the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants.
(a) the name of the credit institution to which the requirements of this Directive apply; (b) an outline of the differences in the basis of consolidation for accounting and prudential purposes, with a brief description of the entities that are: (i) fully consolidated; (ii) proportionally consolidated; (iii) deducted from own funds; or (iv) neither consolidated nor deducted;
(c) any current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities among the parent undertaking and its subsidiaries; (d) the aggregate amount by which the actual own funds are less than the required minimum in all subsidiaries not included in the consolidation, and the name or names of such subsidiaries; and (e) if applicable, the circumstance of making use of the provisions laid down in Articles 69 and 70.
(a) summary information on the terms and conditions of the main features of all own funds items and components thereof; (b) the amount of the original own funds, with separate disclosure of all positive items and deductions; (c) the total amount of additional own funds, and own funds as defined in Chapter IV of Directive 2006/49/EC; (d) deductions from original and additional own funds pursuant to Article 66(2), with separate disclosure of items referred to in Article 57(q); and (e) total eligible own funds, net of deductions and limits laid down in Article 66.
(a) a summary of the credit institution's approach to assessing the adequacy of its internal capital to support current and future activities; (b) for credit institutions calculating the risk‐weighted exposure amounts in accordance with Articles 78 to 83, 8 per cent of the risk‐weighted exposure amounts for each of the exposure classes specified in Article 79; (c) for credit institutions calculating risk‐weighted exposure amounts in accordance with Articles 84 to 89, 8 per cent of the risk‐weighted exposure amounts for each of the exposure classes specified in Article 86. For the retail exposure class, this requirement applies to each of the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond. For the equity exposure class, this requirement applies to: (i) each of the approaches provided in Annex VII, Part 1, points 17 to 26; (ii) exchange traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures; (iii) exposures subject to supervisory transition regarding capital requirements; and (iv) exposures subject to grandfathering provisions regarding capital requirements;
(d) minimum capital requirements calculated in accordance with Article 75, points (b) and (c); and (e) minimum capital requirements calculated in accordance with Articles 103 to 105, and disclosed separately.
(a) a discussion of the methodology used to assign internal capital and credit limits for counterparty credit exposures; (b) a discussion of policies for securing collateral and establishing credit reserves; (c) a discussion of policies with respect to wrong-way risk exposures; (d) a discussion of the impact of the amount of collateral the credit institution would have to provide given a downgrade in its credit rating; (e) gross positive fair value of contracts, netting benefits, netted current credit exposure, collateral held and net derivatives credit exposure. Net derivatives credit exposure is the credit exposure on derivatives transactions after considering both the benefits from legally enforceable netting agreements and collateral arrangements; (f) measures for exposure value under the methods set out in Parts 3 to 6 of Annex III, whichever method is applicable; (g) the notional value of credit derivative hedges, and the distribution of current credit exposure by types of credit exposure; (h) credit derivative transactions (notional), segregated between use for the credit institution's own credit portfolio, as well as in its intermediation activities, including the distribution of the credit derivatives products used, broken down further by protection bought and sold within each product group; and (i) the estimate of α if the credit institution has received the approval of the competent authorities to estimate α.
(a) the definitions for accounting purposes of "past due" and "impaired"; (b) a description of the approaches and methods adopted for determining value adjustments and provisions; (c) the total amount of exposures after accounting offsets and without taking into account the effects of credit risk mitigation, and the average amount of the exposures over the period broken down by different types of exposure classes; (d) the geographic distribution of the exposures, broken down in significant areas by material exposure classes, and further detailed if appropriate; (e) the distribution of the exposures by industry or counterparty type, broken down by exposure classes, and further detailed if appropriate; (f) the residual maturity breakdown of all the exposures, broken down by exposure classes, and further detailed if appropriate; (g) by significant industry or counterparty type, the amount of: (i) impaired exposures and past due exposures, provided separately; (ii) value adjustments and provisions; and (iii) charges for value adjustments and provisions during the period;
(h) the amount of the impaired exposures and past due exposures, provided separately, broken down by significant geographical areas including, if practical, the amounts of value adjustments and provisions related to each geographical area; (i) the reconciliation of changes in the value adjustments and provisions for impaired exposures, shown separately. The information shall comprise: (i) a description of the type of value adjustments and provisions; (ii) the opening balances; (iii) the amounts taken against the provisions during the period; (iv) the amounts set aside or reversed for estimated probable losses on exposures during the period, any other adjustments including those determined by exchange rate differences, business combinations, acquisitions and disposals of subsidiaries, and transfers between provisions; and (v) the closing balances.
(a) the names of the nominated ECAIs and ECAs and the reasons for any changes; (b) the exposure classes for which each ECAI or ECA is used; (c) a description of the process used to transfer the issuer and issue credit assessments onto items not included in the trading book; (d) the association of the external rating of each nominated ECAI or ECA with the credit quality steps prescribed in Annex VI, taking into account that this information needs not be disclosed if the credit institution complies with the standard association published by the competent authority; and (e) the exposure values and the exposure values after credit risk mitigation associated with each credit quality step prescribed in Annex VI, as well as those deducted from own funds.
(a) for each sub-portfolio covered: (i) the characteristics of the models used; (ii) a description of stress testing applied to the sub-portfolio; (iii) a description of the approaches used for back-testing and validating the accuracy and consistency of the internal models and modelling processes;
(b) the scope of acceptance by the competent authority; and (c) a description of the extent and methodologies for compliance with the requirements set out in Annex VII, Part B to Directive 2006/49/EC.
(a) the approaches for the assessment of own funds requirements for operational risk that the credit institution qualifies for; and (b) a description of the methodology set out in Article 105, if used by the credit institution, including a discussion of relevant internal and external factors considered in the credit institution's measurement approach. In the case of partial use, the scope and coverage of the different methodologies used.
(a) the differentiation between exposures based on their objectives, including for capital gains relationship and strategic reasons, and an overview of the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation and any significant changes in these practices; (b) the balance sheet value, the fair value and, for those exchange-traded, a comparison to the market price where it is materially different from the fair value; (c) the types, nature and amounts of exchange-traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures; (d) the cumulative realised gains or losses arising from sales and liquidations in the period; and (e) the total unrealised gains or losses, the total latent revaluation gains or losses, and any of these amounts included in the original or additional own funds.
(a) the nature of the interest rate risk and the key assumptions (including assumptions regarding loan prepayments and behaviour of non-maturity deposits), and frequency of measurement of the interest rate risk; and (b) the variation in earnings, economic value or other relevant measure used by the management for upward and downward rate shocks according to management's method for measuring the interest rate risk, broken down by currency.
(a) a description of the credit institution's objectives in relation to securitisation activity; (b) the roles played by the credit institution in the securitisation process; (c) an indication of the extent of the credit institution's involvement in each of them; (d) the approaches to calculating risk weighted exposure amounts that the credit institution follows for its securitisation activities; (e) a summary of the credit institution's accounting policies for securitisation activities, including: (i) whether the transactions are treated as sales or financings; (ii) the recognition of gains on sales; (iii) the key assumptions for valuing retained interests; and (iv) the treatment of synthetic securitisations if this is not covered by other accounting policies;
(f) the names of the ECAIs used for securitisations and the types of exposure for which each agency is used; (g) the total outstanding amount of exposures securitised by the credit institution and subject to the securitisation framework (broken down into traditional and synthetic), by exposure type; (h) for exposures securitised by the credit institution and subject to the securitisation framework, a breakdown by exposure type of the amount of impaired and past due exposures securitised, and the losses recognised by the credit institution during the period; (i) the aggregate amount of securitisation positions retained or purchased, broken down by exposure type; (j) the aggregate amount of securitisation positions retained or purchased, broken down into a meaningful number of risk weight bands. Positions that have been risk weighted at 1250 % or deducted shall be disclosed separately;(k) the aggregate outstanding amount of securitised revolving exposures segregated by the originator's interest and the investors' interest; and (l) a summary of the securitisation activity in the period, including the amount of exposures securitised (by exposure type), and recognised gain or loss on sale by exposure type.
(a) the competent authority's acceptance of approach or approved transition; (b) an explanation and review of: (i) the structure of internal rating systems and relation between internal and external ratings; (ii) the use of internal estimates other than for calculating risk‐weighted exposure amounts in accordance with Articles 84 to 89; (iii) the process for managing and recognising credit risk mitigation; and (iv) the control mechanisms for rating systems including a description of independence, accountability, and rating systems review;
(c) a description of the internal ratings process, provided separately for the following exposure classes: (i) central governments and central banks; (ii) institutions; (iii) corporate, including SMEs, specialised lending and purchased corporate receivables; (iv) retail, for each of the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond; and (v) equities;
(d) the exposure values for each of the exposure classes specified in Article 86. Exposures to central governments and central banks, institutions and corporates where credit institutions use own estimates of LGDs or conversion factors for the calculation of risk‐weighted exposure amounts shall be disclosed separately from exposures for which the credit institutions do not use such estimates; (e) for each of the exposure classes central governments and central banks, institutions, corporate and equity, and across a sufficient number of obligor grades (including default) to allow for a meaningful differentiation of credit risk, credit institutions shall disclose: (i) the total exposures (for the exposure classes central governments and central banks, institutions and corporate, the sum of outstanding loans and exposure values for undrawn commitments; for equities, the outstanding amount); (ii) for the credit institutions using own LGD estimates for the calculation of risk‐weighted exposure amounts, the exposure-weighted average LGD in percentage; (iii) the exposure-weighted average risk weight; and (iv) for the credit institutions using own estimates of conversion factors for the calculation of risk‐weighted exposure amounts, the amount of undrawn commitments and exposure-weighted average exposure values for each exposure class;
(f) for the retail exposure class and for each of the categories as defined under point (c)(iv), either the disclosures outlined under (e) above (if applicable, on a pooled basis), or an analysis of exposures (outstanding loans and exposure values for undrawn commitments) against a sufficient number of EL grades to allow for a meaningful differentiation of credit risk (if applicable, on a pooled basis); (g) the actual value adjustments in the preceding period for each exposure class (for retail, for each of the categories as defined under point (c)(iv) and how they differ from past experience; (h) a description of the factors that impacted on the loss experience in the preceding period (for example, has the credit institution experienced higher than average default rates, or higher than average LGDs and conversion factors); and (i) the credit institution's estimates against actual outcomes over a longer period. At a minimum, this shall include information on estimates of losses against actual losses in each exposure class (for retail, for each of the categories as defined under point (c)(iv) over a period sufficient to allow for a meaningful assessment of the performance of the internal rating processes for each exposure class (for retail for each of the categories as defined under point (c)(iv). Where appropriate, the credit institutions shall further decompose this to provide analysis of PD and, for the credit institutions using own estimates of LGDs and/or conversion factors, LGD and conversion factor outcomes against estimates provided in the quantitative risk assessment disclosures above.
(a) the policies and processes for, and an indication of the extent to which the entity makes use of, on- and off-balance sheet netting; (b) the policies and processes for collateral valuation and management; (c) a description of the main types of collateral taken by the credit institution; (d) the main types of guarantor and credit derivative counterparty and their creditworthiness; (e) information about market or credit risk concentrations within the credit mitigation taken; (f) for credit institutions calculating risk‐weighted exposure amounts in accordance with Articles 78 to 83 or 84 to 89, but not providing own estimates of LGDs or conversion factors in respect of the exposure class, separately for each exposure class, the total exposure value (after, where applicable, on- or off-balance sheet netting) that is covered — after the application of volatility adjustments — by eligible financial collateral, and other eligible collateral; and (g) for credit institutions calculating risk‐weighted exposure amounts in accordance with Articles 78 to 83 or 84 to 89, separately for each exposure class, the total exposure (after, where applicable, on- or off-balance sheet netting) that is covered by guarantees or credit derivatives. For the equity exposure class, this requirement applies to each of the approaches provided in Annex VII, Part 1, points 17 to 26.
| Directive | Deadline for transposition | |
|---|---|---|
| Directive 2000/12/EC | - - - - - | |
| Directive 2000/28/EC | ||
| Directive 2002/87/EC | ||
| Directive 2004/39/EC | ||
| Directive 2004/69/EC | ||
| Directive 2005/1/EC |
| This Directive | Directive 2000/12/EC | Directive 2000/28/EC | Directive 2002/87/EC | Directive 2004/39/EC | Directive 2005/1/EC |
|---|---|---|---|---|---|
| Article 1 | Article 2(1) and (2) | ||||
| Article 2 | |||||
| Article 2 | Article 2(4) | ||||
| Article 3 | Article 2(5) and (6) | ||||
| Article 3(1), third subparagraph | Article 3(2) | ||||
| Article 4(1) | Article 1(1) | ||||
| Article 4(2) to (5) | Article 1(2) to (5) | ||||
| Article 4(7) to (9) | Article 1(6) to (8) | ||||
| Article 4(10) | Article 29(1)(a) | ||||
| Article 4(11) to (14) | Article 1(10), (12) and (13) | ||||
| Article 4(21) and 22) | Article 29(1)(b) | ||||
| Article 4(23) | Article 1(23) | ||||
| Article 4(45) to (47) | Article 1(25) to (27) | ||||
| Article 5 | |||||
| Article 6 | Article 4 | ||||
| Article 7 | Article 8 | ||||
| Article 8 | Article 9 | ||||
| Article 9(1) | Article 5(1) and 1(11) | ||||
| Article 9(2) | Article 5(2) | ||||
| Article 10 | Article 5(3) to (7) | ||||
| Article 11 | Article 6 | ||||
| Article 12 | Article 7 | ||||
| Article 13 | Article 10 | ||||
| Article 14 | Article 11 | ||||
| Article 15(1) | Article 12 | ||||
| Article 15(2) and (3) | Article 29(2) | ||||
| Article 16 | Article 13 | ||||
| Article 17 | Article 14 | ||||
| Article 18 | Article 15 | ||||
| Article 19(1) | Article 16(1) | ||||
| Article 19(2) | Article 29(3) | ||||
| Article 20 | Article 16(3) | ||||
| Article 21 | Article 16(4) to (6) | ||||
| Article 22 | Article 17 | ||||
| Article 23 | Article 18 | ||||
| Article 24(1) | Article 19(1) to (3) | ||||
| Article 24(2) | Article 19(6) | ||||
| Article 24(3) | Article 19(4) | ||||
| Article 25(1) to (3) | Article 20(1) to (3), first and second subparagraphs | ||||
| Article 25(3) | Article 19(5) | ||||
| Article 25(4) | Article 20(3) third subparagraph | ||||
| Article 26 | Article 20(4) to (7) | ||||
| Article 27 | Article 1(3), second sentence | ||||
| Article 28 | Article 21 | ||||
| Article 29 | Article 22 | ||||
| Article 30 | Article 22(2) to (4) | ||||
| Article 31 | Article 22(5) | ||||
| Article 32 | Article 22(6) | ||||
| Article 33 | Article 22(7) | ||||
| Article 34 | Article 22(8) | ||||
| Article 35 | Article 22(9) | ||||
| Article 36 | Article 22(10) | ||||
| Article 37 | Article 22(11) | ||||
| Article 38 | Article 24 | ||||
| Article 39(1) and (2) | Article 25 | ||||
| Article 39(3) | Article 3(8) | ||||
| Article 40 | Article 26 | ||||
| Article 41 | Article 27 | ||||
| Article 42 | Article 28 | ||||
| Article 43 | Article 29 | ||||
| Article 44 | Article 30(1) to (3) | ||||
| Article 45 | Article 30(4) | ||||
| Article 46 | Article 30(3) | ||||
| Article 47 | Article 30(5) | ||||
| Article 48 | Article 30(6) and (7) | ||||
| Article 49 | Article 30(8) | ||||
| Article 50 | Article 30(9), first and second subparagraphs | ||||
| Article 51 | Article 30(9), third subparagraph | ||||
| Article 52 | Article 30(10) | ||||
| Article 53 | Article 31 | ||||
| Article 54 | Article 32 | ||||
| Article 55 | Article 33 | ||||
| Article 56 | Article 34(1) | ||||
| Article 57 | Article 29(4)(a) | ||||
| Article 58 | Article 29(4)(b) | ||||
| Article 59 | Article 29(4)(b) | ||||
| Article 60 | Article 29(4)(b) | ||||
| Article 61 | Article 34(3) and (4) | ||||
| Article 63 | Article 35 | ||||
| Article 64 | Article 36 | ||||
| Article 65 | Article 37 | ||||
| Article 66(1) and (2) | Article 38(1) and (2) | ||||
| Article 67 | Article 39 | ||||
| Article 73 | Article 52(3) | ||||
| Article 106 | Article 1(24) | ||||
| Article 107 | Article 1(1), third subparagraph | ||||
| Article 108 | Article 48(1) | ||||
| Article 109 | Article 48(4), first subparagraph | ||||
| Article 110 | Article 48(2) to (4), second subparagraph | ||||
| Article 111 | Article 49(1) to (5) | ||||
| Article 113 | Article 49(4), (6) and (7) | ||||
| Article 115 | Article 49(8) and (9) | ||||
| Article 116 | Article 49(10) | ||||
| Article 117 | Article 49(11) | ||||
| Article 118 | Article 50 | ||||
| Article 120 | Article 51(1), (2) and (5) | ||||
| Article 121 | Article 51(4) | ||||
| Article 122(1) and (2) | Article 51(6) | Article 29(5) | |||
| Article 125 | Article 53(1) and (2) | ||||
| Article 126 | Article 53(3) | ||||
| Article 128 | Article 53(5) | ||||
| Article 133(1) | Article 54(1) | Article 29(7)(a) | |||
| Article 133(2) and (3) | Article 54(2) and (3) | ||||
| Article 134(1) | Article 54(4), first subparagraph | ||||
| Article 134(2) | Article 54(4), second subparagraph | ||||
| Article 135 | Article 29(8) | ||||
| Article 137 | Article 55 | ||||
| Article 138 | Article 29(9) | ||||
| Article 139 | Article 56(1) to (3) | ||||
| Article 140 | Article 56(4) to (6) | ||||
| Article 141 | Article 56(7) | Article 29(10) | |||
| Article 142 | Article 56(8) | ||||
| Article 143 | Article 29(11) | Article 3(10) | |||
| Article 150 | Article 60(1) | ||||
| Article 151 | Article 60(2) | Article 3(10) | |||
| Article 158 | Article 67 | ||||
| Article 159 | Article 68 | ||||
| Article 160 | Article 69 | ||||
| Annex I, points 1 to 14, excluding the final paragraph | Annex I | ||||
| Annex I, final paragraph | Article 68 | ||||
| Annex II | Annex II | ||||
| Annex III | Annex III | ||||
| Annex IV | Annex IV |