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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

Type Regulation

Publication 2013-06-26

Last updated 2026-06-26

State In force

Department Council of the European Union, European Parliament

Source EUR-Lex

articles 737

Reform history JSON API

(a) institutions may calculate the amount of holdings on the basis of the net long position provided that both the following conditions are met: (i) the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk; (ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book;

(b) institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own Tier 2 instruments in those indices;

(c) institutions may net gross long positions in own Tier 2 instruments resulting from holdings of index securities against short positions in own Tier 2 instruments resulting from short positions in the underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met: (i) the long and short positions are in the same underlying indices; (ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book.

Article 68

Deduction of holdings of Tier 2 instruments of financial sector entities and where an institution has a reciprocal cross holding designed artificially to inflate own funds

Institutions shall make the deductions required by points (b), (c) and (d) of Article 66 in accordance with the following provisions:

(a) holdings of Tier 2 instruments shall be calculated on the basis of the gross long positions;

(b) holdings of Tier 2 own-fund insurance items and Tier 3 own-fund insurance items shall be treated as holdings of Tier 2 instruments for the purposes of deduction.

Article 69

Deduction of holdings of Tier 2 instruments of financial sector entities

Institutions shall make the deductions required by points (c) and (d) of Article 66 in accordance with the following:

(a) they may calculate direct, indirect and synthetic holdings of Tier 2 instruments of the financial sector entities on the basis of the net long position in the same underlying exposure provided that both the following conditions are met: (i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year; (ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book;

(b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the capital instruments of the financial sector entities in those indices.

Article 70

Deduction of Tier 2 instruments where an institution does not have a significant investment in a relevant entity

For the purposes of point (c) of Article 66, institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:

(a) the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities in which the institution does not have a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution calculated after applying the following: (i) Articles 32 to 35; (ii) Article 36(1), points (a) to (g), points (k)(ii) to (vi) and points (l), (m) and (n), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences; (iii) Articles 44 and 45;

(b) the amount of direct, indirect and synthetic holdings by the institution of the Tier 2 instruments of financial sector entities in which the institution does not have a significant investment divided by the aggregate amount of all direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of those financial sector entities.

The amount to be deducted pursuant to paragraph 1 shall be apportioned across each Tier 2 instrument held. Institutions shall determine the amount to be deducted from each Tier 2 instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:

(a) the total amount of holdings required to be deducted pursuant to paragraph 1;

(b) the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the Tier 2 instruments of financial sector entities in which the institution does not have a significant investment represented by each Tier 2 instrument held.

Institutions shall determine the amount of each Tier 2 instrument that is risk weighted pursuant to paragraph 4 by multiplying the amount specified in point (a) of this paragraph by the amount specified in point (b) of this paragraph:

(a) the amount of holdings required to be risk weighted pursuant to paragraph 4;

(b) the proportion resulting from the calculation in point (b) of paragraph 3.

Section 3

Tier 2 capital

Article 71

Tier 2 capital

The Tier 2 capital of an institution shall consist of the Tier 2 items of the institution after the deductions referred to in Article 66 and the application of Article 79.

CHAPTER 5

Own funds

Article 72

Own funds

The own funds of an institution shall consist of the sum of its Tier 1 capital and Tier 2 capital.

CHAPTER 5a

Eligible liabilities

Section 1

Eligible liabilities items and instruments

Article 72a

Eligible liabilities items

Eligible liabilities items shall consist of the following, unless they fall into any of the categories of excluded liabilities laid down in paragraph 2 of this Article, and to the extent specified in Article 72c:

(a) eligible liabilities instruments where the conditions set out in Article 72b are met, to the extent that they do not qualify as Common Equity Tier 1, Additional Tier 1 or Tier 2 items;

(b) Tier 2 instruments with a residual maturity of at least one year, to the extent that they do not qualify as Tier 2 items in accordance with Article 64.

The following liabilities shall be excluded from eligible liabilities items:

(a) covered deposits;

(b) sight deposits and short term deposits with an original maturity of less than one year;

(c) the part of eligible deposits from natural persons and micro, small and medium-sized enterprises which exceeds the coverage level referred to in Article 6 of Directive 2014/49/EU of the European Parliament and of the Council (²⁹);

(d) deposits that would be eligible deposits from natural persons, micro, small and medium–sized enterprises if they were not made through branches located outside the Union of institutions established in the Union;

(e) secured liabilities, including covered bonds and liabilities in the form of financial instruments used for hedging purposes that form an integral part of the cover pool and that in accordance with national law are secured in a manner similar to covered bonds, provided that all secured assets relating to a covered bond cover pool remain unaffected, segregated and with enough funding and excluding any part of a secured liability or a liability for which collateral has been pledged that exceeds the value of the assets, pledge, lien or collateral against which it is secured;

(f) any liability that arises by virtue of the holding of client assets or client money including client assets or client money held on behalf of collective investment undertakings, provided that such a client is protected under the applicable insolvency law;

(g) any liability that arises by virtue of a fiduciary relationship between the resolution entity or any of its subsidiaries (as fiduciary) and another person (as beneficiary), provided that such a beneficiary is protected under the applicable insolvency or civil law;

(h) liabilities to institutions, excluding liabilities to entities that are part of the same group, with an original maturity of less than seven days;

(i) liabilities with a remaining maturity of less than seven days, owed to: (i) systems or system operators designated in accordance with Directive 98/26/EC of the European Parliament and of the Council (³⁰); (ii) participants in a system designated in accordance with Directive 98/26/EC and arising from the participation in such a system; or (iii) third-country CCPs recognised in accordance with Article 25 of Regulation (EU) No 648/2012;

(j) a liability to any of the following: (i) an employee in relation to accrued salary, pension benefits or other fixed remuneration, except for the variable component of the remuneration that is not regulated by a collective bargaining agreement, and except for the variable component of the remuneration of material risk takers as referred to in Article 92(2) of Directive 2013/36/EU; (ii) a commercial or trade creditor where the liability arises from the provision to the institution or the parent undertaking of goods or services that are critical to the daily functioning of the institution's or parent undertaking's operations, including IT services, utilities and the rental, servicing and upkeep of premises; (iii) tax and social security authorities, provided that those liabilities are preferred under the applicable law; (iv) deposit guarantee schemes where the liability arises from contributions due in accordance with Directive 2014/49/EU;

(k) liabilities arising from derivatives;

(l) liabilities arising from debt instruments with embedded derivatives.

For the purposes of point (l) of the first subparagraph, debt instruments containing early redemption options exercisable at the discretion of the issuer or of the holder, and debt instruments with variable interests derived from a broadly used reference rate such as Euribor or Libor, shall not be considered as debt instruments with embedded derivatives solely because of such features.

Article 72b

Eligible liabilities instruments

Liabilities shall qualify as eligible liabilities instruments, provided that all the following conditions are met:

(a) the liabilities are directly issued or raised, as applicable, by an institution and are fully paid up;

(b) the liabilities are not owned by any of the following: (i) the institution or an entity included in the same resolution group; (ii) an undertaking in which the institution has a direct or indirect participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of that undertaking;

(d) the claim on the principal amount of the liabilities under the provisions governing the instruments is wholly subordinated to claims arising from the excluded liabilities referred to in Article 72a(2); that subordination requirement shall be considered to be met in any of the following situations: (i) the contractual provisions governing the liabilities specify that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation; (ii) the applicable law specifies that in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim on the principal amount of the instruments ranks below claims arising from any of the excluded liabilities referred to in Article 72a(2) of this Regulation; (iii) the instruments are issued by a resolution entity which does not have on its balance sheet any excluded liabilities as referred to in Article 72a(2) of this Regulation that rank pari passu or junior to eligible liabilities instruments;

(e) the liabilities are neither secured, nor subject to a guarantee or any other arrangement that enhances the seniority of the claim by any of the following: (i) the institution or its subsidiaries; (ii) the parent undertaking of the institution or its subsidiaries; (iii) any undertaking that has close links with entities referred to in points (i) and (ii);

(f) the liabilities are not subject to set-off or netting arrangements that would undermine their capacity to absorb losses in resolution;

(g) the provisions governing the liabilities do not include any incentive for their principal amount to be called, redeemed or repurchased prior to their maturity or repaid early by the institution, as applicable, except in the cases referred to in Article 72c(3);

(h) the liabilities are not redeemable by the holders of the instruments prior to their maturity, except in the cases referred to in Article 72c(2);

(i) subject to Article 72c(3) and (4), where the liabilities include one or more early repayment options, including call options, the options are exercisable at the sole discretion of the issuer, except in the cases referred to in Article 72c(2);

(j) the liabilities may only be called, redeemed, repaid or repurchased early where the conditions set out in Articles 77 and 78a are met;

(k) the provisions governing the liabilities do not indicate explicitly or implicitly that the liabilities would be called, redeemed, repaid or repurchased early, as applicable by the resolution entity other than in the case of the insolvency or liquidation of the institution and the institution does not otherwise provide such an indication;

(l) the provisions governing the liabilities do not give the holder the right to accelerate the future scheduled payment of interest or principal, other than in the case of the insolvency or liquidation of the resolution entity;

(m) the level of interest or dividend payments, as applicable, due on the liabilities is not amended on the basis of the credit standing of the resolution entity or its parent undertaking;

(n) for instruments issued after 28 June 2021 the relevant contractual documentation and, where applicable, the prospectus related to the issuance explicitly refer to the possible exercise of the write-down and conversion powers in accordance with Article 48 of Directive 2014/59/EU.

For the purposes of point (a) of the first subparagraph, only the parts of liabilities that are fully paid up shall be eligible to qualify as eligible liabilities instruments.

For the purposes of point (d) of the first subparagraph of this Article, where some of the excluded liabilities referred to in Article 72a(2) are subordinated to ordinary unsecured claims under national insolvency law, inter alia, due to being held by a creditor who has close links with the debtor, by being or having been a shareholder, in a control or group relationship, a member of the management body or related to any of those persons, subordination shall not be assessed by reference to claims arising from such excluded liabilities.

For the purposes of Article 92b, references to the resolution entity in points (c), (k), (l) and (m) of the first subparagraph of this paragraph shall also be understood as references to an institution that is a material subsidiary of a non-EU G-SII.

In addition to the liabilities referred to in paragraph 2 of this Article, the resolution authority may permit liabilities to qualify as eligible liabilities instruments up to an aggregate amount that does not exceed 3,5 % of the total risk exposure amount calculated in accordance with Article 92(3), provided that:

(a) all the conditions set out in paragraph 2 except for the condition set out in point (d) of the first subparagraph of paragraph 2 are met;

(b) the liabilities rank pari passu with the lowest ranking excluded liabilities referred to in Article 72a(2) with the exception of the excluded liabilities that are subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article; and

(c) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.

The resolution authority may permit liabilities to qualify as eligible liabilities instruments in addition to the liabilities referred to in paragraph 2, provided that:

(a) the institution is not permitted to include in eligible liabilities items liabilities referred to in paragraph 3;

(b) all the conditions set out in paragraph 2, except for the condition set out in point (d) of the first subparagraph of paragraph 2, are met;

(c) the liabilities rank pari passu or are senior to the lowest ranking excluded liabilities referred to in Article 72a(2), with the exception of the excluded liabilities subordinated to ordinary unsecured claims under national insolvency law referred to in the third subparagraph of paragraph 2 of this Article;

(d) on the balance sheet of the institution, the amount of the excluded liabilities referred to in Article 72a(2) which rank pari passu or below those liabilities in insolvency does not exceed 5 % of the amount of the own funds and eligible liabilities of the institution;

(e) the inclusion of those liabilities in eligible liabilities items would not give rise to a material risk of a successful legal challenge or of valid compensation claims as assessed by the resolution authority in relation to the principles referred to in point (g) of Article 34(1) and Article 75 of Directive 2014/59/EU.

EBA shall develop draft regulatory technical standards to specify:

(a) the applicable forms and nature of indirect funding of eligible liabilities instruments;

(b) the form and nature of incentives to redeem for the purposes of the condition set out in point (g) of the first subparagraph of paragraph 2 of this Article and Article 72c(3).

Those draft regulatory technical standards shall be fully aligned with the delegated act referred to in point (a) of Article 28(5) and in point (a) of Article 52(2).

EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.

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

Article 72c

Amortisation of eligible liabilities instruments

Eligible liabilities instruments with a residual maturity of less than one year shall not qualify as eligible liabilities items.

Article 72d

Consequences of the eligibility conditions ceasing to be met

Where, in the case of an eligible liabilities instrument, the applicable conditions set out in Article 72b cease to be met, the liabilities shall immediately cease to qualify as eligible liabilities instruments.

Liabilities referred to in Article 72b(2) may continue to count as eligible liabilities instruments as long as they qualify as eligible liabilities instruments under Article 72b(3) or (4).

Section 2

Deductions from eligible liabilities items

Article 72e

Deductions from eligible liabilities items

Institutions that are subject to Article 92a shall deduct the following from eligible liabilities items:

(a) direct, indirect and synthetic holdings by the institution of own eligible liabilities instruments, including own liabilities that that institution could be obliged to purchase as a result of existing contractual obligations;

(b) direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities with which the institution has reciprocal cross holdings that the competent authority considers to have been designed to artificially inflate the loss absorption and recapitalisation capacity of the resolution entity;

(c) the applicable amount determined in accordance with Article 72i of direct, indirect and synthetic holdings of eligible liabilities instruments of G-SII entities, where the institution does not have a significant investment in those entities;

(d) direct, indirect and synthetic holdings by the institution of eligible liabilities instruments of G-SII entities, where the institution has a significant investment in those entities, excluding underwriting positions held for five business days or fewer.

For the purposes of this Section, institutions may calculate the amount of holdings of the eligible liabilities instruments referred to in Article 72b(3) as follows:

where:

Where an EU parent institution or a parent institution in a Member State that is subject to Article 92a has direct, indirect or synthetic holdings of own funds instruments or eligible liabilities instruments of one or more subsidiaries which do not belong to the same resolution group as that parent institution, the resolution authority of that parent institution, after duly considering the opinion of the resolution authorities or relevant third-country authorities of any subsidiaries concerned, may permit the parent institution to deduct such holdings by deducting a lower amount specified by the resolution authority of that parent institution. That adjusted amount shall be at least equal to the amount (m) calculated as follows:

where:

Where the parent institution is allowed to deduct the adjusted amount in accordance with the first subparagraph, the difference between the amount of holdings of own funds instruments and eligible liabilities instruments referred to in the first subparagraph and that adjusted amount shall be deducted by the subsidiary.

Institutions and entities referred to in Article 1(1), points (b), (c) and (d), of Directive 2014/59/EU shall deduct from eligible liabilities items their holdings of own funds instruments and eligible liabilities instruments where all of the following conditions are met:

(a) the own funds instruments and eligible liabilities instruments are held by an institution or entity that is not itself a resolution entity but that is a subsidiary of a resolution entity or of a third-country entity that would be a resolution entity if it were established in the Union;

(b) the institution or entity referred to in point (a) is required to comply with the requirements laid down in Article 92b of this Regulation or in Article 45f of Directive 2014/59/EU;

(c) the own funds instruments and eligible liabilities instruments held by the institution or entity referred to in point (a) were issued by an institution or entity referred to in Article 92b(1) of this Regulation or in Article 45f(1) of Directive 2014/59/EU that is not itself a resolution entity and that belongs to the same resolution group as the institution or entity referred to in point (a).

By way of derogation from the first subparagraph, holdings of own funds instruments and eligible liabilities instruments shall not be deducted where the institution or entity referred to in point (a) of the first subparagraph is required to comply with the requirement referred to in point (b) of the first subparagraph on a consolidated basis and the institution or entity referred to in point (c) of the first subparagraph is included in the consolidation of the institution or entity referred to in point (a) of the first subparagraph in accordance with Part One, Title II, Chapter 2.

For the purposes of this paragraph, the reference to eligible liabilities items shall be understood as a reference to any of the following:

(a) eligible liabilities items taken into account for the purposes of complying with the requirement laid down in Article 92b;

(b) liabilities that meet the conditions set out in Article 45f(2), point (a), of Directive 2014/59/EU.

For the purposes of this paragraph, the reference to own funds instruments and eligible liabilities instruments shall be understood as a reference to any of the following:

(a) own funds instruments and eligible liabilities instruments that meet the conditions set out in Article 92b(2) and (3);

(b) own funds and liabilities that meet the conditions set out in Article 45f(2) of Directive 2014/59/EU.

Article 72f

Deduction of holdings of own eligible liabilities instruments

For the purposes of point (a) of Article 72e(1), institutions shall calculate holdings on the basis of the gross long positions subject to the following exceptions:

(a) institutions may calculate the amount of holdings on the basis of the net long position, provided that both the following conditions are met: (i) the long and short positions are in the same underlying exposure and the short positions involve no counterparty risk; (ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book;

(b) institutions shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by calculating the underlying exposure to own eligible liabilities instruments in those indices;

(c) institutions may net gross long positions in own eligible liabilities instruments resulting from holdings of index securities against short positions in own eligible liabilities instruments resulting from short positions in underlying indices, including where those short positions involve counterparty risk, provided that both the following conditions are met: (i) the long and short positions are in the same underlying indices; (ii) either both the long and the short positions are held in the trading book or both are held in the non-trading book.

Article 72g

Deduction base for eligible liabilities items

For the purposes of points (b), (c) and (d) of Article 72e(1), institutions shall deduct the gross long positions subject to the exceptions laid down in Articles 72h and 72i.

Article 72h

Deduction of holdings of eligible liabilities of other G-SII entities

Institutions not making use of the exception set out in Article 72j shall make the deductions referred to in points (c) and (d) of Article 72e(1) in accordance with the following:

(a) they may calculate direct, indirect and synthetic holdings of eligible liabilities instruments on the basis of the net long position in the same underlying exposure, provided that both the following conditions are met: (i) the maturity date of the short position is either the same as, or later than the maturity date of the long position or the residual maturity of the short position is at least one year; (ii) either both the long position and the short position are held in the trading book or both are held in the non-trading book;

(b) they shall determine the amount to be deducted for direct, indirect and synthetic holdings of index securities by looking through to the underlying exposure to the eligible liabilities instruments in those indices.

Article 72i

Deduction of eligible liabilities where the institution does not have a significant investment in G-SII entities

For the purposes of point (c) of Article 72e(1), institutions shall calculate the applicable amount to be deducted by multiplying the amount referred to in point (a) of this paragraph by the factor derived from the calculation referred to in point (b) of this paragraph:

(a) the aggregate amount by which the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the institution has a significant investment exceeds 10 % of the Common Equity Tier 1 items of the institution after applying the following: (i) Articles 32 to 35; (ii) Article 36(1), points (a) to (g), points (k)(ii) to (vi) and points (l), (m) and (n), excluding the amount to be deducted for deferred tax assets that rely on future profitability and arise from temporary differences; (iii) Articles 44 and 45;

(b) the amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment divided by the aggregate amount of the direct, indirect and synthetic holdings by the institution of the Common Equity Tier 1, Additional Tier 1, Tier 2 instruments of financial sector entities and eligible liabilities instruments of G-SII entities in none of which the resolution entity has a significant investment.

The amount to be deducted pursuant to paragraph 1 shall be apportioned across each eligible liabilities instrument of a G-SII entity held by the institution. Institutions shall determine the amount of each eligible liabilities instrument that is deducted pursuant to paragraph 1 by multiplying the amount specified in point (a) of this paragraph by the proportion specified in point (b) of this paragraph:

(a) the amount of holdings required to be deducted pursuant to paragraph 1;

(b) the proportion of the aggregate amount of direct, indirect and synthetic holdings by the institution of the eligible liabilities instruments of G-SII entities in which the institution does not have a significant investment represented by each eligible liabilities instrument held by the institution.

Article 72j

Trading book exception from deductions from eligible liabilities items

Institutions may decide not to deduct a designated part of their direct, indirect and synthetic holdings of eligible liabilities instruments, that in aggregate and measured on a gross long basis is equal to or less than 5 % of the Common Equity Tier 1 items of the institution after applying Articles 32 to 36, provided that all the following conditions are met:

(a) the holdings are in the trading book;

(b) the eligible liabilities instruments are held for no longer than 30 business days.

Section 3

Own funds and eligible liabilities

Article 72k

Eligible liabilities

The eligible liabilities of an institution shall consist of the eligible liabilities items of the institution after the deductions referred to in Article 72e.

Article 72l

Own funds and eligible liabilities

The own funds and eligible liabilities of an institution shall consist of the sum of its own funds and its eligible liabilities.

CHAPTER 6

General requirements for own funds and eligible liabilities

Article 73

Distributions on instruments

Competent authorities shall grant the prior permission referred to in paragraph 1 only where they consider all the following conditions to be met:

(a) the ability of the institution to cancel payments under the instrument would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made;

(b) the ability of the capital instrument or of the liability to absorb losses would not be adversely affected by the discretion referred to in paragraph 1, or by the form in which distributions could be made;

(c) the quality of the capital instrument or liability would not otherwise be reduced by the discretion referred to in paragraph 1, or by the form in which distributions could be made.

The competent authority shall consult the resolution authority regarding an institution's compliance with those conditions before granting the prior permission referred to in paragraph 1.

Paragraph 4 shall not apply where the institution is a reference entity in that broad market index unless both the following conditions are met:

(a) the institution considers movements in that broad market index not to be significantly correlated to the credit standing of the institution, its parent institution or parent financial holding company or parent mixed financial holding company or parent mixed activity holding company;

(b) the competent authority has not reached a different determination from that referred to in point (a).

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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

Article 74

Holdings of capital instruments issued by regulated financial sector entities that do not qualify as regulatory capital

Institutions shall not deduct from any element of own funds direct, indirect or synthetic holdings of capital instruments issued by a regulated financial sector entity that do not qualify as regulatory capital of that entity. Institutions shall apply risk weights to such holdings in accordance with Part Three, Title II, Chapter 2.

Article 75

Deduction and maturity requirements for short positions

The maturity requirements for short positions referred to in point (a) of Article 45, point (a) of Article 59, point (a) of Article 69 and point (a) of Article 72h shall be considered to be met in respect of positions held where all the following conditions are met:

(a) the institution has the contractual right to sell on a specific future date to the counterparty providing the hedge the long position that is being hedged;

(b) the counterparty providing the hedge to the institution is contractually obliged to purchase from the institution on that specific future date the long position referred to in point (a).

Article 76

Index holdings of capital instruments and of liabilities

For the purposes of point (a) of Article 42, point (a) of Article 45, point (a) of Article 57, point (a) of Article 59, point (a) of Article 67, point (a) of Article 69, point (a) of Article 72f and point (a) of Article 72h, institutions may reduce the amount of a long position in a capital instrument or in a liability by the portion of an index that is made up of the same underlying exposure that is being hedged, provided that all the following conditions are met:

(a) either both the long position being hedged and the short position in an index used to hedge that long position are held in the trading book or both are held in the non-trading book;

(b) the positions referred to in point (a) are held at fair value on the balance sheet of the institution;

(c) the short position referred to in point (a) qualifies as an effective hedge under the internal control processes of the institution;

(d) the competent authorities assess the adequacy of the internal control processes referred to in point (c) on at least an annual basis and are satisfied with their continuing appropriateness.

Where the competent authority has granted its prior permission, an institution may use a conservative estimate of the underlying exposure of the institution to capital instruments or to liabilities included in indices as an alternative to an institution calculating its exposure to the items referred to in one or more of the following points:

(a) own Common Equity Tier 1, Additional Tier 1, Tier 2 and eligible liabilities instruments included in indices;

(b) Common Equity Tier 1, Additional Tier 1 and Tier 2 instruments of financial sector entities, included in indices;

EBA shall develop draft regulatory technical standards to specify:

(a) when an estimate used as an alternative to the calculation of underlying exposure referred to in paragraph 2 is sufficiently conservative;

(b) the meaning of operationally burdensome for the purposes of paragraph 3.

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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

Article 77

Conditions for reducing own funds and eligible liabilities

An institution shall obtain the prior permission of the competent authority to do any of the following:

(a) reduce, redeem or repurchase Common Equity Tier 1 instruments issued by the institution in a manner that is permitted under applicable national law;

(b) reduce, distribute or reclassify as another own funds item the share premium accounts related to own funds instruments;

(c) effect the call, redemption, repayment or repurchase of Additional Tier 1 or Tier 2 instruments prior to the date of their contractual maturity.

Article 78

Supervisory permission to reduce own funds

The competent authority shall grant permission for an institution to reduce, call, redeem, repay or repurchase Common Equity Tier 1, Additional Tier 1 or Tier 2 instruments, or to reduce, distribute or reclassify related share premium accounts, where either of the following conditions is met:

(a) before or at the same time as any of the actions referred to in Article 77(1), the institution replaces the instruments or the related share premium accounts referred to in Article 77(1) with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;

(b) the institution has demonstrated to the satisfaction of the competent authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(1) of this Regulation, exceed the requirements laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU by a margin that the competent authority considers necessary.

Where an institution provides sufficient safeguards as to its capacity to operate with own funds above the amounts required in this Regulation and in Directive 2013/36/EU, the competent authority may grant that institution a general prior permission to take any of the actions set out in Article 77(1) of this Regulation, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the competent authority. In the case of Common Equity Tier 1 instruments, that predetermined amount shall not exceed 3 % of the relevant issue and shall not exceed 10 % of the amount by which Common Equity Tier 1 capital exceeds the sum of the Common Equity Tier 1 capital requirements laid down in this Regulation, in Directives 2013/36/EU and 2014/59/EU and a margin that the competent authority considers necessary. In the case of Additional Tier 1 or Tier 2 instruments, that predetermined amount shall not exceed 10 % of the relevant issue and shall not exceed 3 % of the total amount of outstanding Additional Tier 1 or Tier 2 instruments, as applicable.

Competent authorities shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.

Competent authorities may permit institutions to call, redeem, repay or repurchase Additional Tier 1 or Tier 2 instruments or related share premium accounts during the five years following their date of issuance where the conditions set out in paragraph 1 and one of the following conditions is met:

(a) there is a change in the regulatory classification of those instruments that would be likely to result in their exclusion from own funds or reclassification as own funds of lower quality, and both the following conditions are met: (i) the competent authority considers such a change to be sufficiently certain; (ii) the institution demonstrates to the satisfaction of the competent authority that the regulatory reclassification of those instruments was not reasonably foreseeable at the time of their issuance;

(b) there is a change in the applicable tax treatment of those instruments which the institution demonstrates to the satisfaction of the competent authority is material and was not reasonably foreseeable at the time of their issuance;

(d) before or at the same time as the action referred to in Article 77(1), the institution replaces the instruments or related share premium accounts referred to in Article 77(1) with own funds instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution and the competent authority has permitted that action on the basis of the determination that it would be beneficial from a prudential point of view and justified by exceptional circumstances;

(e) the Additional Tier 1 or Tier 2 instruments are repurchased for market making purposes.

EBA shall develop draft regulatory technical standards to specify the following:

(a) the meaning of ‘sustainable for the income capacity of the institution’;

(b) the appropriate bases of limitation of redemption referred to in paragraph 3;

(c) the process including the limits and procedures for granting approval in advance by competent authorities for an action listed in Article 77(1), and data requirements for an application by an institution for the permission of the competent authority to carry out an action listed therein, including the process to be applied in the case of redemption of shares issued to members of cooperative societies, and the time period for processing such an application.

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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

Article 78a

Permission to reduce eligible liabilities instruments

The resolution authority shall grant permission for an institution to call, redeem, repay or repurchase eligible liabilities instruments where one of the following conditions is met:

(a) before or at the same time as any of the actions referred to in Article 77(2), the institution replaces the eligible liabilities instruments with own funds or eligible liabilities instruments of equal or higher quality at terms that are sustainable for the income capacity of the institution;

(b) the institution has demonstrated to the satisfaction of the resolution authority that the own funds and eligible liabilities of the institution would, following the action referred to in Article 77(2) of this Regulation, exceed the requirements for own funds and eligible liabilities laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU by a margin that the resolution authority, in agreement with the competent authority, considers necessary;

(c) the institution has demonstrated to the satisfaction of the resolution authority that the partial or full replacement of the eligible liabilities with own funds instruments is necessary to ensure compliance with the own funds requirements laid down in this Regulation and in Directive 2013/36/EU for continuing authorisation.

Where an institution provides sufficient safeguards as to its capacity to operate with own funds and eligible liabilities above the amount of the requirements laid down in this Regulation and in Directives 2013/36/EU and 2014/59/EU, the resolution authority, after consulting the competent authority, may grant that institution a general prior permission to effect calls, redemptions, repayments or repurchases of eligible liabilities instruments, subject to criteria that ensure that any such future action will be in accordance with the conditions set out in points (a) and (b) of this paragraph. That general prior permission shall be granted only for a specified period, which shall not exceed one year, after which it may be renewed. The general prior permission shall be granted for a certain predetermined amount, which shall be set by the resolution authority. Resolution authorities shall inform the competent authorities about any general prior permission granted.

The resolution authority shall withdraw the general prior permission where an institution breaches any of the criteria provided for the purposes of that permission.

EBA shall develop draft regulatory technical standards to specify the following:

(a) the process of cooperation between the competent authority and the resolution authority;

(b) the procedure, including the time limits and information requirements, for granting the permission in accordance with the first subparagraph of paragraph 1;

(c) the procedure, including the time limits and information requirements, for granting the general prior permission in accordance with the second subparagraph of paragraph 1;

(d) the meaning of ‘sustainable for the income capacity of the institution’.

For the purposes of point (d) of the first subparagraph of this paragraph, the draft regulatory technical standards shall be fully aligned with the delegated act referred to in Article 78.

EBA shall submit those draft regulatory technical standards to the Commission by 28 December 2019.

Article 79

Temporary waiver from deduction from own funds and eligible liabilities

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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

Article 79a

Assessment of compliance with the conditions for own funds and eligible liabilities instruments

Institutions shall have regard to the substantial features of instruments and not only their legal form when assessing compliance with the requirements laid down in Part Two. The assessment of the substantial features of an instrument shall take into account all arrangements related to the instruments, even where those are not explicitly set out in the terms and conditions of the instruments themselves, for the purpose of determining that the combined economic effects of such arrangements are compliant with the objective of the relevant provisions.

Article 80

Continuing review of the quality of own funds and eligible liabilities instruments

Competent authorities shall, without delay and upon request by EBA, forward all information to EBA that EBA considers relevant concerning new capital instruments or new types of liabilities issued in order to enable EBA to monitor the quality of own funds and eligible liabilities instruments issued by institutions across the Union.

A notification shall include the following:

(a) a detailed explanation of the nature and extent of the shortfall identified;

(b) technical advice on the action by the Commission that EBA considers to be necessary;

EBA shall provide technical advice to the Commission on any significant changes it considers to be required to the definition of own funds and eligible liabilities as a result of any of the following:

(a) relevant developments in market standards or practice;

(b) changes in relevant legal or accounting standards;

TITLE II

MINORITY INTEREST AND ADDITIONAL TIER 1 AND TIER 2 INSTRUMENTS ISSUED BY SUBSIDIARIES

Article 81

Minority interests that qualify for inclusion in consolidated Common Equity Tier 1 capital

Minority interests shall comprise the sum of Common Equity Tier 1 items of a subsidiary where the following conditions are met:

(a) the subsidiary is one of the following: (i) an institution; (ii) an undertaking that is subject by virtue of applicable national law to the requirements of this Regulation and of Directive 2013/36/EU; (iii) an intermediate financial holding company or intermediate mixed financial holding company that is subject to the requirements of this Regulation on a sub‐consolidated basis, or an intermediate investment holding company that is subject to the requirements of Regulation (EU) 2019/2033 on a consolidated basis; (iv) an investment firm; (v) an intermediate financial holding company in a third country, provided that that intermediate financial holding company is subject to prudential requirements as stringent as those applied to credit institutions of that third country and provided that the Commission has adopted a decision in accordance with Article 107(4) determining that those prudential requirements are at least equivalent to those of this Regulation;

(b) the subsidiary is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One;

(c) the Common Equity Tier 1 items, referred to in the introductory part of this paragraph, are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.

Article 82

Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds

Qualifying Additional Tier 1, Tier 1, Tier 2 capital and qualifying own funds shall comprise the minority interest, Additional Tier 1 or Tier 2 instruments, as applicable, plus the related share premium accounts, of a subsidiary where the following conditions are met:

(b) the subsidiary is included fully in the scope of consolidation pursuant to Chapter 2 of Title II of Part One;

(c) the Common Equity Tier 1 items, Additional Tier 1 items and Tier 2 items referred to in the introductory part of this paragraph, are owned by persons other than the undertakings included in the consolidation pursuant to Chapter 2 of Title II of Part One.

Article 83

Qualifying Additional Tier 1 and Tier 2 capital issued by a special purpose entity

Additional Tier 1 and Tier 2 instruments issued by a special purpose entity, and the related share premium accounts, are included until 31 December 2021 in qualifying Additional Tier 1, Tier 1 or Tier 2 capital or qualifying own funds, as applicable, only where the following conditions are met:

(a) the special purpose entity issuing those instruments is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One;

(b) the instruments, and the related share premium accounts, are included in qualifying Additional Tier 1 capital only where the conditions laid down in Article 52(1) are satisfied;

(c) the instruments, and the related share premium accounts, are included in qualifying Tier 2 capital only where the conditions laid down in Article 63 are satisfied;

(d) the only asset of the special purpose entity is its investment in the own funds of the parent undertaking or a subsidiary thereof that is included fully in the consolidation pursuant to Chapter 2 of Title II of Part One, the form of which satisfies the relevant conditions laid down in Articles 52(1) or 63, as applicable.

Where the competent authority considers the assets of a special purpose entity other than its investment in the own funds of the parent undertaking or a subsidiary thereof that is included in the scope of consolidation pursuant to Chapter 2 of Title II of Part One, to be minimal and insignificant for such an entity, the competent authority may waive the condition specified in point (d) of the first subparagraph.

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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

Article 84

Minority interests included in consolidated Common Equity Tier 1 capital

Institutions shall determine the amount of minority interests of a subsidiary that is included in consolidated Common Equity Tier 1 capital by subtracting from the minority interests of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows:

(a) the Common Equity Tier 1 capital of the subsidiary minus the lower of the following: (i) the amount of Common Equity Tier 1 capital of that subsidiary required to meet the following: (1) where the subsidiary is one of those listed in Article 81(1), point (a), of this Regulation but not an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 92(1), point (a), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries insofar as those requirements are to be met by Common Equity Tier 1 capital; (2) where the subsidiary is an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a), of Directive (EU) 2019/2034, or any local supervisory regulations in third countries, insofar as those requirements are to be met by Common Equity Tier 1 capital; (ii) the amount of consolidated Common Equity Tier 1 capital that relates to that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (a), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries, insofar as those requirements are to be met by Common Equity Tier 1 capital;

(b) the minority interests of the subsidiary expressed as a percentage of all Common Equity Tier 1 items of that undertaking.

By way of derogation from the first subparagraph, point (a), the competent authority may allow an institution to subtract either of the amounts referred to in point (a)(i) or (ii), once that institution has demonstrated to the satisfaction of the competent authority that the additional amount of minority interest is available to absorb losses at consolidated level.

An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the minority interest of that subsidiary may not be included in consolidated Common Equity Tier 1 capital.

EBA shall submit those draft regulatory technical standards to the Commission by 28 July 2013.

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

Competent authorities may grant a waiver from the application of this Article to a parent financial holding company that satisfies all the following conditions:

(a) its principal activity is to acquire holdings;

(b) it is subject to prudential supervision on a consolidated basis;

(c) it consolidates a subsidiary institution in which it has only a minority holding by virtue of the control relationship within the meaning of Article 4(1), point (37);

(d) more than 90 % of the consolidated required Common Equity Tier 1 capital arises from the subsidiary institution referred to in point c) calculated on a sub-consolidated basis.

Where, after 28 June 2013, a parent financial holding company that meets the conditions laid down in the first subparagraph becomes a parent mixed financial holding company, competent authorities may grant the waiver referred to in the first subparagraph to that parent mixed financial holding company provided that it meets the conditions laid down in that subparagraph.

Article 85

Qualifying Tier 1 instruments included in consolidated Tier 1 capital

Institutions shall determine the amount of qualifying Tier 1 capital of a subsidiary that is included in consolidated own funds by subtracting from the qualifying Tier 1 capital of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows:

(a) the Tier 1 capital of the subsidiary minus the lower of the following: (i) the amount of Tier 1 capital of the subsidiary required to meet the following: (1) where the subsidiary is one of those listed in Article 81(1), point (a), of this Regulation but not an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 92(1), point (b), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 capital; (2) where the subsidiary is an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a), of Directive (EU) 2019/2034, or any local supervisory regulations in third countries insofar as those requirements are to be met by Tier 1 capital; (ii) the amount of consolidated Tier 1 capital that relates to that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (b), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries, insofar as those requirements are to be met by Tier 1 capital;

(b) the qualifying Tier 1 capital of the subsidiary expressed as a percentage of all Common Equity Tier 1 and Additional Tier 1 items of that undertaking.

By way of derogation from the first subparagraph, point (a), the competent authority may allow an institution to subtract either of the amounts referred to in point (a)(i) or (ii), once that institution has demonstrated to the satisfaction of the competent authority that the additional amount of Tier 1 capital is available to absorb losses at consolidated level.

An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the qualifying Tier 1 capital of that subsidiary may not be included in consolidated Tier 1 capital.

Article 86

Qualifying Tier 1 capital included in consolidated Additional Tier 1 capital

Without prejudice to Article 84 (5) or (6), institutions shall determine the amount of qualifying Tier 1 capital of a subsidiary that is included in consolidated Additional Tier 1 capital by subtracting from the qualifying Tier 1 capital of that undertaking included in consolidated Tier 1 capital the minority interests of that undertaking that are included in consolidated Common Equity Tier 1 capital.

Article 87

Qualifying own funds included in consolidated own funds

Institutions shall determine the amount of qualifying own funds of a subsidiary that is included in consolidated own funds by subtracting from the qualifying own funds of that undertaking the result of multiplying the amount referred to in point (a) by the percentage referred to in point (b) as follows:

(a) the own funds of the subsidiary minus the lower of the following: (i) the amount of own funds of the subsidiary required to meet the following: (1) where the subsidiary is one of those listed in Article 81(1), point (a), of this Regulation but not an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 92(1), point (c), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries insofar as those requirements are to be met by own funds; (2) where the subsidiary is an investment firm or an intermediate investment holding company, the sum of the requirement laid down in Article 11 of Regulation (EU) 2019/2033, the specific own funds requirements referred to in Article 39(2), point (a), of Directive (EU) 2019/2034, or any local supervisory regulations in third countries insofar as those requirements are to be met by own funds; (ii) the amount of own funds that relates to that subsidiary that is required on a consolidated basis to meet the sum of the requirement laid down in Article 92(1), point (c), of this Regulation, the requirements referred to in Articles 458 and 459 of this Regulation, the specific own funds requirements referred to in Article 104 of Directive 2013/36/EU and the combined buffer requirement defined in Article 128, point (6), of that Directive, or any local supervisory regulations in third countries, insofar as those requirements are to be met by own funds;

(b) the qualifying own funds of the undertaking, expressed as a percentage of the sum of all the Common Equity Tier 1 items, Additional Tier 1 items and Tier 2 items, excluding the amounts referred to in points (c) and (d) of Article 62, of that undertaking.

By way of derogation from the first subparagraph, point (a), the competent authority may allow an institution to subtract either of the amounts referred to in point (a)(i) or (ii), once that institution has demonstrated to the satisfaction of the competent authority that the additional amount of own funds is available to absorb losses at consolidated level.

An institution may choose not to undertake this calculation for a subsidiary referred to in Article 81(1). Where an institution takes such a decision, the qualifying own funds of that subsidiary may not be included in consolidated own funds.

Article 88

Qualifying own funds instruments included in consolidated Tier 2 capital

Without prejudice to Article 84(5) or (6), institutions shall determine the amount of qualifying own funds of a subsidiary that is included in consolidated Tier 2 capital by subtracting from the qualifying own funds of that undertaking that are included in consolidated own funds the qualifying Tier 1 capital of that undertaking that is included in consolidated Tier 1 capital.

Article 88a

Qualifying eligible liabilities instruments

Liabilities issued by a subsidiary established in the Union that belongs to the same resolution group as the resolution entity shall qualify for inclusion in the consolidated eligible liabilities instruments of an institution subject to Article 92a, provided that all the following conditions are met:

(a) they are issued in accordance with point (a) of Article 45f(2) of Directive 2014/59/EU;

(b) they are bought by an existing shareholder that is not part of the same resolution group as long as the exercise of the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU does not affect the control of the subsidiary by the resolution entity;

(c) they do not exceed the amount determined by subtracting the amount referred to in point (i) from the amount referred to in point (ii): (i) the sum of the liabilities issued to and bought by the resolution entity either directly or indirectly through other entities in the same resolution group and the amount of own funds instruments issued in accordance with point (b) of Article 45f(2) of Directive 2014/59/EU; (ii) the amount required in accordance with Article 45f(1) of Directive 2014/59/EU.

Article 88b

Undertakings in third countries

For the purposes of this Title, the terms ‘investment firm’ and ‘institution’ shall be understood to include undertakings established in third countries, which would, if established in the Union, fall under the definitions of those terms in this Regulation.

TITLE III

QUALIFYING HOLDINGS OUTSIDE THE FINANCIAL SECTOR

Article 89

Risk weighting and prohibition of qualifying holdings outside the financial sector

Competent authorities shall apply the requirements laid down in point (a) or (b) to qualifying holdings of institutions referred to in paragraphs 1 and 2:

(a) for the purpose of calculating the capital requirement in accordance with Part Three, institutions shall apply a risk weight of 1 250 % to the greater of the following: (i) the amount of qualifying holdings referred to in paragraph 1 in excess of 15 % of eligible capital; (ii) the total amount of qualifying holdings referred to in paragraph 2 that exceed 60 % of the eligible capital of the institution;

(b) the competent authorities shall prohibit institutions from having qualifying holdings referred to in paragraphs 1 and 2 the amount of which exceeds the percentages of eligible capital laid down in those paragraphs.

Competent authorities shall publish their choice of (a) or (b).

Article 90

Alternative to 1 250 % risk weight

As an alternative to applying a 1 250 % risk weight to the amounts in excess of the limits specified in Article 89(1) and (2), institutions may deduct those amounts from Common Equity Tier 1 items in accordance with point (k) of Article 36(1).

Article 91

Exceptions

Shares of undertakings not referred to in points (a) and (b) of Article 89(1) shall not be included in calculating the eligible capital limits specified in that Article where any of the following conditions is met:

(a) those shares are held temporarily during a financial assistance operation as referred to in Article 79;

(b) the holding of those shares is an underwriting position held for five working days or fewer;

PART THREE

CAPITAL REQUIREMENTS

TITLE I

GENERAL REQUIREMENTS, VALUATION AND REPORTING

CHAPTER 1

Required level of own funds

Section 1

Own funds requirements for institutions

Article 92

Own funds requirements

Subject to Articles 93 and 94, institutions shall at all times satisfy the following own funds requirements:

(a) a Common Equity Tier 1 capital ratio of 4,5 %;

(b) a Tier 1 capital ratio of 6 %;

(d) a leverage ratio of 3 %.

A G-SII shall meet the leverage ratio buffer requirement with Tier 1 capital only. Tier 1 capital that is used to meet the leverage ratio buffer requirement shall not be used towards meeting any of the leverage based requirements set out in this Regulation and in Directive 2013/36/EU, unless explicitly otherwise provided therein.

Where a G-SII does not meet the leverage ratio buffer requirement, it shall be subject to the capital conservation requirement in accordance with Article 141b of Directive 2013/36/EU.

Where a G-SII does not meet at the same time the leverage ratio buffer requirement and the combined buffer requirement as defined in point (6) of Article 128 of Directive 2013/36/EU, it shall be subject to the higher of the capital conservation requirements in accordance with Articles 141 and 141b of that Directive.

Institutions shall calculate their capital ratios as follows:

(a) the Common Equity Tier 1 capital ratio is the Common Equity Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;

(b) the Tier 1 capital ratio is the Tier 1 capital of the institution expressed as a percentage of the total risk exposure amount;

(c) the total capital ratio is the own funds of the institution expressed as a percentage of the total risk exposure amount.

Institutions shall calculate the total risk exposure amount as follows:

TREA = max{U-TREA; x ‏‏‏· S-TREA}

where:

TREA = the total risk exposure amount of the entity;

U-TREA = the un-floored total risk exposure amount of the entity calculated in accordance with paragraph 4;

S-TREA = the standardised total risk exposure amount of the entity calculated in accordance with paragraph 5;

x = 72,5 %.

By way of derogation from the first subparagraph of this paragraph, a Member State may decide that the total risk exposure amount shall be the un-floored total risk exposure amount, calculated in accordance with paragraph 4, for institutions which are part of a group with a parent institution in the same Member State, provided that that parent institution or, in the case of groups composed of a central body and permanently affiliated institutions, the whole as constituted by the central body together with its affiliated institutions, calculates its total risk exposure amount in accordance with the first subparagraph of this paragraph on a consolidated basis.

The un-floored total risk exposure amount shall be calculated as the sum of points (a) to (g) of this paragraph after having taken into account paragraph 6 of this Article:

(a) the risk-weighted exposure amounts for credit risk, including counterparty credit risk, and dilution risk, calculated in accordance with Title II of this Part and Article 379, in respect of all business activities of an institution, excluding risk-weighted exposure amounts from the trading-book business of the institution;

(b) the own funds requirements for the trading-book business of an institution for the following: (i) market risk, calculated in accordance with Title IV of this Part; (ii) large exposures exceeding the limits specified in Articles 395 to 401, to the extent that an institution is permitted to exceed those limits, as determined in accordance with Part Four;

(c) the own funds requirements for market risk, calculated in accordance with Title IV of this Part for all non-trading book business activities that are subject to foreign exchange risk or commodity risk;

(d) the own funds requirements for settlement risk, calculated in accordance with Articles 378 and 380;

(e) the own funds requirements for credit valuation adjustment risk, calculated in accordance with Title VI of this Part;

(f) the own funds requirements for operational risk, calculated in accordance with Title III of this Part;

(g) the risk-weighted exposure amounts for counterparty credit risk arising from the trading book business of the institution for the following types of transactions and agreements, calculated in accordance with Title II of this Part: (i) contracts listed in Annex II and credit derivatives; (ii) repurchase transactions, securities or commodities lending or borrowing transactions based on securities or commodities; (iii) margin lending transactions based on securities or commodities; (iv) long settlement transactions.

The standardised total risk exposure amount shall be calculated as the sum of paragraph 4, points (a) to (g), after having taken into account paragraph 6 and the following requirements:

(a) the risk-weighted exposure amounts for credit risk, including counterparty credit risk, and dilution risk, referred to in paragraph 4, point (a), and for counterparty credit risk arising from the trading book business of the institution as referred to in point (g) of that paragraph shall be calculated without using any of the following approaches: (i) the internal model approach for master netting agreements set out in Article 221; (ii) the Internal Ratings Based Approach set out in Title II, Chapter 3; (iii) the Securitisation Internal Ratings Based Approach set out in Articles 258, 259 and 260 and the Internal Assessment Approach set out in Article 265; (iv) the Internal Model Method set out in Title II, Chapter 6, Section 6;

(b) the own funds requirements for market risk for the trading book business referred to in paragraph 4, point (b)(i), shall be calculated without using: (i) the alternative internal model approach set out in Title IV, Chapter 1b; or (ii) any approach listed under point (a) of this paragraph, where applicable;

(c) the own funds requirements for all non-trading book business activities of an institution that are subject to foreign exchange risk or commodity risk referred to in paragraph 4, point (c), of this Article shall be calculated without using the alternative internal model approach set out in Title IV, Chapter 1b.

The following provisions shall apply to the calculations of the un-floored total risk exposure amount referred to in paragraph 4 and of the standardised total risk exposure amount referred to in paragraph 5:

(a) the own funds requirements referred to in paragraph 4, points (d), (e) and (f), shall include those arising from all business activities of an institution;

(b) institutions shall multiply the own funds requirements set out in paragraph 4, points (b) to (f), by 12,5 .

Article 92a

Requirements for own funds and eligible liabilities for G-SIIs

Subject to Articles 93 and 94 and to the exceptions set out in paragraph 2 of this Article, institutions identified as resolution entities and that are G-SII entities shall at all times satisfy the following requirements for own funds and eligible liabilities:

(a) a risk-based ratio of 18 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total risk exposure amount calculated in accordance with Article 92(3);

(b) a non-risk-based ratio of 6,75 %, representing the own funds and eligible liabilities of the institution expressed as a percentage of the total exposure measure referred to in Article 429(4).

The requirements laid down in paragraph 1 shall not apply in the following cases:

(a) within the three years following the date on which the institution or the group of which the institution is part has been identified as a G-SII;

(b) within the two years following the date on which the resolution authority has applied the bail-in tool in accordance with Directive 2014/59/EU;

(c) within the two years following the date on which the resolution entity has put in place an alternative private sector measure referred to in point (b) of Article 32(1) of Directive 2014/59/EU by which capital instruments and other liabilities have been written down or converted into Common Equity Tier 1 items in order to recapitalise the resolution entity without the application of resolution tools.

Article 92b

Requirement for own funds and eligible liabilities for non-EU G-SIIs

An eligible liabilities instrument shall only be taken into account for the purpose of complying with paragraph 1 where it fulfils all the following additional conditions:

(a) in the event of normal insolvency proceedings as defined in point (47) of Article 2(1) of Directive 2014/59/EU, the claim resulting from the liability ranks below claims resulting from liabilities that do not fulfil the conditions set out in paragraph 2 of this Article and that do not qualify as own funds;

(b) it is subject to the write-down or conversion powers in accordance with Articles 59 to 62 of Directive 2014/59/EU.

Article 93

Initial capital requirement on going concern

Article 94

Derogation for small trading book business

By way of derogation from Article 92(4), point (b), and Article 92(5), point (b), institutions may calculate the own funds requirement for their trading-book business in accordance with paragraph 2 of this Article, provided that the size of the institutions’ on- and off-balance-sheet trading-book business is equal to or less than both of the following thresholds on the basis of an assessment carried out on a monthly basis using the data as of the last day of the month:

(a) 5 % of the institution's total assets;

(b) EUR 50 million.

Where both conditions set out in points (a) and (b) of paragraph 1 are met, institutions may calculate the own funds requirement for their trading-book business as follows:

(a) for the contracts listed in Annex II, point 1, contracts relating to equities which are referred to in point 3 of that Annex and credit derivatives, institutions may exempt those positions from the own funds requirement referred to in Article 92(4), point (b), and Article 92(5), point (b);

(b) for trading book positions other than those referred to in point (a) of this paragraph, institutions may replace the own funds requirement referred to in Article 92(4), point (b), and Article 92(5), point (b), with the requirement calculated in accordance with Article 92(4), point (a), and Article 92(5), point (a).

Institutions shall calculate the size of their on- and off-balance-sheet trading book business on the basis of data as of the last day of each month for the purposes of paragraph 1 in accordance with the following requirements:

(a) all the positions assigned to the trading book in accordance with Article 104 shall be included in the calculation except for the following: (i) positions concerning foreign exchange and commodities; (ii) positions in credit derivatives that are recognised as internal hedges against non-trading book credit risk exposures or counterparty risk exposures and the credit derivate transactions that perfectly offset the market risk of those internal hedges as referred to in Article 106(3);

(b) all positions included in the calculation in accordance with point (a) shall be valued at their market value on that given date; where the market value of a position is not available on a given date, institutions shall take a fair value for the position on that date; where the market value and fair value of a position are not available on a given date, institutions shall take the most recent of the market value or fair value for that position;

(c) the absolute value of the aggregated long position shall be summed with the absolute value of the aggregated short position.

For the purposes of the first subparagraph, a long position is one where the market value of the position increases when the value of its main risk driver increases, and a short position is one where the market value of the position decreases when the value of its main risk driver increases.

For the purposes of the first subparagraph, the value of the aggregated long (short) position shall be equal to the sum of the values of the individual long (short) positions included in the calculation in accordance with point (a).

An institution shall cease to calculate the own funds requirements of its trading-book business in accordance with paragraph 2 within three months of one of the following occurring:

(a) the institution does not meet the conditions set out in point (a) or (b) of paragraph 1 for three consecutive months;

(b) the institution does not meet the conditions set out in point (a) or (b) of paragraph 1 during more than 6 out of the last 12 months.

In developing those draft regulatory technical standards, EBA shall take into consideration the method developed for the regulatory technical standards mandated in accordance with Article 279a(3), point (b).

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.

Section 2

Own funds requirements for investment firms with limited authorisation to provide investment services

CHAPTER 3

Trading book

Article 102

Requirements for the trading book

Article 103

Management of the trading book

Institutions shall have in place clearly defined policies and procedures for the overall management of the trading book. Those policies and procedures shall at least address:

(a) the activities which the institution considers to be trading business and as constituting part of the trading book for own funds requirement purposes;

(b) the extent to which a position can be marked-to-market daily by reference to an active, liquid two-way market;

(c) for positions that are marked-to-model, the extent to which the institution can: (i) identify all material risks of the position; (ii) hedge all material risks of the position with instruments for which an active, liquid two-way market exists; (iii) derive reliable estimates for the key assumptions and parameters used in the model;

(d) the extent to which the institution can, and is required to, generate valuations for the position that can be validated externally in a consistent manner;

(e) the extent to which legal restrictions or other operational requirements would impede the institution's ability to effect a liquidation or hedge of the position in the short term;

(f) the extent to which the institution can, and is required to, actively manage the risks of positions within its trading operation;

(g) the extent to which the institution may reclassify risk or positions between the non-trading and trading books and the requirements for such reclassifications as referred to in Article 104a.

In managing its positions or portfolios of positions in the trading book, the institution shall comply with all the following requirements:

(a) the institution shall have in place a clearly documented trading strategy for the position or portfolios in the trading book, which shall be approved by senior management and include the expected holding period;

(b) the institution shall have in place clearly defined policies and procedures for the active management of positions or portfolios in the trading book; those policies and procedures shall include the following: (i) which positions or portfolios of positions may be entered into by each trading desk or, as the case may be, by designated dealers; (ii) the setting of position limits and monitoring them for appropriateness; (iii) ensuring that dealers have the autonomy to enter into and manage the position within agreed limits and according to the approved strategy; (iv) ensuring that positions are reported to senior management as an integral part of the institution's risk management process; (v) ensuring that positions are actively monitored with reference to market information sources and an assessment is made of the marketability or hedgeability of the position or its component risks, including the assessment, the quality and availability of market inputs to the valuation process, level of market turnover, sizes of positions traded in the market; (vi) active anti-fraud procedures and controls;

(c) the institution shall have in place clearly defined policies and procedures to monitor the positions against the institution's trading strategy, including the monitoring of turnover and positions for which the originally intended holding period has been exceeded.

Article 104

Inclusion in the trading book

An institution shall have in place an independent risk control function which shall evaluate, on an ongoing basis, whether its instruments are being properly assigned to the trading book or the non-trading book.

Institutions shall assign positions in the following instruments to the trading book:

(a) instruments that meet the criteria set out in Article 325(6), (7) and (8), for the inclusion in the alternative correlation trading portfolio (ACTP);

(b) instruments that would give rise to a net short credit or net short equity position in the non-trading book, with the exception of the own liabilities of the institution, unless such positions meet the criteria referred to in point (e);

(c) instruments resulting from securities underwriting commitments, where those underwriting commitments relate only to securities that are expected to be purchased by the institution on the settlement date;

(d) instruments classified unambiguously as having a trading purpose under the accounting framework applicable to the institution;

(e) instruments resulting from market-making activities;

(f) positions held with trading intent in CIUs, provided that those CIUs meet at least one of the conditions set out in paragraph 8;

(g) listed equities;

(h) trading-related securities financing transactions;

(i) options, or other derivatives, embedded in the own liabilities of the institution in the non-trading book that relate to credit risk or equity risk.

For the purposes of the first subparagraph, point (b), an institution shall have a net short equity position where a decrease in the equity’s price results in a profit for the institution. An institution shall have a net short credit position where the credit spread increase, or the deterioration in the creditworthiness of the issuer or group of issuers, results in a profit for the institution. Institutions shall continuously monitor whether instruments give rise to a net short credit or net short equity position in the non-trading book.

For the purposes of the first subparagraph, point (i), an institution shall split the embedded option, or other derivative, from its own liability in the non-trading book that relates to credit risk or equity risk. It shall assign the embedded option, or other derivative, to the trading book and shall leave the own liability in the non-trading book. Where, due to its nature, it is not possible to split the instrument, an institution shall assign the whole instrument to the trading book. In such a case, it shall duly document the reason for applying that treatment.

Institutions shall not assign positions in the following instruments to the trading book:

(a) instruments designated for securitisation warehousing;

(b) real estate holdings-related instruments;

(d) instruments related to retail and SME credit;

(e) positions in other CIUs than those referred to in paragraph 2, point (f);

(f) derivative contracts and CIUs with one or more of the underlying instruments referred to in points (a) to (d) of this paragraph;

(g) instruments held for hedging a particular risk of one or more positions in an instrument referred to in points (a) to (f), (h) and (i) of this paragraph;

(h) own liabilities of the institution, unless such instruments meet the criteria referred to in paragraph 2, point (e), or the criteria referred to in paragraph 2, third subparagraph;

(i) instruments in hedge funds.

An institution shall assign to the trading book a position in a CIU, other than the positions referred to in paragraph 3, point (f), that is held with trading intent, where the institution meets any of the following conditions:

(a) the institution is able to obtain sufficient information about the individual underlying exposures of the CIU;

(b) the institution is not able to obtain sufficient information about the individual underlying exposures of the CIU, but the institution has knowledge of the content of the mandate of the CIU and is able to obtain daily price quotes for the CIU.

EBA shall submit those draft regulatory technical standards to the Commission by 10 July 2027.

Article 104a

Reclassification of a position

EBA shall monitor the range of supervisory practices and shall issue by 10 July 2027 guidelines, in accordance with Article 16 of Regulation (EU) No 1093/2010, on what exceptional circumstances entail for the purposes of the first subparagraph of this paragraph and of paragraph 5 of this Article. Until EBA issues those guidelines, competent authorities shall notify EBA of, and shall provide a rationale for, their decisions on whether or not to permit an institution to reclassify a position as referred to in paragraph 2 of this Article.

The decision referred to in the first subparagraph shall be approved by the management body.

Where the competent authority has granted permission for the reclassification of a position in accordance with paragraph 2, the institution which received that permission shall:

(a) publicly disclose, without delay, (i) information that its position has been reclassified, and (ii) where the effect of that reclassification is a reduction in the institution's own funds requirements, the size of that reduction; and

(b) where the effect of that reclassification is a reduction in the institution's own funds requirements, not recognise that effect until the position matures, unless the institution's competent authority permits it to recognise that effect at an earlier date.

Article 104b

Requirements for trading desk

Institutions' trading desks shall at all times meet all the following requirements:

(a) each trading desk shall have a clear and distinctive business strategy and a risk management structure that is adequate for its business strategy;

(b) each trading desk shall have a clear organisational structure; positions in a given trading desk shall be managed by designated dealers within the institution; each dealer shall have dedicated functions in the trading desk; each dealer shall be assigned to one trading desk only;

(d) reports on the activities, profitability, risk management and regulatory requirements at the trading desk level shall be produced at least on a weekly basis and communicated to the management body on a regular basis;

(e) each trading desk shall have a clear annual business plan including a well-defined remuneration policy on the basis of sound criteria used for performance measurement;

(f) reports on maturing positions, intra-day trading limit breaches, daily trading limit breaches and actions taken by the institution to address those breaches, as well as assessments of market liquidity, shall be prepared for each trading desk on a monthly basis and made available to the competent authorities.

Article 104c

Treatment of foreign exchange risk hedges of capital ratios

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