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

Article 494a

Grandfathering of issuances through special purpose entities

• (a) the conditions set out in Article 52(1), except for the condition requiring that the instruments are directly issued by the institution;

• (b) the instruments are issued through an entity within the consolidation pursuant to Chapter 2 of Title II of Part One;

• (c) the proceeds are immediately available to the institution without limitation and in a form that satisfies the conditions set out in this paragraph.

• (a) the conditions set out in Article 63, except for the condition requiring that the instruments are directly issued by the institution;

- (b) the instruments are issued through an entity within the consolidation pursuant to Chapter 2 of Title II of Part One;

• (c) the proceeds are immediately available to the institution without limitation and in a form that satisfies the conditions set out in this paragraph.

Article 494b

Grandfathering of own funds instruments and eligible liabilities instruments

2. By way of derogation from Articles 62 and 63, instruments issued prior to 27 June 2019 shall qualify as Tier 2 instruments at the latest until 28 June 2025, where they meet the conditions set out in Articles 62 and 63, except for the conditions referred to in points (n), (o) and (p) of Article 63.

Article 494c

Grandfathering of senior securitisation positions

By way of derogation from Article 270, an originator institution may calculate the risk-weighted exposure amounts of a senior securitisation position in accordance with Article 260, 262 or 264 where both the following conditions are met:

- (a) the securitisation was issued before 9 April 2021;

• (b) the securitisation met, on 8 April 2021, the conditions laid down in Article 270 as applicable at that date.

Article 494d

Reversion to less sophisticated approaches

By way of derogation from Article 149, an institution may from 9 July 2024 until 10 July 2027, revert to less sophisticated approaches for one or more of the exposure classes referred to in Article 147(2), where all of the following conditions are met:

• (a) the institution already existed on 8 July 2024 and was authorised by its competent authority to treat those exposure classes under the IRB Approach;

• (b) the institution requests a reversion to a less sophisticated approach only once during that three-year period;

• (c) the request to revert to a less sophisticated approach is not made with a view to engaging in regulatory arbitrage;

- (d) the institution has formally notified the competent authority that it wishes to revert to a less sophisticated approach for those exposure classes at least six months before it effectively does revert to that approach;

• (e) the competent authority has not objected to the institution’s request to such reversion within three months of the receipt of the notification referred to in point (d).

Article 495

Treatment of equity exposures under the IRB Approach

• (a) the risk-weighted exposure amount calculated in accordance with Article 495a(1) and (2);

• (b) the risk-weighted exposure amount calculated under this Regulation in the version applicable on 8 July 2024.

Where institutions apply the first subparagraph of this paragraph, Article 495a(1) and (2) shall not apply.

For the purposes of this paragraph, the conditions to revert to the use of less sophisticated approaches set out in Article 149 shall not apply.

3. Institutions applying the treatment laid down in paragraph 1 of this Article shall calculate the expected loss amount in accordance with Article 158(7), (8) or (9), as applicable, in the version of those paragraphs applicable on 8 July 2024 and apply Article 36(1), point (d), and Article 62, point (d), as applicable, in the version of those points applicable on 8 July 2024 where the risk-weighted exposure amount calculated pursuant to paragraph 1, point (b), of this Article is higher than the risk-weighted exposure amount calculated pursuant to paragraph 1, point (a), of this Article.

Article 495a

Transitional arrangements for equity exposures

• (a) 100 % during the period from 1 January 2025 to 31 December 2025;

• (b) 130 % during the period from 1 January 2026 to 31 December 2026;

• (c) 160 % during the period from 1 January 2027 to 31 December 2027;

• (d) 190 % during the period from 1 January 2028 to 31 December 2028;

• (e) 220 % during the period from 1 January 2029 to 31 December 2029.

• (a) 100 % during the period from 1 January 2025 to 31 December 2025;

• (b) 160 % during the period from 1 January 2026 to 31 December 2026;

• (c) 220 % during the period from 1 January 2027 to 31 December 2027;

• (d) 280 % during the period from 1 January 2028 to 31 December 2028;

- (e) 340 % during the period from 1 January 2029 to 31 December 2029.

Article 495b

Transitional arrangements for specialised lending exposures

• (a) 50 % during the period from 1 January 2025 to 31 December 2027;

• (b) 80 % during the period from 1 January 2028 to 31 December 2028;

• (c) 100 % during the period from 1 January 2029 to 31 December 2029.

EBA shall submit that report to the European Parliament to the Council and to the Commission by 10 July 2026.

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 2027.

• (a) the obligor can meet its financial obligations even under severely stressed conditions due to the presence of all of the following features:
• (i) adequate exposure-to-value of the exposure;
• (ii) conservative repayment profile of the exposure;
• (iii) commensurate remaining lifetime of the assets upon full pay-out of the exposure or alternatively recourse to a protection provider with high creditworthiness;
• (iv) low refinancing risk of the exposure by the obligor or that risk is adequately mitigated by a commensurate residual asset value or recourse to a protection provider with high creditworthiness;
• (v) the obligor has contractual restrictions over its activity and funding structure;
• (vi) the obligor uses derivatives only for risk-mitigation purposes;
• (vii) material operating risks are properly managed;

• (b) the contractual arrangements on the assets provide lenders with a high degree of protection, including the following features:
• (i) the lenders have a legally enforceable first-ranking right over the assets financed and, where applicable, over the income that they generate;
• (ii) there are contractual restrictions on the ability of the obligor to make changes to the asset which would have a negative impact on its value;
• (iii) where the asset is under construction, the lenders have a legally enforceable first-ranking right over the assets and the underlying construction contracts;

• (c) the assets being financed meet all of the following standards to operate in a sound and effective manner:
• (i) the technology and design of the asset are tested;
• (ii) all necessary permits and authorisations for the operation of the assets have been obtained;
• (iii) where the asset is under construction, the obligor has adequate safeguards on the agreed specifications, budget and completion date of the asset, including strong completion guarantees or the involvement of an experienced constructor and adequate contract provisions for liquidated damages.

• (a) the evolution of the trends and conditions in markets for object finance in the Union;

• (b) the effective riskiness of the object finance exposures over a full economic cycle;

• (c) the impact on own funds requirements of the treatment set out in Article 122a(3), point (a), for object finance exposures, without taking into account Article 465(1);

• (d) the appropriateness of the definition of the sub-class of ‘high quality object finance’ and to assign to that sub-class of exposures a different prudential treatment.

EBA shall submit that report to the European Parliament, to the Council and to the Commission by 31 December 2030.

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.

Article 495c

Transitional arrangements for leasing exposures as a credit risk mitigation technique

• (a) 50 % during the period from 1 January 2025 to 31 December 2027;

• (b) 80 % during the period from 1 January 2028 to 31 December 2028;

• (c) 100 % during the period from 1 January 2029 to 31 December 2029.

EBA shall submit that report to the European Parliament, to the Council and to the Commission by 10 July 2027.

On the basis of that report, and taking into account the internationally agreed standards developed by the BCBS, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2028.

Article 495d

Transitional arrangements for unconditional cancellable commitments

• (a) 0 % during the period from 1 January 2025 to 31 December 2029;

• (b) 25 % during the period from 1 January 2030 to 31 December 2030;

• (c) 50 % during the period from 1 January 2031 to 31 December 2031;

• (d) 75 % during the period from 1 January 2032 to 31 December 2032.

EBA shall submit that report to the European Parliament, to the Council and to the Commission by 31 December 2028.

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

Article 495e

Transitional arrangements for ECAI credit assessments of institutions

By way of derogation from Article 138, point (g), competent authorities may allow institutions to continue using an ECAI credit assessment in relation to an institution which incorporates assumptions of implicit government support until 31 December 2029.

Article 495f

Transitional arrangements for property revaluation requirements

By way of derogation from Article 229(1), points (a) to (d), for exposures secured by residential property or commercial immovable property granted before 1 January 2025, institutions may continue to value residential property or commercial immovable property at or less than the market value, or in those Member States that have provided for rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions, the mortgage lending value of that property, until a review of the property value is required in accordance with Article 208(3), or 31 December 2027, whichever is earlier.

Article 495g

Transitional arrangements for certain public guarantees schemes

By way of derogation from Articles 183(1) and 213(1), a guarantee that can be cancelled in the event of fraud by the obligor or the extent of credit protection of which can be diminished in such event, shall be considered to meet the requirements referred to in Article 183(1), point (d), and in Article 213(1), point (c), where the guarantee was provided by an entity referred to in Article 214(2), point (a), no later than 31 December 2024.

Article 495h

Transitional arrangements for the use of the alternative internal model approach for market risk

By way of derogation from Article 325az(2), point (d), institutions may use, until 1 January 2026, the alternative internal model approach to calculate their own funds requirements for market risk for trading desks that do not meet the requirements laid down in Article 325bg.

Article 495i

Transitional provisions as regards the profit and loss attribution test under the alternative internal model approach for market risk

1. By way of derogation from Article 325az(2), point (d), and until 31 December 2029, institutions may use the alternative internal model approach to calculate their own funds requirements for market risk for trading desks that do not meet the requirements laid down in Article 325bg.

Article 495j

Transitional operational relief measure on own funds requirements for non-modellable risk factors

The liquidity horizon assigned in accordance with the first subparagraph shall not be shorter than the liquidity horizon that would be assigned to the risk factor, if the number of verifiable prices was sufficient to assess the risk factor as modellable in accordance with Article 1(1) and (2) and Article 4(2) and (3) of Delegated Regulation (EU) 2022/2060.

Article 495k

Transitional provisions on data requirements for the assessment of modellability of new issuances

By way of derogation from Article 1(2) and Article 4 of Delegated Regulation (EU) 2022/2060 and until 31 December 2029, institutions, when assessing the modellability of risk factors in accordance with Article 325be of this Regulation, shall consider that for new risk factors from recently issued or recently created instruments:

- (a) the observation period referred to in Article 1(1) and Article 4 of Delegated Regulation (EU) 2022/2060 begins on the day on which those instruments are issued or traded for the first time in the market;

• (b) the minimum number of verifiable prices which are representative of the risk factor in accordance with that Delegated Regulation are prorated until 12 months after that issuance or after that first trading date.

Article 495l

Transitional provisions on own funds requirements under the internal default risk model

By way of derogation from Article 325bp(5), point (a), and until 31 December 2029, institutions shall apply a multiplier equal to 0 to the probability of default estimates used for the calculation of the own funds requirements for default risk under the internal default risk model laid down in Part Three, Title IV, Chapter 1b, Section 3 for all issuers or obligors the exposures to which would attract a 0 % risk weight in the calculation of own funds requirements for default risk under the alternative standardised approach.

Article 495m

Transitional provisions on the calculation frequency for the alternative internal model approach

1. Until 31 December 2029, institutions that apply Article 325ba(1) for the calculation of their own funds requirements for market risk may choose to calculate the average values referred to in Article 325ba(1), point (b), over the preceding 12 weeks, instead of over the preceding 60 business days.

Article 495n

Transitional provisions on own funds requirements for positions in CIUs under the alternative internal model approach

• (a) at least 50 % of all underlying positions of the CIU, measured by market value;

• (b) the underlying positions of the CIUs on a quarterly basis rather than on a weekly basis.

For the purposes of the first subparagraph, point (a), institutions shall calculate the own funds requirement for market risk for all remaining positions in that CIU using the risk weight set out in Article 325j(1), point (b)(i).

2. When carrying out the look through referred to in paragraph 1, institutions shall be able to monitor risks resulting from significant changes in the composition of the CIUs concerned between two calculation dates.

Article 495o

Transitional provisions on own funds requirements for positions in CIUs under the alternative standardised approach

• (a) at least 50 % of the underlying positions in those CIUs, measured by market value;

• (b) the underlying positions of the CIU on a quarterly basis rather than on a monthly basis.

For the purposes of the first subparagraph, point (a), institutions shall calculate the own funds requirement for market risk for all remaining positions in those CIUs using the approach laid down in Article 325j(1), point (b)(i).

Article 495p

Transitional provisions on own funds requirements for residual risk add-on under the alternative standardised approach

By way of derogation from Article 325u and until 31 December 2029, institutions shall apply a multiplier equal to 0 to the own funds requirements for residual risks calculated in accordance with that Article for the following instruments:

• (a) instruments that reference future realised volatility as an underlying and that would not attract a residual risk add-on for other reasons;

- (b) instruments that are options that can be exercised on a finite set of predetermined dates and that would not attract a residual risk add-on for other reasons;

• (c) instruments that are options on the difference between two constant maturity swap rates denominated in the same currency and that would not attract a residual risk add-on for other reasons.

Article 495q

Transitional provisions on the calculation of the own funds requirements for default risk under the alternative standardised approach

By way of derogation from Article 325x(4) and until 31 December 2029, institutions may at their discretion assign:

- (a) to cash equity positions that hedge derivative instruments, the same maturity as the maturity of the derivative instruments they hedge;

• (b) a maturity of three months to equity derivative exposures.

Article 495r

Transitional provisions on the calculation of own funds requirements under the alternative standardised approach for instruments subject to EU ETS carbon trading risk

By way of derogation from Article 325at(2) and until 31 December 2029, institutions shall divide by 99,1 % the tenor correlation parameter set out in that Article for the calculation of their own funds requirements for market risk under the alternative standardised approach for instruments subject to EU ETS carbon trading delta commodity risk.

Article 495s

Transitional provisions on the phase-in of the own funds requirements under the alternative standardised approach and simplified standardised approach

1. Until 31 December 2029, institutions shall apply a multiplier of 0,9 to the result of the calculation of their own funds requirements for market risk under the sensitivities-based method in accordance with Article 325h(4).

Article 495t

Transitional provisions on the treatment of instruments in the ACTP portfolio

By way of derogation from Article 325i(1), points (a) and (b), and until 31 December 2029, institutions may choose to also apply the treatment laid down in that Article to positions included in the ACTP.

Article 495u

Transitional provisions on the derogation for small trading book business institutions

Until 31 December 2029, an institution that is eligible for the treatment set out in Article 94 may apply the approach referred to in Article 325(2) to calculate its own funds requirements for market risk of non-trading book positions that are subject to foreign exchange risk or commodity risk.

Article 495v

Transitional provisions on the application of a multiplier to own funds requirements for market risk

7. An institution that applies the multiplier laid down in paragraph 1 shall disclose that it chooses to apply the multiplier. That institution shall continue to also comply with the disclosure requirements of the own funds requirements for market risk set out in Part Eight of this Regulation in the version in force on 8 July 2024.

Article 497

Own funds requirements for exposures to CCPs

• (a) where the Commission has already adopted an implementing act referred to in Article 25(6) of Regulation (EU) No 648/2012 in relation to the third country in which the CCP is established and that implementing act has entered into force, two years after the date of submission of the application;

• (b) where the Commission has not yet adopted an implementing act referred to in Article 25(6) of Regulation (EU) No 648/2012 in relation to the third country in which the CCP is established or where that implementing act has not yet entered into force, the earlier of the following dates:
• (i) two years after the date of entry into force of the implementing act;
• (ii) for CCPs that submitted the application after 27 June 2019, two years after the date of submission of the application;
• (iii) for those CCPs that submitted the application before 27 June 2019, 28 June 2021.

Image omitted; see official source

where:

Image omitted; see official source	=	the own funds requirement;
---	---	---
KCCP	=	the hypothetical capital of the QCCP communicated to the institution by the QCCP in accordance with Article 50c of Regulation (EU) No 648/2012;
---	---	---
DFCCP	=	the pre-funded financial resources of the CCP communicated to the institution by the CCP in accordance with Article 50c of Regulation (EU) No 648/2012;
---	---	---
i	=	the index denoting the clearing member;
---	---	---
IMi	=	the initial margin posted with the CCP by clearing member i; and

| | | |

| --- | --- | --- | | IM | = | the total amount of initial margin communicated to the institution by the CCP in accordance with Article 89(5a) of Regulation (EU) No 648/2012. |

Article 498

Exemption for Commodities dealers

Until 26 June 2021, the provisions on own funds requirements as set out in this Regulation shall not apply to investment firms the main business of which consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points (5), (6), (7), (9), (10) and (11) of Section C of Annex I to Directive 2014/65/EU and to which Directive 2004/39/EC did not apply on 31 December 2006.

Article 499

Leverage

• (a) Tier 1 capital;

- (b) Tier 1 capital, subject to the derogations laid down in Chapters 1 and 2 of this Title.

Article 500

Adjustment for massive disposals

• (a) the institution has notified the competent authority of a plan providing the scale, composition and the dates of the disposals of defaulted exposures;

• (b) the dates of the disposals of defaulted exposures are after 23 November 2016 but not later than 31 December 2024;

• (c) the cumulative amount of defaulted exposures disposed of since the date of the first disposal in accordance with the plan referred to in point (a) has surpassed 20 % of the outstanding amount of all defaulted exposures as of the date of the first disposal referred to in points (a) and (b).

The adjustment referred to in the first subparagraph may only be carried out until 31 December 2024 and its effects may last for as long as the corresponding exposures are included in the institution’s own LGD estimates.

3. The Commission shall, by 31 December 2026, and every two years thereafter, assess whether the level of defaulted exposures in the balance sheets of the institutions has increased significantly, whether it expects a significant deterioration in the institutions’ asset quality, and whether the degree of development of secondary markets for defaulted exposures is not adequate to ensure efficient disposals of defaulted exposures by institutions, also taking into consideration the regulatory developments on securitisation.

The Commission shall review the appropriateness of the derogation set out in paragraph 1 and shall, where appropriate, submit a legislative proposal to the European Parliament and to the Council to extend, reintroduce or amend, as needed, the adjustment provided for in this Article.

Article 500a

Temporary treatment of public debt issued in the currency of another Member State

• (a) until 31 December 2024, the risk weight applied to the exposure values shall be 0 % of the risk weight assigned to those exposures in accordance with Article 114(2);

• (b) in 2025, the risk weight applied to the exposure values shall be 20 % of the risk weight assigned to those exposures in accordance with Article 114(2);

• (c) in 2026, the risk weight applied to the exposure values shall be 50 % of the risk weight assigned to those exposures in accordance with Article 114(2).

• (a) 100 % of the institution’s Tier 1 capital until 31 December 2025;

• (b) 75 % of the institution’s Tier 1 capital between 1 January and 31 December 2026;

• (c) 50 % of the institution’s Tier 1 capital between 1 January and 31 December 2027.

The limits referred to in points (a), (b) and (c) of the first subparagraph of this paragraph shall apply to exposure values after taking into account the effect of the credit risk mitigation in accordance with Articles 399 to 403.

Article 500b

Temporary exclusion of certain exposures to central banks from the total exposure measure in view of the COVID-19 pandemic

• (a) coins and banknotes constituting legal currency in the jurisdiction of the central bank;

• (b) assets representing claims on the central bank, including reserves held at the central bank.

The amount excluded by the institution shall not exceed the daily average amount of the exposures listed in points (a) and (b) of the first subparagraph over the most recent full reserve maintenance period of the institution’s central bank.

The exposures to be excluded under paragraph 1 shall meet both of the following conditions:

• (a) they are denominated in the same currency as the deposits taken by the institution;

- (b) their average maturity does not significantly exceed the average maturity of the deposits taken by the institution.

An institution that excludes exposures to its central bank from its total exposure measure in accordance with paragraph 1 shall also disclose the leverage ratio it would have if it did not exclude those exposures.

Article 500c

Exclusion of overshootings from the calculation of the back-testing addend in view of the COVID-19 pandemic

By way of derogation from Article 325bf, competent authorities may, in exceptional circumstances and in individual cases, permit institutions to exclude the overshootings evidenced by the institution’s back-testing on hypothetical or actual changes from the calculation of the addend set out in Article 325bf, provided that those overshootings do not result from deficiencies in the internal model and provided that they occurred between 1 January 2020 and 31 December 2021.

Article 500d

Temporary calculation of the exposure value of regular-way purchases and sales awaiting settlement in view of the COVID-19 pandemic

Institutions may offset the full nominal value of commitments to pay related to regular-way purchases by the full nominal value of cash receivables related to regular-way sales awaiting settlement only where both of the following conditions are met:

• (a) both the regular-way purchases and sales are settled on a delivery-versus-payment basis;

- (b) the financial assets bought and sold that are associated with cash payables and receivables are measured at fair value through profit or loss and included in the institution’s trading book.

Article 501

Adjustment of risk-weighted non-defaulted SME exposures

Image omitted; see official source

where:

RWEA*	=	the RWEA adjusted by an SME supporting factor; and
---	---	---
E* is either of the following:	=	(a) the total amount owed to the institution, its subsidiaries, its parent undertakings and other subsidiaries of those parent undertakings, including any exposure in default, but excluding claims or contingent claims secured on residential property collateral, by the SME or the group of connected clients of the SME; (b) where the total amount referred to in point (a) is equal to 0, the amount of claims or contingent claims against the SME or the group of connected clients of the SME that are secured on residential property collateral and that are excluded from the calculation of the total amount referred to in that point.

• (a) the exposure to an SME shall be included either in the retail or in the corporates or secured by mortgages on immovable property exposure classes but excluding ADC exposures;

- (b) an SME shall have the meaning laid down in Article 5, point (9);

• (c) institutions shall take reasonable steps to correctly determine E* and obtain the information required under point (b).

Article 501a

Adjustment to own funds requirements for credit risk for exposures to entities that operate or finance physical structures or facilities, systems and networks that provide or support essential public services

• (a) the exposure is assigned to the exposure class referred to in Article 112, point (g), or to any of the exposure classes referred to in Article 147(2), point (c)(i), (ii) or (iii), with the exclusion of exposures in default;

• (b) the exposure is to an entity which was created specifically to finance or operate physical structures or facilities, systems and networks that provide or support essential public services;

• (c) the source of repayment of the obligation is represented for not less than two thirds of its amount by the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise, or by subsidies, grants or funding provided by one or more of the entities listed in points (b)(i) and (b)(ii) of paragraph 2;

• (d) the obligor can meet its financial obligations even under severely stressed conditions that are relevant for the risk of the project;

• (e) the cash flows that the obligor generates are predictable and cover all future loan repayments during the duration of the loan;

• (f) the obligor’s refinancing risk is low or adequately mitigated, taking into account any subsidies, grants or funding provided by one or more of the entities listed in paragraph 2, points (b)(i) and (ii);

• (g) the contractual arrangements provide lenders with a high degree of protection including the following:
• (i) where the revenues of the obligor are not funded by payments from a large number of users, the contractual arrangements shall include provisions that effectively protect lenders against losses resulting from the termination of the project by the party which agrees to purchase the goods or services provided by the obligor;
• (ii) the obligor has sufficient reserve funds fully funded in cash or other financial arrangements with highly rated guarantors to cover the contingency funding and working capital requirements over the lifetime of the assets referred to in point (b) of this paragraph;
• (iii) the lenders have a substantial degree of control over the assets and the income generated by the obligor;
• (iv) the lenders have the benefit of security to the extent permitted by applicable law in assets and contracts critical to the infrastructure business or have alternative mechanisms in place to secure their position;
• (v) equity is pledged to lenders such that they are able to take control of the entity upon default;
• (vi) the use of net operating cash flows after mandatory payments from the project for purposes other than servicing debt obligations is restricted;
• (vii) there are contractual restrictions on the ability of the obligor to perform activities that may be detrimental to lenders, including the restriction that new debt cannot be issued without the consent of existing debt providers;

• (h) the obligation is senior to all other claims other than statutory claims and claims from derivatives counterparties;

• (i) where the obligor is in the construction phase, the following criteria shall be fulfilled by the equity investor, or where there is more than one equity investor, the following criteria shall be fulfilled by a group of equity investors as a whole:
• (i) the equity investors have a history of successfully overseeing infrastructure projects, the financial strength and the relevant expertise;
• (ii) the equity investors have a low risk of default, or there is a low risk of material losses for the obligor as a result of their default;
• (iii) there are adequate mechanisms in place to align the interest of the equity investors with the interests of lenders;

• (j) the obligor has adequate safeguards to ensure completion of the project according to the agreed specification, budget or completion date; including strong completion guarantees or the involvement of an experienced constructor and adequate contract provisions for liquidated damages;

• (k) where operating risks are material, they are properly managed;

• (l) the obligor uses tested technology and design;

• (m) all necessary permits and authorisations have been obtained;

• (n) the obligor uses derivatives only for risk-mitigation purposes;

• (o) for exposures originated after 1 January 2025 the obligor has carried out an assessment that the assets being financed contribute positively to one or more of the environmental objectives set out in Article 9 of Regulation (EU) 2020/852 and do not significantly harm the other objectives set out in that Article, or that the assets being financed do not significantly harm any of the environmental objectives set out in that Article.

• (a) one of the following criteria is met:
• (i) the revenues are availability-based;
• (ii) the revenues are subject to a rate-of-return regulation;
• (iii) the revenues are subject to a take-or-pay contract;
• (iv) the level of output or the usage and the price shall independently meet one of the following criteria:
• — it is regulated,
• — it is contractually fixed,
• — it is sufficiently predictable as a result of low demand risk;

• (b) where the revenues of the obligor are not funded by payments from a large number of users, the party which agrees to purchase the goods or services provided by the obligor shall be one of the following:
• (i) a central bank, a central government, a regional government or a local authority, provided that they are assigned a risk weight of 0 % in accordance with Articles 114 and 115 or are assigned an ECAI rating with a credit quality step of at least 3;
• (ii) a public sector entity, provided that it is assigned a risk weight of 20 % or below in accordance with Article 116 or is assigned an ECAI rating with a credit quality step of at least 3;
• (iii) a multilateral development bank referred to in Article 117(2);
• (iv) an international organisation referred to in Article 118;
• (v) a corporate entity which has been assigned an ECAI rating with a credit quality step of at least 3;
• (vi) an entity that is replaceable without a significant change in the level and timing of revenues.

• (a) an analysis of the evolution of the trends and conditions in markets for infrastructure lending and project finance over the period referred to in paragraph 4;

- (b) an analysis of the effective riskiness of entities referred to in point (b) of paragraph 1 over a full economic cycle;

• (c) the consistency of own funds requirements laid down in this Regulation with the outcomes of the analysis under points (a) and (b) of this paragraph.

Article 501b

Derogation from reporting requirements

By way of derogation from Article 430, during the period between the date of application of the relevant provisions of this Regulation and the date of the first remittance of reports specified in the implementing technical standards referred to in that Article, a competent authority may waive the requirement to report information in the format specified in the templates contained in the implementing act referred to in Article 430(7) where those templates have not been updated to reflect the provisions of this Regulation.

TITLE II REPORTS AND REVIEWS

Article 501c

Prudential treatment of exposures to environmental or social factors

• (a) the availability and accessibility of reliable and consistent ESG data for each exposure class determined in accordance with Part Three, Title II;

• (b) in consultation with EIOPA, the feasibility of introducing a standardised methodology to identify and qualify the exposures, for each exposure class determined in accordance with Part Three, Title II, based on a common set of principles to ESG risk classification, using the information on transition risk and physical risk indicators made available by sustainability disclosure reporting frameworks adopted in the Union and where available internationally, the guidance and conclusions coming from the supervisory stress-testing or scenario analysis of climate-related financial risks conducted by EBA or the competent authorities and if appropriately reflecting the ESG risks, the relevant ESG score of the credit risk rating by a nominated ECAI;

• (c) the effective riskiness of exposures related to assets and activities subject to the impact of environmental or social factors compared to the riskiness of other exposures and the possible additional and more comprehensive revisions to the framework that should be considered, taking into consideration the developments agreed at international level by the BCBS;

• (d) the potential short, medium and long-term effects of an adjusted dedicated prudential treatment of exposures related to assets and activities subject to the impact of environmental or social factors on financial stability and bank lending in the Union;

• (e) the targeted enhancements that could be considered within the current prudential framework.

• (a) 9 July 2024 for the assessments required under paragraph 1, point (e);

• (b) 31 December 2024 for the assessments required under paragraph 1, points (a) and (b);

- (c) 31 December 2025 for the assessments required under paragraph 1, points (c) and (d).

On the basis of those EBA reports, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal by 31 December 2026.

Article 501d

Transitional provisions on the prudential treatment of crypto-assets

• (a) criteria for assigning crypto-assets to different crypto-asset categories based on their risk characteristics and compliance with specific conditions;

• (b) specific own funds requirements for all risks entailed by different crypto-assets;

• (c) an aggregate limit for exposures to specific types of crypto-assets;

• (d) specific leverage ratio requirements for crypto-asset exposures;

• (e) specific supervisory powers as regards crypto-asset exposure assignment, monitoring and calculation of the own funds requirements;

• (f) specific liquidity requirements for crypto-asset exposures;

• (g) disclosure and reporting requirements.

• (a) crypto-asset exposures to tokenised traditional assets shall be treated as exposures to the traditional assets that they represent;

• (b) exposures to asset-referenced tokens whose issuers comply with Regulation (EU) 2023/1114 and that reference one or more traditional assets shall be assigned a risk weight of 250 %;

• (c) crypto-asset exposures other than those referred to in points (a) and (b) shall be assigned a risk weight of 1 250 %.

By way of derogation from the first subparagraph, point (a), crypto-asset exposures to tokenised traditional assets whose values depend on any other crypto-assets shall be assigned to point (c).

In developing those draft regulatory technical standards, EBA shall take into consideration the related internationally agreed standards developed by the BCBS as well as existing authorisations in the Union under Regulation (EU) 2023/1114.

EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2025.

Power is delegated to the Commission to supplement this Regulation by adopting the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1093/2010.

Article 502

Cyclicality of capital requirements

The Commission, in cooperation with EBA, ESRB and the Member States, and taking into account the opinion of the ECB, shall periodically monitor whether this Regulation taken as a whole, together with Directive 2013/36/EU, has significant effects on the economic cycle and, in the light of that examination, shall consider whether any remedial measures are justified.

By 31 December 2013, EBA shall report to the Commission on whether, and if so how, methodologies of institutions under the IRB Approach should converge with a view to more comparable capital requirements while mitigating pro-cyclicality.

Based on that analysis and taking into account the opinion of the ECB, the Commission shall draw up a biennial report and submit it to the European Parliament and to the Council, together with any appropriate proposals. Contributions from credit taking and credit lending parties shall be adequately acknowledged when the report is drawn up.

By 31 December 2014, the Commission shall review, and report on, the application of Article 33(1)(c) and shall submit that report to the European Parliament and the Council, together with a legislative proposal, if appropriate.

With respect to the potential deletion of Article 33(1)(c) and its potential application at the Union level, the review shall in particular ensure that sufficient safeguards are in place to ensure financial stability in all Member States.

Article 503

Own funds requirements for exposures in the form of covered bonds

• (a) the extent to which the current regulatory capital requirements applicable to covered bonds adequately differentiate between variances in the credit quality of covered bonds and the collateral against which they are secured, including the extent of variations across Member States;

• (b) the transparency of the covered bond market and the extent to which this facilitates comprehensive internal analysis by investors in respect of the credit risk of covered bonds and the collateral against which they are secured and the asset segregation in case of the issuer's insolvency, including the mitigating effects of the underlying strict national legal framework in accordance with Article 129 of this Regulation and Article 52(4) of Directive 2009/65/EC on the overall credit quality of a covered bond and its implications on the level of transparency needed by investors; and

• (c) the extent to which covered bond issuance by a credit institution impacts on the credit risk to which other creditors of the issuing institution are exposed.

3. The Commission shall, by 31 December 2014, after consulting EBA, report to the European Parliament and the Council on whether loans secured by aircrafts (aircraft liens) and residential loans secured by a guarantee but not secured by a registered mortgage, should under certain conditions be considered an eligible asset in accordance with Article 129.

Article 504

Capital instruments subscribed by public authorities in emergency situations

The Commission shall, by 31 December 2016, after consulting EBA, report to the European Parliament and the Council, together with any appropriate proposals, whether the treatment set out in Article 31 needs to be amended or deleted.

Article 504a

Holdings of eligible liabilities instruments

By 28 June 2022, EBA shall report to the Commission on the amounts and distribution of holdings of eligible liabilities instruments among institutions identified as G-SIIs or O-SIIs and on potential impediments to resolution and the risk of contagion in relation to those holdings.

Based on the report by EBA the Commission shall, by 28 June 2023, report to the European Parliament and to the Council on the appropriate treatment of such holdings, accompanied by a legislative proposal, where appropriate.

Article 505

Review of agricultural financing

• (a) the appropriateness of a dedicated risk weight for own funds requirements for credit risk calculated in accordance with Part Three, Title II, for exposures to an agricultural enterprise;

• (b) where applicable, prudentially justified criteria for the application of such a dedicated risk weight, including farming practices, as well as the inclusion of exposures in the corporates, retail or secured by mortgages on immovable property exposure classes;

• (c) the alignment with the ‘farm to fork’ strategy set out in the communication of the Commission of 20 May 2020 entitled ‘A Farm to Fork Strategy for a fair, healthy and environmentally-friendly food system’ and the respective environmental impact within the meaning of Regulation (EU) 2020/852, in particular with the indicators as collected in the Union’s Farm Accountancy Data Network, showing contribution scores with regard to:
• (i) net greenhouse gas emissions per hectare;
• (ii) pesticides and fertilisers usage per hectare;
• (iii) soil’s minerals efficiency ratios, including carbon, ammonia, phosphate and nitrogen per hectare;
• (iv) water use efficiency;
• (v) a confirmation of positive impact on the indicators referred to in points (i) to (iv) of this point with an organic production logo of the European Union referred to in Regulation (EU) 2018/848 of the European Parliament and of the Council (⁴⁴).

2. Taking into account the EBA report referred to in paragraph 1, the Commission shall submit the report to the European Parliament and to the Council. Where appropriate, that report shall be accompanied by a legislative proposal to amend this Regulation in order to mitigate its negative effects on agricultural financing.

Article 506

Credit risk — credit insurance

By 30 June 2024, EBA shall, in close cooperation with EIOPA, report to the Commission on the eligibility and use of credit insurance policy as a credit risk mitigation technique, including on:

• (a) the appropriateness of the associated risk parameters referred to in Part Three, Title II, Chapters 3 and 4;

• (b) an analysis of the effective and observed riskiness of credit risk exposures where a credit insurance was recognised as a credit risk mitigation technique;

- (c) the consistency of own funds requirements laid down in this Regulation with the outcomes of the analysis under points (a) and (b).

On the basis of that report, the Commission shall, where appropriate, submit to the European Parliament and to the Council a legislative proposal to amend the treatment applicable to credit insurance referred to in Part Three, Title II, by 31 December 2024.

Article 506a

CIUs with an underlying portfolio of euro area sovereign bonds

In close cooperation with the ESRB and EBA, the Commission shall publish a report by 31 December 2021 in which it shall assess whether changes to the regulatory framework are needed to promote the market for, and bank purchases of, exposures in the form of units or shares in CIUs with an underlying portfolio consisting exclusively of sovereign bonds of Member States whose currency is the euro, where the relative weight of each Member States’ sovereign bonds in the total portfolio of the CIU is equal to the relative weight of each Member States’ capital contribution to the ECB.

Article 506b

NPE securitisations

1. EBA shall monitor the application of Article 269a and shall evaluate the regulatory capital treatment of NPE securitisations having regard to the state of the market for NPEs in general and the state of NPE securitisation market in particular, and submit a report on its findings to the Commission by 10 October 2022.

Article 506c

Credit risk — interaction between Common Equity Tier 1 capital reductions and credit risk parameters