Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014 (Text with EEA relevance)
Modified by
Regulation (EU) 2023/2869 of the European Parliament and of the Councilof 13 December 2023amending certain Regulations as regards the establishment and functioning of the European single access point(Text with EEA relevance), 32023R2869, December 20, 2023
Corrected by
Corrigendum to Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014, 32019R2033R(02), January 24, 2020
Corrigendum to Regulation (EU) 2019/2033 of the European Parliament and of the Council of 27 November 2019 on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014, 32019R2033R(05), December 2, 2020
Regulation (EU) 2019/2033 of the European Parliament and of the Councilof 27 November 2019on the prudential requirements of investment firms and amending Regulations (EU) No 1093/2010, (EU) No 575/2013, (EU) No 600/2014 and (EU) No 806/2014(Text with EEA relevance)PART ONEGENERAL PROVISIONSTITLE ISUBJECT MATTER, SCOPE AND DEFINITIONSArticle 1Subject matter and scope1.This Regulation lays down uniform prudential requirements which apply to investment firms authorised and supervised under Directive 2014/65/EU and supervised for compliance with prudential requirements under Directive (EU) 2019/2034 in relation to the following:(a)own funds requirements relating to quantifiable, uniform and standardised elements of risk‐to‐firm, risk‐to‐client and risk‐to‐market;(b)requirements limiting concentration risk;(c)liquidity requirements relating to quantifiable, uniform and standardised elements of liquidity risk;(d)reporting requirements related to points (a), (b) and (c);(e)public disclosure requirements.2.By way of derogation from paragraph 1, an investment firm authorised and supervised under Directive 2014/65/EU, which carries out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU, shall apply the requirements of Regulation (EU) No 575/2013 where the undertaking is not a commodity and emission allowance dealer, a collective investment undertaking or an insurance undertaking, and any of the following conditions apply:(a)the total value of the consolidated assets of the investment firm is equal to or exceeds EUR 15 billion, calculated as an average of the previous 12 months excluding the value of the individual assets of any subsidiaries established outside the Union that carry out any of the activities referred to in this subparagraph;(b)the total value of the consolidated assets of the investment firm is less than EUR 15 billion, and the investment firm is part of a group in which the total value of the consolidated assets of all undertakings in the group that individually have total assets of less than EUR 15 billion and that carry out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU is equal to or exceeds EUR 15 billion, all calculated as an average of the previous 12 months, excluding the value of the individual assets of any subsidiaries established outside the Union that carry out either of the activities referred to in this subparagraph; or(c)the investment firm is subject to a decision by the competent authority in accordance with Article 5 of Directive (EU) 2019/2034.Investment firms referred to in this paragraph shall be supervised for compliance with prudential requirements under Titles VII and VIII of Directive 2013/36/EU, including for the purposes of the determination of the consolidating supervisor where such investment firms belong to an investment firm group as defined in point (25) of Article 4(1) of this Regulation.3.The derogation provided for in paragraph 2 does not apply where an investment firm no longer meets any of the thresholds set out in that paragraph, calculated over a period of 12 consecutive months, or where a competent authority so decides in accordance with Article 5 of Directive (EU) 2019/2034. The investment firm shall notify the competent authority without undue delay any breach of a threshold during that period.4.Investment firms that meet the conditions set out in paragraph 2 shall remain subject to the requirements of Articles 55 and 59.5.By way of derogation from paragraph 1, competent authorities may allow an investment firm authorised and supervised under Directive 2014/65/EU that carries out any of the activities referred to in points (3) and (6) of Section A of Annex I to Directive 2014/65/EU to apply the requirements of Regulation (EU) No 575/2013 where all of the following conditions are fulfilled:(a)the investment firm is a subsidiary and is included in the supervision on a consolidated basis of a credit institution, a financial holding company or a mixed financial holding company, in accordance with the provisions of Chapter 2 of Title II of Part One of Regulation (EU) No 575/2013;(b)the investment firm notifies the competent authority under this Regulation and the consolidating supervisor, if applicable;(c)the competent authority is satisfied that the application of the own funds requirements of Regulation (EU) No 575/2013 on an individual basis to the investment firm and on a consolidated basis to the group, as applicable, is prudentially sound, does not result in a reduction of the own funds requirements of the investment firm under this Regulation, and is not undertaken for the purposes of regulatory arbitrage.Competent authorities shall inform the investment firm of a decision to allow the application of Regulation (EU) No 575/2013 and Directive 2013/36/EU pursuant to the first subparagraph within two months from the receipt of a notification referred to in point (b) of the first subparagraph of this paragraph, and shall inform EBA thereof. Where a competent authority refuses to allow the application of Regulation (EU) No 575/2013 and Directive 2013/36/EU, it shall provide full reasons.Investment firms referred to in this paragraph shall be supervised for compliance with prudential requirements under Titles VII and VIII of Directive 2013/36/EU, including for the purposes of the determination of the consolidating supervisor where such investment firms belong to an investment firm group as defined in point (25) of Article 4(1) of this Regulation.For the purposes of this paragraph, Article 7 of Regulation (EU) No 575/2013 shall not apply.Article 2Supervisory powersFor the purpose of ensuring compliance with this Regulation, competent authorities shall have the powers and shall follow the procedures set out in Directive (EU) 2019/2034.Article 3Application of stricter requirements by investment firmsThis Regulation shall not prevent investment firms from holding own funds and their components and liquid assets in excess of, or applying measures that are stricter than, those required by this Regulation.Article 4Definitions1.For the purposes of this Regulation, the following definitions apply:(1)"ancillary services undertaking" means an undertaking, the principal activity of which consists of owning or managing property, managing data‐processing services, or a similar activity which is ancillary to the principal activity of one or more investment firms;(2)"asset management company" means an asset management company as defined in point (19) of Article 4(1) of Regulation (EU) No 575/2013;(3)"clearing member" means an undertaking established in a Member State which fulfils the definition in point (14) of Article 2 of Regulation (EU) No 648/2012 of the European Parliament and of the CouncilRegulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories (OJ L 201, 27.7.2012, p. 1).;(4)"client" means a client as defined in point (9) of Article 4(1) of Directive 2014/65/EU except that, for the purposes of Part Four of this Regulation, "client" means any counterparty of the investment firm;(5)"commodity and emission allowance dealer" means a commodity and emission allowance dealer as defined in point (150) of Article 4(1) of Regulation (EU) No 575/2013;(6)"commodity derivatives" means commodity derivatives as defined in point (30) of Article 2(1) of Regulation (EU) No 600/2014;(7)"competent authority" means a competent authority as defined in point (5) of Article 3(1) of Directive (EU) 2019/2034;(8)"credit institution" means a credit institution as defined in point (1) of Article 4(1) of Regulation (EU) No 575/2013;(9)"dealing on own account" means dealing on own account as defined in point (6) of Article 4(1) of Directive 2014/65/EU;(10)"derivatives" means derivatives as defined in point (29) of Article 2(1) of Regulation (EU) No 600/2014;(11)"consolidated situation" means the situation that results from applying the requirements of this Regulation in accordance with Article 7 to a Union parent investment firm, Union parent investment holding company or Union parent mixed financial holding company as if that undertaking formed, together with all the investment firms, financial institutions, ancillary services undertakings and tied agents in the investment firm group, a single investment firm; for the purpose of this definition, the terms "investment firm", "financial institution", "ancillary services undertaking" and "tied agent" shall also apply to undertakings established in third countries, which, were they established in the Union, would fulfil the definitions of those terms;(12)"consolidated basis" means on the basis of the consolidated situation;(13)"execution of orders on behalf of clients" means execution of orders on behalf of clients as defined in point (5) of Article 4(1) of Directive 2014/65/EU;(14)"financial institution" means an undertaking other than a credit institution or investment firm, and other than a pure industrial holding company, the principal activity of which is to acquire holdings or to pursue one or more of the activities listed in points (2) to (12) and point (15) of Annex I to Directive 2013/36/EU, including a financial holding company, a mixed financial holding company, an investment holding company, a payment institution within the meaning of Directive (EU) 2015/2366 of the European Parliament and of the CouncilDirective (EU) 2015/2366 of the European Parliament and of the Council of 25 November 2015 on payment services in the internal market, amending Directives 2002/65/EC, 2009/110/EC and 2013/36/EU and Regulation (EU) No 1093/2010, and repealing Directive 2007/64/EC (OJ L 337, 23.12.2015, p. 35)., and an asset management company, but excluding insurance holding companies and mixed‐activity insurance holding companies as defined in point (g) of Article 212(1) of Directive 2009/138/EC of the European Parliament and of the CouncilDirective 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335, 17.12.2009, p. 1).;(15)"financial instrument" means a financial instrument as defined in point (15) of Article 4(1) of Directive 2014/65/EU;(16)"financial holding company" means a financial holding company as defined in point (20) of Article 4(1) of Regulation (EU) No 575/2013;(17)"financial sector entity" means a financial sector entity as defined in point (27) of Article 4(1) of Regulation (EU) No 575/2013;(18)"initial capital" means initial capital as defined in point (18) of Article 3(1) of Directive (EU) 2019/2034;(19)"group of connected clients" means a group of connected clients as defined in point (39) of Article 4(1) of Regulation (EU) No 575/2013;(20)"investment advice" means investment advice as defined in point (4) of Article 4(1) of Directive 2014/65/EU;(21)"investment advice of an ongoing nature" means the recurring provision of investment advice as well as the continuous or periodic assessment and monitoring or review of a client portfolio of financial instruments, including of the investments undertaken by the client on the basis of a contractual arrangement;(22)"investment firm" means an investment firm as defined in point (1) of Article 4(1) of Directive 2014/65/EU;(23)"investment holding company" means a financial institution, the subsidiaries of which are exclusively or mainly investment firms or financial institutions, at least one of such subsidiaries being an investment firm, and which is not a financial holding company as defined in point (20) of Article 4(1) of Regulation (EU) No 575/2013;(24)"investment services and activities" means investment services and activities as defined in point (2) of Article 4(1) of Directive 2014/65/EU;(25)"investment firm group" means a group of undertakings which consists of a parent undertaking and its subsidiaries or of undertakings which meet the conditions set out in Article 22 of Directive 2013/34/EU of the European Parliament and of the CouncilDirective 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19)., of which at least one is an investment firm and which does not include a credit institution;(26)"K‐factors" means own funds requirements set out in Title II of Part Three for risks that an investment firm poses to clients, markets and to itself;(27)"assets under management" or "AUM" means the value of assets that an investment firm manages for its clients under both discretionary portfolio management and nondiscretionary arrangements constituting investment advice of an ongoing nature;(28)"client money held" or "CMH" means the amount of client money that an investment firm holds, taking into account the legal arrangements in relation to asset segregation and irrespective of the national accounting regime applicable to client money held by the investment firm;(29)"assets safeguarded and administered" or "ASA" means the value of assets that an investment firm safeguards and administers for clients, irrespective of whether assets appear on the investment firm’s own balance sheet or are in third‐party accounts;(30)"client orders handled" or "COH" means the value of orders that an investment firm handles for clients, through the reception and transmission of client orders and through the execution of orders on behalf of clients;(31)"concentration risk" or "CON" means the exposures in the trading book of an investment firm to a client or a group of connected clients the value of which exceeds the limits in Article 37(1);(32)"clearing margin given" or "CMG" means the amount of total margin required by a clearing member or qualifying central counterparty, where the execution and settlement of transactions of an investment firm dealing on own account take place under the responsibility of a clearing member or qualifying central counterparty;(33)"daily trading flow" or "DTF" means the daily value of transactions that an investment firm enters through dealing on own account or the execution of orders on behalf of clients in its own name, excluding the value of orders that an investment firm handles for clients through the reception and transmission of client orders and through the execution of orders on behalf of clients which are already taken into account in the scope of client orders handled;(34)"net position risk" or "NPR" means the value of transactions recorded in the trading book of an investment firm;(35)"trading counterparty default" or "TCD" means the exposures in the trading book of an investment firm in instruments and transactions referred to in Article 25 giving rise to the risk of trading counterparty default;(36)"current market value" or "CMV" means the net market value of the portfolio of transactions or securities legs subject to netting in accordance with Article 31, where both positive and negative market values are used in computing CMV;(37)"long settlement transactions" means long settlement transactions as defined in point (2) of Article 272 of Regulation (EU) No 575/2013;(38)"margin lending transaction" means margin lending transactions as defined in point (10) of Article 3 of Regulation (EU) 2015/2365 of the European Parliament and of the CouncilRegulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse and amending Regulation (EU) No 648/2012 (OJ L 337, 23.12.2015, p. 1).;(39)"management body" means a management body as defined in point (36) of Article 4(1) of Directive 2014/65/EU;(40)"mixed financial holding company" means a mixed financial holding company as defined in point (15) of Article 2 of Directive 2002/87/EC of the European Parliament and of the CouncilDirective 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 and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council (OJ L 35, 11.2.2003, p. 1).;(41)"off‐balance‐sheet item" means any of the items referred to in Annex I to Regulation (EU) No 575/2013;(42)"parent undertaking" means a parent undertaking within the meaning of point (9) of Article 2 and Article 22 of Directive 2013/34/EU;(43)"participation" means participation as defined in point (35) of Article 4(1) of Regulation (EU) No 575/2013;(44)"profit" means profit as defined in point (121) of Article 4(1) of Regulation (EU) No 575/2013;(45)"qualifying central counterparty" or "QCCP" means a qualifying central counterparty as defined in point (88) of Article 4(1) of Regulation (EU) No 575/2013;(46)"portfolio management" means portfolio management as defined in point (8) of Article 4(1) of Directive 2014/65/EU;(47)"qualifying holding" means a qualifying holding as defined in point (36) of Article 4(1) of Regulation (EU) No 575/2013;(48)"securities financing transaction" or "SFT" means SFT as defined in point (11) of Article 3 of Regulation (EU) 2015/2365;(49)"segregated accounts", for the purposes of Table 1 in Article 15(2), means accounts with entities where client money held by an investment firm is deposited in accordance with Article 4 of Commission Delegated Directive (EU) 2017/593Commission Delegated Directive (EU) 2017/593 of 7 April 2016 supplementing Directive 2014/65/EU of the European Parliament and of the Council with regard to safeguarding of financial instruments and funds belonging to clients, product governance obligations and the rules applicable to the provision or reception of fees, commissions or any monetary or non‐monetary benefits (OJ L 87, 31.3.2017, p. 500). and, where applicable, where national law provides that, in the event of insolvency or entry into resolution or administration of the investment firm, the client money cannot be used to satisfy claims in relation to the investment firm other than claims by the client;(50)"repurchase transaction" means a repurchase transaction as defined in point (9) of Article 3 of Regulation (EU) 2015/2365;(51)"subsidiary" means a subsidiary undertaking as defined in point (10) of Article 2 and within the meaning of Article 22 of Directive 2013/34/EU, including any subsidiary of a subsidiary undertaking of an ultimate parent undertaking;(52)"tied agent" means a tied agent as defined in point (29) of Article 4(1) of Directive 2014/65/EU;(53)"total gross revenue" means the annual operating income of an investment firm, in connection with the investment firm’s investment services and activities it is authorised to perform, including income stemming from interest receivable, from shares and other securities whether fixed yield or variable, from commission and fees, any gain and losses that the investment firm incurs on its trading assets, on assets held at fair value, or from hedging activities, but excluding any income which is not linked to the investment services and activities performed;(54)"trading book" means all positions in financial instruments and commodities held by an investment firm, either with trading intent or in order to hedge positions held with trading intent;(55)"positions held with trading intent" means any of the following:(a)proprietary positions and positions arising from client servicing and market making;(b)positions intended to be resold in the short term;(c)positions intended to benefit from actual or expected short‐term price differences between buying and selling prices or from other price or interest rate variations;(56)"Union parent investment firm" means an investment firm in a Member State which is part of an investment firm group and which has an investment firm or a financial institution as a subsidiary or which holds a participation in such an investment firm or financial institution, and which is not itself a subsidiary of another investment firm authorised in any Member State, or of an investment holding company or mixed financial holding company set up in any Member State;(57)"Union parent investment holding company" means an investment holding company in a Member State which is part of an investment firm group and which is not itself a subsidiary of an investment firm authorised in any Member State or of another investment holding company in any Member State;(58)"Union parent mixed financial holding company" means a parent undertaking of an investment firm group which is a mixed financial holding company as defined in point (15) of Article 2 of Directive 2002/87/EC.2.The Commission is empowered to adopt delegated acts in accordance with Article 56 to supplement this Regulation by clarifying the definitions set out in paragraph 1 to:(a)ensure uniform application of this Regulation;(b)take account, in the application of this Regulation, of developments on financial markets.TITLE IILEVEL OF APPLICATION OF REQUIREMENTSCHAPTER 1Application of requirements on an individual basisArticle 5General principleInvestment firms shall comply with the requirements laid down in Parts Two to Seven on an individual basis.Article 6Exemptions1.Competent authorities may exempt an investment firm from the application of Article 5 in respect of Parts Two, Three, Four, Six and Seven, where all of the following conditions apply:(a)the investment firm meets the conditions for qualifying as a small and non‐interconnected investment firm set out in Article 12(1);(b)one of the following conditions is satisfied:(i)the investment firm is a subsidiary and is included in the supervision on a consolidated basis of a credit institution, a financial holding company or a mixed financial holding company, in accordance with the provisions of Chapter 2 of Title II of Part One of Regulation (EU) No 575/2013;(ii)the investment firm is a subsidiary and is included in an investment firm group supervised on a consolidated basis in accordance with Article 7;(c)both the investment firm and its parent undertaking are subject to authorisation and supervision by the same Member State;(d)the authorities competent for the supervision on a consolidated basis in accordance with Regulation (EU) No 575/2013 or in accordance with Article 7 of this Regulation agree to such an exemption;(e)own funds are distributed adequately between the parent undertaking and the investment firm, and all of the following conditions are satisfied:(i)there is no current or foreseen material practical or legal impediment to the prompt transfer of capital or repayment of liabilities by the parent undertaking;(ii)upon prior approval by the competent authority, the parent undertaking declares that it guarantees the commitments entered into by the investment firm or that the risks in the investment firm are of negligible interest;(iii)the risk evaluation, measurement and control procedures of the parent undertaking include the investment firm; and(iv)the parent undertaking holds more than 50 % of the voting rights attached to shares in the capital of the investment firm or has the right to appoint or remove a majority of the members of the investment firm’s management body.2.Competent authorities may exempt investment firms from the application of Article 5 in respect of Part Six where all of the following conditions apply:(a)the investment firm meets the conditions for qualifying as a small and non‐interconnected investment firm set out in Article 12(1);(b)the investment firm is a subsidiary and is included in the supervision on a consolidated basis of an insurance or reinsurance undertaking in accordance with Article 228 of Directive 2009/138/EC;(c)both the investment firm and its parent undertaking are subject to authorisation and supervision by the same Member State;(d)the authorities competent for the supervision on a consolidated basis in accordance with Directive 2009/138/EC agree to such an exemption;(e)own funds are distributed adequately between the parent undertaking and the investment firm and all of the following conditions are satisfied:(i)there is no current or foreseen material practical or legal impediment to the prompt transfer of capital or repayment of liabilities by the parent undertaking;(ii)upon prior approval by the competent authority, the parent undertaking declares that it guarantees the commitments entered into by the investment firm or that the risks in the investment firm are of negligible interest;(iii)the risk evaluation, measurement and control procedures of the parent undertaking include the investment firm; and(iv)the parent undertaking holds more than 50 % of the voting rights attached to shares in the capital of the investment firm or has the right to appoint or remove a majority of the members of the investment firm’s management body.3.Competent authorities may exempt investment firms from the application of Article 5 in respect of Part Five where all of the following conditions are satisfied:(a)the investment firm is included in the supervision on a consolidated basis in accordance with Chapter 2 of Title II of Part One of Regulation (EU) No 575/2013 or is included in an investment firm group for which Article 7(3) of this Regulation applies and the exemption provided for in Article 7(4) does not apply;(b)the parent undertaking, on a consolidated basis, monitors and has oversight at all times over the liquidity positions of all institutions and investment firms within the group or sub‐group that are subject to a waiver and ensures a sufficient level of liquidity for all of those institutions and investment firms;(c)the parent undertaking and the investment firm have entered into contracts that, to the satisfaction of the competent authorities, provide for the free movement of funds between the parent undertaking and the investment firm to enable them to meet their individual obligations and joint obligations as they become due;(d)there is no current or foreseen material, practical or legal impediment to the fulfilment of the contracts referred to in point (c);(e)the authorities competent for the supervision on a consolidated basis in accordance with Regulation (EU) No 575/2013 or in accordance with Article 7 of this Regulation agree to such an exemption.CHAPTER 2Prudential consolidation and exemptions for an investment firm groupArticle 7Prudential consolidation1.Union parent investment firms, Union parent investment holding companies and Union parent mixed financial holding companies shall comply with the obligations laid down in Parts Two, Three, Four, Six and Seven on the basis of their consolidated situation. The parent undertaking and those of its subsidiaries that are subject to this Regulation shall set up a proper organisational structure and appropriate internal control mechanisms in order to ensure that the data required for consolidation are duly processed and forwarded. In particular, the parent undertaking shall ensure that subsidiaries that are not subject to this Regulation implement arrangements, processes and mechanisms to ensure proper consolidation.2.For the purposes of paragraph 1 of this Article, when applying Part Two on a consolidated basis, the rules laid down in Title II of Part Two of Regulation (EU) No 575/2013 shall also apply to investment firms.For that purpose, when applying the provisions of Article 84(1), Article 85(1) and Article 87(1) of Regulation (EU) No 575/2013 only the references to Article 92(1) of Regulation (EU) No 575/2013 shall apply and shall consequently be read as referring to the own funds requirements set out under the corresponding provisions in this Regulation.3.Union parent investment firms, Union parent investment holding companies and Union parent mixed financial companies shall comply with the obligations laid down in Part Five on the basis of their consolidated situations.4.By way of derogation from paragraph 3, competent authorities may exempt the parent undertaking from compliance with that paragraph, taking into account the nature, scale and complexity of the investment firm group.5.EBA shall develop draft regulatory technical standards to specify the details of the scope and methods for prudential consolidation of an investment firm group, in particular for the purpose of calculating the fixed overheads requirement, the permanent minimum capital requirement, the K‐factor requirement on the basis of the consolidated situation of the investment firm group, and the method and necessary details to properly implement paragraph 2.EBA shall submit those draft regulatory technical standards to the Commission by 26 December 2020.Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.Article 8The group capital test1.By way of derogation from Article 7, competent authorities may allow the application of this Article in the case of group structures which are deemed to be sufficiently simple, provided that there are no significant risks to clients or to market stemming from the investment firm group as a whole that would otherwise require supervision on a consolidated basis. Competent authorities shall notify EBA when they allow the application of this Article.2.For the purposes of this Article, the following shall apply:(a)"own funds instruments" means own funds as defined in Article 9 of this Regulation, without applying the deductions referred to in point (i) of Article 36(1), point (d) of Article 56, and point (d) of Article 66 of Regulation (EU) No 575/2013;(b)the terms "investment firm", "financial institution", "ancillary services undertaking" and "tied agent" shall also apply to undertakings established in third countries, which, were they established in the Union, would fulfil the definitions of those terms in Article 4.3.Union parent investment firms, Union parent investment holding companies, Union parent mixed financial holding companies and any other parent undertakings that are investment firms, financial institutions, ancillary services undertakings or tied agents in the investment firm group shall hold at least enough own funds instruments to cover the sum of the following:(a)the sum of the full book value of all of their holdings, subordinated claims and instruments referred to in point (i) of Article 36(1), point (d) of Article 56, and point (d) of Article 66 of Regulation (EU) No 575/2013 in investment firms, financial institutions, ancillary services undertakings and tied agents in the investment firm group; and(b)the total amount of all of their contingent liabilities in favour of investment firms, financial institutions, ancillary services undertakings and tied agents in the investment firm group.4.Competent authorities may allow a Union parent investment holding company or a Union parent mixed financial holding company and any other parent undertaking that is an investment firm, a financial institution, an ancillary services undertaking or a tied agent in the investment firm group, to hold a lower amount of own funds than the amount calculated under paragraph 3, provided that this amount is no lower than the sum of the own funds requirements imposed on an individual basis on its subsidiary investment firms, financial institutions, ancillary services undertakings and tied agents, and the total amount of any contingent liabilities in favour of those entities.For the purposes of this paragraph, the own funds requirements for subsidiary undertakings as referred to in the first subparagraph which are located in third countries shall be notional own funds requirements that ensure a satisfactory level of prudence to cover for the risks arising from those subsidiary undertakings, as approved by the relevant competent authorities.5.Union parent investment firms, Union parent investment holding companies, and Union parent mixed financial holding companies shall have systems in place to monitor and control the sources of capital and funding of all investment firms, investment holding companies, mixed financial holding companies, financial institutions, ancillary services undertakings and tied agents within the investment firm group.