Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 Text with EEA relevance

• (a) the total amount of exposures to fossil fuel sector entities;

• (b) how institutions integrate the identified ESG risks in their business strategy and processes, and governance and risk management.

3. EBA shall develop draft implementing technical standards to specify uniform disclosure formats, as laid down in Article 434a, for ESG risks ensuring that they are consistent with and uphold the principle of proportionality while avoiding duplication of disclosure requirements already established in other applicable Union law. Those formats shall not require disclosure of information beyond the information to be reported to competent authorities in accordance with Article 430(1), point (h), and shall in particular take into account the size and complexity of the institution and the relative exposure of small and non-complex institutions subject to Article 433b to ESG risks.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1093/2010.

Article 449b

Disclosure of aggregate exposure to shadow banking entities

Institutions shall disclose the information concerning their aggregate exposure to shadow banking entities, as referred to in Article 394(2), second subparagraph.

Article 450

Disclosure of remuneration policy

• (a) information concerning the decision-making process used for determining the remuneration policy, as well as the number of meetings held by the main body overseeing remuneration during the financial year, including, where applicable, information about the composition and the mandate of a remuneration committee, the external consultant whose services have been used for the determination of the remuneration policy and the role of the relevant stakeholders;

• (b) information about the link between pay of the staff and their performance;

• (c) the most important design characteristics of the remuneration system, including information on the criteria used for performance measurement and risk adjustment, deferral policy and vesting criteria;

• (d) the ratios between fixed and variable remuneration set in accordance with point (g) of Article 94(1) of Directive 2013/36/EU;

• (e) information on the performance criteria on which the entitlement to shares, options or variable components of remuneration is based;

• (f) the main parameters and rationale for any variable component scheme and any other non-cash benefits;

• (g) aggregate quantitative information on remuneration, broken down by business area;

• (h) aggregate quantitative information on remuneration, broken down by senior management and members of staff whose professional activities have a material impact on the risk profile of the institutions, indicating the following:
• (i) the amounts of remuneration awarded for the financial year, split into fixed remuneration including a description of the fixed components, and variable remuneration, and the number of beneficiaries;
• (ii) the amounts and forms of awarded variable remuneration, split into cash, shares, share-linked instruments and other types separately for the part paid upfront and the deferred part;
• (iii) the amounts of deferred remuneration awarded for previous performance periods, split into the amount due to vest in the financial year and the amount due to vest in subsequent years;
• (iv) the amount of deferred remuneration due to vest in the financial year that is paid out during the financial year, and that is reduced through performance adjustments;
• (v) the guaranteed variable remuneration awards during the financial year, and the number of beneficiaries of those awards;
• (vi) the severance payments awarded in previous periods, that have been paid out during the financial year;
• (vii) the amounts of severance payments awarded during the financial year, split into paid upfront and deferred, the number of beneficiaries of those payments and highest payment that has been awarded to a single person;

• (i) the number of individuals that have been remunerated EUR 1 million or more per financial year, with the remuneration between EUR 1 million and EUR 5 million broken down into pay bands of EUR 500 000 and with the remuneration of EUR 5 million and above broken down into pay bands of EUR 1 million;

• (j) upon demand from the relevant Member State or competent authority, the total remuneration for each member of the management body or senior management;

• (k) information on whether the institution benefits from a derogation laid down in Article 94(3) of Directive 2013/36/EU.

For the purposes of point (k) of the first subparagraph of this paragraph, institutions that benefit from such a derogation shall indicate whether they benefit from that derogation on the basis of point (a) or (b) of Article 94(3) of Directive 2013/36/EU. They shall also indicate for which of the remuneration principles they apply the derogation(s), the number of staff members that benefit from the derogation(s) and their total remuneration, split into fixed and variable remuneration.

2. For large institutions, the quantitative information on the remuneration of institutions' collective management body referred to in this Article shall also be made available to the public, differentiating between executive and non-executive members.

Institutions shall comply with the requirements set out in this Article in a manner that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities and without prejudice to Regulation (EU) 2016/679 of the European Parliament and of the Council (³⁸).

Article 451

Disclosure of the leverage ratio

• (a) the leverage ratio and how the institutions apply Article 499(2);

• (b) a breakdown of the total exposure measure referred to in Article 429(4), as well as a reconciliation of the total exposure measure with the relevant information disclosed in published financial statements;

• (c) where applicable, the amount of exposures calculated in accordance with Articles 429(8) and 429a(1) and the adjusted leverage ratio calculated in accordance with Article 429a(7);

• (d) a description of the processes used to manage the risk of excessive leverage;

• (e) a description of the factors that had an impact on the leverage ratio during the period to which the disclosed leverage ratio refers;

• (f) the amount of the additional own funds requirements based on the supervisory review process as referred to in Article 104(1), point (a), of Directive 2013/36/EU to address the risk of excessive leverage and its composition.

2. Public development credit institutions as defined in Article 429a(2) shall disclose the leverage ratio without the adjustment to the total exposure measure determined in accordance with point (d) of the first subparagraph of Article 429a(1).

Article 451a

Disclosure of liquidity requirements

• (a) the average or averages, as applicable, of their liquidity coverage ratio based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period;

• (b) the average or averages, as applicable, of total liquid assets, after applying the relevant haircuts, included in the liquidity buffer pursuant to the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period, and a description of the composition of that liquidity buffer;

• (c) the averages of their liquidity outflows, inflows and net liquidity outflows as calculated in accordance with the delegated act referred to in Article 460(1), based on end-of-the-month observations over the preceding 12 months for each quarter of the relevant disclosure period and the description of their composition.

• (a) quarter-end figures of their net stable funding ratio calculated in accordance with Chapter 2 of Title IV of Part Six for each quarter of the relevant disclosure period;

• (b) an overview of the amount of available stable funding calculated in accordance with Chapter 3 of Title IV of Part Six;

- (c) an overview of the amount of required stable funding calculated in accordance with Chapter 4 of Title IV of Part Six.

Article 451b

Disclosure of crypto-asset exposures and related activities

• (a) the direct and indirect exposure amounts in relation to crypto-assets, including the gross long and short components of net exposures;

• (b) the total risk exposure amount for operational risk;

• (c) the accounting classification for crypto-asset exposures;

• (d) a description of the business activities related to crypto-assets and their impact on the risk profile of the institution;

• (e) a specific description of their risk management policies related to crypto-asset exposures and crypto-asset services.

For the purposes of the first subparagraph, point (d), of this paragraph, institutions shall provide more detailed information on material business activities, including on the issuance of significant asset-referenced tokens and of significant e-money tokens and on the provision of crypto-asset services under Articles 60 and 61 of Regulation (EU) 2023/1114.

2. Institutions shall not apply the exception laid down in Article 432 for the purposes of the disclosure requirements laid down in paragraph 1 of this Article.

TITLE III **QUALIFYING REQUIREMENTS FOR THE USE OF PARTICULAR INSTRUMENTS OR METHODOLOGIES**

Article 452

Disclosure of the use of the IRB Approach to credit risk

Institutions calculating the risk-weighted exposure amounts under the IRB Approach to credit risk shall disclose the following information:

• (a) the competent authority's permission of the approach or approved transition;

• (b) for each exposure class referred to in Article 147, the percentage of the total exposure value of each exposure class subject to the Standardised Approach laid down in Chapter 2 of Title II of Part Three or to the IRB Approach laid down in Chapter 3 of Title II of Part Three, as well as the part of each exposure class subject to a roll-out plan; where institutions have received permission to use own LGDs and conversion factors for the calculation of risk-weighted exposure amounts, they shall disclose separately the percentage of the total exposure value of each exposure class subject to that permission;

• (c) the control mechanisms for rating systems at the different stages of model development, controls and changes, which shall include information on:
• (i) the relationship between the risk management function and the internal audit function;
• (ii) the rating system review;
• (iii) the procedure to ensure the independence of the function in charge of reviewing the models from the functions responsible for the development of the models;
• (iv) the procedure to ensure the accountability of the functions in charge of developing and reviewing the models;

• (d) the role of the functions involved in the development, approval and subsequent changes of the credit risk models;

• (e) the scope and main content of the reporting related to credit risk models;

• (f) a description of the internal ratings process by exposure class, including the number of key models used with respect to each portfolio and a brief discussion of the main differences between the models within the same portfolio, covering:
• (i) the definitions, methods and data for estimation and validation of PD, which shall include information on how PDs are estimated for low default portfolios, whether there are regulatory floors and the drivers for differences observed between PD and actual default rates at least for the last three periods;
• (ii) where applicable, the definitions, methods and data for estimation and validation of LGD, such as methods to calculate downturn LGD, how LGDs are estimated for low default portfolio and the time lapse between the default event and the closure of the exposure;
• (iii) where applicable, the definitions, methods and data for estimation and validation of conversion factors, including assumptions employed in the derivation of those variables;

• (g) as applicable, the following information in relation to each exposure class referred to in Article 147:
• (i) their gross on-balance-sheet exposure;
• (ii) their off-balance-sheet exposure values prior to the relevant conversion factor;
• (iii) their exposure after applying the relevant conversion factor and credit risk mitigation;
• (iv) any model, parameter or input relevant for the understanding of the risk weighting and the resulting risk exposure amounts disclosed across a sufficient number of obligor grades (including default) to allow for a meaningful differentiation of credit risk;
• (v) separately for those exposure classes in relation to which institutions have received permission to use own LGDs and conversion factors for the calculation of risk-weighted exposure amounts, and for exposures for which the institutions do not use such estimates, the values referred to in points (i) to (iv) subject to that permission;

- (h) institutions' estimates of PDs against the actual default rate for each exposure class over a longer period, with separate disclosure of the PD range, the external rating equivalent, the weighted average and arithmetic average PD, the number of obligors at the end of the previous year and of the year under review, the number of defaulted obligors, including the new defaulted obligors, and the annual average historical default rate.

For the purposes of point (b) of this Article, institutions shall use the exposure value as defined in Article 166.

Article 453

Disclosure of the use of credit risk mitigation techniques

Institutions using credit risk mitigation techniques shall disclose the following information:

• (a) the core features of the policies and processes for on- and off-balance-sheet netting and an indication of the extent to which institutions make use of balance sheet netting;

• (b) the core features of the policies and processes for eligible collateral evaluation and management;

• (c) a description of the main types of collateral taken by the institution to mitigate credit risk;

• (d) for guarantees and credit derivatives used as credit protection, the main types of guarantor and credit derivative counterparty and their creditworthiness used for the purpose of reducing capital requirements, excluding those used as part of synthetic securitisation structures;

• (e) information about market or credit risk concentrations within the credit risk mitigation taken;

• (f) for institutions calculating risk-weighted exposure amounts under the Standardised Approach or the IRB Approach, the total exposure value not covered by any eligible credit protection and the total exposure value covered by eligible credit protection after applying volatility adjustments; the disclosure set out in this point shall be made separately for loans and debt securities and including a breakdown of defaulted exposures;

• (g) the corresponding conversion factor and the credit risk mitigation associated with the exposure and the incidence of credit risk mitigation techniques with and without substitution effect;

• (h) for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the on- and off-balance-sheet exposure value by exposure class before and after the application of conversion factors and any associated credit risk mitigation;

- (i) for institutions calculating risk-weighted exposure amounts under the Standardised Approach, the risk-weighted exposure amount and the ratio between that risk-weighted exposure amount and the exposure value after applying the corresponding conversion factor and the credit risk mitigation associated with the exposure; the disclosure set out in this point shall be made separately for each exposure class;

• (j) for institutions calculating risk-weighted exposure amounts under the IRB Approach, the risk-weighted exposure amount before and after recognition of the credit risk mitigation impact of credit derivatives; where institutions have received permission to use own LGDs and conversion factors for the calculation of risk-weighted exposure amounts, they shall make the disclosure set out in this point separately for the exposure classes subject to that permission.

Article 454

Disclosure of the use of the Advanced Measurement Approaches to operational risk

The institutions using the Advanced Measurement Approaches set out in Articles 321 to 324 for the calculation of their own funds requirements for operational risk shall disclose a description of their use of insurance and other risk-transfer mechanisms for the purpose of mitigating that risk.

Article 455

Use of internal models for market risk

• (a) its objectives in undertaking trading activities and the processes implemented to identify, measure, monitor and control the market risk;

• (b) the policies referred to in Article 104(1) for determining which position is to be included in the trading book;

• (c) a general description of the structure of the trading desks covered by the internal models, including for each desk a broad description of the desk’s business strategy, the instruments permitted therein and the main risk types in relation to that desk;

• (d) an overview of the trading book positions not covered by the internal models, including a general description of the desk structure and of types of instruments included in the desks or in the desk categories in accordance with Article 104b;

• (e) the structure and organisation of the market risk management function and governance;

• (f) the scope, the main characteristics and the key modelling choices of the different internal models used to calculate the risk exposure amounts for the main models used at the consolidated level, and a description of the extent to which those internal models represent the models used at the consolidated level, including, where applicable, a broad description of the following:
• (i) the modelling approach used to calculate the expected shortfall referred to in Article 325ba(1), point (a), including the frequency of data update;
• (ii) the methodology used to calculate the stress scenario risk measure referred to in Article 325ba(1), point (b), other than the specifications provided for in Article 325bk(3);
• (iii) the modelling approach used to calculate the default risk charge referred to in Article 325ba(2), including the frequency of data update.

• (a) the most recent value as well as the highest, lowest and mean value for the previous 60 business days of:
• (i) the unconstrained expected shortfall measure referred to in Article 325bb(1);
• (ii) the unconstrained expected shortfall measure referred to in Article 325bb(1) for each regulatory broad risk factor category;

• (b) the most recent value as well as the mean value for the previous 60 business days of:
• (i) the expected shortfall risk measure referred to in Article 325bb(1);
• (ii) the stress scenario risk measure referred to in Article 325ba(1), point (b);
• (iii) the own funds requirement for default risk referred to in Article 325ba(2);
• (iv) the sum of the own funds requirements referred to in Article 325ba(3), including all components of the formula and the applicable multiplier factor;

- (c) the number of back-testing overshootings over the most recent 250 business days at the 99th percentile as referred to in Article 325bf(6).

3. Institutions shall disclose on an aggregate basis for all trading desks the own funds requirements for market risk that would be calculated in accordance with Part Three Title IV, Chapter 1a, had the institutions not been granted permission to use their internal models for those trading desks.

PART NINE

DELEGATED AND IMPLEMENTING ACTS

Article 456

Delegated acts

• (a) clarification of the definitions set out in Articles 4, 5, 142, 153, 192, 242, 272, 300, 381 and 411 to ensure uniform application of this Regulation;

• (b) clarification of the definitions set out in Articles 4, 5, 142, 153, 192, 242, 272, 300, 381 and 411 in order to take account, in the application of this Regulation, of developments on financial markets;

• (c) amendment of the list of exposure classes in Articles 112 and 147 in order to take account of developments on financial markets;

• (d) the amount specified in Article 123(1), point (b), Article 147(5), point (a), Article 153(4) and Article 162(4), to take into account the effects of inflation;

• (e) the list and classification of the off-balance sheet items in Annexes I and II, in order to take account of developments on financial markets;

• (h) amendment of the own funds requirements as set out in Articles 301 to 311 of this Regulation and Articles 50a to 50d of Regulation (EU) No 648/2012 to take account of developments or amendments of the international standards for exposures to a central counterparty;

• (i) clarification of the terms referred to in the exemptions provided for in Article 400;

• (j) amendment of the capital measure and the total exposure measure of the leverage ratio referred to in Article 429(2) in order to correct any shortcomings discovered on the basis of the reporting referred to in Article 430(1) before the leverage ratio has to be published by institutions as set out in Article 451(1)(a);

• (k) amendments to the disclosure requirements laid down in Titles II and III of Part Eight to take account of developments or amendments of the international standards on disclosure.

• (a) the treatment of CVA risk as a stand-alone charge versus an integrated component of the market risk framework;

• (b) the scope of the CVA risk charge including the exemption in Article 482;

• (c) eligible hedges;

- (d) calculation of capital requirements of CVA risk.

On the basis of that report and where the findings are that such action is necessary the Commission shall also be empowered to adopt a delegated act in accordance with Article 462 to amend Article 381, Article 382(1) to (3) and Articles 383 to 386 concerning those items.

Article 457

Technical adjustments and corrections

The Commission shall be empowered to adopt delegated acts in accordance with Article 462, to make technical adjustment and corrections of non-essential elements in the following provisions in order to take account of developments in new financial products or activities, to make adjustments taking into account developments after the adoption of this Regulation in other legislative acts of the Union on financial services and accounting including accounting standards based on Regulation (EC) No 1606/2002:

• (a) the own funds requirements for credit risk laid down in Articles 111 to 134, and in Articles 143 to 191;

• (b) the effects of credit risk mitigation in accordance with Articles 193 to 241;

• (c) the own funds requirements for securitisation laid down in Articles 242 to 270a;

• (d) the own funds requirements for counterparty credit risks in accordance with Articles 272 to 311;

• (e) the own funds requirements for operational risk laid down in Articles 315 to 324;

• (f) the own funds requirements for market risk laid down in Articles 325 to 377;

• (g) the own funds requirements for settlement risk laid down in Articles 378 and 379;

- (h) the own funds requirements for credit valuation adjustment risk laid down in Articles 383, 384 and 386;

• (i) Part Two and Article 430 only as a result of developments in accounting standards or requirements which take account of Union legislative acts.

Article 458

Macroprudential or systemic risk identified at the level of a Member State

The notification shall be accompanied by the following documents and include, where appropriate, relevant quantitative or qualitative evidence on:

• (a) the changes in the intensity of macroprudential or systemic risk;

• (b) the reasons why such changes could pose a threat to financial stability at national level or to the real economy;

• (c) an explanation as to why the authority considers that the macroprudential tools set out in Articles 124 and 164 of this Regulation and Articles 133 and 136 of Directive 2013/36/EU would be less suitable and effective to deal with those risks than the draft national measures referred to in point (d) of this paragraph;

• (d) the draft national measures for domestically authorised institutions, or a subset of those institutions, intended to mitigate the changes in the intensity of risk and concerning:
• (i) the level of own funds laid down in Article 92;
• (ii) the requirements for large exposures laid down in Article 392 and Articles 395 to 403;
• (iii) liquidity requirements laid down in Part Six;
• (iv) risk weights for targeting asset bubbles in the residential property and commercial immovable property sector;
• (v) the public disclosure requirements laid down in Part Eight;
• (vi) the level of the capital conservation buffer laid down in Article 129 of Directive 2013/36/EU; or
• (vii) intra-financial sector exposures;

• (e) an explanation as to why the draft measures are considered by the authority designated in accordance with paragraph 1 to be suitable, effective and proportionate to address the situation; and

• (f) an assessment of the likely positive or negative impact of the draft measures on the internal market based on information which is available to the Member State concerned.

Within one month of receipt of the notification referred to in paragraph 2, the ESRB and EBA shall provide their opinions on the matters referred to in points (a) to (f) of that paragraph to the Council, to the Commission and to the Member State concerned.

Taking utmost account of the opinions referred to in the second subparagraph and if there is robust, strong and detailed evidence that the measure will have a negative impact on the internal market that outweighs the financial stability benefits resulting in a reduction of the macroprudential or systemic risk identified, the Commission may, within one month, propose to the Council an implementing act to reject the draft national measures.

In the absence of a Commission proposal within that period of one month, the Member State concerned may immediately adopt the draft national measures for a period of up to two years or until the macroprudential or systemic risk ceases to exist if that occurs sooner.

The Council shall decide on the proposal by the Commission within one month after receipt of the proposal and state its reasons for rejecting or not rejecting the draft national measures.

The Council shall only reject the draft national measures if it considers that one or more of the following conditions are not met:

• (a) the changes in the intensity of macroprudential or systemic risk are of such nature as to pose risk to financial stability at national level;

• (b) the macroprudential tools set out in this Regulation and in Directive 2013/36/EU are less suitable or effective than the draft national measures to deal with the macroprudential or systemic risk identified;

• (c) the draft national measures do not entail disproportionate adverse effects on the whole or parts of the financial system in other Member States or in the Union as a whole, thus forming or creating an obstacle to the functioning of the internal market; and

• (d) the issue concerns only one Member State.

The assessment of the Council shall take into account the opinion of the ESRB and EBA and shall be based on the evidence presented in accordance with paragraph 2 by the authority designated in accordance with paragraph 1.

In the absence of a Council implementing act to reject the draft national measures within one month of receipt of the proposal by the Commission, the Member State concerned may adopt the measures and apply them for a period of up to two years or until the macroprudential or systemic risk ceases to exist if that occurs sooner.

9. Before the expiry of the authorisation issued in accordance with paragraphs 2 and 4, the Member State concerned shall, in consultation with the ESRB, EBA and the Commission, review the situation and may adopt, in accordance with the procedure referred to in paragraphs 2 and 4, a new decision for the extension of the period of application of national measures for up to two additional years each time.

Article 459

Prudential requirements

The Commission shall be empowered to adopt delegated acts in accordance with Article 462, to impose, for a period of one year, stricter prudential requirements for exposures where this is necessary to address changes in the intensity of microprudential and macroprudential risks which arise from market developments in the Union or outside the Union affecting all Member States, and where the instruments of this Regulation and Directive 2013/36/EU are not sufficient to address these risks, in particular upon the recommendation or opinion of the ESRB or EBA, concerning:

• (a) the level of own funds laid down in Article 92;

• (b) the requirements for large exposures laid down in Article 392 and Articles 395 to 403;

- (c) the public disclosure requirements laid down in Articles 431 to 455.

The Commission, assisted by the ESRB shall, at least on an annual basis, submit to the European Parliament and the Council, a report on market developments potentially requiring the use of this Article.

Article 460

Liquidity

In particular, the Commission is empowered to supplement this Regulation by adopting delegated acts specifying the detailed liquidity requirements for the purposes of the application of Article 8(3), Articles 411 to 416, 419, 422, 425, 428a, 428f, 428g, 428j to 428n, 428p, 428r, 428s, 428w, 428ae, 428ag, 428ah, 428ak and 451a.

• (a) 60 % of the liquidity coverage requirement in 2015;

• (b) 70 % as from 1 January 2016;

• (c) 80 % as from 1 January 2017;

• (d) 100 % as from 1 January 2018.

For this purpose the Commission shall take into account the reports referred to in Article 509(1), (2) and (3) and international standards developed by international fora as well as Union specificities.

The Commission shall adopt the delegated act referred to in paragraph 1 by 30 June 2014. It shall enter into force by 31 December 2014, but shall not apply before 1 January 2015.

3. The Commission is empowered to amend this Regulation by adopting delegated acts in accordance with Article 462 amending the list of products or services set out in Article 428f(2) if it considers that assets and liabilities directly linked to other products or services meet the conditions set out in Article 428f(1).

The Commission shall adopt the delegated act referred to in the first subparagraph by 28 June 2024.

Article 461

Review of the phasing-in of the liquidity coverage requirement

EBA shall in its report assess in particular a deferred introduction of the 100 % minimum binding standard, until 1 January 2019. The report shall take into account the annual reports referred to in Article 509(1), relevant market data and the recommendations of all competent authorities.

For the purposes of assessing the necessity of deferral the Commission shall take into account the report and assessment referred to in paragraph 1.

A delegated act adopted in accordance with this Article shall not apply before 1 January 2018 and shall enter into force by 30 June 2017.

Article 461a

Own funds requirements for market risk

• (a) applying, until the date of application of the legislative act referred to in paragraph 3 of this Article or for up to three years in the absence of such an act, and where necessary to preserve a level playing field and to offset those observed differences, targeted operational relief measures or targeted multipliers equal to or greater than 0 and lower than 1 in the calculation of the institutions’ own funds requirements for market risk, for specific risk classes and specific risk factors, using one of the approaches referred to in Article 325(1), and laid out in:
• (i) Articles 325c to 325ay, specifying the alternative standardised approach;
• (ii) Articles 325az to 325bp, specifying the alternative internal model approach;
• (iii) Articles 326 to 361, specifying the simplified standardised approach;

• (b) postponing for up to two years the date from which institutions shall apply the own funds requirements for market risk set out in Part Three, Title IV, or any of the approaches to calculate the own funds requirements for market risk referred to in Article 325(1).

Where the Commission adopts the delegated act referred to in the first subparagraph, the Commission shall, where appropriate, submit a legislative proposal to the European Parliament and to the Council to adjust the implementation in the Union of international standards on own funds requirements for market risk to preserve in a more permanent manner a level playing field with third countries, in terms of own funds requirements and the impact of those requirements.

3. By 10 July 2026, EBA shall submit a report to the European Parliament, to the Council and to the Commission on the implementation of international standards on own funds requirements for market risk in third countries.

On the basis of that report, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal, in order to ensure a global level playing field.

Article 462

Exercise of the delegation

5. As soon as it adopts a delegated act, the Commission shall notify it simultaneously to the European Parliament and to the Council.

Article 463

Objections to regulatory technical standards

Where the Commission adopts a regulatory technical standard pursuant to this Regulation which is the same as the draft regulatory technical standard submitted by EBA, the period during which the European Parliament and the Council may object to that regulatory technical standard shall be one month from the date of notification. At the initiative of the European Parliament or the Council that period shall be extended by one month. By way of derogation from the second subparagraph of Article 13(1) of Regulation (EU) No 1093/2010, the period during which the European Parliament or the Council may object to that regulatory technical standard may, where appropriate, be further extended by one month.

Article 464

European Banking Committee

1. The Commission shall be assisted by the European Banking Committee established by Commission Decision 2004/10/EC (³⁹). That committee shall be a committee within the meaning of Regulation (EU) No 182/2011.

2. Where reference is made to this paragraph, Article 5 of Regulation (EU) No 182/2011 shall apply.

PART TEN

TRANSITIONAL PROVISIONS, REPORTS, REVIEWS AND AMENDMENTS

TITLE I TRANSITIONAL PROVISIONS

CHAPTER 1 Own funds requirements, unrealised gains and losses measured at fair value and deductions

Section 1 Own funds requirements

Article 465

Transitional arrangements for the output floor

• (a) 50 % during the period from 1 January 2025 to 31 December 2025;

• (b) 55 % during the period from 1 January 2026 to 31 December 2026;

• (c) 60 % during the period from 1 January 2027 to 31 December 2027;

• (d) 65 % during the period from 1 January 2028 to 31 December 2028;

• (e) 70 % during the period from 1 January 2029 to 31 December 2029.

Image omitted; see official source

For the purposes of that calculation, institutions shall take into account the applicable factor x referred to in paragraph 1.

EBA and ESMA, in cooperation with EIOPA, shall monitor the use of the transitional treatment laid down in the first subparagraph and assess, in particular:

• (a) the availability of credit assessments by nominated ECAIs for corporates and the extent to which that affects institutions’ lending towards corporates;

• (b) the development of credit rating agencies, barriers to entry to the market for new credit rating agencies, the rate of uptake by corporates choosing to be rated by one or more of those agencies, and impediments to the availability of credit assessments for corporates by ECAIs;

• (c) possible measures to address the impediments, taking into account differences across economic sectors and geographical areas and the development of private or publicly led solutions such as credit scoring, private ratings mandated by institutions, as well as central bank ratings;

• (d) the appropriateness of the risk-weighted exposure amounts of unrated corporate exposures and their implications for financial stability;

• (e) the approaches of third countries concerning the application of the output floor to corporate exposures and long-term level playing field considerations that could arise as a result;

• (f) compliance with related internationally agreed standards developed by the BCBS.

EBA and ESMA, in cooperation with EIOPA, shall submit a report with their findings to the Commission by 10 July 2029.

On the basis of that report and taking due account of the related internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2031.

• (a) until 31 December 2032, a risk weight of 10 % to the part of the exposures secured by mortgages on residential property up to 55 % of the property value determined in accordance with Article 125(1), first subparagraph; and

• (b) until 31 December 2029, a risk weight of 45 % to any remaining part of the exposures secured by mortgages on residential property up to 80 % of the property value determined in accordance with Article 125(1), first subparagraph, provided that the adjustment to own funds requirements for credit risk referred to in Article 501 is not applied.

Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 10 % risk weight, the amount of 55 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of:

• (a) 55 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and

• (b) the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens.

Where liens not held by the institution rank pari passu with the lien held by the institution, to determine the part of the institution’s exposure that is eligible for the 45 % risk weight, the amount of 80 % of the property value, reduced by the amount of any more senior liens not held by the institution, shall be reduced by the product of:

• (a) 80 % of the property value, reduced by the amount of more senior liens, if any, both held by the institution and held by other institutions; and

• (b) the amount of liens not held by the institution that rank pari passu with the lien held by the institution divided by the sum of all pari passu liens.

• (a) the exposures qualify for the treatment pursuant to Article 125(1);

• (b) the qualifying exposures are risk weighted in accordance with Part Three, Title II, Chapter 3;

• (c) the residential property securing the qualifying exposures is located in the Member State that has exercised the discretion;

• (d) over the last eight years the institution’s losses in any given year, as reported by the institution pursuant to Article 430a(1), points (a) and (c), or pursuant to Article 101(1), points (a) and (c), in the version of those points applicable on 27 June 2021, on the part of the exposures secured by mortgages on residential property up to the lower of the pledged amount and 55 % of the property value, unless otherwise determined under Article 124(9), do not exceed on average 0,25  % of the sum of the exposure values of all outstanding exposures secured by mortgages on residential property;

• (e) for the qualifying exposures the institution has the following enforceable rights in the event of the default or non-payment of the obligor:
• (i) a right on the residential property securing the exposure or the right to take a mortgage on the residential property in accordance with Article 108(5), point (g);
• (ii) a right on other assets and income of the obligor either contractually or by applicable national law;

• (f) the competent authority has verified that the conditions set out in points (a) to (e) are met.

• (a) 52,5  % during the period from 1 January 2030 to 31 December 2030;

• (b) 60 % during the period from 1 January 2031 to 31 December 2031;

• (c) 67,5  % during the period from 1 January 2032 to 31 December 2032.

On the basis of that report and taking due account of the related internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2031.

- (a) p = 0,25 for a position in a securitisation to which Article 262 applies;

• (b) p = 0,5 for a position in a securitisation to which Article 261 applies.

Article 466

First time application of International Financial Reporting Standards

By way of derogation from Article 24(2), competent authorities shall grant institutions which are required to effect the valuation of assets and off-balance sheet items and the determination of own funds in accordance with the international accounting standards as applicable under Regulation (EC) No 1606/2002 for the first time a lead time of 24 months for the implementation of the necessary internal processes and technical requirements.

Section 2 Unrealised gains and losses measured at fair value

Article 468

Temporary treatment of unrealised gains and losses measured at fair value through other comprehensive income

A = a · f

where:

• a = the amount of unrealised gains and losses accumulated since 31 December 2019 accounted for as ‘fair value changes of debt instruments measured at fair value through other comprehensive income’ in the balance sheet, corresponding to exposures to central governments, to regional governments or to local authorities referred to in Article 115(2) of this Regulation and to public sector entities referred to in Article 116(4) of this Regulation, excluding those financial assets that are credit-impaired as defined in Appendix A to the Annex to Commission Regulation (EC) No 1126/2008 (‘Annex relating to IFRS 9’); and

• f = the factor applicable for each reporting year during the period of temporary treatment in accordance with paragraph 2.

• (a) the amount of deferred tax assets that is deducted from Common Equity Tier 1 items in accordance with point (c) of Article 36(1) or risk weighted in accordance with Article 48(4);

• (b) the amount of specific credit risk adjustments.

When recalculating the relevant requirement, the institution shall not take into account the effects that the expected credit loss provisions relating to exposures to central governments, to regional governments or to local authorities referred to in Article 115(2) of this Regulation and to public sector entities referred to in Article 116(4) of this Regulation, excluding those financial assets that are credit-impaired as defined in Appendix A to the Annex relating to IFRS 9, have on those items.

5. During the periods set out in paragraph 2 of this Article, in addition to disclosing the information required in Part Eight, institutions that have decided to apply the temporary treatment set out in paragraph 1 of this Article shall disclose the amounts of own funds, Common Equity Tier 1 capital and Tier 1 capital, the total capital ratio, the Common Equity Tier 1 capital ratio, the Tier 1 capital ratio, and the leverage ratio they would have in case they were not to apply that treatment.

Section 3 Deductions

Sub-Section 1

Deductions from Common Equity Tier 1 items

Article 469

Deductions from Common Equity Tier 1 items

• (a) institutions shall deduct from Common Equity Tier 1 items the applicable percentage specified in Article 478 of the amounts required to be deducted pursuant to points (a) to (h) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences;

• (b) institutions shall apply the relevant provisions laid down in Article 472 to the residual amounts of items required to be deducted pursuant to points (a) to (h) of Article 36(1), excluding deferred tax assets that rely on future profitability and arise from temporary differences;

• (c) institutions shall deduct from Common Equity Tier 1 items the applicable percentage specified in Article 478 of the total amount required to be deducted pursuant to points (c) and (i) of Article 36(1) after applying Article 470;

• (d) institutions shall apply the requirements laid down in Article 472(5) or (11), as applicable, to the total residual amount of items required to be deducted pursuant to points (c) and (i) of Article 36(1) after applying Article 470.

• (a) the amount of deferred tax assets that are dependent on future profitability and arise from temporary differences referred to in point (a) of Article 470(2);

• (b) the sum of the amounts referred to in points (a) and (b) of Article 470(2).

- (a) the amount of direct and indirect holdings of the Common Equity Tier 1 instruments referred to in point (b) of Article 470(2);

• (b) the sum of the amounts referred to in points (a) and (b) of Article 470(2).

Article 469a

Derogation from deductions from Common Equity Tier 1 items for non-performing exposures

By way of derogation from point (m) Article 36(1), institutions shall not deduct from Common Equity Tier 1 items the applicable amount of insufficient coverage for non-performing exposures where the exposure was originated prior to 26 April 2019.

Where the terms and conditions of an exposure which was originated prior to 26 April 2019 are modified by the institution in a way that increases the institution's exposure to the obligor, the exposure shall be considered as having been originated on the date when the modification applies and shall cease to be subject to the derogation provided for in the first subparagraph.

Article 470

Exemption from deduction from Common Equity Tier 1 items

• (a) deferred tax assets that are dependent on future profitability and arise from temporary differences and in aggregate are equal to or less than 10 % of relevant Common Equity Tier 1 items;

- (b) where an institution has a significant investment in a financial sector entity, the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1 instruments of that entity that in aggregate are equal to or less than 10 % of relevant Common Equity Tier 1 items.

Article 471

Exemption from Deduction of Equity Holdings in Insurance Companies from Common Equity Tier 1 Items

• (a) the conditions set out in points (a), and (e) of Article 49(1);

• (b) the competent authorities are satisfied with the level of risk control and financial analysis procedures specifically adopted by the institution in order to supervise the investment in the undertaking or holding company;

• (c) the equity holdings of the institution in the insurance undertaking, reinsurance undertaking or insurance holding company do not exceed 15 % of the Common Equity Tier 1 instruments issued by that insurance entity as at 31 December 2012 and during the period from 1 January 2013 to 31 December 2024;

- (d) the amount of the equity holding which is not deducted does not exceed the amount held in the Common Equity Tier 1 instruments in the insurance undertaking, reinsurance undertaking or insurance holding company as at 31 December 2012.

Article 472

Items not deducted from Common Equity Tier 1

• (a) losses that are material are deducted from Tier 1 items;

• (b) losses that are not material are not deducted.

• (a) the amount of direct holdings is deducted from Tier 1 items;

• (b) the amount of indirect and synthetic holdings, including own Common Equity Tier 1 instruments that an institution could be obliged to purchase by virtue of an existing or contingent contractual obligation, is not deducted and is subject to a risk weight in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements laid down in Title IV of Part Three, as applicable.

• (a) where an institution does not have a significant investment in that financial sector entity, the amount of its holding of the Common Equity Tier 1 instruments of that entity is treated as falling under point (h) of Article 36(1);

• (b) where an institution has a significant investment in that financial sector entity, the amount of its holdings of Common Equity Tier 1 instruments of that entity is treated as falling under point (i) of Article 36(1).

• (a) the amounts required to be deducted that relate to direct holdings are deducted half from Tier 1 items and half from Tier 2 items;

• (b) the amounts that relate to indirect and synthetic holdings are not deducted and are subject to a risk weights in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements laid down in Title IV of Part Three, as applicable.

- (a) the amounts required to be deducted that relate to direct holdings are deducted half from Tier 1 items and half from Tier 2 items;

• (b) the amounts that relate to indirect and synthetic holdings are not deducted and are subject to risk weights in accordance with Chapter 2 or 3 of Title II of Part Three and to the requirements laid down in Title IV of Part Three, as applicable.

Article 473

Introduction of amendments to IAS 19

• (a) institutions shall determine the values of the assets of their defined benefit pension funds or plans, as applicable, in accordance with Regulation (EC) No 1126/2008 (⁴⁰) as amended by Regulation (EU) No 1205/2011 (⁴¹). Institutions shall then deduct from the values of these assets the values of the obligations under the same funds or plans determined according to the same accounting rules;

• (b) institutions shall determine the values of the assets of their defined pension funds or plans, as applicable, in accordance with the rules set out in Regulation (EC) No 1126/2008. Institutions shall then deduct from the values of those assets, the values of the obligations under the same funds or plans determined in accordance with the same accounting rules.