# CE2006227EN.01008301.xml

| 21.9.2006 | EN | Official Journal of the European Union | CE 227/83 |
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21.9.2006

EN

Official Journal of the European Union

CE 227/83

---

MINUTES

(2006/C 227 E/03)

PROCEEDINGS OF THE SITTING

IN THE CHAIR: Josep BORRELL FONTELLES

President

1.   Opening of sitting

The sitting opened at 9.05.

2.   Transfers of appropriations

The Committee on Budgets had considered the Commission's proposal for transfer of appropriations DEC 27/2005 (C6-0231/2005 — SEC(2005)0923).

After noting the Council's opinion, the committee agreed — in accordance with Article 24(3) of the Financial Regulation of 25 June 2002 — to mobilise the emergency reserve for an amount of 70 million Euro and transfer it to budget line 23 02 01 of the 2005 budget, in order to finance rehabilitation and reconstruction assistance to the tsunami-affected countries.

3.   Opening of negotiations with Turkey — Additional Protocol to the EEC-Turkey Association Agreement *** (debate)

(debate)

Council and Commission statements: Opening of negotiations with Turkey

Recommendation on the proposal for a Council decision on the conclusion of the Additional Protocol to the Agreement establishing an Association between the European Economic Community and Turkey following the enlargement of the European Union (9617/2005 — COM(2005)0191 — C6-0194/2005 — 2005/0091(AVC)) — Committee on Foreign Affairs.

Rapporteur: Elmar Brok (A6-0241/2005)

Douglas Alexander (President-in-Office of the Council) and Olli Rehn (Member of the Commission) made the statements.

Elmar Brok introduced the recommendation.

The following spoke: Hans-Gert Poettering, on behalf of the PPE-DE Group, Martin Schulz, on behalf of the PSE Group (with several off-microphone interruptions from Werner Langen), Emma Bonino, on behalf of the ALDE Group, Daniel Marc Cohn-Bendit, on behalf of the Verts/ALE Group, Elmar Brok, who made a personal statement in response to Mr Cohn-Bendit's remarks, Philippe de Villiers, also on those remarks, Francis Wurtz, on behalf of the GUE/NGL Group, Roger Knapman, on behalf of the IND/DEM Group, Konrad Szymański, on behalf of the UEN Group, Philip Claeys, Non-attached Member, Camiel Eurlings, Jan Marinus Wiersma, Andrew Duff, Joost Lagendijk, Adamos Adamou, Bastiaan Belder, Roberta Angelilli, Jan Tadeusz Masiel, Ioannis Kasoulides, Hannes Swoboda, Marielle De Sarnez, Cem Özdemir, Vittorio Agnoletto and Georgios Karatzaferis.

IN THE CHAIR: Pierre MOSCOVICI

Vice-President

The following spoke: Sebastiano (Nello) Musumeci, Hans-Peter Martin, Renate Sommer, Véronique De Keyser, Silvana Koch-Mehrin, Mirosław Mariusz Piotrowski, Mogens N.J. Camre, Andreas Mölzer, Jacques Toubon, Michel Rocard, Karin Riis-Jørgensen, Francesco Enrico Speroni, Roger Helmer, Geoffrey Van Orden, Vural Öger, Marios Matsakis, Philippe de Villiers, Ville Itälä, Emine Bozkurt, Karin Resetarits, Françoise Grossetête, Stavros Lambrinidis, Giorgos Dimitrakopoulos, Panagiotis Beglitis, Ursula Stenzel, Libor Rouček, Zbigniew Zaleski, Nicola Zingaretti, György Schöpflin, Douglas Alexander and Olli Rehn.

The following spoke: Bernd Posselt, who made a personal statement in response to Daniel Marc Cohn-Bendit's remarks, and Werner Langen, who made a personal statement in response to Martin Schulz's remarks.

Motions for resolutions to wind up the debate tabled pursuant to Rule 103(2):

| — | Daniel Marc Cohn-Bendit, Monica Frassoni, Joost Lagendijk and Cem Özdemir, on behalf of the Verts/ALE Group, on the opening of negotiations with Turkey (B6-0484/2005), |
| --- | --- |

—

Daniel Marc Cohn-Bendit, Monica Frassoni, Joost Lagendijk and Cem Özdemir, on behalf of the Verts/ALE Group, on the opening of negotiations with Turkey (B6-0484/2005),

| — | Andrew Duff, on behalf of the ALDE Group, on the opening of negotiations with Turkey (B6-0487/2005), |
| --- | --- |

—

Andrew Duff, on behalf of the ALDE Group, on the opening of negotiations with Turkey (B6-0487/2005),

| — | Martin Schulz, Jan Marinus Wiersma and Hannes Swoboda, on behalf of the PSE Group, on the opening of negotiations with Turkey (B6-0496/2005), |
| --- | --- |

—

Martin Schulz, Jan Marinus Wiersma and Hannes Swoboda, on behalf of the PSE Group, on the opening of negotiations with Turkey (B6-0496/2005),

| — | Cristiana Muscardini, Anna Elzbieta Fotyga, Konrad Szymański and Inese Vaidere, on behalf of the UEN Group, on the opening of negotiations with Turkey (B6-0498/2005), |
| --- | --- |

—

Cristiana Muscardini, Anna Elzbieta Fotyga, Konrad Szymański and Inese Vaidere, on behalf of the UEN Group, on the opening of negotiations with Turkey (B6-0498/2005),

| — | Francis Wurtz, André Brie, Adamos Adamou, Kyriacos Triantaphyllides, Feleknas Uca and Jonas Sjöstedt, on behalf of the GUE/NGL Group, on the opening of negotiations with Turkey (B6-0502/2005), |
| --- | --- |

—

Francis Wurtz, André Brie, Adamos Adamou, Kyriacos Triantaphyllides, Feleknas Uca and Jonas Sjöstedt, on behalf of the GUE/NGL Group, on the opening of negotiations with Turkey (B6-0502/2005),

| — | Elmar Brok, João de Deus Pinheiro and Camiel Eurlings, on behalf of the PPE-DE Group, on the opening of negotiations with Turkey (B6-0505/2005). |
| --- | --- |

—

Elmar Brok, João de Deus Pinheiro and Camiel Eurlings, on behalf of the PPE-DE Group, on the opening of negotiations with Turkey (B6-0505/2005).

The debate closed.

Vote: Minutes of 28.09.2005, Item 5.1 and Minutes of 28.09.2005, Item 5.2.

Minutes of 28.09.2005, Item 5.1 and Minutes of 28.09.2005, Item 5.2

(The sitting was suspended at 11.50 pending voting time and resumed at 12.05.)

(The sitting was suspended at 11.50 pending voting time and resumed at 12.05.)

IN THE CHAIR: Josep BORRELL FONTELLES

President

4.   Welcome

On behalf of Parliament, the President welcomed members of a delegation from the Mexican Congress — led by Fernando Margaín, Chairman of the Mexican Senate's Committee on Foreign Affairs — who had taken their seats in the official gallery.

5.   Voting time

Details of voting (amendments, separate and split votes, etc.) appear in Annex I to the Minutes.

5.1.   Additional Protocol to the EEC-Turkey Association Agreement *** (Rule 131) (vote)

(Rule 131) (vote)

Recommendation on the proposal for a Council decision on the conclusion of the Additional Protocol to the Agreement establishing an Association between the European Economic Community and Turkey following the enlargement of the European Union (9617/2005 — COM(2005)0191 — C6-0194/2005 — 2005/0091(AVC)) — Committee on Foreign Affairs.

Rapporteur: Elmar Brok (A6-0241/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 1)

(Voting record: Annex I, Item 1)

DRAFT LEGISLATIVE RESOLUTION

The following spoke: Hans-Gert Poettering, on behalf of the PPE-DE Group, who requested that the vote be postponed under Rule 170(4), and Martin Schulz, on behalf of the PSE Group, on the request.

Parliament approved the request by electronic vote (311 for, 285 against, 63 abstentions).

5.2.   Opening of negotiations with Turkey (vote)

(vote)

Motions for resolution B6-0484/2005, B6-0487/2005, B6-0496/2005, B6-0498/2005, B6-0502/2005 and B6-0505/2005.

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 2)

(Voting record: Annex I, Item 2)

MOTION FOR A RESOLUTION RC-B6-0484/2005

(replacing B6-0484/2005, B6-0487/2005, B6-0496/2005, B6-0498/2005, B6-0502/2005 and B6-0505/2005):

tabled by the following Members:

| | Hans-Gert Poettering, Camiel Eurlings, Elmar Brok and João de Deus Pinheiro, on behalf of the PPE-DE Group |
| --- | --- |

Hans-Gert Poettering, Camiel Eurlings, Elmar Brok and João de Deus Pinheiro, on behalf of the PPE-DE Group

| | Martin Schulz, Jan Marinus Wiersma and Hannes Swoboda, on behalf of the PSE Group |
| --- | --- |

Martin Schulz, Jan Marinus Wiersma and Hannes Swoboda, on behalf of the PSE Group

| | Graham Watson, Andrew Duff and Emma Bonino, on behalf of the ALDE Group |
| --- | --- |

Graham Watson, Andrew Duff and Emma Bonino, on behalf of the ALDE Group

| | Daniel Marc Cohn-Bendit, Joost Lagendijk and Cem Özdemir, on behalf of the Verts/ALE Group, |
| --- | --- |

Daniel Marc Cohn-Bendit, Joost Lagendijk and Cem Özdemir, on behalf of the Verts/ALE Group,

| | Francis Wurtz, Adamos Adamou, Kyriacos Triantaphyllides, Tobias Pflüger and Vittorio Agnoletto, on behalf of the GUE/NGL Group |
| --- | --- |

Francis Wurtz, Adamos Adamou, Kyriacos Triantaphyllides, Tobias Pflüger and Vittorio Agnoletto, on behalf of the GUE/NGL Group

| | Brian Crowley and Inese Vaidere, on behalf of the UEN Group. |
| --- | --- |

Brian Crowley and Inese Vaidere, on behalf of the UEN Group.

Adopted (P6_TA(2005)0350)

(P6_TA(2005)0350)

The following spoke on the vote:

The following spoke on the vote:

| — | Giorgos Dimitrakopoulos, on behalf of the PPE-DE Group, who moved an oral amendment to amendment 5, which was incorporated; |
| --- | --- |

—

Giorgos Dimitrakopoulos, on behalf of the PPE-DE Group, who moved an oral amendment to amendment 5, which was incorporated;

| — | Jan Marinus Wiersma, on behalf of the PSE Group, who moved an oral amendment to paragraphs 6 and 16, which was not incorporated as more than 37 Members objected; |
| --- | --- |

—

Jan Marinus Wiersma, on behalf of the PSE Group, who moved an oral amendment to paragraphs 6 and 16, which was not incorporated as more than 37 Members objected;

| — | Andrew Duff, on the conduct of the vote. |
| --- | --- |

—

Andrew Duff, on the conduct of the vote.

IN THE CHAIR: Alejo VIDAL-QUADRAS ROCA

Vice-President

6.   Welcome

On behalf of Parliament, the President welcomed Gustavo Pacheco, Chairman of the Committee on Foreign Affairs of the Peruvian Congress, who had taken his seat in the official gallery.

7.   Voting time (continuation)

(continuation)

7.1.   1. Taking up and pursuit of the business of credit institutions, 2. Capital adequacy of investment firms and credit institutions ***I (vote)

(vote)

Report

| 1. | on the proposal for a directive of the European Parliament and of the Council recasting Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions [COM(2004)0486 — C6-0141/2004 — 2004/0155(COD)] and |
| --- | --- |

1.

on the proposal for a directive of the European Parliament and of the Council recasting Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions [COM(2004)0486 — C6-0141/2004 — 2004/0155(COD)] and

| 2. | on the proposal for a directive of the European Parliament and of the Council recasting Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions [COM(2004)0486 — C6-0144/2004 — 2004/0159(COD)] — Committee on Economic and Monetary Affairs. |
| --- | --- |

2.

on the proposal for a directive of the European Parliament and of the Council recasting Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions [COM(2004)0486 — C6-0144/2004 — 2004/0159(COD)] — Committee on Economic and Monetary Affairs.

Rapporteur: Alexander Radwan (A6-0257/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 3)

(Voting record: Annex I, Item 3)

1. COMMISSION PROPOSAL

Approved as amended (P6_TA(2005)0351)

(P6_TA(2005)0351)

DRAFT LEGISLATIVE RESOLUTION

Adopted (P6_TA(2005)0351)

(P6_TA(2005)0351)

2. COMMISSION PROPOSAL

Approved as amended (P6_TA(2005)0352)

(P6_TA(2005)0352)

DRAFT LEGISLATIVE RESOLUTION

Adopted (P6_TA(2005)0352)

(P6_TA(2005)0352)

The following spoke on the vote:

The following spoke on the vote:

| — | Alexander Radwan, on behalf of the PPE-DE Group, who moved an oral amendment to amendments 778 and 782, and another oral amendment to amendments 781 and 785 (both were incorporated). |
| --- | --- |

—

Alexander Radwan, on behalf of the PPE-DE Group, who moved an oral amendment to amendments 778 and 782, and another oral amendment to amendments 781 and 785 (both were incorporated).

7.2.   Statutory audit of annual accounts and consolidated accounts ***I (vote)

(vote)

Report on the proposal for a directive of the European Parliament and of the Council on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/349/EEC (COM(2004)0177 — C6-0005/2004 — 2004/0065(COD)) — Committee on Legal Affairs.

Rapporteur: Bert Doorn (A6-0224/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 4)

(Voting record: Annex I, Item 4)

COMMISSION PROPOSAL

Approved as amended (P6_TA(2005)0353)

(P6_TA(2005)0353)

DRAFT LEGISLATIVE RESOLUTION

Adopted (P6_TA(2005)0353)

(P6_TA(2005)0353)

The following spoke:

The following spoke:

| — | Bert Doorn (rapporteur) before the vote. |
| --- | --- |

—

Bert Doorn (rapporteur) before the vote.

7.3.   Development of the Community's railways ***I (vote)

(vote)

Report on the proposal for a directive of the European Parliament and of the Council amending Council Directive 91/440/EEC on the development of the Community's railways (COM(2004)0139 — C6-0001/2004 — 2004/0047(COD)) — Committee on Transport and Tourism.

Rapporteur: Georg Jarzembowski (A6-0143/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 5)

(Voting record: Annex I, Item 5)

COMMISSION PROPOSAL

Approved as amended (P6_TA(2005)0354)

(P6_TA(2005)0354)

DRAFT LEGISLATIVE RESOLUTION

Adopted (P6_TA(2005)0354)

(P6_TA(2005)0354)

7.4.   Certification of train crews ***I (vote)

(vote)

Report on the proposal for a directive of the European Parliament and of the Council on the certification of train crews operating locomotives and trains on the Community's rail network (COM(2004)0142 — C6-0002/2004 — 2004/0048(COD)) — Committee on Transport and Tourism.

Rapporteur: Gilles Savary (A6-0133/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 6)

(Voting record: Annex I, Item 6)

COMMISSION PROPOSAL

Approved as amended (P6_TA(2005)0355)

(P6_TA(2005)0355)

DRAFT LEGISLATIVE RESOLUTION

Adopted (P6_TA(2005)0355)

(P6_TA(2005)0355)

The following spoke on the vote:

The following spoke on the vote:

| — | Erik Meijer, on behalf of the GUE/NGL Group, who moved an oral amendment to amendment 50. |
| --- | --- |

—

Erik Meijer, on behalf of the GUE/NGL Group, who moved an oral amendment to amendment 50.

7.5.   International rail passengers' rights and obligations ***I (vote)

(vote)

Report on the proposal for a regulation of the European Parliament and of the Council on International Rail Passengers' Rights and Obligations (COM(2004)0143 — C6-0003/2004 — 2004/0049(COD)) — Committee on Transport and Tourism.

Rapporteur: Dirk Sterckx (A6-0123/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 7)

(Voting record: Annex I, Item 7)

COMMISSION PROPOSAL

Approved as amended (P6_TA(2005)0356)

(P6_TA(2005)0356)

DRAFT LEGISLATIVE RESOLUTION

Adopted (P6_TA(2005)0356)

(P6_TA(2005)0356)

The following spoke on the vote:

The following spoke on the vote:

| — | Michael Cramer, on behalf of the Verts/ALE Group, who moved an oral amendment to amendment 138/rev, which was incorporated. He also proposed that amendment 138/rev as amended be put to the vote before amendment 32 (Parliament agreed to the proposal). |
| --- | --- |

—

Michael Cramer, on behalf of the Verts/ALE Group, who moved an oral amendment to amendment 138/rev, which was incorporated. He also proposed that amendment 138/rev as amended be put to the vote before amendment 32 (Parliament agreed to the proposal).

7.6.   Contractual quality requirements for rail freight services ***I (vote)

(vote)

Report on the proposal for a regulation of the European Parliament and of the Council on compensation in cases of non-compliance with contractual quality requirements for rail freight services (COM(2004)0144 — C6-0004/2004 — 2004/0050(COD)) — Committee on Transport and Tourism.

Rapporteur: Roberts Zīle (A6-0171/2005).

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 8)

(Voting record: Annex I, Item 8)

COMMISSION PROPOSAL

Rejected.

Olli Rehn (Member of the Commission) announced that the Commission had taken note of Parliament's position.

The matter was referred back to the committee responsible under Rule 52(3).

7.7.   25th anniversary of Solidarity and its message for Europe (vote)

(vote)

Motions for resolution B6-0485/2005, B6-0495/2005, B6-0500/2005 and B6-0504/2005

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 9)

(Voting record: Annex I, Item 9)

MOTION FOR A RESOLUTION RC-B6-0485/2005

(replacing B6-0485/2005, B6-0495/2005 and B6-0504/2005):

tabled by the following Members:

| | Jerzy Buzek, Janusz Lewandowski and Jacek Emil Saryusz-Wolski, on behalf of the PPE-DE Group |
| --- | --- |

Jerzy Buzek, Janusz Lewandowski and Jacek Emil Saryusz-Wolski, on behalf of the PPE-DE Group

| | Dariusz Rosati, Józef Pinior and Jan Marinus Wiersma, on behalf of the PSE Group |
| --- | --- |

Dariusz Rosati, Józef Pinior and Jan Marinus Wiersma, on behalf of the PSE Group

| | Bronisław Geremek and Janusz Onyszkiewicz, on behalf of the ALDE Group |
| --- | --- |

Bronisław Geremek and Janusz Onyszkiewicz, on behalf of the ALDE Group

| | Milan Horáček, Joost Lagendijk and Angelika Beer, on behalf of the Verts/ALE Group |
| --- | --- |

Milan Horáček, Joost Lagendijk and Angelika Beer, on behalf of the Verts/ALE Group

| | Wojciech Roszkowski, Brian Crowley, Guntars Krasts, Ģirts Valdis Kristovskis and Cristiana Muscardini, on behalf of the UEN Group. |
| --- | --- |

Wojciech Roszkowski, Brian Crowley, Guntars Krasts, Ģirts Valdis Kristovskis and Cristiana Muscardini, on behalf of the UEN Group.

Adopted (P6_TA(2005)0357)

(P6_TA(2005)0357)

(Motion for a resolution B6-0500/2005 fell.)

7.8.   Territorial cohesion in regional development (vote)

(vote)

Report on the role of territorial cohesion in regional development (2004/2256(INI)) — Committee on Regional Development.

Rapporteur: Ambroise Guellec (A6-0251/2005)

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 10)

(Voting record: Annex I, Item 10)

MOTION FOR A RESOLUTION

Adopted (P6_TA(2005)0358)

(P6_TA(2005)0358)

7.9.   A stronger partnership for the outermost regions (vote)

(vote)

Report on a stronger partnership for the outermost regions (2004/2253(INI)) — Committee on Regional Development.

Rapporteur: Sérgio Marques (A6-0246/2005)

(Simple majority)

(Simple majority)

(Voting record: Annex I, Item 11)

(Voting record: Annex I, Item 11)

MOTION FOR A RESOLUTION

Adopted (P6_TA(2005)0359)

(P6_TA(2005)0359)

The following spoke on the vote:

The following spoke on the vote:

| — | Carl Schlyter, who pointed out an error in the Swedish version of amendment 5. |
| --- | --- |

—

Carl Schlyter, who pointed out an error in the Swedish version of amendment 5.

8.   Explanations of vote

Written explanations of vote:

Written explanations of vote:

Explanations of vote submitted in writing under Rule 163(3) appear in the verbatim report of proceedings for the sitting.

Oral explanations of vote:

Oral explanations of vote:

Opening of negotiations with Turkey — RC-B6-0484/2005

| — | Bernat Joan i Marí, Carlo Fatuzzo, Richard Seeber, Bernd Posselt, Mario Borghezio, Luca Romagnoli, Frank Vanhecke, Albert Deß |
| --- | --- |

—

Bernat Joan i Marí, Carlo Fatuzzo, Richard Seeber, Bernd Posselt, Mario Borghezio, Luca Romagnoli, Frank Vanhecke, Albert Deß

Report: Roberts Zīle — A6-0171/2005

| — | Richard Seeber |
| --- | --- |

—

Richard Seeber

Report: Ambroise Guellec — A6-0251/2005

| — | Richard Seeber |
| --- | --- |

—

Richard Seeber

Report: Sérgio Marques — A6-0246/2005

| — | Richard Seeber |
| --- | --- |

—

Richard Seeber

9.   Corrections to votes

Corrections to votes appear on the ‘Séance en direct’ website under ‘Votes’/‘Results of votes’/‘Roll-call votes’. They are published in hard copy in Annex II to the Minutes, ‘Result of roll-call votes’.

The electronic version on Europarl will be regularly updated for a maximum of two weeks after the day of the vote concerned.

After the two-week deadline has passed, the list of corrections to votes will be finalised so that it can be translated and published in the Official Journal.

Members present but not voting:

Members present but not voting:

Daniel Caspary had informed the Chair that he had been present but had not taken part in all of the votes.

(The sitting was suspended at 13.40 and resumed at 15.05.)

(The sitting was suspended at 13.40 and resumed at 15.05.)

IN THE CHAIR: Jacek Emil SARYUSZ-WOLSKI

Vice-President

10.   Approval of Minutes of previous sitting

The Minutes of the previous sitting were approved.

11.   Defence of parliamentary immunity (developments)

(developments)

Following the European Parliament's decision of 5 July 2005 to uphold Umberto Bossi's parliamentary immunity in the context of criminal proceedings pending before a court in Brescia, the President had, in accordance with Rule 7(9), been notified by the Italian authorities of the judicial ruling on the case, handed down by the Brescia Court of Appeal on 6 June 2005.

The notification would be sent to the Committee on Legal Affairs for information.

12.   Oil (debate)

(debate)

Council and Commission statements: Oil price rises and dependence on oil

Douglas Alexander (President-in-Office of the Council) and Andris Piebalgs (Member of the Commission) made the statements.

The following spoke: Giles Chichester, on behalf of the PPE-DE Group, Hannes Swoboda, on behalf of the PSE Group, Fiona Hall, on behalf of the ALDE Group, Claude Turmes, on behalf of the Verts/ALE Group, Umberto Guidoni, on behalf of the GUE/NGL Group, Guntars Krasts, on behalf of the UEN Group, Sergej Kozlík, Non-attached Member, Robert Goebbels, Vittorio Prodi, Satu Hassi, Dimitrios Papadimoulis, Liam Aylward, Luca Romagnoli, Christoph Konrad, Reino Paasilinna, Roberto Musacchio, Luis de Grandes Pascual, Ewa Hedkvist Petersen, Carmen Fraga Estévez, Mechtild Rothe, Paul Rübig, Riitta Myller, Ján Hudacký, Mia De Vits, Alejo Vidal-Quadras Roca, Antolín Sánchez Presedo, Peter Liese, Péter Olajos, Ivo Belet, Ivo Strejček and Douglas Alexander.

IN THE CHAIR: Antonios TRAKATELLIS

Vice-President

Andris Piebalgs spoke.

Motions for resolutions to wind up the debate tabled pursuant to Rule 103(2):

| — | Fiona Hall, Sophia in 't Veld and Vittorio Prodi, on behalf of the ALDE Group, on oil prices and energy dependency (B6-0481/2005), |
| --- | --- |

—

Fiona Hall, Sophia in 't Veld and Vittorio Prodi, on behalf of the ALDE Group, on oil prices and energy dependency (B6-0481/2005),

| — | Claude Turmes, on behalf of the Verts/ALE Group, on oil price rises and dependence on oil (B6-0482/2005), |
| --- | --- |

—

Claude Turmes, on behalf of the Verts/ALE Group, on oil price rises and dependence on oil (B6-0482/2005),

| — | Umberto Pirilli, Roberta Angelilli, Guntars Krasts and Roberts Zīle, on behalf of the UEN Group, on the increase in the price of oil and oil dependency (B6-0491/2005), |
| --- | --- |

—

Umberto Pirilli, Roberta Angelilli, Guntars Krasts and Roberts Zīle, on behalf of the UEN Group, on the increase in the price of oil and oil dependency (B6-0491/2005),

| — | Umberto Guidoni and Ilda Figueiredo, on behalf of the GUE/NGL Group, on oil (B6-0499/2005), |
| --- | --- |

—

Umberto Guidoni and Ilda Figueiredo, on behalf of the GUE/NGL Group, on oil (B6-0499/2005),

| — | Alexander Radwan, Giles Chichester and Paul Rübig, on behalf of the PPE-DE Group, on oil price rises and dependence on oil (B6-0506/2005), |
| --- | --- |

—

Alexander Radwan, Giles Chichester and Paul Rübig, on behalf of the PPE-DE Group, on oil price rises and dependence on oil (B6-0506/2005),

| — | Hannes Swoboda, Robert Goebbels, Mechtild Rothe and Mia De Vits, on behalf of the PSE Group, on the oil price rises and dependence on oil (B6-0509/2005). |
| --- | --- |

—

Hannes Swoboda, Robert Goebbels, Mechtild Rothe and Mia De Vits, on behalf of the PSE Group, on the oil price rises and dependence on oil (B6-0509/2005).

The debate closed.

Vote: Minutes of 29.09.2005, Item 6.2

Minutes of 29.09.2005, Item 6.2

13.   Reform of the UN, the Millennium Development Goals (debate)

(debate)

Council and Commission statements: Reform of the UN, the Millennium Development Goals

Douglas Alexander (President-in-Office of the Council) and Benita Ferrero-Waldner (Member of the Commission) made the statements.

The following spoke: Francisco José Millán Mon, on behalf of the PPE-DE Group, Glenys Kinnock, on behalf of the PSE Group, Alexander Lambsdorff, on behalf of the ALDE Group, Frithjof Schmidt, on behalf of the Verts/ALE Group, Miguel Portas, on behalf of the GUE/NGL Group, Hélène Goudin, on behalf of the IND/DEM Group, Inese Vaidere, on behalf of the UEN Group, Irena Belohorská, Non-attached Member, Nirj Deva, Jo Leinen, Lapo Pistelli, Raül Romeva i Rueda, Tobias Pflüger, Kathy Sinnott, Koenraad Dillen, Enrique Barón Crespo, Paul Marie Coûteaux, Miguel Angel Martínez Martínez, Inger Segelström, Manuel António dos Santos, Douglas Alexander, Benita Ferrero-Waldner and Alexander Lambsdorff, who put a question to the Commission that Benita Ferrero-Waldner answered.

Motions for resolutions to wind up the debate tabled pursuant to Rule 103(2):

| — | Raül Romeva i Rueda, Frithjof Schmidt, Hélène Flautre and Marie Anne Isler Béguin, on behalf of the Verts/ALE Group, on reform of the UN (B6-0483/2005), |
| --- | --- |

—

Raül Romeva i Rueda, Frithjof Schmidt, Hélène Flautre and Marie Anne Isler Béguin, on behalf of the Verts/ALE Group, on reform of the UN (B6-0483/2005),

| — | Brian Crowley, Inese Vaidere, Ģirts Valdis Kristovskis and Guntars Krasts, on behalf of the UEN Group, on the reform of the UN (B6-0492/2005), |
| --- | --- |

—

Brian Crowley, Inese Vaidere, Ģirts Valdis Kristovskis and Guntars Krasts, on behalf of the UEN Group, on the reform of the UN (B6-0492/2005),

| — | José Ignacio Salafranca Sánchez-Neyra, Elmar Brok, Nirj Deva, Francisco José Millán Mon and Simon Coveney, on behalf of the PPE-DE Group, on the outcome of the United Nations World Summit and the Millennium Development Goals (14-16 September 2005) (B6-0493/2005), |
| --- | --- |

—

José Ignacio Salafranca Sánchez-Neyra, Elmar Brok, Nirj Deva, Francisco José Millán Mon and Simon Coveney, on behalf of the PPE-DE Group, on the outcome of the United Nations World Summit and the Millennium Development Goals (14-16 September 2005) (B6-0493/2005),

| — | André Brie and Luisa Morgantini, on behalf of the GUE/NGL Group, on the results of the 2005 World Summit of the UN (B6-0501/2005), |
| --- | --- |

—

André Brie and Luisa Morgantini, on behalf of the GUE/NGL Group, on the results of the 2005 World Summit of the UN (B6-0501/2005),

| — | Alexander Lambsdorff and Lapo Pistelli, on behalf of the ALDE Group, on the UN Summit (B6-0507/2005), |
| --- | --- |

—

Alexander Lambsdorff and Lapo Pistelli, on behalf of the ALDE Group, on the UN Summit (B6-0507/2005),

| — | Glenys Kinnock, Michel Rocard, Pasqualina Napoletano, Jo Leinen and Miguel Angel Martínez Martínez, on behalf of the PSE Group, on reform of the UN (B6-0510/2005). |
| --- | --- |

—

Glenys Kinnock, Michel Rocard, Pasqualina Napoletano, Jo Leinen and Miguel Angel Martínez Martínez, on behalf of the PSE Group, on reform of the UN (B6-0510/2005).

The debate closed.

Vote: Minutes of 29.09.2005, Item 6.3

Minutes of 29.09.2005, Item 6.3

(The sitting was suspended at 18.10 pending Question Time and resumed at 18.25.)

(The sitting was suspended at 18.10 pending Question Time and resumed at 18.25.)

IN THE CHAIR: Manuel António dos SANTOS

Vice-President

14.   Question Time (Council)

(Council)

Parliament considered a number of questions to the Council (B6-0331/2005).

Question 1 (Marie Panayotopoulos-Cassiotou): The problem of waste and how to deal with it.

Douglas Alexander (President-in-Office of the Council) answered the question and a supplementary by Marie Panayotopoulos-Cassiotou.

Question 2 (Sajjad Karim): Harmonisation of the Member States' approach to combating terrorism.

Douglas Alexander answered the question and supplementaries by Sajjad Karim and David Martin.

Question 3 (Chris Davies): Council of Ministers' website.

Douglas Alexander answered the question and supplementaries by Chris Davies, David Martin and Bill Newton Dunn.

Question 4 (Sarah Ludford): Obstacles to the right of access to Council documents.

Douglas Alexander answered the question and a supplementary by Sarah Ludford.

Question 5 (Nigel Farage): Fisheries Partnership Agreements.

Douglas Alexander answered the question and supplementaries by Nigel Farage, Christopher Beazley and Catherine Stihler.

Question 6 (Bernd Posselt): Minority rights in Serbia.

Douglas Alexander answered the question and supplementaries by Bernd Posselt, Zsolt László Becsey and Paul Rübig.

Question 7 (Dimitrios Papadimoulis): Property rights of religious minorities in Turkey.

Douglas Alexander answered the question and supplementaries by Dimitrios Papadimoulis and Catherine Stihler.

Question 8 (James Hugh Allister): IRA terrorists.

Douglas Alexander (President-in-Office of the Council) answered the question and supplementaries by James Hugh Allister, James Nicholson and Proinsias De Rossa.

Christopher Beazley spoke.

Questions which had not been answered for lack of time would receive written answers.

Council Question Time closed.

(The sitting was suspended at 19.05 and resumed at 21.05.)

(The sitting was suspended at 19.05 and resumed at 21.05.)

IN THE CHAIR: Pierre MOSCOVICI

Vice-President

15.   Belarus (debate)

(debate)

Commission statement: Belarus

Olli Rehn (Member of the Commission) made the statement.

The following spoke: Bogdan Klich, on behalf of the PPE-DE Group, Joseph Muscat, on behalf of the PSE Group, Janusz Onyszkiewicz, on behalf of the ALDE Group, Elisabeth Schroedter, on behalf of the Verts/ALE Group, Jonas Sjöstedt, on behalf of the GUE/NGL Group, Bastiaan Belder, on behalf of the IND/DEM Group, Konrad Szymański, on behalf of the UEN Group, Bernd Posselt, Józef Pinior, Věra Flasarová, Mirosław Mariusz Piotrowski, Inese Vaidere, Barbara Kudrycka, Bogusław Sonik and Olli Rehn.

Motions for resolutions to wind up the debate tabled pursuant to Rule 103(2):

| — | Janusz Onyszkiewicz, on behalf of the ALDE Group, on the situation in Belarus (B6-0486/2005), |
| --- | --- |

—

Janusz Onyszkiewicz, on behalf of the ALDE Group, on the situation in Belarus (B6-0486/2005),

| — | Laima Liucija Andrikienė, Árpád Duka-Zólyomi, James Elles, Alfred Gomolka, Tunne Kelam, Bogdan Klich, Barbara Kudrycka, Aldis Kušķis, Rihards Pīks, Bernd Posselt, Jacek Emil Saryusz-Wolski, Charles Tannock and Karl von Wogau, on behalf of the PPE-DE Group, on the situation of minorities in Belarus (B6-0488/2005), |
| --- | --- |

—

Laima Liucija Andrikienė, Árpád Duka-Zólyomi, James Elles, Alfred Gomolka, Tunne Kelam, Bogdan Klich, Barbara Kudrycka, Aldis Kušķis, Rihards Pīks, Bernd Posselt, Jacek Emil Saryusz-Wolski, Charles Tannock and Karl von Wogau, on behalf of the PPE-DE Group, on the situation of minorities in Belarus (B6-0488/2005),

| — | Jan Marinus Wiersma and Joseph Muscat, on behalf of the PSE Group, on Belarus (B6-0490/2005), |
| --- | --- |

—

Jan Marinus Wiersma and Joseph Muscat, on behalf of the PSE Group, on Belarus (B6-0490/2005),

| — | Bastiaan Belder, on behalf of the IND/DEM Group, on the situation of minorities in Belarus (B6-0494/2005), |
| --- | --- |

—

Bastiaan Belder, on behalf of the IND/DEM Group, on the situation of minorities in Belarus (B6-0494/2005),

| — | Anna Elzbieta Fotyga, Konrad Szymański and Inese Vaidere, on behalf of the UEN Group, on the political situation in Belarus (B6-0497/2005), |
| --- | --- |

—

Anna Elzbieta Fotyga, Konrad Szymański and Inese Vaidere, on behalf of the UEN Group, on the political situation in Belarus (B6-0497/2005),

| — | Eva-Britt Svensson, on behalf of the GUE/NGL Group, on Belarus (B6-0503/2005), |
| --- | --- |

—

Eva-Britt Svensson, on behalf of the GUE/NGL Group, on Belarus (B6-0503/2005),

| — | Elisabeth Schroedter, Milan Horáček and Marie Anne Isler Béguin, on behalf of the Verts/ALE Group, on independent media and the political situation in Belarus (B6-0508/2005). |
| --- | --- |

—

Elisabeth Schroedter, Milan Horáček and Marie Anne Isler Béguin, on behalf of the Verts/ALE Group, on independent media and the political situation in Belarus (B6-0508/2005).

The debate closed.

Vote: Minutes of 29.09.2005, Item 6.4

Minutes of 29.09.2005, Item 6.4

16.   EU-India relations (debate)

(debate)

Report on EU-India relations: a strategic partnership (2004/2169(INI)) — Committee on Foreign Affairs.

Rapporteur: Emilio Menéndez del Valle (A6-0256/2005)

Emilio Menéndez del Valle introduced report.

Olli Rehn (Member of the Commission) spoke.

The following spoke: Georgios Papastamkos (draftsman of the opinion of the INTA Committee), Marcello Vernola, on behalf of the PPE-DE Group, Neena Gill, on behalf of the PSE Group, Sajjad Karim, on behalf of the ALDE Group, Derek Roland Clark, on behalf of the IND/DEM Group, Ryszard Czarnecki, Non-attached Member, Charles Tannock, Jo Leinen, Eija-Riitta Korhola and Libor Rouček.

The debate closed.

Vote: Minutes of 29.09.2005, Item 6.5

Minutes of 29.09.2005, Item 6.5

17.   Renewable energy in the EU (debate)

(debate)

Report on the share of renewable energy in the EU and proposals for concrete actions (2004/2153(INI)) — Committee on Industry, Research and Energy.

Rapporteur: Claude Turmes (A6-0227/2005)

Claude Turmes introduced report.

Andris Piebalgs (Member of the Commission) spoke.

The following spoke: Dimitrios Papadimoulis (draftsman of the opinion of the ENVI Committee), Mairead McGuinness (draftsman of the opinion of the AGRI Committee), Peter Liese, on behalf of the PPE-DE Group, Mechtild Rothe, on behalf of the PSE Group, Vittorio Prodi, on behalf of the ALDE Group, Umberto Guidoni, on behalf of the GUE/NGL Group, Mieczysław Edmund Janowski, on behalf of the UEN Group, Sergej Kozlík, Non-attached Member, Nikolaos Vakalis, Adam Gierek, Esko Seppänen, Avril Doyle, Andres Tarand and Andris Piebalgs.

The debate closed.

Vote: Minutes of 29.09.2005, Item 6.6

Minutes of 29.09.2005, Item 6.6

18.   Human rights of minority groups in Kosovo (debate)

(debate)

Commission statement: Human rights of minority groups in Kosovo

Olli Rehn (Member of the Commission) made the statement.

The following spoke: Bernd Posselt, on behalf of the PPE-DE Group, Panagiotis Beglitis, on behalf of the PSE Group, Viktória Mohácsi, on behalf of the ALDE Group, Elly de Groen-Kouwenhoven, on behalf of the Verts/ALE Group, Gisela Kallenbach and Olli Rehn.

The debate closed.

19.   EU road-safety action programme (debate)

(debate)

Report on the European road safety action programme: halving the number of road accident victims in the European Union by 2010: a shared responsibility (2004/2162(INI)) — Committee on Transport and Tourism.

Rapporteur: Ari Vatanen (A6-0225/2005)

Ari Vatanen introduced report.

Jacques Barrot (Vice-President of the Commission) spoke.

The following spoke: Dieter-Lebrecht Koch, on behalf of the PPE-DE Group, Inés Ayala Sender, on behalf of the PSE Group, Hannu Takkula, on behalf of the ALDE Group, Margrete Auken, on behalf of the Verts/ALE Group, Ewa Hedkvist Petersen and Jacques Barrot.

The debate closed.

Vote: Minutes of 29.09.2005, Item 6.7

Minutes of 29.09.2005, Item 6.7

20.   Agenda for next sitting

The agenda for the next sitting had been established (‘Agenda’ PE 361.877/OJJE).

21.   Closure of sitting

The sitting closed at 23.50.

Julian Priestley

Secretary-General

Manuel António dos Santos

Vice-President

---

ATTENDANCE REGISTER

The following signed:

Adamou, Agnoletto, Allister, Alvaro, Andersson, Andrejevs, Andria, Andrikienė, Angelilli, Antoniozzi, Arif, Arnaoutakis, Ashworth, Atkins, Attard-Montalto, Aubert, Audy, Auken, Ayala Sender, Aylward, Ayuso González, Bachelot-Narquin, Baco, Badia I Cutchet, Barón Crespo, Barsi-Pataky, Batten, Battilocchio, Batzeli, Bauer, Beaupuy, Beazley, Becsey, Beer, Beglitis, Belder, Belet, Belohorská, Bennahmias, Beňová, Berend, Berès, van den Berg, Berger, Berlato, Berlinguer, Berman, Bersani, Birutis, Blokland, Bloom, Bobošíková, Böge, Bösch, Bonde, Bonino, Bono, Bonsignore, Booth, Borghezio, Borrell Fontelles, Bourlanges, Bourzai, Bowis, Bowles, Bozkurt, Bradbourn, Braghetto, Brejc, Brepoels, Breyer, Březina, Brie, Brok, Budreikaitė, Buitenweg, Bullmann, van den Burg, Bushill-Matthews, Busk, Busquin, Busuttil, Buzek, Cabrnoch, Calabuig Rull, Callanan, Camre, Capoulas Santos, Carlotti, Carnero González, Carollo, Casa, Casaca, Cashman, Caspary, Castex, Castiglione, del Castillo Vera, Cavada, Cederschiöld, Cercas, Cesa, Chatzimarkakis, Chichester, Chiesa, Chmielewski, Christensen, Chruszcz, Cirino Pomicino, Claeys, Clark, Cocilovo, Coelho, Cohn-Bendit, Corbett, Corbey, Cornillet, Correia, Costa, Cottigny, Coûteaux, Coveney, Cramer, Crowley, Ryszard Czarnecki, D'Alema, Daul, Davies, Degutis, Dehaene, De Keyser, Demetriou, Deprez, De Rossa, De Sarnez, Descamps, Désir, Deß, Deva, De Veyrac, De Vits, Díaz de Mera García Consuegra, Didžiokas, Díez González, Dillen, Dimitrakopoulos, Dionisi, Dobolyi, Dombrovskis, Doorn, Douay, Dover, Doyle, Drčar Murko, Duchoň, Dührkop Dührkop, Duff, Duka-Zólyomi, Duquesne, Ebner, Ehler, Ek, El Khadraoui, Elles, Esteves, Estrela, Ettl, Eurlings, Jillian Evans, Jonathan Evans, Robert Evans, Fajmon, Falbr, Farage, Fatuzzo, Fava, Fazakas, Ferber, Fernandes, Anne Ferreira, Elisa Ferreira, Figueiredo, Fjellner, Flasarová, Flautre, Florenz, Foglietta, Fontaine, Ford, Fotyga, Fourtou, Fraga Estévez, Frassoni, Freitas, Friedrich, Fruteau, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, García Pérez, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gebhardt, Gentvilas, Geremek, Geringer de Oedenberg, Gibault, Gierek, Gill, Gklavakis, Glante, Glattfelder, Goebbels, Goepel, Golik, Gollnisch, Gomes, Gomolka, Goudin, Grabowska, Grabowski, Graça Moura, Graefe zu Baringdorf, Gräßle, de Grandes Pascual, Grech, Griesbeck, Gröner, de Groen-Kouwenhoven, Grosch, Grossetête, Gruber, Guardans Cambó, Guellec, Guerreiro, Guidoni, Gurmai, Gutiérrez-Cortines, Guy-Quint, Gyürk, Hänsch, Hall, Hammerstein Mintz, Hamon, Handzlik, Hannan, Harangozó, Harbour, Harkin, Harms, Hasse Ferreira, Hassi, Hatzidakis, Haug, Hedh, Hedkvist Petersen, Hegyi, Helmer, Henin, Hennicot-Schoepges, Hennis-Plasschaert, Herczog, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Honeyball, Hoppenstedt, Horáček, Howitt, Hudacký, Hughes, Hutchinson, Hybášková, Ibrisagic, Ilves, in 't Veld, Isler Béguin, Itälä, Iturgaiz Angulo, Jackson, Jäätteenmäki, Jałowiecki, Janowski, Járóka, Jarzembowski, Jeggle, Jensen, Joan i Marí, Jöns, Jørgensen, Jonckheer, Jordan Cizelj, Juknevičienė, Kacin, Kaczmarek, Kallenbach, Kamall, Karas, Karatzaferis, Karim, Kasoulides, Kaufmann, Tunne Kelam, Kilroy-Silk, Kindermann, Kinnock, Kirkhope, Klamt, Klaß, Klich, Klinz, Knapman, Koch, Koch-Mehrin, Kohlíček, Konrad, Korhola, Kósáné Kovács, Koterec, Kozlík, Krahmer, Krarup, Krasts, Krehl, Kreissl-Dörfler, Kristensen, Kristovskis, Krupa, Kuc, Kudrycka, Kuhne, Kułakowski, Kušķis, Kusstatscher, Kuźmiuk, Lagendijk, Laignel, Lamassoure, Lambert, Lambrinidis, Lambsdorff, Landsbergis, Lang, Langen, Langendries, Laperrouze, La Russa, Lavarra, Lax, Lechner, Le Foll, Lehne, Lehtinen, Leichtfried, Leinen, Jean-Marie Le Pen, Marine Le Pen, Le Rachinel, Letta, Lévai, Lewandowski, Liberadzki, Libicki, Lichtenberger, Lienemann, Liese, Liotard, Lipietz, Lombardo, López-Istúriz White, Louis, Lucas, Ludford, Lulling, Lundgren, Lynne, Maat, Maaten, McAvan, McCarthy, McDonald, McGuinness, McMillan-Scott, Madeira, Malmström, Manders, Maňka, Erika Mann, Thomas Mann, Mantovani, Markov, Marques, Martens, David Martin, Hans-Peter Martin, Martinez, Martínez Martínez, Masiel, Masip Hidalgo, Maštálka, Mastenbroek, Mathieu, Mato Adrover, Matsakis, Matsis, Matsouka, Mauro, Mavrommatis, Mayer, Mayor Oreja, Medina Ortega, Meijer, Méndez de Vigo, Menéndez del Valle, Meyer Pleite, Miguélez Ramos, Mikko, Mikolášik, Millán Mon, Mitchell, Mölzer, Mohácsi, Montoro Romero, Moraes, Moreno Sánchez, Morgan, Morgantini, Morillon, Moscovici, Mote, Mulder, Musacchio, Muscardini, Muscat, Musotto, Mussolini, Musumeci, Myller, Napoletano, Nassauer, Nattrass, Navarro, Newton Dunn, Annemie Neyts-Uyttebroeck, Nicholson, Niebler, van Nistelrooij, Novak, Obiols i Germà, Öger, Özdemir, Olajos, Olbrycht, Ó Neachtain, Onesta, Onyszkiewicz, Oomen-Ruijten, Ortuondo Larrea, Ouzký, Oviir, Paasilinna, Pack, Pafilis, Pahor, Paleckis, Pálfi, Panayotopoulos-Cassiotou, Pannella, Panzeri, Papadimoulis, Papastamkos, Parish, Patrie, Peillon, Pęk, Alojz Peterle, Pflüger, Piecyk, Pieper, Pīks, Pinheiro, Pinior, Piotrowski, Piskorski, Pistelli, Pittella, Pleguezuelos Aguilar, Pleštinská, Podestà, Podkański, Poettering, Poignant, Polfer, Poli Bortone, Portas, Posselt, Prets, Prodi, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Ransdorf, Rapkay, Remek, Resetarits, Reul, Reynaud, Riera Madurell, Ries, Riis-Jørgensen, Rivera, Rizzo, Rocard, Rogalski, Roithová, Romagnoli, Romeva i Rueda, Rosati, Roszkowski, Roth-Behrendt, Rothe, Rouček, Roure, Rudi Ubeda, Rübig, Rühle, Rutowicz, Ryan, Sacconi, Saïfi, Sakalas, Salafranca Sánchez-Neyra, Salinas García, Salvini, Samuelsen, Sánchez Presedo, dos Santos, Sartori, Saryusz-Wolski, Savary, Savi, Sbarbati, Schapira, Scheele, Schenardi, Schierhuber, Schlyter, Schmidt, Ingo Schmitt, Schmitt, Schnellhardt, Schöpflin, Schröder, Schroedter, Schulz, Schuth, Schwab, Seeber, Seeberg, Segelström, Seppänen, Siekierski, Sifunakis, Silva Peneda, Sinnott, Siwiec, Sjöstedt, Skinner, Škottová, Smith, Sommer, Sonik, Sornosa Martínez, Sousa Pinto, Spautz, Speroni, Staes, Staniszewska, Starkevičiūtė, Šťastný, Stenzel, Sterckx, Stevenson, Stihler, Stockmann, Strejček, Strož, Stubb, Sturdy, Sudre, Sumberg, Surján, Svensson, Swoboda, Szájer, Szejna, Szent-Iványi, Szymański, Tabajdi, Tajani, Takkula, Tannock, Tarabella, Tarand, Tatarella, Thomsen, Thyssen, Titford, Titley, Toia, Toubon, Toussas, Trakatellis, Trautmann, Triantaphyllides, Trüpel, Turmes, Tzampazi, Ulmer, Väyrynen, Vaidere, Vakalis, Valenciano Martínez-Orozco, Vanhecke, Van Hecke, Van Lancker, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Vatanen, Vaugrenard, Ventre, Verges, Vergnaud, Vernola, Vidal-Quadras Roca, de Villiers, Vincenzi, Virrankoski, Vlasák, Vlasto, Voggenhuber, Wagenknecht, Wallis, Walter, Watson, Henri Weber, Manfred Weber, Weiler, Weisgerber, Westlund, Whitehead, Whittaker, Wieland, Wiersma, Wijkman, Wise, von Wogau, Wohlin, Janusz Wojciechowski, Wortmann-Kool, Wuermeling, Wurtz, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Záborská, Zahradil, Zaleski, Zani, Zapałowski, Zappalà, Ždanoka, Železný, Zieleniec, Zīle, Zimmer, Zimmerling, Zingaretti, Zvěřina, Zwiefka

Observers:

Abadjiev Dimitar, Ali Nedzhmi, Anastase Roberta Alma, Arabadjiev Alexander, Athanasiu Alexandru, Bărbuleţiu Tiberiu, Becşenescu Dumitru, Bliznashki Georgi, Buruiană Aprodu Daniela, Cappone Maria, Ciornei Silvia, Cioroianu Adrian Mihai, Corlăţean Titus, Coşea Dumitru Gheorghe Mircea, Creţu Corina, Creţu Gabriela, Dîncu Vasile, Dimitrov Martin, Duca Viorel Senior, Dumitrescu Cristian, Ganţ Ovidiu Victor, Hogea Vlad Gabriel, Christova Christina Velcheva, Husmenova Filiz, Iacob Ridzi Monica Maria, Ilchev Stanimir, Ivanova Iglika, Kazak Tchetin, Kelemen Atilla Béla Ladislau, Kirilov Evgeni, Kónya-Hamar Sándor, Marinescu Marian-Jean, Mihăescu Eugen, Morţun Alexandru Ioan, Muscă Monica Octavia, Nicolae Şerban, Paparizov Atanas Atanassov, Parvanova Antonyia, Paşcu Ioan Mircea, Petre Maria, Podgorean Radu, Popa Nicolae Vlad, Popeangă Petre, Sârbu Daciana Octavia, Severin Adrian, Shouleva Lydia, Silaghi Ovidiu Ioan, Sofianski Stefan, Stoyanov Dimitar, Szabó Károly Ferenc, Tîrle Radu, Vigenin Kristian, Zgonea Valeriu Ştefan

---

ANNEX I

RESULTS OF VOTES

Abbreviations and symbols

| + | adopted |
| --- | --- |
| - | rejected |
| ↓ | lapsed |
| W | withdrawn |
| RCV (..., ..., ...) | roll-call vote (for, against, abstentions) |
| EV (..., ..., ...) | electronic vote (for, against, abstentions) |
| split | split vote |
| sep | separate vote |
| am | amendment |
| CA | compromise amendment |
| CP | corresponding part |
| D | deleting amendment |
| = | identical amendments |
| § | paragraph |
| art | article |
| rec | recital |
| MOT | motion for a resolution |
| JT MOT | joint motion for a resolution |
| SEC | secret ballot |

+

adopted

-

rejected

↓

lapsed

W

withdrawn

RCV (..., ..., ...)

roll-call vote (for, against, abstentions)

EV (..., ..., ...)

electronic vote (for, against, abstentions)

split

split vote

sep

separate vote

am

amendment

CA

compromise amendment

CP

corresponding part

D

deleting amendment

=

identical amendments

§

paragraph

art

article

rec

recital

MOT

motion for a resolution

JT MOT

joint motion for a resolution

SEC

secret ballot

1.   Additional Protocol to the EEC-Turkey Association Agreement ***

Report: Elmar BROK (A6-0241/2005)

| Subject | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- |
| Single vote | | Postponed | |

Subject

RCV, etc.

Vote

RCV/EV — remarks

Single vote

Postponed

The vote had been postponed under Rule 170(4).

2.   Opening of negotiations with Turkey

Motions for resolutions: B6-0484/2005, B6-0487/2005, B6-0496/2005, B6-0498/2005, B6-0502/2005, B6-0505/2005

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Joint motion for a resolution RC-B6-0484/2005




  (PPE-DE, PSE, ALDE, Verts/ALE, GUE/NGL+UEN) |
| § 1 | 2 | PPE-DE | RCV | + | 322, 282, 61 |
| § | original text | | ↓ | |
| After § 2 | 5 | Lambrinidis et al | | + | oral amendment |
| After § 3 | 1 | Moscovici et al | split/RCV | | |
| 1 | + | 542, 74, 46 |
| 2 | + | 304, 294, 57 |
| After § 4 | 6 | Lambrinidis et al | EV | - | 184, 272, 213 |
| § 5 | 7 | Lambrinidis et al | EV | - | 175, 273, 217 |
| § | original text | split | | |
| 1 | + | |
| 2 | + | |
| After § 10 | 3 | PPE-DE | RCV | - | 235, 291, 129 |
| § 15 | | original text | split | | |
| 1 | + | |
| 2 | + | |
| § 16 | | original text | sep | + | |
| Recital D | | original text | split | | |
| 1 | + | |
| 2 | + | |
| After recital I | 4 | Moscovici et al | | + | |
| Vote: resolution (as a whole) | RCV | + | 356, 181, 125 |
| Motions for resolutions by political groups |
| B6-0484/2005 | | Verts/ALE | | ↓ | |
| B6-0487/2005 | | ALDE | | ↓ | |
| B6-0496/2005 | | PSE | | ↓ | |
| B6-0498/2005 | | UEN | | ↓ | |
| B6-0502/2005 | | GUE/NGL | | ↓ | |
| B6-0505/2005 | | PPE-DE | | ↓ | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Joint motion for a resolution RC-B6-0484/2005

(PPE-DE, PSE, ALDE, Verts/ALE, GUE/NGL+UEN)

§ 1

2

PPE-DE

RCV

+

322, 282, 61

§

original text

↓

After § 2

5

Lambrinidis et al

+

oral amendment

After § 3

1

Moscovici et al

split/RCV

1

+

542, 74, 46

2

+

304, 294, 57

After § 4

6

Lambrinidis et al

EV

-

184, 272, 213

§ 5

7

Lambrinidis et al

EV

-

175, 273, 217

§

original text

split

1

+

2

+

After § 10

3

PPE-DE

RCV

-

235, 291, 129

§ 15

original text

split

1

+

2

+

§ 16

original text

sep

+

Recital D

original text

split

1

+

2

+

After recital I

4

Moscovici et al

+

Vote: resolution (as a whole)

RCV

+

356, 181, 125

Motions for resolutions by political groups

B6-0484/2005

Verts/ALE

↓

B6-0487/2005

ALDE

↓

B6-0496/2005

PSE

↓

B6-0498/2005

UEN

↓

B6-0502/2005

GUE/NGL

↓

B6-0505/2005

PPE-DE

↓

Requests for roll-call votes

IND/DEM am 2 and final vote

PPE-DE ams 1, 3

Verts/ALE am 1

Requests for separate votes

UEN § 16

PPE-DE § 16

Requests for split votes

Verts/ALE

am 1

First part: up to ‘the Armenian genocide;’

Second part: remainder

PSE

§ 15

First part: up to ‘automatically to accession;’

Second part: remainder

PPE-DE

§ 5

First part: Text as a whole without the words ‘on the basis of the Annan Plan’

Second part: those words

Recital D

First part: Text as a whole without the words ‘on the basis of the Annan Plan’

Second part: those words

Miscellaneous

Jan Marinus Wiersma moved an oral amendment on behalf of the PSE Group to §§ 6 and 16.

Giorgos Dimitrakopoulos, on behalf of the PPE-DE Group, moved the following oral amendment to amendment 5:

| 2a. | Stresses that this unilateral declaration by Turkey does not form part of the Protocol and has no legal effect on Turkey's obligations under the Protocol;
  and should not be sent to the Grand National Assembly for ratification
  ; |
| --- | --- |

2a.

Stresses that this unilateral declaration by Turkey does not form part of the Protocol and has no legal effect on Turkey's obligations under the Protocol;
  and should not be sent to the Grand National Assembly for ratification
  ;

3.   1. Taking up and pursuit of the business of credit institutions, 2. Capital adequacy of investment firms and credit institutions ***I

Report: Alexander RADWAN (A6-0257/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| 1. | Taking up and pursuit of the business of credit institutions |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

1.

Block 1A

1-2

4-5

8

10-11

15-17

19-22

24-26

28-29

31-39

41-49

50

52-53

54-57

60-64

67, 69, 71

73-74

76-78

81-86

88-92

94-100

102-107

109

111-115

117

119-126

128

130-139

141-151

154-159

161-165

168-170

172

174-208

211-218

223

227-248

250-255

256-262

264

266-269

271-275

277, 278

280-285

288-290

292-295

297-298

300-305

307-309

312-313

315-316

319-320

322-338

340-347

349-369

373-383

385-386

390-392

394-401

403-407

409-414

416-426

428

430-431

433-434

436-448

523-673

675-691

727

Committee

PPE-DE, PSE, ALDE

+

Block 1B

13

18

27

30

65

77

93

101

110

118

129

167

222

249

265

270

286-287

291

306

310-311

314

317

321

348

370-372

384

387-389

393

402

427

429

435

Committee

-

Annex VII

674

PPE-DE, PSE + ALDE

+

276

Committee

↓

Block 2

728-748

750-772

779

780

PPE-DE, PSE + ALDE

+

Block 3

3

6-7

9

12

23

40

51

58-59

66

68

70

72

75

79-80

87

108

116

127

152

160

166

171

173

209-210

219-221

224-226

263

279

296

299

318

339

408

415

432

Committee

↓

Article 145, after § 3

749

PPE-DE, PSE + ALDE

+

140

Committee

↓

After Article 150

781

PPE-DE, PSE + ALDE

+

oral amendment

153

Committee

↓

After recital 57

778

PPE-DE, PSE + ALDE

+

oral amendment

14

Committee

↓

Vote: amended proposal

+

Vote: legislative resolution

+

| 2. | Capital adequacy of investment firms and credit institutions |
| --- | --- |

2.

Block 1A

449-451

455-488

491-492

496-497

499-511

515-520

522

692

695-712

714-726

Committee

PPE-DE, PSE, ALDE

+

Block 1B

498

521

Committee

-

Block 1B

453

Committee

RCV

-

43, 546, 78

Annex I, § 14

693

PPE-DE, PSE + ALDE

+

512

Committee

↓

513

Committee

↓

Annex I, § 15

694

PPE-DE, PSE + ALDE

+

514

Committee

↓

Block 2

773-777

783-784

PPE-DE, PSE + ALDE

+

Block 3

452

489

493-495

Committee

↓

Article 43, after § 2

785

PPE-DE, PSE + ALDE

RCV

+

oral amendment

613, 35, 11

490

Committee

↓

After recital 32

782

PPE-DE, PSE, ALDE

+

oral amendment

454

Committee

↓

Vote: amended proposal

+

Vote: legislative resolution

+

Amendments 753 to 777 inclusive had been signed on behalf of the PSE Group by Ieke van den Burg, not Margrietus van den Berg.

On behalf of the PPE-DE Group, Alexander Radwan moved an oral amendment to add ‘In the view of the European Parliament,’ to the beginning of the last sentence of amendments 778 and 782.

On behalf of the PPE-DE Group, Alexander Radwan moved an oral amendment to replace amendments 781 and 785 by the following text:

‘2b.
  Without prejudice to the implementing measures already adopted, upon expiry of a two-year period following the adoption of this Directive and on 1 April 2008 at latest, the application of its provisions requiring the adoption of technical rules, amendments and decisions in accordance with paragraph 2 shall be suspended. Acting on a proposal from the Commission, the European Parliament and the Council may renew the provisions concerned in accordance with the procedure laid down in Article 251 of the Treaty and, to that end, they shall review them prior to the expiry of the period or date referred to above
  .’

Requests for roll-call votes

IND/DEM: ams 453 and 785

Requests for separate votes

IND/DEM: am 140

4.   Statutory audit of annual accounts and consolidated accounts ***I

Report: Bert DOORN (A6-0224/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Amendments by the committee responsible — block vote | 1-4
  6-14
  16-17
  19
  20
  24-41
  43-54
  56-64
  66-78
  80-87
  89-91
  97-98 | Committee | | + | |
| Amendments by the committee responsible | 92 | Committee | vs | - | |
| Article 23 | 104/rev | PPE-DE, PSE, ALDE+ Verts/ALE | | + | |
| 55 | Committee | | ↓ | |
| After Article 30 | 105/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 65 | Committee | | ↓ | |
| Article 39, §§ 1-4 | 79cp | PPE-DE, PSE, ALDE+Verts/ALE | | + | |
| Article 39 § 5 | 106/rev | PPE-DE, PSE, ALDE+Verts/ALE | | + | |
| 79cp | Committee | | ↓ | |
| Article 39 § 6 | 79cp | Committee | | + | |
| Article 47, § 1, after point (d) | 88 | Committee | | - | |
| 107/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| Article 49, after § 2 | 110 | PPE-DE, PSE+ Verts/ALE | | + | |
| Article 50 | 108/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 93-96 | Committee | | ↓ | |
| Recital 10 | 99/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 5 | Committee | | ↓ | |
| Recital 20 | 100/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 15 | Committee | | ↓ | |
| After recital 20 | 101/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 18 | Committee | | ↓ | |
| After recital 22 | 102/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 21 | Committee | | ↓ | |
| After recital 23 | 109 | PPE-DE+PSE | | + | |
| 22 | Committee | | ↓ | |
| After recital 27 | 103/rev | PPE-DE, PSE, ALDE + Verts/ALE | | + | |
| 23 | Committee | | ↓ | |
| Vote: amended proposal | | + | |
| Vote: legislative resolution | | + | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Amendments by the committee responsible — block vote

1-4

6-14

16-17

19

20

24-41

43-54

56-64

66-78

80-87

89-91

97-98

Committee

+

Amendments by the committee responsible

92

Committee

vs

-

Article 23

104/rev

PPE-DE, PSE, ALDE+ Verts/ALE

+

55

Committee

↓

After Article 30

105/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

65

Committee

↓

Article 39, §§ 1-4

79cp

PPE-DE, PSE, ALDE+Verts/ALE

+

Article 39 § 5

106/rev

PPE-DE, PSE, ALDE+Verts/ALE

+

79cp

Committee

↓

Article 39 § 6

79cp

Committee

+

Article 47, § 1, after point (d)

88

Committee

-

107/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

Article 49, after § 2

110

PPE-DE, PSE+ Verts/ALE

+

Article 50

108/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

93-96

Committee

↓

Recital 10

99/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

5

Committee

↓

Recital 20

100/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

15

Committee

↓

After recital 20

101/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

18

Committee

↓

After recital 22

102/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

21

Committee

↓

After recital 23

109

PPE-DE+PSE

+

22

Committee

↓

After recital 27

103/rev

PPE-DE, PSE, ALDE + Verts/ALE

+

23

Committee

↓

Vote: amended proposal

+

Vote: legislative resolution

+

Amendment 42 did not concern all language versions and was therefore not put to the vote (Rule 151(1)).

Requests for separate votes

PPE-DE am 92

5.   Development of the Community's railways ***I

Report: Georg JARZEMBOWSKI (A6-0143/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Proposal for a directive |
| Proposal to reject the Commission proposal | 14 | GUE/NGL | RCV | - | 135, 491, 35 |
| Amendments by the committee responsible | 2 | Committee | RCV | + | 352, 291, 19 |
| 3 | Committee | sep | + | |
| 4 | Committee | sep | + | |
| 5 | Committee | sep | + | |
| 6 | Committee | sep | + | |
| 7 | Committee | sep | + | |
| 8 | Committee | RCV | + | 368, 258, 38 |
| 9 | Committee | split/RCV | | |
| 1 | + | 393, 255, 14 |
| 2 | + | 347, 290, 15 |
| 3 | + | 350, 298, 10 |
| 10 | Committee | sep | + | |
| 11 | Committee | sep | + | |
| 12 | Committee | RCV | + | 553, 79, 32 |
| 13 | Committee | sep | + | |
| Vote: amended proposal | RCV | + | 402, 203, 60 |
| Draft legislative resolution |
| After § 1 | 15 | Verts/ALE | RCV | - | 157, 483, 23 |
| Vote: legislative resolution | RCV | + | 401, 211, 51 |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Proposal for a directive

Proposal to reject the Commission proposal

14

GUE/NGL

RCV

-

135, 491, 35

Amendments by the committee responsible

2

Committee

RCV

+

352, 291, 19

3

Committee

sep

+

4

Committee

sep

+

5

Committee

sep

+

6

Committee

sep

+

7

Committee

sep

+

8

Committee

RCV

+

368, 258, 38

9

Committee

split/RCV

1

+

393, 255, 14

2

+

347, 290, 15

3

+

350, 298, 10

10

Committee

sep

+

11

Committee

sep

+

12

Committee

RCV

+

553, 79, 32

13

Committee

sep

+

Vote: amended proposal

RCV

+

402, 203, 60

Draft legislative resolution

After § 1

15

Verts/ALE

RCV

-

157, 483, 23

Vote: legislative resolution

RCV

+

401, 211, 51

Requests for roll-call votes

GUE/NGL ams 2, 9, 12, 14, amended proposal and final vote

Verts/ALE am 15

PSE ams 2, 8, 9

Requests for separate votes

GUE/NGL ams 3, 4, 6, 8, 10, 11

PPE-DE ams 2, 9

Verts/ALE ams 2 -13

PSE am 10

Requests for split votes

PSE

§ 9

First part: Text as a whole without the words ‘by 1 January 2008’ and ‘by 1 January 2012’

Second part:‘by 1 January 2008’

Third part:‘by 1 January 2012’

Miscellaneous

Amendment 1 had been withdrawn.

6.   Certification of train crews ***I

Report: Gilles SAVARY (A6-0133/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Amendments by the committee responsible — block vote | 1-13
  18-19
  22-34
  36
  38-44 | Committee | | + | |
| Amendments by the committee responsible | 15 | Committee | sep | + | |
| 17 | Committee | sep | + | |
| 21 | Committee | sep | + | |
| Article 10 | 50 | GUE/NGL | | - | |
| 14 | Committee | | + | |
| 45 | PSE | | + | |
| Article 14 § 1 | 16 | Committee | EV | - | 265, 375, 10 |
| 46 | PSE | EV | + | 347, 299, 10 |
| 47 | PSE | | + | |
| Article 16 § 1 | 20 | Committee | | - | |
| 48 | PSE | | - | |
| Article 25 | 49/rev | IND/DEM | | - | |
| 35 | Committee | | + | |
| Article 29 | 37 | Committee | split | | |
| 1 | + | |
| 2 | + | |
| 51 | GUE/NGL | | ↓ | |
| Vote: amended proposal | | + | |
| Vote: legislative resolution | RCV | + | 603, 24, 40 |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Amendments by the committee responsible — block vote

1-13

18-19

22-34

36

38-44

Committee

+

Amendments by the committee responsible

15

Committee

sep

+

17

Committee

sep

+

21

Committee

sep

+

Article 10

50

GUE/NGL

-

14

Committee

+

45

PSE

+

Article 14 § 1

16

Committee

EV

-

265, 375, 10

46

PSE

EV

+

347, 299, 10

47

PSE

+

Article 16 § 1

20

Committee

-

48

PSE

-

Article 25

49/rev

IND/DEM

-

35

Committee

+

Article 29

37

Committee

split

1

+

2

+

51

GUE/NGL

↓

Vote: amended proposal

+

Vote: legislative resolution

RCV

+

603, 24, 40

Requests for roll-call votes

PPE-DE: final vote

Requests for split votes

ALDE

am 37

First part: up to ‘12 and 17 thereof.’

Second part: remainder

Requests for separate votes

ALDE: am 21

PSE ams 15, 17

Miscellaneous

Erik Meijer, on behalf of the GUE/NGL Group, moved an oral amendment to paragraph 2 of amendment 50.

7.   International rail passengers' rights and obligations ***I

Report: Dirk STERCKX (A6-0123/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Amendments by the committee responsible — block vote | 1
  3-4
  6-8
  10
  12
  14-20
  24-27
  30-31
  33
  35-36
  39-40
  42-53
  55-62
  64-65
  68-70
  72-78
  80-87
  90
  92
  95-100
  102
  104-107
  110-121 | Committee | | + | |
| Amendments by the committee responsible | 2 | Committee | sep | + | |
| 5 | Committee | sep | + | |
| 9 | Committee | sep | + | |
| 11 | Committee | RCV | + | 502, 146, 9 |
| 23 | Committee | sep | + | |
| 28 | Committee | sep | + | |
| 29 | Committee | sep | + | |
| 34 | Committee | sep | + | |
| 38 | Committee | RCV | + | 530, 106, 17 |
| 66 | Committee | sep | + | |
| 67 | Committee | sep | + | |
| 71 | Committee | sep | + | |
| 79 | Committee | sep | + | |
| 91 | Committee | sep | + | |
| 103 | Committee | RCV | + | 533, 116, 9 |
| Article 1, § 2, sub-para 1 | 13 | Committee | RCV | + | 519, 119, 6 |
| 122 | Bradbourn et al | | ↓ | |
| Article 2, point 15 | 131 | GUE/NGL | | - | |
| 21 | Committee | | + | |
| Article 2, point 16 | 132 | GUE/NGL | | - | |
| 22 | Committee | | + | |
| Article 3, after sub-para 3 | 133 | GUE/NGL | | - | |
| 138/rev | Verts/ALE
  El Hadraoui | RCV | + | oral amendment


  550, 87, 16 |
| 32 | Committee | | + | |
| Article 6 § 1 | 37 | Committee | | + | |
| 134 | GUE/NGL | | ↓ | |
| Article 6 § 4 | 123 | ALDE | split | | |
| 1 | + | |
| 2 | + | |
| 41 | Committee | | ↓ | |
| Article 11, sub-para 2 | 54 | Committee | | + | |
| 135 | GUE/NGL | | ↓ | |
| Article 15 § 2 | 124 | ALDE | | + | |
| 63 | Committee | | ↓ | |
| After Article 27 | 88 | Committee | | - | |
| 89 | Committee | | - | |
| 125 | ALDE | | + | |
| Article 28, after § 3 | 127 | PSE | | + | |
| Article 29 | 93 | Committee | | - | |
| 128 | PSE | | + | |
| Article 30 | 94 | Committee | | - | |
| 126 | ALDE | | + | |
| Article 33 § 2 | 101 | Committee | | + | |
| 136 | GUE/NGL | | ↓ | |
| Article 36 | 108 | Committee | EV | + | 416, 199, 21 |
| 129 | PSE | | ↓ | |
| Article 37 | 109 | Committee | | + | |
| 137 | GUE/NGL | | ↓ | |
| After recital 2 | 130 | GUE/NGL | | - | |
| Vote: amended proposal | | + | |
| Vote: legislative resolution | | + | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Amendments by the committee responsible — block vote

1

3-4

6-8

10

12

14-20

24-27

30-31

33

35-36

39-40

42-53

55-62

64-65

68-70

72-78

80-87

90

92

95-100

102

104-107

110-121

Committee

+

Amendments by the committee responsible

2

Committee

sep

+

5

Committee

sep

+

9

Committee

sep

+

11

Committee

RCV

+

502, 146, 9

23

Committee

sep

+

28

Committee

sep

+

29

Committee

sep

+

34

Committee

sep

+

38

Committee

RCV

+

530, 106, 17

66

Committee

sep

+

67

Committee

sep

+

71

Committee

sep

+

79

Committee

sep

+

91

Committee

sep

+

103

Committee

RCV

+

533, 116, 9

Article 1, § 2, sub-para 1

13

Committee

RCV

+

519, 119, 6

122

Bradbourn et al

↓

Article 2, point 15

131

GUE/NGL

-

21

Committee

+

Article 2, point 16

132

GUE/NGL

-

22

Committee

+

Article 3, after sub-para 3

133

GUE/NGL

-

138/rev

Verts/ALE

El Hadraoui

RCV

+

oral amendment

550, 87, 16

32

Committee

+

Article 6 § 1

37

Committee

+

134

GUE/NGL

↓

Article 6 § 4

123

ALDE

split

1

+

2

+

41

Committee

↓

Article 11, sub-para 2

54

Committee

+

135

GUE/NGL

↓

Article 15 § 2

124

ALDE

+

63

Committee

↓

After Article 27

88

Committee

-

89

Committee

-

125

ALDE

+

Article 28, after § 3

127

PSE

+

Article 29

93

Committee

-

128

PSE

+

Article 30

94

Committee

-

126

ALDE

+

Article 33 § 2

101

Committee

+

136

GUE/NGL

↓

Article 36

108

Committee

EV

+

416, 199, 21

129

PSE

↓

Article 37

109

Committee

+

137

GUE/NGL

↓

After recital 2

130

GUE/NGL

-

Vote: amended proposal

+

Vote: legislative resolution

+

Requests for separate votes

PPE-DE ams 2, 5, 9, 22, 41, 66, 67, 79

PSE ams 23, 28, 29, 34, 54, 71, 91

Requests for roll-call votes

PPE-DE ams 11, 13, 38, 103

Verts/ALE am 138/rev

Requests for split votes

PSE

am 123

First part: text as a whole without the words ‘anti-fraud policy’

Second part: those words

Miscellaneous

Michael Cramer, on behalf of the Verts/ALE Group, moved the following oral amendment to amendment 138/rev:

| ‘1. | By the transport contract the railway undertaking or railway undertakings shall undertake to transport the passenger as well as hand luggage and luggage to the place of destination.
  They shall transport the bicycle of the passenger in all trains, including transborder and high speed trains, possibly on payment of a charge.
  The contract must be confirmed by one or more tickets issued to the passenger. The tickets shall be considered prima facie of the conclusion of the contract.’ |
| --- | --- |

‘1.

By the transport contract the railway undertaking or railway undertakings shall undertake to transport the passenger as well as hand luggage and luggage to the place of destination.
  They shall transport the bicycle of the passenger in all trains, including transborder and high speed trains, possibly on payment of a charge.
  The contract must be confirmed by one or more tickets issued to the passenger. The tickets shall be considered prima facie of the conclusion of the contract.’

8.   Contractual quality requirements for rail freight services ***I

Report: Roberts ZILE (A6-0171/2005)

Report: Roberts ZILE (A6-0171/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Vote: proposal for a regulation | | - | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Vote: proposal for a regulation

Vote: proposal for a regulation

-

-

As the Commission did not withdraw its position, the matter was referred back to the committee responsible (TRANS), under Rule 52(3).

9.   The 25th anniversary of Solidarity and its message for Europe

Motions for resolutions: B6-0485/2005, 0495/2005, 0500/2005 and 0504/2005

Motions for resolutions: B6-0485/2005, 0495/2005, 0500/2005 and 0504/2005

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| Joint motion for a resolution RC-B6-0485/2005




  (PPE-DE, PSE, ALDE, Verts/ALE and UEN) |
| Vote: resolution (as a whole) | | + | |
| Motions for resolutions by political groups |
| B6-0485/2005 | | Verts/ALE | | ↓ | |
| B6-0495/2005 | | PSE | | ↓ | |
| B6-0500/2005 | | GUE/NGL | | ↓ | |
| B6-0504/2005 | | PPE-DE, PSE, ALDE + UEN | | ↓ | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

Joint motion for a resolution RC-B6-0485/2005

Joint motion for a resolution RC-B6-0485/2005

(PPE-DE, PSE, ALDE, Verts/ALE and UEN)

(PPE-DE, PSE, ALDE, Verts/ALE and UEN)

Vote: resolution (as a whole)

Vote: resolution (as a whole)

+

Motions for resolutions by political groups

Motions for resolutions by political groups

B6-0485/2005

Verts/ALE

↓

B6-0495/2005

PSE

↓

B6-0500/2005

GUE/NGL

↓

B6-0504/2005

PPE-DE, PSE, ALDE + UEN

↓

10.   Territorial cohesion in regional development *

Report: Ambroise GUELLEC (A6-0251/2005)

Report: Ambroise GUELLEC (A6-0251/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| § 3 | 5 | GUE/NGL | | - | |
| § 4 | 6 | GUE/NGL | | - | |
| § 8 | 7 | GUE/NGL | | - | |
| § 12 | § | original text | RCV | + | 487, 83, 38 |
| § 13 | 1 | PPE-DE | | + | |
| § 14 | 2 | PPE-DE | split | | |
| 1 | + | |
| 2 | + | |
| Recital A | 3 | GUE/NGL | | - | |
| Recital D | 4 | GUE/NGL | | - | |
| Vote: resolution (as a whole) | | + | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

§ 3

5

GUE/NGL

-

§ 4

6

GUE/NGL

-

§ 8

7

GUE/NGL

-

§ 12

§

original text

original text

RCV

+

487, 83, 38

§ 13

1

PPE-DE

+

§ 14

2

PPE-DE

split

1

+

2

+

Recital A

3

GUE/NGL

-

Recital D

4

GUE/NGL

-

Vote: resolution (as a whole)

Vote: resolution (as a whole)

+

Requests for split votes

Requests for split votes

PSE

am 2

am 2

First part: Text as a whole without the words ‘by means of EPSON’

First part:

Second part: remainder

Second part:

Requests for roll-call votes

Requests for roll-call votes

PPE-DE § 12

11.   A stronger partnership for the outermost regions *

Report: Sérgio MARQUES (A6-0246/2005)

Report: Sérgio MARQUES (A6-0246/2005)

| Subject | Am. No | Author | RCV, etc. | Vote | RCV/EV — remarks |
| --- | --- | --- | --- | --- | --- |
| § 6 | § | original text | sep | + | |
| § 7 | 1 | Verts/ALE | | - | |
| § 8 | § | original text | sep | + | |
| After § 8 | 5 | GUE/NGL | RCV | - | 44, 547, 10 |
| § 9 | § | original text | sep | + | |
| § 10 | 2 | Verts/ALE | | - | |
| § 17 | § | original text | split | | |
| 1 | + | |
| 2/EV | + | 300, 285, 15 |
| 3 | + | |
| After § 21 | 6 | GUE/NGL | RCV | - | 52, 547, 5 |
| § 22 | § | original text | split | | |
| 1 | + | |
| 2 | + | |
| § 23 | § | original text | split | | |
| 1 | + | |
| 2 | + | |
| § 24 | § | original text | sep | + | |
| § 25 | § | original text | split | | |
| 1 | + | |
| 2 | + | |
| § 27 | § | original text | sep | + | |
| § 29 | § | original text | sep | + | |
| § 30 | § | original text | sep | + | |
| § 33 | § | original text | sep | + | |
| § 34 | § | original text | split | | |
| 1 | + | |
| 2 | + | |
| 3/EV | - | 237, 333, 13 |
| 4 | + | |
| § 36 | § | original text | split | | |
| 1 | + | |
| 2 | - | |
| 3 | + | |
| § 39 | 7 | GUE/NGL | RCV | - | 84, 490, 3 |
| § 40 | § | original text | sep | + | |
| § 41 | § | original text | split | | |
| 1 | + | |
| 2 | - | |
| § 42 | § | original text | sep | + | |
| § 49 | § | original text | split | | |
| 1 | + | |
| 2 | + | |
| Recital A | 3 | GUE/NGL | RCV | - | 165, 391, 9 |
| Recital M | § | original text | sep | - | |
| After recital N | 4 | GUE/NGL | RCV | - | 46, 500, 5 |
| Vote: resolution (as a whole) | | + | |

Subject

Am. No

Author

RCV, etc.

Vote

RCV/EV — remarks

§ 6

§

original text

original text

sep

+

§ 7

1

Verts/ALE

-

§ 8

§

original text

original text

sep

+

After § 8

5

GUE/NGL

RCV

-

44, 547, 10

§ 9

§

original text

original text

sep

+

§ 10

2

Verts/ALE

-

§ 17

§

original text

original text

split

1

+

2/EV

+

300, 285, 15

3

+

After § 21

6

GUE/NGL

RCV

-

52, 547, 5

§ 22

§

original text

original text

split

1

+

2

+

§ 23

§

original text

original text

split

1

+

2

+

§ 24

§

original text

original text

sep

+

§ 25

§

original text

original text

split

1

+

2

+

§ 27

§

original text

original text

sep

+

§ 29

§

original text

original text

sep

+

§ 30

§

original text

original text

sep

+

§ 33

§

original text

original text

sep

+

§ 34

§

original text

original text

split

1

+

2

+

3/EV

-

237, 333, 13

4

+

§ 36

§

original text

original text

split

1

+

2

-

3

+

§ 39

7

GUE/NGL

RCV

-

84, 490, 3

§ 40

§

original text

original text

sep

+

§ 41

§

original text

original text

split

1

+

2

-

§ 42

§

original text

original text

sep

+

§ 49

§

original text

original text

split

1

+

2

+

Recital A

3

GUE/NGL

RCV

-

165, 391, 9

Recital M

§

original text

original text

sep

-

After recital N

4

GUE/NGL

RCV

-

46, 500, 5

Vote: resolution (as a whole)

Vote: resolution (as a whole)

+

+

Requests for roll-call votes

Requests for roll-call votes

GUE/NGL: ams 5, 6, 7, 3, 4

Requests for separate votes

Requests for separate votes

PPE-DE: recital M and § 41

Verts/ALE: 6, 8, 9, 17, 24, 27, 29, 30, 33, 40, 41, 42

Requests for split votes

Requests for split votes

PPE-DE:

§ 17

§ 17

First part: up to ‘sugar sector’

First part:

Second part:‘calls for the restoration ... by the outermost regions’

Second part:

Third part: remainder

Third part:

§ 36

§ 36

First part: up to ‘due attention’

First part:

Second part:‘in both sectoral ... framework legislation’

Second part:

Third part: remainder

Third part:

Verts/ALE

§ 22

§ 22

First part: up to ‘practices permitted’

First part:

Second part: remainder

Second part:

§ 23

§ 23

First part: Text as a whole without the words ‘and the principle of relative stability’

First part:

Second part: those words

Second part:

§ 25

§ 25

First part: Text as a whole without the words ‘or higher than’

First part:

Second part: those words

Second part:

§ 49

§ 49

First part: Text as a whole without the words ‘for co-financing to meet additional transport costs and’

First part:

Second part: those words

Second part:

ALDE

§ 41

§ 41

First part: Text as a whole without the words ‘a priority and make them’

First part:

Second part: those words

Second part:

PPE-DE, Verts/ALE

§ 34

§ 34

First part: up to ‘businesses in those regions’

First part:

Second part:‘whether via specific measures to ... competitiveness’ without the words ‘offset the additional costs ... their activities and to’

Second part:

Third part:‘offset the additional costs ... their activities and’

Third part:

Fourth part: remainder

Fourth part:

---

ANNEX II

RESULT OF ROLL-CALL VOTES

1.   RC B6-0484/2005 Turkey

Amendment 2

For: 322

ALDE: Beaupuy, Birutis, Bourlanges, Budreikaitė, Cavada, Chiesa, Cornillet, Costa, Degutis, Deprez, De Sarnez, Fourtou, Gibault, Griesbeck, Guardans Cambó, Lambsdorff, Laperrouze, Lax, Manders, Matsakis, Morillon, Mulder, Onyszkiewicz, Ortuondo Larrea, Oviir, Ries, Starkevičiūtė, Takkula

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Belder, Blokland, Borghezio, Chruszcz, Grabowski, Karatzaferis, Piotrowski, Rogalski, Salvini, Sinnott, Speroni, Zapałowski, Železný

NI: Claeys, Czarnecki Ryszard, Dillen, Gollnisch, Helmer, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Masiel, Mölzer, Mussolini, Rivera, Romagnoli, Rutowicz, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Bonsignore, Bradbourn, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Cabrnoch, Callanan, Caspary, del Castillo Vera, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deva, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Florenz, Fontaine, Freitas, Friedrich, Gahler, Gál, Gaľa, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, Grosch, Grossetête, Guellec, Gutiérrez-Cortines, Gyürk, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Hieronymi, Higgins, Hudacký, Hybášková, Itälä, Jackson, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Lamassoure, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, Lulling, Maat, McMillan-Scott, Mann Thomas, Mantovani, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Mikolášik, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Oomen-Ruijten, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rübig, Saïfi, Sartori, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Silva Peneda, Škottová, Sommer, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Varvitsiotis, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Berger, Bösch, Bono, Dührkop Dührkop, Ettl, Hänsch, Haug, Leichtfried, Scheele

UEN: Aylward, Berlato, Camre, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, Libicki, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Against: 282

ALDE: Alvaro, Andria, Attwooll, Bonino, Bowles, Busk, Chatzimarkakis, Cocilovo, Davies, Drčar Murko, Duff, Duquesne, Ek, Gentvilas, Geremek, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Letta, Ludford, Lynne, Maaten, Malmström, Mohácsi, Newton Dunn, Neyts-Uyttebroeck, Pannella, Pistelli, Polfer, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Sbarbati, Schuth, Staniszewska, Sterckx, Szent-Iványi, Väyrynen, Van Hecke, Watson

IND/DEM: Batten, Bloom, Booth, Clark, Coûteaux, Farage, Knapman, Louis, Nattrass, Titford, de Villiers, Whittaker, Wise

NI: Battilocchio, Bobošíková, Mote

PPE-DE: Bowis, Buzek, Cederschiöld, Chmielewski, Deß, De Veyrac, Fjellner, Handzlik, Hökmark, Ibrisagic, Jałowiecki, Kaczmarek, Kudrycka, Kuźmiuk, Lewandowski, Olbrycht, Podkański, Saryusz-Wolski, Seeberg, Siekierski, Sonik, Spautz, Ventre, Wijkman, Zaleski, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, van den Berg, Berlinguer, Berman, Bozkurt, van den Burg, Calabuig Rull, Capoulas Santos, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, El Khadraoui, Estrela, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Elisa, Ford, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Gröner, Gruber, Harangozó, Hasse Ferreira, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Lambrinidis, Lavarra, Lehtinen, Leinen, Lévai, Liberadzki, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Muscat, Napoletano, Obiols i Germà, Öger, Paasilinna, Paleckis, Panzeri, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Prets, Rapkay, Riera Madurell, Rosati, Rothe, Rouček, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, La Russa, Muscardini, Musumeci

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Turmes

Abstention: 61

ALDE: Savi, Toia

GUE/NGL: Krarup

IND/DEM: Bonde, Goudin, Krupa, Lundgren, Pęk, Wohlin

NI: Allister, Baco, Belohorská, Kozlík

PPE-DE: Ayuso González, Busuttil, Casa, Fraga Estévez, Galeote Quecedo, de Grandes Pascual, Herranz García, Herrero-Tejedor, Hoppenstedt, Iturgaiz Angulo, Landsbergis, López-Istúriz White, Millán Mon, Rudi Ubeda, Salafranca Sánchez-Neyra, Van Orden, Varela Suanzes-Carpegna, Vidal-Quadras Roca

PSE: Berès, Bourzai, Carlotti, Cottigny, Douay, Ferreira Anne, Fruteau, Grech, Gurmai, Guy-Quint, Hamon, Ilves, Laignel, Lienemann, Moscovici, Navarro, Pahor, Patrie, Peillon, Poignant, Reynaud, Rocard, Roth-Behrendt, Roure, Savary, Schapira, Vergnaud

Verts/ALE: Lichtenberger, Voggenhuber, Ždanoka

Corrections to votes

For

Françoise Castex

Against

Catherine Guy-Quint

Abstention

Guy Bono

2.   RC B6-0484/2005 Turkey

Amendment 1/1

For: 542

ALDE: Alvaro, Beaupuy, Birutis, Bourlanges, Budreikaitė, Cavada, Chatzimarkakis, Chiesa, Cornillet, Costa, Degutis, Deprez, De Sarnez, Duquesne, Fourtou, Gibault, Griesbeck, Guardans Cambó, Juknevičienė, Klinz, Koch-Mehrin, Krahmer, Lambsdorff, Laperrouze, Lax, Matsakis, Morillon, Mulder, Onyszkiewicz, Ortuondo Larrea, Oviir, Ries, Sbarbati, Schuth, Starkevičiūtė, Takkula, Toia

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Belder, Blokland, Bonde, Borghezio, Chruszcz, Coûteaux, Goudin, Grabowski, Karatzaferis, Krupa, Louis, Lundgren, Pęk, Piotrowski, Salvini, Sinnott, Speroni, de Villiers, Wohlin, Zapałowski, Železný

NI: Allister, Battilocchio, Belohorská, Claeys, Dillen, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Masiel, Mölzer, Mote, Mussolini, Romagnoli, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Audy, Bachelot-Narquin, Barsi-Pataky, Becsey, Belet, Bonsignore, Bowis, Braghetto, Brepoels, Březina, Brok, Bushill-Matthews, Buzek, Caspary, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Cirino Pomicino, Coelho, Daul, Dehaene, Demetriou, Descamps, Deva, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Freitas, Friedrich, Gahler, Gál, Gaľa, García-Margallo y Marfil, Gargani, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Gomolka, Graça Moura, Gräßle, Grosch, Grossetête, Guellec, Gutiérrez-Cortines, Gyürk, Handzlik, Harbour, Hatzidakis, Hennicot-Schoepges, Hieronymi, Higgins, Hökmark, Hudacký, Ibrisagic, Itälä, Jackson, Jałowiecki, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lehne, Lewandowski, Maat, Mann Thomas, Marques, Martens, Mathieu, Mauro, Mavrommatis, Mayer, Mayor Oreja, Mikolášik, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rübig, Saïfi, Sartori, Saryusz-Wolski, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Toubon, Trakatellis, Ulmer, Vakalis, Varvitsiotis, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zaleski, Zappalà, Zimmerling, Zwiefka

PSE: Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bullmann, van den Burg, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Patrie, Peillon, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Schulz, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 74

ALDE: Andria, Attwooll, Bonino, Bowles, Busk, Davies, Drčar Murko, Duff, Ek, Gentvilas, Geremek, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Kacin, Karim, Kułakowski, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Mohácsi, Newton Dunn, Neyts-Uyttebroeck, Pannella, Pistelli, Polfer, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Savi, Staniszewska, Sterckx, Szent-Iványi, Väyrynen, Van Hecke, Watson

NI: Czarnecki Ryszard, Rutowicz

PPE-DE: Ayuso González, Cabrnoch, Duchoň, Fajmon, Fraga Estévez, Galeote Quecedo, Garriga Polledo, de Grandes Pascual, Hannan, Herranz García, Herrero-Tejedor, Hybášková, Iturgaiz Angulo, López-Istúriz White, Millán Mon, Ouzký, Rudi Ubeda, Salafranca Sánchez-Neyra, Strejček, Varela Suanzes-Carpegna, Vidal-Quadras Roca, Vlasák, Zahradil, Zvěřina

PSE: Andersson, Hedkvist Petersen, Segelström, Westlund

Verts/ALE: Lagendijk

Abstention: 46

GUE/NGL: Krarup

IND/DEM: Batten, Bloom, Booth, Clark, Farage, Knapman, Nattrass, Rogalski, Titford, Whittaker, Wise

NI: Baco, Bobošíková, Helmer, Kozlík, Rivera

PPE-DE: Atkins, Bauer, Berend, Bradbourn, Brejc, Busuttil, Callanan, Casa, Chichester, Coveney, Deß, De Veyrac, Evans Jonathan, Goepel, Hoppenstedt, Kamall, McMillan-Scott, Matsis, Parish, Schröder, Thyssen, Van Orden, Ventre, Zieleniec

PSE: Hasse Ferreira, Haug, Ilves, Jöns, Kuhne

Corrections to votes

For

Claude Turmes, Othmar Karas

Against

Robert Sturdy

3.   RC B6-0484/2005 Turkey

Amendment 1/2

For: 304

ALDE: Birutis, Budreikaitė, Chiesa, Costa, Degutis, Deprez, Duquesne, Guardans Cambó, Harkin, Juknevičienė, Lax, Matsakis, Ortuondo Larrea, Oviir, Ries, Starkevičiūtė, Takkula, Toia

GUE/NGL: Adamou, Agnoletto, Brie, Flasarová, Guidoni, Henin, Kaufmann, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Papadimoulis, Pflüger, Ransdorf, Remek, Seppänen, Sjöstedt, Strož, Svensson, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Belder, Blokland, Bonde, Borghezio, Goudin, Karatzaferis, Lundgren, Salvini, Sinnott, Speroni, Wohlin, Železný

NI: Allister, Belohorská, Claeys, Dillen, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Mölzer, Mote, Mussolini, Romagnoli, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Audy, Barsi-Pataky, Becsey, Bonsignore, Braghetto, Březina, Brok, Buzek, Caspary, del Castillo Vera, Chmielewski, Cirino Pomicino, Coelho, Daul, Dehaene, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Fatuzzo, Ferber, Florenz, Fontaine, Freitas, Friedrich, Gahler, Gál, Gaľa, García-Margallo y Marfil, Gargani, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Gomolka, Graça Moura, Gräßle, Grosch, Guellec, Gutiérrez-Cortines, Gyürk, Handzlik, Hatzidakis, Hennicot-Schoepges, Hieronymi, Higgins, Hudacký, Jałowiecki, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, Lulling, Maat, Mann Thomas, Mantovani, Martens, Mavrommatis, Mayer, Méndez de Vigo, Mikolášik, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rübig, Saïfi, Sartori, Saryusz-Wolski, Schierhuber, Schmitt Pál, Schöpflin, Schwab, Seeber, Siekierski, Silva Peneda, Škottová, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Toubon, Trakatellis, Ulmer, Vakalis, Varvitsiotis, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Zaleski, Zappalà, Zimmerling, Zwiefka

PSE: Arif, Arnaoutakis, Attard-Montalto, Batzeli, Beglitis, Beňová, Berès, Bono, Bourzai, Carlotti, Casaca, Castex, Cercas, Cottigny, De Keyser, Désir, Douay, Falbr, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, Gomes, Gurmai, Guy-Quint, Hamon, Hutchinson, Lambrinidis, Lienemann, Matsouka, Moscovici, Muscat, Navarro, Patrie, Peillon, Poignant, Reynaud, Roure, Savary, Schapira, Sifunakis, Thomsen, Trautmann, Tzampazi, Vaugrenard, Vergnaud, Weber Henri, Whitehead, Xenogiannakopoulou

UEN: Angelilli, Berlato, Camre, Foglietta, Krasts, Kristovskis, La Russa, Muscardini, Musumeci, Poli Bortone, Tatarella, Vaidere, Zīle

Verts/ALE: Bennahmias, Jonckheer, Ždanoka

Against: 294

ALDE: Alvaro, Andria, Attwooll, Beaupuy, Bonino, Bourlanges, Bowles, Busk, Cavada, Chatzimarkakis, Cornillet, Davies, De Sarnez, Drčar Murko, Duff, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Hall, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Pannella, Pistelli, Polfer, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Sterckx, Szent-Iványi, Väyrynen, Van Hecke, Watson

IND/DEM: Chruszcz, Grabowski, Krupa, Piotrowski, Rogalski, Zapałowski

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Masiel, Rutowicz

PPE-DE: Ayuso González, Bachelot-Narquin, Bowis, Bradbourn, Bushill-Matthews, Cabrnoch, Cederschiöld, Cesa, Demetriou, Descamps, Duchoň, Fjellner, Fraga Estévez, Galeote Quecedo, Garriga Polledo, de Grandes Pascual, Grossetête, Hannan, Harbour, Herranz García, Herrero-Tejedor, Hökmark, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Kamall, Karas, Lamassoure, López-Istúriz White, McMillan-Scott, Marques, Mathieu, Mauro, Mayor Oreja, Millán Mon, Ouzký, Parish, Pinheiro, Purvis, Rudi Ubeda, Salafranca Sánchez-Neyra, Schnellhardt, Seeberg, Strejček, Stubb, Thyssen, Van Orden, Varela Suanzes-Carpegna, Vidal-Quadras Roca, Vlasák, Záborská, Zahradil, Zvěřina

PSE: Andersson, Ayala Sender, Badia I Cutchet, Barón Crespo, van den Berg, Berger, Berlinguer, Berman, Bösch, Bozkurt, van den Burg, Calabuig Rull, Capoulas Santos, Carnero González, Christensen, Corbett, Corbey, Correia, De Rossa, De Vits, Díez González, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Grabowska, Gruber, Hänsch, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Herczog, Honeyball, Howitt, Hughes, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lavarra, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Myller, Napoletano, Obiols i Germà, Öger, Paasilinna, Paleckis, Panzeri, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Prets, Riera Madurell, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Segelström, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Titley, Valenciano Martínez-Orozco, Van Lancker, Vincenzi, Walter, Weiler, Westlund, Wiersma, Wynn, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Aylward, Crowley, Fotyga, Janowski, Libicki, Ó Neachtain, Roszkowski, Ryan

Verts/ALE: Aubert, Auken, Beer, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Hassi, Horáček, Joan i Marí, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes

Abstention: 57

GUE/NGL: Krarup, Portas

IND/DEM: Batten, Bloom, Booth, Clark, Coûteaux, Farage, Knapman, Louis, Nattrass, Titford, de Villiers, Whittaker, Wise

NI: Helmer, Rivera

PPE-DE: Atkins, Bauer, Belet, Berend, Brejc, Brepoels, Busuttil, Callanan, Casa, Chichester, Coveney, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Doyle, Evans Jonathan, Fajmon, Goepel, Hoppenstedt, Landsbergis, Lombardo, Matsis, Schröder, Ventre, Wijkman, Zieleniec

PSE: D'Alema, Dobolyi, Golik, Grech, Hegyi, Ilves, Pahor, Rocard, Rosati, Scheele

UEN: Didžiokas

Verts/ALE: Isler Béguin, Voggenhuber

Corrections to votes

For

Othmar Karas, Claude Turmes, Gérard Onesta, Marie Anne Isler Béguin

Against

Robert Sturdy, Britta Thomsen

4.   RC B6-0484/2005 Turkey

Amendment 3

For: 235

ALDE: Beaupuy, Birutis, Bourlanges, Cavada, Cornillet, Costa, Degutis, Deprez, De Sarnez, Fourtou, Gibault, Griesbeck, Guardans Cambó, Laperrouze, Lax, Matsakis, Mulder, Onyszkiewicz, Ortuondo Larrea, Oviir, Pistelli, Starkevičiūtė, Takkula, Toia, Virrankoski

IND/DEM: Belder, Blokland, Bonde, Coûteaux, Goudin, Karatzaferis, Lundgren, Sinnott, Wohlin, Železný

NI: Claeys, Czarnecki Ryszard, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Masiel, Mölzer, Mussolini, Romagnoli, Rutowicz, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Barsi-Pataky, Becsey, Belet, Bonsignore, Braghetto, Březina, Brok, Cesa, Cirino Pomicino, Coelho, Dehaene, Demetriou, Deß, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Fatuzzo, Ferber, Florenz, Freitas, Friedrich, Gahler, Gál, Gaľa, García-Margallo y Marfil, Gargani, Gauzès, Gawronski, Gklavakis, Glattfelder, Gomolka, Graça Moura, Gräßle, Grosch, Gyürk, Hatzidakis, Hennicot-Schoepges, Hieronymi, Higgins, Hudacký, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Lechner, Lehne, Lewandowski, Liese, Lombardo, Lulling, Maat, McGuinness, Mann Thomas, Marques, Martens, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Mitchell, Musotto, Nassauer, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rübig, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Surján, Szájer, Thyssen, Trakatellis, Ulmer, Vakalis, Varvitsiotis, Ventre, Vernola, Weber Manfred, Weisgerber, Wieland, von Wogau, Wortmann-Kool, Wuermeling, Zieleniec, Zimmerling

PSE: Berger, Bösch, Ettl, Ferreira Anne, Gebhardt, Hänsch, Haug, Krehl, Leichtfried, Lienemann, Patrie, Piecyk, Prets, Scheele

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Zīle

Verts/ALE: Voggenhuber

Against: 291

ALDE: Alvaro, Andria, Attwooll, Busk, Chiesa, Cocilovo, Davies, Duquesne, Ek, Gentvilas, Hall, Harkin, Hennis-Plasschaert, Juknevičienė, Kacin, Karim, Koch-Mehrin, Lambsdorff, Letta, Ludford, Lynne, Maaten, Malmström, Mohácsi, Newton Dunn, Neyts-Uyttebroeck, Pannella, Polfer, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Sterckx, Szent-Iványi, Väyrynen, Van Hecke, Watson

GUE/NGL: Agnoletto, Brie, Flasarová, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Nattrass

NI: Allister, Battilocchio, Bobošíková, Kilroy-Silk, Mote

PPE-DE: Audy, Bachelot-Narquin, Buzek, Cederschiöld, Daul, Descamps, Doyle, Fjellner, Fontaine, Gaubert, Grossetête, Guellec, Hökmark, Hybášková, Ibrisagic, Jałowiecki, Mathieu, Saïfi, Seeberg, Siekierski, Stubb, Sudre, Toubon, Vlasto, Wijkman, Záborská

PSE: Andersson, Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, van den Berg, Berlinguer, Berman, Bourzai, Bozkurt, van den Burg, Calabuig Rull, Capoulas Santos, Carnero González, Casaca, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Rossa, Désir, De Vits, Díez González, El Khadraoui, Estrela, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Elisa, Ford, García Pérez, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Hamon, Harangozó, Hasse Ferreira, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Lambrinidis, Lavarra, Lehtinen, Leinen, Lévai, Liberadzki, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Myller, Napoletano, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Pinior, Pittella, Pleguezuelos Aguilar, Rapkay, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vincenzi, Walter, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Lagendijk, Lambert, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Ždanoka

Abstention: 129

ALDE: Krahmer, Manders

GUE/NGL: Figueiredo, Guerreiro, Krarup, Pafilis, Toussas

IND/DEM: Batten, Bloom, Booth, Borghezio, Chruszcz, Clark, Farage, Grabowski, Knapman, Krupa, Louis, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Zapałowski

NI: Baco, Belohorská, Helmer, Kozlík, Rivera

PPE-DE: Ashworth, Atkins, Ayuso González, Bauer, Berend, Bowis, Bradbourn, Brejc, Brepoels, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, del Castillo Vera, Chichester, Chmielewski, Deva, Dover, Duchoň, Evans Jonathan, Fajmon, Fraga Estévez, Galeote Quecedo, Garriga Polledo, Goepel, de Grandes Pascual, Handzlik, Hannan, Harbour, Herranz García, Herrero-Tejedor, Hoppenstedt, Itälä, Iturgaiz Angulo, Jackson, Kaczmarek, Kamall, Kudrycka, Langendries, López-Istúriz White, McMillan-Scott, Mantovani, Millán Mon, Nicholson, Ouzký, Parish, Podestà, Podkański, Purvis, Rudi Ubeda, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Sonik, Stevenson, Strejček, Sturdy, Sumberg, Tajani, Tannock, Van Orden, Varela Suanzes-Carpegna, Vidal-Quadras Roca, Vlasák, Wojciechowski, Zahradil, Zaleski, Zappalà, Zvěřina, Zwiefka

PSE: Attard-Montalto, Beňová, Bono, Carlotti, Castex, Dobolyi, Douay, Fruteau, Guy-Quint, Ilves, Laignel, Le Foll, Muscat, Navarro, Peillon, Poignant, Reynaud, Roure, Savary, Schapira, Vergnaud, Weber Henri

UEN: Vaidere

Verts/ALE: Kusstatscher, Lichtenberger

Corrections to votes

For

Alexander Lambsdorff

Against

Simon Coveney

5.   RC B6-0484/2005 Turkey

Resolution

For: 356

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Bonino, Bowles, Busk, Chatzimarkakis, Cocilovo, Costa, Davies, Drčar Murko, Duff, Duquesne, Ek, Gentvilas, Geremek, Hall, in 't Veld, Jäätteenmäki, Jensen, Kacin, Karim, Koch-Mehrin, Kułakowski, Lambsdorff, Letta, Ludford, Lynne, Maaten, Malmström, Mohácsi, Mulder, Newton Dunn, Neyts-Uyttebroeck, Ortuondo Larrea, Pannella, Pistelli, Polfer, Prodi, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Toia, Väyrynen, Van Hecke, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Flasarová, Guidoni, Kaufmann, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Papadimoulis, Portas, Rizzo, Seppänen, Sjöstedt, Svensson, Triantaphyllides, Verges, Wurtz, Zimmer

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Rivera, Rutowicz

PPE-DE: Antoniozzi, Ayuso González, Bauer, Belet, Bonsignore, Bowis, Brok, Buzek, del Castillo Vera, Cederschiöld, Chmielewski, Cirino Pomicino, Coelho, Coveney, Dehaene, Demetriou, Díaz de Mera García Consuegra, Dimitrakopoulos, Doorn, Doyle, Duka-Zólyomi, Esteves, Eurlings, Fjellner, Fraga Estévez, Freitas, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gawronski, Gklavakis, Goepel, de Grandes Pascual, Handzlik, Hatzidakis, Herranz García, Herrero-Tejedor, Hökmark, Hudacký, Hybášková, Ibrisagic, Iturgaiz Angulo, Jackson, Jałowiecki, Jarzembowski, Jordan Cizelj, Kaczmarek, Karas, Kasoulides, Kelam, Kratsa-Tsagaropoulou, Kudrycka, Kuźmiuk, Lewandowski, López-Istúriz White, Lulling, Maat, McMillan-Scott, Mantovani, Martens, Matsis, Mavrommatis, Mayor Oreja, Millán Mon, Mitchell, Musotto, van Nistelrooij, Olbrycht, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pinheiro, Piskorski, Podestà, Podkański, Poettering, Purvis, Roithová, Rudi Ubeda, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schöpflin, Seeberg, Siekierski, Silva Peneda, Sonik, Spautz, Stubb, Tajani, Thyssen, Trakatellis, Vakalis, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vidal-Quadras Roca, Wijkman, Wojciechowski, Wortmann-Kool, Wuermeling, Zappalà, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, van den Berg, Berlinguer, Berman, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Elisa, Ford, Fruteau, García Pérez, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hamon, Harangozó, Hasse Ferreira, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Kreissl-Dörfler, Kristensen, Kuc, Lambrinidis, Lavarra, Le Foll, Lehtinen, Lévai, Liberadzki, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Peillon, Pinior, Pittella, Pleguezuelos Aguilar, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Rothe, Rouček, Roure, Sacconi, Salinas García, Sánchez Presedo, dos Santos, Schapira, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Crowley, Kristovskis, Ó Neachtain, Ryan

Verts/ALE: Bennahmias

Against: 181

ALDE: Beaupuy, Birutis, Bourlanges, Budreikaitė, Cavada, Chiesa, Cornillet, Deprez, De Sarnez, Fourtou, Gibault, Griesbeck, Guardans Cambó, Harkin, Juknevičienė, Laperrouze, Lax, Matsakis, Morillon, Onyszkiewicz, Virrankoski

GUE/NGL: Henin

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Borghezio, Chruszcz, Clark, Coûteaux, Farage, Goudin, Grabowski, Karatzaferis, Knapman, Krupa, Louis, Lundgren, Nattrass, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Wohlin, Zapałowski, Železný

NI: Allister, Claeys, Dillen, Gollnisch, Helmer, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Masiel, Mölzer, Mote, Mussolini, Romagnoli, Schenardi, Vanhecke

PPE-DE: Andrikienė, Audy, Bachelot-Narquin, Barsi-Pataky, Becsey, Berend, Braghetto, Brejc, Brepoels, Březina, Cesa, Daul, Descamps, Deß, De Veyrac, Dionisi, Ebner, Elles, Fatuzzo, Ferber, Florenz, Fontaine, Friedrich, Gahler, Gál, Gaľa, Gaubert, Gauzès, Glattfelder, Gomolka, Graça Moura, Gräßle, Grosch, Grossetête, Guellec, Gyürk, Hennicot-Schoepges, Hieronymi, Itälä, Járóka, Jeggle, Klamt, Klaß, Koch, Konrad, Korhola, Lamassoure, Langen, Langendries, Lechner, Lehne, Liese, Mathieu, Mauro, Mayer, Mikolášik, Nassauer, Niebler, Olajos, Pack, Pálfi, Pieper, Pīks, Pleštinská, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rübig, Saïfi, Schierhuber, Schmitt Pál, Schnellhardt, Schwab, Seeber, Sommer, Stenzel, Sudre, Surján, Szájer, Toubon, Ulmer, Vlasto, Weber Manfred, Weisgerber, Wieland, Záborská, Zieleniec, Zimmerling

PSE: Berger, Bösch, Ettl, Hänsch, Haug, Jöns, Kuhne, Laignel, Leichtfried, Lienemann, Piecyk, Prets, Scheele

UEN: Camre, Didžiokas, Fotyga, Janowski, Roszkowski

Verts/ALE: Staes

Abstention: 125

ALDE: Degutis, Hennis-Plasschaert, Klinz, Krahmer, Manders, Oviir, Resetarits, Takkula

GUE/NGL: Figueiredo, Guerreiro, Krarup, Pafilis, Pflüger, Ransdorf, Remek, Strož, Toussas, Wagenknecht

IND/DEM: Bonde

NI: Baco, Belohorská, Kozlík

PPE-DE: Ashworth, Atkins, Bradbourn, Bushill-Matthews, Busuttil, Cabrnoch, Casa, Chichester, Deva, Dombrovskis, Dover, Duchoň, Evans Jonathan, Fajmon, Hannan, Harbour, Higgins, Hoppenstedt, Kamall, Klich, Landsbergis, Lombardo, McGuinness, Mann Thomas, Marques, Nicholson, Oomen-Ruijten, Őry, Ouzký, Parish, Schröder, Škottová, Šťastný, Stevenson, Strejček, Sturdy, Sumberg, Tannock, Van Orden, Vlasák, von Wogau, Zahradil, Zaleski, Zvěřina

PSE: Dobolyi, Gebhardt, Ilves, Krehl, Muscat, Patrie, Poignant, Roth-Behrendt, Sakalas, Savary, Weber Henri

UEN: Angelilli, Berlato, Foglietta, Krasts, La Russa, Libicki, Muscardini, Musumeci, Poli Bortone, Szymański, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Trüpel, Voggenhuber, Ždanoka

Corrections to votes

For

Mairead McGuinness, Joseph Muscat, Ria Oomen-Ruijten

Abstention

Claude Turmes, Henri Weber

6.   Report: Radwan A6-0257/2005

Amendment 453

For: 43

IND/DEM: Borghezio, Salvini, Speroni

NI: Belohorská, Claeys, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Mölzer, Mussolini, Romagnoli, Rutowicz, Schenardi, Vanhecke

PPE-DE: Atkins, Cirino Pomicino, Jałowiecki

UEN: Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Against: 546

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Watson

GUE/NGL: Krarup, Morgantini, Sjöstedt

IND/DEM: Batten, Belder, Blokland, Bloom, Bonde, Booth, Chruszcz, Clark, Farage, Goudin, Grabowski, Karatzaferis, Knapman, Krupa, Lundgren, Nattrass, Pęk, Piotrowski, Rogalski, Sinnott, Titford, Whittaker, Wise, Wohlin, Zapałowski, Železný

NI: Allister, Battilocchio, Bobošíková, Czarnecki Ryszard, Helmer, Kilroy-Silk, Masiel, Mote

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Casa, del Castillo Vera, Cederschiöld, Cesa, Chichester, Chmielewski, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Sartori, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Patrie, Peillon, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

Abstention: 78

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Coûteaux, Louis, de Villiers

NI: Baco, Kozlík, Martin Hans-Peter, Rivera

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Trüpel, Turmes, Voggenhuber, Ždanoka

Corrections to votes

For

Claude Turmes

Against

Rainer Wieland

7.   Report: Radwan A6-0257/2005

Amendment 785

For: 613

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Watson

GUE/NGL: Adamou, Brie, Figueiredo, Flasarová, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Triantaphyllides, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Goudin, Lundgren, Sinnott, Wohlin

NI: Battilocchio, Bobošíková, Claeys, Czarnecki Ryszard, Dillen, Gollnisch, Helmer, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Masiel, Mölzer, Mussolini, Rivera, Romagnoli, Rutowicz, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Casa, Cederschiöld, Cesa, Chichester, Chmielewski, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Panzeri, Patrie, Peillon, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Berlato, Camre, Didžiokas, Krasts, Kristovskis, La Russa, Musumeci, Poli Bortone, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Turmes, Voggenhuber, Ždanoka

Against: 35

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Borghezio, Chruszcz, Clark, Farage, Grabowski, Karatzaferis, Knapman, Krupa, Louis, Nattrass, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Zapałowski, Železný

NI: Kilroy-Silk, Mote

UEN: Aylward, Crowley, Foglietta, Fotyga, Janowski, Ó Neachtain, Ryan

Abstention: 11

GUE/NGL: Agnoletto, Pafilis, Toussas

NI: Allister, Baco, Belohorská, Kozlík

UEN: Libicki, Roszkowski, Szymański

Verts/ALE: Schlyter

Corrections to votes

For

Claude Turmes

8.   Report: Jarzembowski A6-0143/2005

Amendment 14

For: 135

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Bloom, Booth, Chruszcz, Clark, Farage, Grabowski, Karatzaferis, Knapman, Krupa, Nattrass, Pęk, Piotrowski, Rogalski, Titford, Whittaker, Wise, Zapałowski, Železný

NI: Gollnisch, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Mölzer, Schenardi

PPE-DE: Cirino Pomicino, Mikolášik, Varvitsiotis, Wijkman, Wortmann-Kool, Wuermeling

PSE: Arif, Beňová, Berès, van den Berg, Berger, Bösch, Bono, Bourzai, Busquin, Carlotti, Castex, Cottigny, De Keyser, De Rossa, Désir, De Vits, Douay, El Khadraoui, Ettl, Ferreira Anne, Fruteau, Golik, Hamon, Hutchinson, Laignel, Le Foll, Lehtinen, Leichtfried, Lévai, Lienemann, Maňka, Moscovici, Navarro, Patrie, Poignant, Prets, Reynaud, Rocard, Roure, Savary, Scheele, Siwiec, Tarabella, Trautmann, Van Lancker, Vaugrenard, Vergnaud, Weber Henri

Verts/ALE: Beer, Bennahmias, Evans Jillian, Flautre, Frassoni, Horáček, Isler Béguin, Kallenbach, Kusstatscher, Lambert, Lipietz, Lucas, Onesta, Schlyter, Smith, Staes, Turmes

Against: 491

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

IND/DEM: Belder, Blokland, Coûteaux, Goudin, Lundgren, Sinnott, Wohlin

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Helmer, Kilroy-Silk, Masiel, Mote, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Coelho, Coveney, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Gyürk, Hannan, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Oomen-Ruijten, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, von Wogau, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Andersson, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Berlinguer, Berman, Bozkurt, van den Burg, Calabuig Rull, Capoulas Santos, Carnero González, Cercas, Christensen, Corbett, Corbey, Correia, D'Alema, Díez González, Dobolyi, Estrela, Evans Robert, Falbr, Fava, Fazakas, Ferreira Elisa, Ford, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Lambrinidis, Lavarra, Liberadzki, McAvan, McCarthy, Madeira, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Muscat, Myller, Napoletano, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Rapkay, Riera Madurell, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Schapira, Schulz, Segelström, Sifunakis, Skinner, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarand, Thomsen, Titley, Tzampazi, Valenciano Martínez-Orozco, Vincenzi, Walter, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Buitenweg, Cohn-Bendit, Cramer, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Jonckheer, Lichtenberger, Romeva i Rueda, Rühle, Schmidt, Schroedter, Trüpel, Ždanoka

Abstention: 35

ALDE: Chiesa

IND/DEM: Borghezio, Salvini, Speroni

NI: Baco, Belohorská, Claeys, Dillen, Kozlík, Mussolini, Rivera, Romagnoli, Vanhecke

PPE-DE: Chmielewski, Handzlik, Harbour, Jałowiecki, Kaczmarek, Klich, Kudrycka, Lewandowski, Olbrycht, Őry, Saryusz-Wolski, Siekierski, Sonik, Wojciechowski, Zaleski, Zwiefka

Verts/ALE: Aubert, Breyer, Joan i Marí, Lagendijk, Özdemir, Voggenhuber

Corrections to votes

For

Kathalijne Maria Buitenweg, Joost Lagendijk

Against

Othmar Karas, Anders Wijkman, Malcolm Harbour, Luís Queiró, Monica Frassoni

9.   Report: Jarzembowski A6-0143/2005

Amendment 2

For: 352

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Ek, Gentvilas, Geremek, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Koch-Mehrin, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Malmström, Matsakis, Mohácsi, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Prodi, Resetarits, Riis-Jørgensen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Goudin, Lundgren, Wohlin

NI: Belohorská, Bobošíková, Claeys, Czarnecki Ryszard, Dillen, Helmer, Rutowicz, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Březina, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Dover, Doyle, Duchoň, Ebner, Ehler, Elles, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gauzès, Gawronski, Gklavakis, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kušķis, Lamassoure, Landsbergis, Langen, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Mauro, Mayer, Mayor Oreja, Méndez de Vigo, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, Ouzký, Pack, Pálfi, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Surján, Tajani, Tannock, Ulmer, Van Orden, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasák, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Attard-Montalto, Bullmann, Corbett, D'Alema, Dobolyi, Evans Robert, Falbr, Fava, Fazakas, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Golik, Grabowska, Grech, Gröner, Gurmai, Guy-Quint, Hänsch, Harangozó, Haug, Hegyi, Herczog, Hughes, Ilves, Jöns, Kindermann, Kinnock, Kósáné Kovács, Krehl, Kuc, Kuhne, Lavarra, Lehtinen, Lévai, Liberadzki, McCarthy, Martin David, Mastenbroek, Mikko, Moraes, Muscat, Napoletano, Obiols i Germà, Öger, Pahor, Paleckis, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Roth-Behrendt, Rouček, Sacconi, Sakalas, Schulz, Siwiec, Skinner, Stihler, Stockmann, Swoboda, Szejna, Tarand, Titley, Vincenzi, Walter, Wynn, Xenogiannakopoulou, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Krasts, Kristovskis, La Russa, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Beer, Breyer, Cramer, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Horáček, Kusstatscher, Lichtenberger, Özdemir, Trüpel, Voggenhuber

Against: 291

ALDE: Beaupuy, Birutis, Bourlanges, Cornillet, Deprez, De Sarnez, Duquesne, Fourtou, Gibault, Griesbeck, Hennis-Plasschaert, Laperrouze, Maaten, Manders, Morillon, Mulder, Polfer, Ries

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Bonde, Booth, Borghezio, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Knapman, Krupa, Louis, Nattrass, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Zapałowski

NI: Battilocchio, Kilroy-Silk, Le Pen Marine, Masiel, Mölzer, Mote, Schenardi

PPE-DE: Audy, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Brepoels, Buzek, Chmielewski, Daul, Dehaene, Descamps, De Veyrac, Dimitrakopoulos, Doorn, Duka-Zólyomi, Eurlings, Fontaine, Gál, Gaubert, Glattfelder, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Hudacký, Jałowiecki, Járóka, Kaczmarek, Kratsa-Tsagaropoulou, Kudrycka, Kuźmiuk, Langendries, Lulling, Maat, Martens, Mathieu, Matsis, Mavrommatis, Mikolášik, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Panayotopoulos-Cassiotou, Papastamkos, Saïfi, Saryusz-Wolski, Schmitt Pál, Siekierski, Sonik, Sudre, Szájer, Toubon, Trakatellis, Vakalis, Varvitsiotis, Vlasto, Wojciechowski, Wortmann-Kool, Zaleski, Zwiefka

PSE: Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbey, Correia, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Ettl, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Glante, Goebbels, Gomes, Gruber, Hamon, Hasse Ferreira, Honeyball, Howitt, Hutchinson, Jørgensen, Koterec, Kreissl-Dörfler, Kristensen, Laignel, Lambrinidis, Le Foll, Leichtfried, Lienemann, McAvan, Madeira, Maňka, Mann Erika, Martínez Martínez, Masip Hidalgo, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Morgan, Moscovici, Myller, Navarro, Paasilinna, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Rothe, Roure, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Sifunakis, Sornosa Martínez, Sousa Pinto, Tabajdi, Tarabella, Thomsen, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Weiler, Wiersma, Yañez-Barnuevo García, Zani

UEN: Fotyga, Janowski, Libicki, Roszkowski, Szymański

Verts/ALE: Aubert, Bennahmias, Buitenweg, Cohn-Bendit, Evans Jillian, Flautre, Frassoni, Hassi, Isler Béguin, Jonckheer, Kallenbach, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Turmes, Ždanoka

Abstention: 19

IND/DEM: Karatzaferis, Železný

NI: Allister, Baco, Kozlík, Martin Hans-Peter, Mussolini, Rivera, Romagnoli

PPE-DE: Klich, Roithová, Thyssen

PSE: Andersson, Hedh, Hedkvist Petersen, Segelström, Westlund, Whitehead

Verts/ALE: Joan i Marí

Corrections to votes

For

Othmar Karas, Marilisa Xenogiannakopoulou

Against

Edith Mastenbroek

10.   Report: Jarzembowski A6-0143/2005

Amendment 8

For: 368

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Birutis, Bowles, Budreikaitė, Busk, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Duquesne, Ek, Gentvilas, Geremek, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pistelli, Prodi, Resetarits, Riis-Jørgensen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Goudin, Lundgren, Sinnott, Wohlin

NI: Belohorská, Claeys, Dillen, Helmer, Rivera, Romagnoli, Rutowicz, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Belet, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Dehaene, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gauzès, Gawronski, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kušķis, Kuźmiuk, Lamassoure, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mauro, Mayer, Mayor Oreja, Méndez de Vigo, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Oomen-Ruijten, Ouzký, Pack, Parish, Peterle, Pieper, Pīks, Pinheiro, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Tajani, Tannock, Thyssen, Ulmer, Van Orden, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasák, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Attard-Montalto, Batzeli, Bullmann, D'Alema, Dobolyi, Fava, Fazakas, Ford, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Grabowska, Grech, Gröner, Gurmai, Hänsch, Harangozó, Honeyball, Howitt, Hughes, Ilves, Jöns, Kindermann, Kinnock, Krehl, Kuc, Kuhne, Lavarra, Lehtinen, Lévai, Liberadzki, McAvan, McCarthy, Mann Erika, Martin David, Mikko, Moraes, Morgan, Muscat, Myller, Napoletano, Öger, Paasilinna, Pahor, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Siwiec, Skinner, Stihler, Stockmann, Szejna, Tabajdi, Tarand, Titley, Vincenzi, Walter, Weiler, Wynn, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Krasts, Kristovskis, La Russa, Muscardini, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Breyer, Cramer, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Horáček, Kusstatscher, Lichtenberger, Özdemir, Voggenhuber, Ždanoka

Against: 258

ALDE: Beaupuy, Bonino, Bourlanges, Cavada, Cornillet, Deprez, De Sarnez, Fourtou, Gibault, Griesbeck, Laperrouze, Morillon, Pannella, Polfer, Ries

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Bonde, Booth, Borghezio, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Knapman, Krupa, Nattrass, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, Whittaker, Wise, Zapałowski

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Kilroy-Silk, Masiel, Mote

PPE-DE: Audy, Bachelot-Narquin, Buzek, Chmielewski, Daul, Descamps, De Veyrac, Dimitrakopoulos, Fontaine, Gaubert, Gklavakis, Grossetête, Guellec, Handzlik, Hudacký, Jałowiecki, Kaczmarek, Klich, Kratsa-Tsagaropoulou, Kudrycka, Landsbergis, Lewandowski, Lulling, Mathieu, Matsis, Mavrommatis, Mikolášik, Olbrycht, Panayotopoulos-Cassiotou, Papastamkos, Piskorski, Saïfi, Saryusz-Wolski, Siekierski, Sonik, Sudre, Toubon, Trakatellis, Vakalis, Varvitsiotis, Vlasto, Wojciechowski, Zaleski, Zwiefka

PSE: Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Ettl, Falbr, Fernandes, Ferreira Anne, Ferreira Elisa, Fruteau, García Pérez, Goebbels, Gomes, Gruber, Guy-Quint, Hamon, Hasse Ferreira, Haug, Hegyi, Herczog, Hutchinson, Jørgensen, Koterec, Kreissl-Dörfler, Kristensen, Laignel, Lambrinidis, Le Foll, Leichtfried, Lienemann, Madeira, Maňka, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Moscovici, Navarro, Obiols i Germà, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Roure, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Sifunakis, Sornosa Martínez, Sousa Pinto, Swoboda, Tarabella, Thomsen, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Wiersma, Xenogiannakopoulou, Yañez-Barnuevo García

UEN: Fotyga, Janowski, Libicki, Roszkowski, Szymański

Verts/ALE: Bennahmias, Buitenweg, Evans Jillian, Flautre, Hassi, Isler Béguin, Jonckheer, Kallenbach, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Turmes

Abstention: 38

IND/DEM: Karatzaferis, Železný

NI: Allister, Baco, Gollnisch, Kozlík, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Mussolini, Schenardi

PPE-DE: Barsi-Pataky, Bauer, Becsey, Duka-Zólyomi, Gál, Glattfelder, Gyürk, Járóka, Olajos, Őry, Pálfi, Roithová, Schmitt Pál, Schöpflin, Surján, Szájer

PSE: Andersson, Hedh, Hedkvist Petersen, Kósáné Kovács, Segelström, Westlund

UEN: Musumeci

Verts/ALE: Joan i Marí

Corrections to votes

Against

Katerina Batzeli

11.   Report: Jarzembowski A6-0143/2005

Amendment 9/1

For: 393

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Bonino, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Ek, Gentvilas, Geremek, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Malmström, Manders, Matsakis, Mohácsi, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Bonde, Borghezio, Goudin, Lundgren, Salvini, Sinnott, Speroni, Wohlin

NI: Claeys, Helmer, Rivera

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Barsi-Pataky, Bauer, Becsey, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Březina, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Coelho, Coveney, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Gyürk, Hannan, Hatzidakis, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, Olajos, Őry, Ouzký, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pinheiro, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Surján, Szájer, Tajani, Tannock, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasák, Weisgerber, Wieland, Wijkman, von Wogau, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Arnaoutakis, Attard-Montalto, Batzeli, Beglitis, Bullmann, Christensen, D'Alema, Dobolyi, Evans Robert, Falbr, Fava, Fazakas, Ford, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Golik, Grabowska, Grech, Gröner, Gruber, Gurmai, Hänsch, Harangozó, Haug, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Lambrinidis, Lavarra, Lehtinen, Lévai, Liberadzki, McAvan, McCarthy, Mann Erika, Martin David, Matsouka, Mikko, Moraes, Morgan, Muscat, Myller, Napoletano, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Sifunakis, Siwiec, Skinner, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarand, Thomsen, Titley, Tzampazi, Vincenzi, Walter, Weiler, Whitehead, Wynn, Xenogiannakopoulou, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Beer, Breyer, Cramer, de Groen-Kouwenhoven, Harms, Hassi, Horáček, Kusstatscher, Lichtenberger, Özdemir, Trüpel, Voggenhuber

Against: 255

ALDE: Beaupuy, Birutis, Bourlanges, Cornillet, Deprez, De Sarnez, Duquesne, Fourtou, Gibault, Griesbeck, Hennis-Plasschaert, Laperrouze, Maaten, Morillon, Polfer

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Karatzaferis, Knapman, Krupa, Louis, Nattrass, Pęk, Piotrowski, Rogalski, Titford, de Villiers, Whittaker, Wise, Zapałowski, Železný

NI: Battilocchio, Belohorská, Bobošíková, Czarnecki Ryszard, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Masiel, Mote, Mussolini, Rutowicz, Schenardi

PPE-DE: Audy, Bachelot-Narquin, Belet, Brepoels, Buzek, Chmielewski, Cirino Pomicino, Daul, Dehaene, Descamps, De Veyrac, Dimitrakopoulos, Doorn, Eurlings, Fontaine, Gaubert, Gauzès, Grosch, Grossetête, Guellec, Handzlik, Jałowiecki, Kaczmarek, Klich, Kudrycka, Langen, Langendries, Lewandowski, Lulling, Maat, Martens, Mathieu, Mikolášik, van Nistelrooij, Olbrycht, Oomen-Ruijten, Pack, Pīks, Piskorski, Quisthoudt-Rowohl, Saïfi, Saryusz-Wolski, Siekierski, Sonik, Sudre, Thyssen, Toubon, Vlasto, Wojciechowski, Wortmann-Kool, Zaleski, Zwiefka

PSE: Arif, Ayala Sender, Badia I Cutchet, Barón Crespo, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Corbett, Corbey, Correia, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Ettl, Fernandes, Ferreira Anne, Ferreira Elisa, Fruteau, García Pérez, Goebbels, Gomes, Guy-Quint, Hamon, Hasse Ferreira, Hegyi, Hutchinson, Koterec, Laignel, Le Foll, Leichtfried, Lienemann, Madeira, Maňka, Martínez Martínez, Masip Hidalgo, Mastenbroek, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Moscovici, Navarro, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Roure, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Sornosa Martínez, Sousa Pinto, Tarabella, Trautmann, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Wiersma, Yañez-Barnuevo García

Verts/ALE: Aubert, Bennahmias, Buitenweg, Cohn-Bendit, Evans Jillian, Flautre, Frassoni, Isler Béguin, Jonckheer, Kallenbach, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Turmes, Ždanoka

Abstention: 14

NI: Allister, Baco, Dillen, Kozlík, Martin Hans-Peter, Romagnoli, Vanhecke

PPE-DE: Roithová

PSE: Andersson, Hedh, Hedkvist Petersen, Segelström, Westlund

Verts/ALE: Joan i Marí

Corrections to votes

For

Othmar Karas, Richard Corbett

Against

Claude Turmes

12.   Report: Jarzembowski A6-0143/2005

Amendment 9/2

For: 347

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Birutis, Bonino, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Duquesne, Ek, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Karim, Klinz, Koch-Mehrin, Krahmer, Lambsdorff, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Matsakis, Mohácsi, Newton Dunn, Neyts-Uyttebroeck, Ortuondo Larrea, Oviir, Pannella, Pistelli, Prodi, Resetarits, Riis-Jørgensen, Savi, Sbarbati, Schuth, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Goudin, Lundgren, Sinnott, Wohlin

NI: Belohorská, Claeys, Dillen, Helmer, Mölzer, Rivera, Romagnoli, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Březina, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, Castiglione, Cederschiöld, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Dover, Doyle, Duchoň, Ebner, Ehler, Elles, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gawronski, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Hannan, Harbour, Hatzidakis, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kušķis, Lamassoure, Landsbergis, Langen, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Mauro, Mayer, Mayor Oreja, Méndez de Vigo, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, Ouzký, Pack, Parish, Peterle, Pieper, Pinheiro, Pleštinská, Podestà, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Surján, Tajani, Ulmer, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasák, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Andersson, Attard-Montalto, Bullmann, Corbett, D'Alema, Dobolyi, Evans Robert, Falbr, Fava, Fazakas, Ford, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Grabowska, Gröner, Gurmai, Hänsch, Harangozó, Haug, Hegyi, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Kindermann, Krehl, Kreissl-Dörfler, Kuc, Kuhne, Lavarra, Lehtinen, Lévai, McAvan, McCarthy, Mann Erika, Martin David, Mikko, Moraes, Morgan, Muscat, Myller, Napoletano, Obiols i Germà, Öger, Pahor, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Schulz, Segelström, Skinner, Stihler, Stockmann, Szejna, Tabajdi, Tarand, Titley, Vincenzi, Walter, Weiler, Westlund, Whitehead, Wynn, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Kristovskis, La Russa, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Beer, Breyer, Cramer, Graefe zu Baringdorf, de Groen-Kouwenhoven, Harms, Horáček, Kusstatscher, Lichtenberger, Özdemir, Trüpel, Voggenhuber, Ždanoka

Against: 290

ALDE: Beaupuy, Bourlanges, Cornillet, Deprez, De Sarnez, Fourtou, Geremek, Gibault, Griesbeck, Laperrouze, Manders, Morillon, Mulder, Onyszkiewicz, Polfer, Ries, Staniszewska

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Bonde, Booth, Borghezio, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Karatzaferis, Knapman, Krupa, Louis, Nattrass, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Zapałowski, Železný

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Masiel, Mote, Mussolini, Rutowicz, Schenardi

PPE-DE: Audy, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Brepoels, Buzek, del Castillo Vera, Chmielewski, Daul, Dehaene, Descamps, De Veyrac, Dimitrakopoulos, Doorn, Duka-Zólyomi, Eurlings, Fontaine, Gauzès, Gklavakis, Glattfelder, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Jałowiecki, Járóka, Kaczmarek, Klich, Kratsa-Tsagaropoulou, Kudrycka, Kuźmiuk, Langendries, Lulling, Maat, Martens, Mathieu, Matsis, Mavrommatis, Mikolášik, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Pīks, Piskorski, Roithová, Saïfi, Saryusz-Wolski, Schmitt Pál, Schöpflin, Siekierski, Sonik, Sudre, Thyssen, Trakatellis, Vakalis, Varvitsiotis, Vlasto, Wojciechowski, Wortmann-Kool, Zaleski, Zwiefka

PSE: Arif, Arnaoutakis, Ayala Sender, Barón Crespo, Batzeli, Beglitis, Beňová, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbey, Correia, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Ettl, Fernandes, Ferreira Anne, Ferreira Elisa, Fruteau, García Pérez, Goebbels, Golik, Gomes, Guy-Quint, Hamon, Hasse Ferreira, Hutchinson, Jørgensen, Koterec, Kristensen, Laignel, Lambrinidis, Le Foll, Leichtfried, Liberadzki, Lienemann, Madeira, Maňka, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Moscovici, Navarro, Paasilinna, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Roure, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Sifunakis, Siwiec, Sornosa Martínez, Sousa Pinto, Tarabella, Thomsen, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Wiersma, Yañez-Barnuevo García

UEN: Fotyga, Janowski, Libicki, Roszkowski, Szymański

Verts/ALE: Aubert, Bennahmias, Buitenweg, Cohn-Bendit, Evans Jillian, Flautre, Hammerstein Mintz, Hassi, Isler Béguin, Jonckheer, Kallenbach, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes

Abstention: 15

ALDE: Kułakowski

NI: Allister, Baco, Kozlík, Martin Hans-Peter

PPE-DE: Lewandowski, Podkański, Szájer

PSE: Gruber, Hedh, Hedkvist Petersen, Kósáné Kovács, Swoboda

Verts/ALE: Frassoni, Joan i Marí

Corrections to votes

Against

Claude Turmes, Pedro Guerreiro

13.   Report: Jarzembowski A6-0143/2005

Amendment 9/3

For: 350

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Birutis, Bonino, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Ek, Gentvilas, Geremek, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Malmström, Manders, Matsakis, Mohácsi, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Goudin, Lundgren, Wohlin

NI: Claeys, Dillen, Helmer, Mölzer, Rivera, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Březina, Bushill-Matthews, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Dover, Doyle, Duchoň, Ebner, Ehler, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gawronski, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kušķis, Lamassoure, Landsbergis, Langen, Lechner, Lehne, López-Istúriz White, Lulling, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Mauro, Mayer, Mayor Oreja, Méndez de Vigo, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, Ouzký, Pack, Parish, Peterle, Pieper, Pinheiro, Pleštinská, Podestà, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Tajani, Tannock, Ulmer, Van Orden, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasák, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Attard-Montalto, Bullmann, Corbett, D'Alema, Dobolyi, Evans Robert, Falbr, Fava, Fazakas, Ford, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Grabowska, Gröner, Gurmai, Hänsch, Harangozó, Haug, Hegyi, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Kindermann, Kinnock, Krehl, Kreissl-Dörfler, Kuc, Kuhne, Lavarra, Lehtinen, Lévai, McAvan, McCarthy, Mann Erika, Martin David, Mikko, Moraes, Morgan, Muscat, Napoletano, Obiols i Germà, Öger, Pahor, Paleckis, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Schulz, Siwiec, Skinner, Stihler, Stockmann, Szejna, Tabajdi, Tarand, Titley, Vincenzi, Walter, Weiler, Whitehead, Wynn, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Krasts, Kristovskis, La Russa, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Beer, Breyer, Cramer, Graefe zu Baringdorf, de Groen-Kouwenhoven, Harms, Horáček, Kusstatscher, Lichtenberger, Özdemir, Schmidt, Schroedter, Trüpel, Voggenhuber, Ždanoka

Against: 298

ALDE: Beaupuy, Bourlanges, Cornillet, Deprez, De Sarnez, Duquesne, Fourtou, Gibault, Griesbeck, Laperrouze, Maaten, Morillon, Polfer, Ries

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Bonde, Booth, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Karatzaferis, Knapman, Krupa, Louis, Nattrass, Piotrowski, Rogalski, Salvini, Titford, de Villiers, Whittaker, Wise, Zapałowski, Železný

NI: Battilocchio, Belohorská, Bobošíková, Czarnecki Ryszard, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Masiel, Mote, Mussolini, Romagnoli, Rutowicz, Schenardi

PPE-DE: Audy, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Brepoels, Buzek, Chmielewski, Daul, Dehaene, Descamps, De Veyrac, Doorn, Duka-Zólyomi, Eurlings, Fontaine, Gál, Gaubert, Gauzès, Gklavakis, Glattfelder, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Hudacký, Jałowiecki, Járóka, Kaczmarek, Klich, Kratsa-Tsagaropoulou, Kudrycka, Kuźmiuk, Langendries, Lewandowski, Maat, Martens, Mathieu, Mavrommatis, Mikolášik, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Pīks, Piskorski, Podkański, Roithová, Saïfi, Saryusz-Wolski, Schmitt Pál, Schöpflin, Siekierski, Sonik, Sudre, Surján, Szájer, Thyssen, Toubon, Trakatellis, Vakalis, Varvitsiotis, Vlasto, Wojciechowski, Wortmann-Kool, Zaleski, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbey, Correia, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Ettl, Fernandes, Ferreira Anne, Ferreira Elisa, Fruteau, García Pérez, Goebbels, Golik, Gomes, Guy-Quint, Hamon, Hasse Ferreira, Hedh, Hedkvist Petersen, Hutchinson, Kósáné Kovács, Koterec, Kristensen, Laignel, Lambrinidis, Le Foll, Leichtfried, Liberadzki, Lienemann, Madeira, Maňka, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Moscovici, Myller, Navarro, Paasilinna, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Roure, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Scheele, Segelström, Sifunakis, Sornosa Martínez, Sousa Pinto, Swoboda, Tarabella, Thomsen, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Westlund, Wiersma, Xenogiannakopoulou, Yañez-Barnuevo García

UEN: Fotyga, Janowski, Libicki, Roszkowski, Szymański

Verts/ALE: Aubert, Bennahmias, Buitenweg, Cohn-Bendit, Evans Jillian, Flautre, Hammerstein Mintz, Hassi, Isler Béguin, Jonckheer, Kallenbach, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Smith, Staes, Turmes

Abstention: 10

IND/DEM: Borghezio, Speroni

NI: Allister, Baco, Kozlík, Martin Hans-Peter

PSE: Grech, Gruber

Verts/ALE: Frassoni, Joan i Marí

Corrections to votes

Against

Claude Turmes

14.   Report: Jarzembowski A6-0143/2005

Amendment 12

For: 553

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Chruszcz, Goudin, Grabowski, Krupa, Lundgren, Pęk, Piotrowski, Rogalski, Wohlin, Zapałowski

NI: Belohorská, Czarnecki Ryszard, Helmer, Masiel, Rivera, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Belet, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Brepoels, Březina, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Chmielewski, Cirino Pomicino, Coelho, Coveney, Dehaene, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gauzès, Gawronski, Gklavakis, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Handzlik, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, López-Istúriz White, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olbrycht, Oomen-Ruijten, Ouzký, Pack, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Surján, Tajani, Tannock, Thyssen, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vlasák, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Arif, Arnaoutakis, Attard-Montalto, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Capoulas Santos, Carlotti, Casaca, Castex, Corbett, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, Gebhardt, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Gröner, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hegyi, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kuc, Kuhne, Laignel, Lavarra, Le Foll, Lehtinen, Leichtfried, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Mastenbroek, Mikko, Moraes, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Patrie, Piecyk, Pinior, Pittella, Poignant, Prets, Rapkay, Reynaud, Rocard, Roth-Behrendt, Rothe, Rouček, Roure, Sacconi, Sakalas, dos Santos, Savary, Schapira, Scheele, Schulz, Sifunakis, Siwiec, Skinner, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Titley, Trautmann, Tzampazi, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 79

GUE/NGL: Kohlíček

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Borghezio, Clark, Coûteaux, Farage, Knapman, Louis, Nattrass, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise

NI: Battilocchio, Bobošíková, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Mölzer, Mote, Mussolini, Schenardi

PPE-DE: Audy, Bachelot-Narquin, Daul, Descamps, De Veyrac, Fontaine, Gaubert, Grossetête, Guellec, Lulling, Mathieu, Saïfi, Sudre, Toubon, Vlasto

PSE: Ayala Sender, Badia I Cutchet, Barón Crespo, Calabuig Rull, Carnero González, Cercas, Christensen, Corbey, Díez González, García Pérez, Geringer de Oedenberg, Gierek, Jørgensen, Kristensen, Martínez Martínez, Masip Hidalgo, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Pleguezuelos Aguilar, Riera Madurell, Salinas García, Sánchez Presedo, Sornosa Martínez, Thomsen, Valenciano Martínez-Orozco, Yañez-Barnuevo García

UEN: Fotyga, Janowski, Roszkowski, Szymański

Abstention: 32

IND/DEM: Karatzaferis, Železný

NI: Allister, Baco, Claeys, Dillen, Kozlík, Martin Hans-Peter, Romagnoli, Vanhecke

PPE-DE: Barsi-Pataky, Bauer, Becsey, Duka-Zólyomi, Gál, Glattfelder, Gyürk, Járóka, Landsbergis, Olajos, Őry, Pálfi, Schmitt Pál, Schöpflin, Szájer

PSE: Andersson, Grech, Gruber, Hedh, Hedkvist Petersen, Segelström, Westlund

Corrections to votes

For

Othmar Karas

15.   Report: Jarzembowski A6-0143/2005

Commission proposal

For: 402

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Birutis, Bonino, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Duquesne, Ek, Gentvilas, Geremek, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Goudin, Lundgren, Sinnott, Wohlin

NI: Czarnecki Ryszard, Helmer, Rivera

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Berend, Böge, Bonsignore, Bowis, Bradbourn, Braghetto, Brejc, Březina, Bushill-Matthews, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Dover, Doyle, Duchoň, Ebner, Ehler, Elles, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, Ouzký, Pack, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Pleštinská, Podestà, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Attard-Montalto, Batzeli, Berman, Bozkurt, Bullmann, Casaca, Corbett, Correia, D'Alema, Dobolyi, Evans Robert, Falbr, Fava, Fazakas, Ferreira Elisa, Ford, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gröner, Gurmai, Hänsch, Harangozó, Haug, Hegyi, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Kindermann, Kinnock, Koterec, Krehl, Kreissl-Dörfler, Kuc, Kuhne, Lambrinidis, Lavarra, Lehtinen, Lévai, Liberadzki, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Mastenbroek, Matsouka, Mikko, Moraes, Morgan, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, dos Santos, Schulz, Sifunakis, Siwiec, Skinner, Stihler, Stockmann, Szejna, Tabajdi, Tarand, Titley, Tzampazi, Vincenzi, Walter, Weiler, Whitehead, Wynn, Xenogiannakopoulou, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Beer, Breyer, Cramer, Graefe zu Baringdorf, Hammerstein Mintz, Harms, Horáček, Kusstatscher, Lichtenberger, Özdemir, Trüpel, Voggenhuber, Ždanoka

Against: 203

ALDE: Bourlanges, Cornillet, Deprez, De Sarnez, Gibault, Griesbeck, Laperrouze

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Knapman, Krupa, Louis, Nattrass, Pęk, Piotrowski, Rogalski, Titford, de Villiers, Whittaker, Wise, Zapałowski

NI: Battilocchio, Bobošíková, Gollnisch, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Masiel, Mölzer, Mote, Mussolini, Schenardi

PPE-DE: Bachelot-Narquin, Buzek, Chmielewski, Handzlik, Jałowiecki, Kaczmarek, Klich, Kudrycka, Kuźmiuk, Lewandowski, Olbrycht, Piskorski, Podkański, Roithová, Saryusz-Wolski, Schmitt Pál, Siekierski, Sonik, Wojciechowski, Zaleski, Zwiefka

PSE: Arif, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Bösch, Bono, Bourzai, Calabuig Rull, Carlotti, Carnero González, Castex, Cercas, Christensen, Corbey, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Estrela, Ettl, Fernandes, Ferreira Anne, Fruteau, García Pérez, Goebbels, Gomes, Guy-Quint, Hamon, Hutchinson, Jørgensen, Kristensen, Laignel, Le Foll, Leichtfried, Lienemann, Martínez Martínez, Masip Hidalgo, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Moscovici, Paasilinna, Pahor, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Roure, Salinas García, Sánchez Presedo, Savary, Schapira, Scheele, Segelström, Sornosa Martínez, Swoboda, Tarabella, Thomsen, Trautmann, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Wiersma, Yañez-Barnuevo García

UEN: Fotyga, Janowski, Roszkowski, Szymański

Verts/ALE: Bennahmias, Buitenweg, Cohn-Bendit, Evans Jillian, Flautre, Hassi, Isler Béguin, Jonckheer, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Smith, Staes, Turmes

Abstention: 60

ALDE: Fourtou, Hennis-Plasschaert, Ries, Staniszewska

IND/DEM: Bonde, Borghezio, Karatzaferis, Salvini, Speroni, Železný

NI: Allister, Baco, Belohorská, Claeys, Dillen, Kozlík, Martin Hans-Peter, Romagnoli, Vanhecke

PPE-DE: Barsi-Pataky, Bauer, Becsey, Belet, Brepoels, Doorn, Duka-Zólyomi, Eurlings, Gál, Glattfelder, Grosch, Gyürk, Járóka, Lulling, Maat, Martens, van Nistelrooij, Olajos, Oomen-Ruijten, Őry, Pálfi, Schöpflin, Surján, Szájer, Ventre, Wortmann-Kool

PSE: Andersson, van den Burg, Busquin, Grech, Gruber, Hedh, Hedkvist Petersen, Kósáné Kovács, Sousa Pinto, Westlund

Verts/ALE: Aubert, Frassoni, Joan i Marí, Kallenbach, Schroedter

Corrections to votes

Against

Edith Mastenbroek, Emine Bozkurt

16.   Report: Jarzembowski A6-0143/2005

Amendment 15

For: 157

ALDE: Beaupuy, Bourlanges, Budreikaitė, Cornillet, Deprez, De Sarnez, Fourtou, Gibault, Griesbeck, Laperrouze, Morillon, Polfer

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Borghezio, Louis, Salvini, Speroni, de Villiers

NI: Battilocchio, Bobošíková

PPE-DE: Bonsignore, Brepoels, Hudacký, Korhola, Mikolášik, Schierhuber, Ventre

PSE: Arif, Beňová, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Carlotti, Castex, Corbey, Cottigny, De Keyser, De Rossa, Désir, De Vits, Douay, El Khadraoui, Ettl, Ferreira Anne, Fruteau, Guy-Quint, Hamon, Hutchinson, Koterec, Laignel, Lavarra, Le Foll, Leichtfried, Lienemann, Maňka, Mastenbroek, Moscovici, Navarro, Paasilinna, Patrie, Piecyk, Poignant, Prets, Reynaud, Rocard, Roure, Savary, Schapira, Scheele, Swoboda, Tarabella, Trautmann, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Wiersma

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 483

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Birutis, Bonino, Bowles, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Duquesne, Ek, Gentvilas, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Matsakis, Mohácsi, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Väyrynen, Van Hecke, Virrankoski, Wallis

IND/DEM: Batten, Bloom, Booth, Chruszcz, Clark, Coûteaux, Farage, Goudin, Grabowski, Knapman, Krupa, Lundgren, Nattrass, Pęk, Piotrowski, Rogalski, Titford, Whittaker, Wise, Wohlin, Zapałowski

NI: Allister, Claeys, Czarnecki Ryszard, Dillen, Gollnisch, Helmer, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Masiel, Mölzer, Mote, Mussolini, Rutowicz, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bowis, Bradbourn, Braghetto, Brejc, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Chmielewski, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Berlinguer, Bullmann, Calabuig Rull, Capoulas Santos, Carnero González, Casaca, Cercas, Christensen, Corbett, Correia, D'Alema, Díez González, Dobolyi, Falbr, Fava, Ferreira Elisa, Ford, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gomes, Grabowska, Gröner, Hänsch, Harangozó, Hasse Ferreira, Haug, Hedkvist Petersen, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Lambrinidis, Lehtinen, Lévai, Liberadzki, McAvan, McCarthy, Madeira, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Muscat, Napoletano, Obiols i Germà, Öger, Pahor, Paleckis, Panzeri, Pinior, Pittella, Pleguezuelos Aguilar, Rapkay, Riera Madurell, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Szejna, Tabajdi, Tarand, Thomsen, Titley, Tzampazi, Valenciano Martínez-Orozco, Vincenzi, Walter, Weiler, Westlund, Whitehead, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Abstention: 23

ALDE: Geremek, Guardans Cambó, Hennis-Plasschaert, Manders, Toia

GUE/NGL: Pafilis, Toussas

IND/DEM: Belder, Blokland, Karatzaferis, Železný

NI: Baco, Belohorská, Kozlík, Martin Hans-Peter, Rivera, Romagnoli

PSE: Estrela, Fernandes, Grech, Gruber, Hegyi, Myller

17.   Report: Jarzembowski A6-0143/2005

Resolution

For: 401

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Birutis, Bonino, Bowles, Budreikaitė, Busk, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Drčar Murko, Duff, Duquesne, Ek, Gentvilas, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

IND/DEM: Goudin, Lundgren, Sinnott, Wohlin

NI: Battilocchio, Belohorská, Bobošíková, Helmer, Mussolini, Rivera, Romagnoli

PPE-DE: Andrikienė, Ashworth, Atkins, Audy, Ayuso González, Berend, Böge, Bowis, Bradbourn, Braghetto, Brejc, Březina, Brok, Bushill-Matthews, Busuttil, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Hannan, Harbour, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jarzembowski, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Ouzký, Pack, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Pleštinská, Podestà, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Seeber, Seeberg, Silva Peneda, Škottová, Sommer, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, von Wogau, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zappalà, Zieleniec, Zimmerling, Zvěřina

PSE: Arnaoutakis, Attard-Montalto, Batzeli, Berlinguer, Bozkurt, Bullmann, Casaca, Corbett, Correia, D'Alema, Dobolyi, Evans Robert, Falbr, Fava, Fazakas, Ford, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Grabowska, Gröner, Gurmai, Hänsch, Harangozó, Haug, Hegyi, Herczog, Honeyball, Howitt, Hughes, Ilves, Jöns, Kindermann, Kinnock, Krehl, Kreissl-Dörfler, Kuc, Kuhne, Lambrinidis, Lavarra, Lehtinen, Lévai, Liberadzki, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Mastenbroek, Matsouka, Mikko, Moraes, Morgan, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Pahor, Panzeri, Piecyk, Pinior, Pittella, Rapkay, Rosati, Roth-Behrendt, Rothe, Rouček, Sacconi, Sakalas, dos Santos, Schulz, Siwiec, Skinner, Stihler, Stockmann, Szejna, Tabajdi, Tarand, Titley, Tzampazi, Vincenzi, Walter, Weiler, Whitehead, Wynn, Xenogiannakopoulou, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Krasts, Kristovskis, Musumeci, Ó Neachtain, Poli Bortone, Ryan, Tatarella, Vaidere, Zīle

Verts/ALE: Auken, Beer, Breyer, Cramer, Graefe zu Baringdorf, de Groen-Kouwenhoven, Harms, Horáček, Kusstatscher, Lichtenberger, Özdemir, Trüpel, Voggenhuber, Ždanoka

Against: 211

ALDE: Beaupuy, Bourlanges, Cornillet, Deprez, De Sarnez, Fourtou, Geremek, Gibault, Griesbeck, Guardans Cambó, Laperrouze, Onyszkiewicz, Staniszewska

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Chruszcz, Clark, Coûteaux, Farage, Grabowski, Karatzaferis, Knapman, Krupa, Louis, Nattrass, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Zapałowski, Železný

NI: Czarnecki Ryszard, Gollnisch, Kilroy-Silk, Le Pen Jean-Marie, Le Pen Marine, Masiel, Mölzer, Mote, Rutowicz, Schenardi

PPE-DE: Bachelot-Narquin, Buzek, Chmielewski, Handzlik, Jałowiecki, Kaczmarek, Klich, Kudrycka, Kuźmiuk, Lewandowski, Olajos, Olbrycht, Piskorski, Podkański, Roithová, Saryusz-Wolski, Siekierski, Sonik, Wijkman, Wojciechowski, Zaleski, Zwiefka

PSE: Arif, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Castex, Cercas, Corbey, Cottigny, De Keyser, De Rossa, Désir, De Vits, Díez González, Douay, El Khadraoui, Ettl, Fernandes, Ferreira Anne, Ferreira Elisa, Fruteau, García Pérez, Goebbels, Gomes, Guy-Quint, Hamon, Hasse Ferreira, Hutchinson, Koterec, Laignel, Le Foll, Leichtfried, Lienemann, Martínez Martínez, Masip Hidalgo, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moreno Sánchez, Moscovici, Patrie, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Roure, Salinas García, Sánchez Presedo, Savary, Schapira, Scheele, Sornosa Martínez, Sousa Pinto, Swoboda, Tarabella, Trautmann, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Weber Henri, Wiersma, Yañez-Barnuevo García

UEN: Fotyga, Janowski, Libicki, Roszkowski, Szymański

Verts/ALE: Bennahmias, Buitenweg, Cohn-Bendit, Evans Jillian, Flautre, Hammerstein Mintz, Hassi, Isler Béguin, Jonckheer, Lagendijk, Lambert, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Turmes

Abstention: 51

ALDE: Cavada, Hennis-Plasschaert, Ries

IND/DEM: Bonde, Borghezio

NI: Allister, Baco, Claeys, Dillen, Kozlík, Martin Hans-Peter, Vanhecke

PPE-DE: Barsi-Pataky, Bauer, Becsey, Belet, Brepoels, Duka-Zólyomi, Gál, Glattfelder, Grosch, Gyürk, Járóka, Lulling, Martens, Oomen-Ruijten, Őry, Pálfi, Schmitt Pál, Schöpflin, Surján, Szájer

PSE: Andersson, van den Burg, Christensen, Estrela, Grech, Gruber, Hedh, Hedkvist Petersen, Jørgensen, Kósáné Kovács, Kristensen, Paasilinna, Segelström, Thomsen, Westlund

Verts/ALE: Aubert, Frassoni, Joan i Marí, Kallenbach

Corrections to votes

For

Anders Wijkman

Against

Edith Mastenbroek, Emine Bozkurt, Thijs Berman

Abstention

Janelly Fourtou

18.   Report: Savary A6-0133/2005

Resolution

For: 603

ALDE: Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Borghezio, Coûteaux, Karatzaferis, Louis, Salvini, Sinnott, Speroni, de Villiers, Železný

NI: Belohorská, Bobošíková, Claeys, Czarnecki Ryszard, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Masiel, Mölzer, Mussolini, Rivera, Romagnoli, Rutowicz, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Braghetto, Brejc, Brepoels, Březina, Brok, Busuttil, Cabrnoch, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Doyle, Duka-Zólyomi, Ebner, Ehler, Esteves, Eurlings, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Glattfelder, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Gyürk, Handzlik, Hatzidakis, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Niebler, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schierhuber, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stubb, Sudre, Surján, Szájer, Tajani, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zaleski, Zappalà, Zieleniec, Zimmerling, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Falbr, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 24

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Chruszcz, Clark, Farage, Goudin, Grabowski, Knapman, Krupa, Lundgren, Nattrass, Pęk, Piotrowski, Rogalski, Titford, Wise, Wohlin, Zapałowski

NI: Kilroy-Silk, Mote

PPE-DE: Podkański

Abstention: 40

GUE/NGL: Pafilis, Toussas

IND/DEM: Bonde

NI: Allister, Baco, Battilocchio, Helmer, Kozlík

PPE-DE: Ashworth, Atkins, Bradbourn, Bushill-Matthews, Buzek, Callanan, Chichester, Deva, Dover, Duchoň, Elles, Evans Jonathan, Fajmon, Hannan, Harbour, Kamall, McMillan-Scott, Nicholson, Parish, Purvis, Reul, Škottová, Stevenson, Strejček, Sturdy, Sumberg, Tannock, Van Orden, Vlasák, Zahradil, Zvěřina

Verts/ALE: Schlyter

19.   Report: Sterckx A6-0123/2005

Amendment 11

For: 502

ALDE: Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Guerreiro, Guidoni, Henin, Kaufmann, Markov, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Rizzo, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Chruszcz, Grabowski, Krupa, Pęk, Piotrowski, Rogalski, Zapałowski

NI: Battilocchio, Belohorská, Claeys, Dillen, Martin Hans-Peter, Rivera, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Audy, Ayuso González, Bachelot-Narquin, Belet, Berend, Böge, Bonsignore, Braghetto, Brejc, Brepoels, Březina, Brok, Busuttil, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Coelho, Dehaene, Descamps, Deß, De Veyrac, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Doorn, Doyle, Ebner, Esteves, Eurlings, Fatuzzo, Ferber, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Hatzidakis, Herranz García, Herrero-Tejedor, Hieronymi, Hoppenstedt, Hudacký, Hybášková, Itälä, Jarzembowski, Jeggle, Jordan Cizelj, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kušķis, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, Lulling, Maat, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Mauro, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Musotto, Nassauer, Niebler, van Nistelrooij, Oomen-Ruijten, Pack, Peterle, Pieper, Pīks, Pinheiro, Pleštinská, Podestà, Podkański, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Sommer, Spautz, Stenzel, Stubb, Sudre, Sumberg, Tajani, Thyssen, Toubon, Ulmer, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wortmann-Kool, Wuermeling, Záborská, Zappalà, Zieleniec, Zimmerling

PSE: Andersson, Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Masip Hidalgo, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Pahor, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Camre, Crowley, Krasts, Kristovskis, Muscardini, Ó Neachtain, Ryan, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Özdemir, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 146

GUE/NGL: Kohlíček, Krarup, Liotard, McDonald, Meijer, Remek, Seppänen, Sjöstedt, Strož, Svensson

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Clark, Coûteaux, Farage, Goudin, Karatzaferis, Knapman, Louis, Lundgren, Nattrass, Sinnott, Titford, de Villiers, Wise, Wohlin, Železný

NI: Allister, Bobošíková, Czarnecki Ryszard, Gollnisch, Helmer, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Masiel, Mölzer, Mote, Mussolini, Romagnoli, Rutowicz, Schenardi

PPE-DE: Ashworth, Atkins, Barsi-Pataky, Bauer, Becsey, Bowis, Bradbourn, Bushill-Matthews, Buzek, Cabrnoch, Callanan, Chichester, Chmielewski, Cirino Pomicino, Coveney, Deva, Dimitrakopoulos, Dover, Duchoň, Duka-Zólyomi, Elles, Evans Jonathan, Fajmon, Fjellner, Gál, Gklavakis, Glattfelder, Gyürk, Handzlik, Hannan, Harbour, Higgins, Hökmark, Ibrisagic, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Kaczmarek, Kamall, Klich, Kratsa-Tsagaropoulou, Kudrycka, Kuźmiuk, Lewandowski, McGuinness, McMillan-Scott, Matsis, Mavrommatis, Millán Mon, Mitchell, Nicholson, Olajos, Olbrycht, Őry, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Piskorski, Purvis, Roithová, Saryusz-Wolski, Schmitt Pál, Schöpflin, Siekierski, Škottová, Sonik, Šťastný, Stevenson, Strejček, Sturdy, Surján, Szájer, Tannock, Trakatellis, Vakalis, Van Orden, Varvitsiotis, Vlasák, Zahradil, Zaleski, Zvěřina, Zwiefka

PSE: Attard-Montalto, Falbr, Paasilinna, Rouček

UEN: Berlato, Didžiokas, Foglietta, Fotyga, Janowski, Libicki, Musumeci, Poli Bortone, Roszkowski, Szymański

Verts/ALE: Schlyter

Abstention: 9

GUE/NGL: Flasarová, Maštálka

IND/DEM: Borghezio, Salvini, Speroni

NI: Baco, Kozlík

PPE-DE: Wojciechowski

UEN: Tatarella

Corrections to votes

Against

Gitte Seeberg

20.   Report: Sterckx A6-0123/2005

Amendment 38

For: 530

ALDE: Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Guerreiro, Guidoni, Henin, Kaufmann, Krarup, Liotard, McDonald, Markov, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Rizzo, Seppänen, Sjöstedt, Svensson, Toussas, Triantaphyllides, Wagenknecht, Wurtz, Zimmer

IND/DEM: Chruszcz, Grabowski, Pęk, Piotrowski, Rogalski, Zapałowski

NI: Battilocchio, Belohorská, Claeys, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Mölzer, Mussolini, Romagnoli, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Audy, Ayuso González, Bachelot-Narquin, Belet, Berend, Böge, Bowis, Braghetto, Brejc, Brepoels, Březina, Busuttil, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Coelho, Daul, Dehaene, Descamps, Deß, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Ebner, Esteves, Eurlings, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Hatzidakis, Herranz García, Herrero-Tejedor, Hieronymi, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jarzembowski, Jeggle, Jordan Cizelj, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, Liese, Lombardo, López-Istúriz White, Lulling, Maat, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Musotto, Nassauer, Niebler, van Nistelrooij, Oomen-Ruijten, Pack, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Pinheiro, Pleštinská, Podestà, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Sommer, Spautz, Stenzel, Stubb, Sudre, Tajani, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wortmann-Kool, Wuermeling, Záborská, Zappalà, Zieleniec, Zimmerling

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Batzeli, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paleckis, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Camre, Crowley, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Ó Neachtain, Roszkowski, Ryan, Szymański, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 106

GUE/NGL: Kohlíček, Remek, Strož

IND/DEM: Batten, Belder, Blokland, Bloom, Clark, Farage, Karatzaferis, Knapman, Nattrass, Sinnott, Titford, Wise, Železný

NI: Allister, Bobošíková, Czarnecki Ryszard, Helmer, Kilroy-Silk, Masiel, Mote, Rutowicz

PPE-DE: Ashworth, Atkins, Barsi-Pataky, Bauer, Becsey, Bradbourn, Brok, Bushill-Matthews, Buzek, Cabrnoch, Callanan, Chichester, Chmielewski, Cirino Pomicino, Coveney, Deva, Dover, Doyle, Duchoň, Duka-Zólyomi, Evans Jonathan, Fajmon, Gál, Glattfelder, Gyürk, Handzlik, Hannan, Harbour, Higgins, Hökmark, Jackson, Jałowiecki, Járóka, Kaczmarek, Kamall, Klich, Kudrycka, Kuźmiuk, Lewandowski, McGuinness, McMillan-Scott, Mitchell, Nicholson, Olajos, Olbrycht, Őry, Pálfi, Parish, Piskorski, Podkański, Purvis, Roithová, Saryusz-Wolski, Schmitt Pál, Schöpflin, Siekierski, Škottová, Sonik, Šťastný, Stevenson, Strejček, Sturdy, Sumberg, Surján, Szájer, Tannock, Van Orden, Vlasák, Wojciechowski, Zahradil, Zaleski, Zvěřina, Zwiefka

PSE: Falbr, Paasilinna, Pahor, Rouček

UEN: Foglietta, Muscardini, Musumeci, Poli Bortone

Verts/ALE: Schlyter

Abstention: 17

GUE/NGL: Flasarová, Maštálka

IND/DEM: Bonde, Borghezio, Coûteaux, Goudin, Krupa, Louis, Lundgren, Salvini, Speroni, de Villiers, Wohlin

NI: Kozlík, Rivera

UEN: Berlato, Didžiokas

Corrections to votes

Against

Gitte Seeberg

21.   Report: Sterckx A6-0123/2005

Amendment 103

For: 533

ALDE: Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Krarup, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Sjöstedt, Strož, Svensson, Toussas, Triantaphyllides, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Chruszcz, Grabowski, Pęk, Piotrowski, Rogalski, Zapałowski

NI: Battilocchio, Belohorská, Claeys, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martin Hans-Peter, Martinez, Mölzer, Mussolini, Schenardi, Vanhecke

PPE-DE: Andrikienė, Antoniozzi, Audy, Ayuso González, Bachelot-Narquin, Belet, Berend, Böge, Bonsignore, Braghetto, Brejc, Brepoels, Březina, Brok, Busuttil, Casa, Castiglione, del Castillo Vera, Cesa, Coelho, Daul, Dehaene, Descamps, Deß, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Ebner, Elles, Esteves, Eurlings, Fatuzzo, Ferber, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Gklavakis, Goepel, Gomolka, Graça Moura, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Hoppenstedt, Hudacký, Hybášková, Itälä, Jarzembowski, Jeggle, Jordan Cizelj, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Kušķis, Lamassoure, Landsbergis, Langen, Langendries, Lechner, Lehne, López-Istúriz White, Lulling, Maat, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Mato Adrover, Matsis, Mavrommatis, Mayer, Méndez de Vigo, Mikolášik, Millán Mon, Musotto, Nassauer, Niebler, van Nistelrooij, Oomen-Ruijten, Pack, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Pinheiro, Pleštinská, Podestà, Podkański, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Silva Peneda, Sommer, Šťastný, Stenzel, Stubb, Sudre, Tajani, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wortmann-Kool, Wuermeling, Záborská, Zappalà, Zieleniec, Zimmerling

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Napoletano, Navarro, Obiols i Germà, Öger, Paleckis, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Aylward, Camre, Crowley, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Ó Neachtain, Roszkowski, Ryan, Szymański, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 116

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Clark, Coûteaux, Farage, Goudin, Karatzaferis, Knapman, Louis, Lundgren, Nattrass, Salvini, Sinnott, Speroni, Titford, de Villiers, Whittaker, Wise, Wohlin, Železný

NI: Allister, Czarnecki Ryszard, Helmer, Kilroy-Silk, Masiel, Mote, Rutowicz

PPE-DE: Ashworth, Atkins, Barsi-Pataky, Bauer, Becsey, Bowis, Bradbourn, Bushill-Matthews, Buzek, Cabrnoch, Callanan, Cederschiöld, Chichester, Chmielewski, Cirino Pomicino, Coveney, Deva, Dover, Doyle, Duchoň, Duka-Zólyomi, Evans Jonathan, Fajmon, Fjellner, Gál, Glattfelder, Gyürk, Handzlik, Hannan, Harbour, Higgins, Hökmark, Ibrisagic, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Kaczmarek, Kamall, Klich, Kratsa-Tsagaropoulou, Kudrycka, Kuźmiuk, Lewandowski, Liese, Lombardo, McGuinness, McMillan-Scott, Mayor Oreja, Mitchell, Nicholson, Olajos, Olbrycht, Őry, Pálfi, Parish, Piskorski, Purvis, Roithová, Saryusz-Wolski, Schmitt Pál, Schöpflin, Siekierski, Škottová, Sonik, Stevenson, Strejček, Sturdy, Sumberg, Surján, Szájer, Tannock, Van Orden, Vlasák, Wojciechowski, Zahradil, Zaleski, Zvěřina, Zwiefka

PSE: Falbr, Paasilinna, Rouček

UEN: Angelilli, Didžiokas, Musumeci, Poli Bortone

Abstention: 9

IND/DEM: Borghezio, Krupa

NI: Bobošíková, Kozlík, Rivera

UEN: Berlato, Muscardini, Tatarella

Verts/ALE: Schlyter

Corrections to votes

For

Rodi Kratsa-Tsagaropoulou

Against

Gitte Seeberg

22.   Report: Sterckx A6-0123/2005

Amendment 13

For: 519

ALDE: Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Väyrynen, Van Hecke, Virrankoski, Wallis, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Guerreiro, Henin, Kaufmann, Markov, Maštálka, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Chruszcz, Grabowski, Pęk, Piotrowski, Rogalski, Sinnott, Zapałowski

NI: Battilocchio, Belohorská, Czarnecki Ryszard, Kozlík, Martin Hans-Peter, Masiel, Mussolini, Romagnoli, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Audy, Ayuso González, Bachelot-Narquin, Belet, Berend, Böge, Bonsignore, Braghetto, Brejc, Brepoels, Březina, Brok, Busuttil, Buzek, Casa, Castiglione, del Castillo Vera, Cesa, Chmielewski, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Descamps, Deß, De Veyrac, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Doorn, Doyle, Ebner, Esteves, Eurlings, Fatuzzo, Ferber, Florenz, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gawronski, Goepel, Gomolka, Gräßle, de Grandes Pascual, Grosch, Grossetête, Guellec, Handzlik, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hoppenstedt, Hudacký, Hybášková, Itälä, Iturgaiz Angulo, Jałowiecki, Jarzembowski, Jeggle, Jordan Cizelj, Kaczmarek, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Langen, Langendries, Lechner, Lehne, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, Mann Thomas, Mantovani, Marques, Mathieu, Mato Adrover, Mauro, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Niebler, van Nistelrooij, Olbrycht, Oomen-Ruijten, Pack, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schierhuber, Schnellhardt, Schröder, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stubb, Sudre, Tajani, Thyssen, Toubon, Ulmer, Varela Suanzes-Carpegna, Ventre, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zaleski, Zappalà, Zieleniec, Zimmerling, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paleckis, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Prets, Rapkay, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Aylward, Camre, Crowley, Krasts, Kristovskis, Libicki, Ó Neachtain, Ryan, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 119

GUE/NGL: Kohlíček, Krarup, Liotard, McDonald, Meijer, Portas, Remek, Seppänen, Sjöstedt, Strož, Svensson

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Borghezio, Clark, Coûteaux, Farage, Goudin, Karatzaferis, Knapman, Louis, Lundgren, Nattrass, Salvini, Speroni, Titford, de Villiers, Whittaker, Wise, Wohlin, Železný

NI: Allister, Claeys, Dillen, Gollnisch, Helmer, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Mölzer, Mote, Schenardi, Vanhecke

PPE-DE: Ashworth, Atkins, Barsi-Pataky, Bauer, Becsey, Bowis, Bradbourn, Bushill-Matthews, Cabrnoch, Callanan, Cederschiöld, Chichester, Deva, Dimitrakopoulos, Dover, Duchoň, Duka-Zólyomi, Evans Jonathan, Fjellner, Gál, Gklavakis, Glattfelder, Gyürk, Hannan, Harbour, Hökmark, Ibrisagic, Jackson, Járóka, Kamall, Kratsa-Tsagaropoulou, McMillan-Scott, Matsis, Mavrommatis, Nicholson, Olajos, Őry, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Purvis, Schmitt Pál, Schöpflin, Škottová, Stevenson, Strejček, Sumberg, Surján, Szájer, Tannock, Trakatellis, Vakalis, Van Orden, Varvitsiotis, Vlasák, Zahradil, Zvěřina

PSE: Paasilinna

UEN: Angelilli, Berlato, Didžiokas, Fotyga, Janowski, La Russa, Musumeci, Poli Bortone, Roszkowski, Szymański

Verts/ALE: Schlyter

Abstention: 6

GUE/NGL: Flasarová

IND/DEM: Krupa

NI: Baco, Rivera

UEN: Muscardini, Tatarella

Corrections to votes

Against

Gitte Seeberg

23.   Report: Sterckx A6-0123/2005

Amendment 138/rev.

For: 550

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Cornillet, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duff, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, Hennis-Plasschaert, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Koch-Mehrin, Krahmer, Kułakowski, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pannella, Pistelli, Polfer, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Wallis, Watson

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Borghezio, Chruszcz, Grabowski, Krupa, Pęk, Piotrowski, Rogalski, Salvini, Speroni, Zapałowski

NI: Battilocchio, Belohorská, Bobošíková, Claeys, Czarnecki Ryszard, Dillen, Martin Hans-Peter, Masiel, Mölzer, Rutowicz, Vanhecke

PPE-DE: Antoniozzi, Ayuso González, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Braghetto, Brejc, Brepoels, Březina, Brok, Busuttil, Buzek, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Cirino Pomicino, Coelho, Coveney, Deß, Díaz de Mera García Consuegra, Dionisi, Dombrovskis, Doorn, Doyle, Duka-Zólyomi, Ebner, Esteves, Eurlings, Fatuzzo, Ferber, Fjellner, Fontaine, Fraga Estévez, Freitas, Friedrich, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gawronski, Gklavakis, Glattfelder, Goepel, Graça Moura, de Grandes Pascual, Grosch, Gyürk, Handzlik, Hatzidakis, Hennicot-Schoepges, Herranz García, Herrero-Tejedor, Hieronymi, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jarzembowski, Jordan Cizelj, Kaczmarek, Karas, Kasoulides, Kelam, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Langen, Langendries, Lechner, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, Mann Thomas, Mantovani, Marques, Martens, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, van Nistelrooij, Olajos, Olbrycht, Oomen-Ruijten, Őry, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Rudi Ubeda, Rübig, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Schröder, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Sommer, Sonik, Spautz, Šťastný, Stenzel, Stubb, Surján, Szájer, Tajani, Thyssen, Trakatellis, Ulmer, Vakalis, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wuermeling, Záborská, Zaleski, Zappalà, Zieleniec, Zimmerling, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grabowska, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Kuhne, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Mann Erika, Martin David, Martínez Martínez, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Öger, Paasilinna, Pahor, Paleckis, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Reynaud, Riera Madurell, Rocard, Rosati, Roth-Behrendt, Rothe, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Swoboda, Szejna, Tabajdi, Tarabella, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Berlato, Camre, Didžiokas, Foglietta, Fotyga, Janowski, Krasts, Kristovskis, La Russa, Libicki, Musumeci, Poli Bortone, Roszkowski, Szymański, Tatarella

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cohn-Bendit, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Özdemir, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Voggenhuber, Ždanoka

Against: 87

ALDE: Morillon, Virrankoski

IND/DEM: Batten, Belder, Blokland, Bloom, Booth, Clark, Karatzaferis, Knapman, Nattrass, Sinnott, Titford, Železný

NI: Allister, Gollnisch, Helmer, Kilroy-Silk, Lang, Le Pen Jean-Marie, Le Pen Marine, Le Rachinel, Martinez, Mote, Mussolini, Romagnoli, Schenardi

PPE-DE: Ashworth, Atkins, Audy, Bachelot-Narquin, Bowis, Bradbourn, Bushill-Matthews, Cabrnoch, Callanan, Chichester, Daul, Descamps, Deva, De Veyrac, Dimitrakopoulos, Dover, Duchoň, Elles, Evans Jonathan, Fajmon, Florenz, Gaubert, Gauzès, Gomolka, Gräßle, Grossetête, Guellec, Hannan, Harbour, Jeggle, Kamall, Klamt, Lehne, McMillan-Scott, Mathieu, Nicholson, Pack, Parish, Purvis, Reul, Roithová, Saïfi, Škottová, Stevenson, Strejček, Sturdy, Sudre, Sumberg, Tannock, Toubon, Van Orden, Vlasák, Vlasto, Zahradil, Zvěřina

PSE: Stockmann

UEN: Aylward, Crowley, Ó Neachtain, Ryan

Abstention: 16

ALDE: Lambsdorff

GUE/NGL: Krarup, Portas, Sjöstedt

IND/DEM: Goudin, Lundgren, Wohlin

NI: Baco, Kozlík, Rivera

PPE-DE: Niebler, Wortmann-Kool

PSE: Falbr, Rouček

UEN: Vaidere, Zīle

24.   Report: Guellec A6-0251/2005

Paragraph 12

For: 487

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duquesne, Fourtou, Gentvilas, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, in 't Veld, Jensen, Juknevičienė, Kacin, Karim, Klinz, Krahmer, Kułakowski, Lambsdorff, Laperrouze, Lax, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Ortuondo Larrea, Oviir, Pistelli, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Henin, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Portas, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Belder, Blokland, Bonde, Borghezio, Karatzaferis, Sinnott, Speroni, Železný

NI: Battilocchio, Romagnoli

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Bauer, Belet, Berend, Böge, Bowis, Bradbourn, Braghetto, Brejc, Brepoels, Brok, Bushill-Matthews, Busuttil, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chichester, Chmielewski, Cirino Pomicino, Coelho, Coveney, Daul, Dehaene, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Ehler, Elles, Esteves, Eurlings, Evans Jonathan, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gklavakis, Glattfelder, Goepel, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Hannan, Harbour, Hatzidakis, Herranz García, Herrero-Tejedor, Higgins, Hökmark, Hoppenstedt, Hudacký, Hybášková, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jeggle, Jordan Cizelj, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kušķis, Kuźmiuk, Lamassoure, Langen, Langendries, Lehne, Lewandowski, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Oomen-Ruijten, Ouzký, Pack, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podestà, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Schmitt Pál, Schnellhardt, Schöpflin, Schwab, Seeber, Seeberg, Spautz, Šťastný, Stenzel, Stevenson, Stubb, Sturdy, Sudre, Sumberg, Surján, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wortmann-Kool, Záborská, Zappalà, Zieleniec, Zimmerling

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Castex, Cercas, Christensen, Corbett, Corbey, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Anne, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Gill, Glante, Goebbels, Golik, Gomes, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Howitt, Hughes, Hutchinson, Ilves, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Pahor, Panzeri, Patrie, Piecyk, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Sifunakis, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Wynn, Xenogiannakopoulou, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Camre, Ryan

Verts/ALE: Graefe zu Baringdorf, Harms, Smith, Staes

Against: 83

ALDE: Ek, Geremek, Onyszkiewicz, Staniszewska, Starkevičiūtė

IND/DEM: Batten, Booth, Chruszcz, Clark, Goudin, Grabowski, Krupa, Lundgren, Pęk, Piotrowski, Rogalski, Titford, Wise, Wohlin, Zapałowski

NI: Czarnecki Ryszard, Kilroy-Silk, Masiel, Rutowicz

PPE-DE: Barsi-Pataky, Becsey, Březina, Buzek, Cabrnoch, Fajmon, Gyürk, Handzlik, Jałowiecki, Járóka, Kaczmarek, Klich, Kudrycka, Olajos, Olbrycht, Őry, Pálfi, Saryusz-Wolski, Siekierski, Silva Peneda, Škottová, Sonik, Strejček, Szájer, Vlasák, Wojciechowski, Wuermeling, Zahradil, Zaleski, Zvěřina, Zwiefka

PSE: Geringer de Oedenberg, Gierek, Jöns, Pinior, Rosati, Siwiec, Szejna, Tabajdi

UEN: Fotyga, Janowski, Libicki, Roszkowski, Szymański

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cramer, Flautre, Hammerstein Mintz, Hassi, Isler Béguin, Onesta, Romeva i Rueda, Schlyter, Turmes

Abstention: 38

NI: Baco, Belohorská, Bobošíková, Claeys, Dillen, Gollnisch, Kozlík, Lang, Le Pen Jean-Marie, Le Rachinel, Martin Hans-Peter, Martinez, Mölzer, Mussolini, Rivera, Schenardi, Vanhecke

PPE-DE: Callanan, Landsbergis

UEN: Angelilli, Aylward, Berlato, Crowley, Foglietta, Krasts, Kristovskis, La Russa, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Tatarella, Vaidere, Zīle

Verts/ALE: Frassoni, Jonckheer, Rühle, Schmidt

25.   Report: Marques A6-0256/2005

Amendment 5

For: 44

ALDE: Chiesa

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Kaufmann, Kohlíček, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Remek, Rizzo, Strož, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Karatzaferis

NI: Belohorská, Claeys, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Le Rachinel, Martinez, Mölzer, Mussolini, Romagnoli, Vanhecke

PSE: Berlinguer, Castex

Against: 547

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bonino, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Cocilovo, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, in 't Veld, Jensen, Juknevičienė, Kacin, Karim, Klinz, Krahmer, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pistelli, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Väyrynen, Van Hecke, Virrankoski, Wallis

IND/DEM: Batten, Belder, Blokland, Bonde, Booth, Borghezio, Chruszcz, Clark, Goudin, Grabowski, Krupa, Lundgren, Pęk, Piotrowski, Rogalski, Sinnott, Speroni, Titford, Wise, Wohlin, Zapałowski, Železný

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Martin Hans-Peter, Masiel, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Coelho, Coveney, Daul, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gklavakis, Glattfelder, Goepel, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Herranz García, Herrero-Tejedor, Higgins, Hökmark, Hoppenstedt, Hudacký, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lehne, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Cercas, Christensen, Corbett, Corbey, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gomes, Grech, Gröner, Gruber, Gurmai, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Lienemann, McAvan, McCarthy, Madeira, Maňka, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rosati, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Foglietta, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Ždanoka

Abstention: 10

GUE/NGL: Liotard, McDonald, Seppänen, Svensson

NI: Baco, Rivera

Verts/ALE: Bennahmias, Joan i Marí, Jonckheer, Turmes

26.   Report: Marques A6-0256/2005

Amendment 6

For: 52

ALDE: Chiesa

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Kaufmann, Kohlíček, Liotard, McDonald, Markov, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Karatzaferis

NI: Belohorská, Gollnisch, Lang, Le Pen Jean-Marie, Martinez, Mölzer, Mussolini

PPE-DE: Pinheiro

PSE: Attard-Montalto, Berlinguer, Castex, Herczog, Paasilinna

UEN: Aylward, Crowley, Ó Neachtain, Ryan

Against: 547

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bourlanges, Bowles, Budreikaitė, Busk, Cavada, Chatzimarkakis, Cocilovo, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duquesne, Ek, Fourtou, Gentvilas, Geremek, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Klinz, Krahmer, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Pistelli, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Staniszewska, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

IND/DEM: Batten, Belder, Blokland, Booth, Borghezio, Chruszcz, Clark, Goudin, Grabowski, Krupa, Lundgren, Pęk, Piotrowski, Rogalski, Sinnott, Speroni, Titford, Wise, Wohlin, Zapałowski, Železný

NI: Battilocchio, Bobošíková, Czarnecki Ryszard, Kilroy-Silk, Martin Hans-Peter, Masiel, Romagnoli, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Braghetto, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Coelho, Coveney, Daul, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gklavakis, Glattfelder, Goepel, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Herranz García, Herrero-Tejedor, Higgins, Hökmark, Hoppenstedt, Hudacký, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lehne, Liese, Lombardo, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mann Thomas, Mantovani, Marques, Martens, Mathieu, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Musotto, Nassauer, Nicholson, Niebler, van Nistelrooij, Olajos, Olbrycht, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Piskorski, Pleštinská, Podkański, Poettering, Posselt, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varela Suanzes-Carpegna, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, Wijkman, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Cercas, Christensen, Corbett, Corbey, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Elisa, Ford, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gomes, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Honeyball, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moraes, Moreno Sánchez, Morgan, Moscovici, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Panzeri, Patrie, Piecyk, Pinior, Pittella, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rosati, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Schulz, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Sousa Pinto, Stihler, Stockmann, Swoboda, Szejna, Tabajdi, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Yañez-Barnuevo García, Zani, Zingaretti

UEN: Angelilli, Berlato, Camre, Foglietta, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Poli Bortone, Roszkowski, Szymański, Tatarella, Vaidere, Zīle

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Horáček, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lagendijk, Lambert, Lichtenberger, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Ždanoka

Abstention: 5

NI: Claeys, Dillen, Rivera, Vanhecke

PSE: Ferreira Anne

27.   Report: Marques A6-0256/2005

Amendment 7

For: 84

ALDE: Chiesa

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Kaufmann, Kohlíček, Liotard, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Bonde, Karatzaferis

NI: Bobošíková, Claeys, Dillen, Gollnisch, Lang, Le Pen Jean-Marie, Martinez, Mölzer, Mussolini, Romagnoli, Schenardi

PSE: Castex, Ferreira Anne

UEN: Aylward, Crowley, Ó Neachtain, Ryan

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lambert, Lichtenberger, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Ždanoka

Against: 490

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bowles, Budreikaitė, Cavada, Chatzimarkakis, Cocilovo, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duquesne, Ek, Fourtou, Gentvilas, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Krahmer, Lambsdorff, Laperrouze, Lax, Letta, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

IND/DEM: Batten, Belder, Blokland, Booth, Borghezio, Chruszcz, Clark, Goudin, Grabowski, Krupa, Lundgren, Pęk, Piotrowski, Rogalski, Sinnott, Speroni, Titford, Wise, Wohlin, Zapałowski, Železný

NI: Battilocchio, Czarnecki Ryszard, Martin Hans-Peter, Masiel, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Brejc, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Casa, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gklavakis, Glattfelder, Goepel, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Herranz García, Herrero-Tejedor, Higgins, Hökmark, Hoppenstedt, Hudacký, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Korhola, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lehne, Liese, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mantovani, Marques, Martens, Mathieu, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Nassauer, Niebler, van Nistelrooij, Olajos, Olbrycht, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Schwab, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Weisgerber, Wieland, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Attard-Montalto, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Cercas, Christensen, Corbett, Corbey, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Elisa, Fruteau, García Pérez, Gebhardt, Gierek, Gill, Glante, Goebbels, Golik, Gomes, Grech, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Herczog, Honeyball, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Lehtinen, Leichtfried, Leinen, Lévai, Liberadzki, Lienemann, McAvan, McCarthy, Madeira, Maňka, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moreno Sánchez, Morgan, Muscat, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Paasilinna, Panzeri, Patrie, Piecyk, Pinior, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rosati, Rothe, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Stihler, Swoboda, Tabajdi, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Xenogiannakopoulou, Yañez-Barnuevo García, Zingaretti

UEN: Angelilli, Berlato, Camre, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Poli Bortone, Roszkowski, Szymański, Vaidere, Zīle

Abstention: 3

NI: Belohorská, Rivera

Verts/ALE: Schlyter

28.   Report: Marques A6-0256/2005

Amendment 3

For: 165

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bowles, Budreikaitė, Cavada, Chatzimarkakis, Chiesa, Cocilovo, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duquesne, Ek, Fourtou, Gentvilas, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Lambsdorff, Laperrouze, Lax, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Prodi, Resetarits, Ries, Riis-Jørgensen, Samuelsen, Savi, Sbarbati, Schuth, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Kaufmann, Kohlíček, Liotard, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Chruszcz, Grabowski, Karatzaferis, Krupa, Pęk, Piotrowski, Rogalski, Zapałowski, Železný

NI: Lang, Martinez, Mussolini, Romagnoli

PPE-DE: Audy, Bachelot-Narquin, Daul, Descamps, De Veyrac, Fontaine, Gaubert, Grossetête, Guellec, Mathieu, Saïfi, Sudre, Vlasto

PSE: Attard-Montalto, Castex, Fruteau, Golik, Grech, Ilves, Muscat, Paasilinna

Verts/ALE: Aubert, Auken, Beer, Bennahmias, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Isler Béguin, Jonckheer, Kallenbach, Kusstatscher, Lambert, Lichtenberger, Lipietz, Lucas, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Ždanoka

Against: 391

ALDE: Krahmer

IND/DEM: Batten, Belder, Blokland, Bonde, Booth, Borghezio, Clark, Sinnott, Speroni, Titford, Wise

NI: Bobošíková, Czarnecki Ryszard, Masiel, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Ashworth, Atkins, Ayuso González, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Braghetto, Brepoels, Březina, Brok, Bushill-Matthews, Busuttil, Buzek, Cabrnoch, Callanan, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Coelho, Coveney, Dehaene, Demetriou, Deß, Deva, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Elles, Esteves, Eurlings, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gauzès, Gklavakis, Glattfelder, Goepel, Graça Moura, Gräßle, de Grandes Pascual, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Herranz García, Herrero-Tejedor, Higgins, Hökmark, Hoppenstedt, Hudacký, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Lehne, Liese, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mantovani, Marques, Martens, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Nassauer, Niebler, van Nistelrooij, Olajos, Olbrycht, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podkański, Poettering, Posselt, Purvis, Queiró, Quisthoudt-Rowohl, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sumberg, Surján, Szájer, Tajani, Tannock, Thyssen, Toubon, Trakatellis, Ulmer, Vakalis, Van Orden, Ventre, Vernola, Vlasák, Weber Manfred, Weisgerber, Wieland, von Wogau, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Cercas, Christensen, Corbett, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Elisa, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Goebbels, Gomes, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Hegyi, Honeyball, Hughes, Hutchinson, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Lienemann, McAvan, McCarthy, Madeira, Maňka, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Moreno Sánchez, Morgan, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Panzeri, Patrie, Piecyk, Pinior, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rosati, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Segelström, Sifunakis, Siwiec, Sornosa Martínez, Stihler, Swoboda, Tabajdi, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Xenogiannakopoulou, Yañez-Barnuevo García, Zingaretti

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Foglietta, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella, Vaidere, Zīle

Abstention: 9

IND/DEM: Goudin, Lundgren, Wohlin

NI: Battilocchio, Martin Hans-Peter, Rivera

PSE: Bullmann, Ferreira Anne

Verts/ALE: Joan i Marí

29.   Report: Marques A6-0256/2005

Amendment 4

For: 46

ALDE: Chiesa

GUE/NGL: Adamou, Agnoletto, Brie, Figueiredo, Flasarová, Guerreiro, Guidoni, Kaufmann, Kohlíček, Liotard, Maštálka, Meijer, Meyer Pleite, Morgantini, Musacchio, Pafilis, Papadimoulis, Pflüger, Ransdorf, Remek, Rizzo, Seppänen, Strož, Svensson, Toussas, Triantaphyllides, Verges, Wagenknecht, Wurtz, Zimmer

IND/DEM: Karatzaferis

NI: Claeys, Dillen, Lang, Martinez, Mölzer, Mussolini, Rivera, Romagnoli, Schenardi, Vanhecke

PSE: Attard-Montalto, Grech, Muscat, Paasilinna

Against: 500

ALDE: Alvaro, Andrejevs, Andria, Attwooll, Beaupuy, Birutis, Bowles, Budreikaitė, Cavada, Chatzimarkakis, Cocilovo, Costa, Davies, Degutis, Deprez, De Sarnez, Drčar Murko, Duquesne, Ek, Fourtou, Gentvilas, Gibault, Griesbeck, Guardans Cambó, Hall, Harkin, in 't Veld, Jäätteenmäki, Jensen, Juknevičienė, Kacin, Karim, Krahmer, Lambsdorff, Laperrouze, Lax, Ludford, Lynne, Maaten, Malmström, Manders, Matsakis, Mohácsi, Morillon, Mulder, Newton Dunn, Neyts-Uyttebroeck, Onyszkiewicz, Ortuondo Larrea, Oviir, Prodi, Resetarits, Ries, Riis-Jørgensen, Savi, Sbarbati, Schuth, Starkevičiūtė, Sterckx, Szent-Iványi, Takkula, Toia, Väyrynen, Van Hecke, Virrankoski, Wallis

IND/DEM: Batten, Belder, Blokland, Booth, Borghezio, Chruszcz, Clark, Goudin, Grabowski, Krupa, Lundgren, Pęk, Piotrowski, Rogalski, Sinnott, Speroni, Titford, Wise, Wohlin, Zapałowski, Železný

NI: Bobošíková, Czarnecki Ryszard, Martin Hans-Peter, Masiel, Rutowicz

PPE-DE: Andrikienė, Antoniozzi, Atkins, Audy, Ayuso González, Bachelot-Narquin, Barsi-Pataky, Bauer, Becsey, Belet, Berend, Böge, Bonsignore, Bowis, Braghetto, Brepoels, Březina, Brok, Busuttil, Buzek, Cabrnoch, Callanan, Castiglione, del Castillo Vera, Cederschiöld, Cesa, Chmielewski, Coelho, Coveney, Daul, Dehaene, Demetriou, Descamps, Deß, Deva, De Veyrac, Díaz de Mera García Consuegra, Dimitrakopoulos, Dionisi, Dombrovskis, Doorn, Dover, Doyle, Duchoň, Duka-Zólyomi, Ebner, Elles, Esteves, Evans Jonathan, Fajmon, Fatuzzo, Ferber, Fjellner, Florenz, Fontaine, Fraga Estévez, Freitas, Gahler, Gál, Gaľa, Galeote Quecedo, García-Margallo y Marfil, Gargani, Garriga Polledo, Gaubert, Gauzès, Gklavakis, Glattfelder, Goepel, Graça Moura, Gräßle, de Grandes Pascual, Grossetête, Guellec, Gyürk, Handzlik, Hannan, Harbour, Hatzidakis, Herranz García, Higgins, Hökmark, Hoppenstedt, Hudacký, Ibrisagic, Itälä, Iturgaiz Angulo, Jackson, Jałowiecki, Járóka, Jeggle, Jordan Cizelj, Kaczmarek, Kamall, Karas, Kasoulides, Kelam, Klamt, Klaß, Klich, Koch, Konrad, Kratsa-Tsagaropoulou, Kudrycka, Kušķis, Kuźmiuk, Lamassoure, Landsbergis, Langen, Langendries, Liese, López-Istúriz White, Lulling, Maat, McGuinness, McMillan-Scott, Mantovani, Marques, Martens, Mathieu, Mato Adrover, Matsis, Mauro, Mavrommatis, Mayer, Mayor Oreja, Méndez de Vigo, Mikolášik, Millán Mon, Mitchell, Nassauer, Niebler, van Nistelrooij, Olajos, Olbrycht, Őry, Ouzký, Pack, Pálfi, Panayotopoulos-Cassiotou, Papastamkos, Parish, Peterle, Pieper, Pīks, Pinheiro, Piskorski, Pleštinská, Podkański, Poettering, Posselt, Purvis, Queiró, Rack, Radwan, Reul, Roithová, Rudi Ubeda, Rübig, Saïfi, Salafranca Sánchez-Neyra, Sartori, Saryusz-Wolski, Schmitt Pál, Schnellhardt, Schöpflin, Seeber, Seeberg, Siekierski, Silva Peneda, Škottová, Sonik, Spautz, Šťastný, Stenzel, Stevenson, Strejček, Stubb, Sturdy, Sudre, Surján, Szájer, Tajani, Thyssen, Trakatellis, Ulmer, Vakalis, Van Orden, Varvitsiotis, Ventre, Vernola, Vlasák, Vlasto, Weber Manfred, Wieland, Wojciechowski, Wortmann-Kool, Wuermeling, Záborská, Zahradil, Zaleski, Zappalà, Zieleniec, Zimmerling, Zvěřina, Zwiefka

PSE: Andersson, Arif, Arnaoutakis, Ayala Sender, Badia I Cutchet, Barón Crespo, Beglitis, Beňová, Berès, van den Berg, Berger, Berlinguer, Berman, Bösch, Bono, Bourzai, Bozkurt, Bullmann, van den Burg, Busquin, Calabuig Rull, Capoulas Santos, Carlotti, Carnero González, Casaca, Christensen, Corbett, Correia, Cottigny, D'Alema, De Keyser, De Rossa, Désir, De Vits, Díez González, Dobolyi, Douay, El Khadraoui, Estrela, Ettl, Evans Robert, Fava, Fazakas, Fernandes, Ferreira Elisa, Fruteau, García Pérez, Gebhardt, Geringer de Oedenberg, Gierek, Gill, Glante, Golik, Gröner, Gruber, Gurmai, Guy-Quint, Hänsch, Hamon, Harangozó, Hasse Ferreira, Haug, Hedh, Hedkvist Petersen, Herczog, Honeyball, Hughes, Hutchinson, Ilves, Jöns, Jørgensen, Kindermann, Kinnock, Kósáné Kovács, Koterec, Krehl, Kreissl-Dörfler, Kristensen, Kuc, Laignel, Lambrinidis, Lavarra, Le Foll, Lehtinen, Leichtfried, Leinen, Lévai, Lienemann, McCarthy, Madeira, Maňka, Martin David, Martínez Martínez, Mastenbroek, Matsouka, Medina Ortega, Menéndez del Valle, Miguélez Ramos, Mikko, Morgan, Myller, Napoletano, Navarro, Obiols i Germà, Öger, Panzeri, Patrie, Piecyk, Pinior, Pleguezuelos Aguilar, Poignant, Prets, Rapkay, Reynaud, Riera Madurell, Rosati, Rouček, Roure, Sacconi, Sakalas, Salinas García, Sánchez Presedo, dos Santos, Savary, Schapira, Segelström, Sifunakis, Siwiec, Skinner, Sornosa Martínez, Stihler, Swoboda, Tabajdi, Tarand, Thomsen, Titley, Trautmann, Tzampazi, Valenciano Martínez-Orozco, Van Lancker, Vaugrenard, Vergnaud, Vincenzi, Walter, Weber Henri, Weiler, Westlund, Whitehead, Wiersma, Xenogiannakopoulou, Yañez-Barnuevo García

UEN: Angelilli, Aylward, Berlato, Camre, Crowley, Janowski, Krasts, Kristovskis, La Russa, Libicki, Muscardini, Musumeci, Ó Neachtain, Poli Bortone, Roszkowski, Ryan, Szymański, Tatarella

Verts/ALE: Aubert, Auken, Bennahmias, Breyer, Buitenweg, Cramer, Evans Jillian, Flautre, Frassoni, Graefe zu Baringdorf, de Groen-Kouwenhoven, Hammerstein Mintz, Harms, Hassi, Isler Béguin, Joan i Marí, Jonckheer, Kallenbach, Kusstatscher, Lambert, Lichtenberger, Lipietz, Onesta, Romeva i Rueda, Rühle, Schlyter, Schmidt, Schroedter, Smith, Staes, Trüpel, Turmes, Ždanoka

Abstention: 5

IND/DEM: Bonde

NI: Battilocchio

PSE: Ferreira Anne

UEN: Vaidere, Zīle

---

TEXTS ADOPTED

P6_TA(2005)0350

Opening of negotiations with Turkey

European Parliament resolution on the opening of negotiations with Turkey

The European Parliament,

| — | having regard to its resolution of 15 December 2004 on the 2004 regular report and the recommendation of the Commission on Turkey's progress towards accession (1) and its previous resolutions on this subject adopted between 18 June 1987 and 15 December 2004, |
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—

having regard to its resolution of 15 December 2004 on the 2004 regular report and the recommendation of the Commission on Turkey's progress towards accession (1) and its previous resolutions on this subject adopted between 18 June 1987 and 15 December 2004,

| — | having regard to its resolution of 6 July 2005 on the role of women in Turkey in social, economic and political life (2), |
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—

having regard to its resolution of 6 July 2005 on the role of women in Turkey in social, economic and political life (2),

| — | having regard to the conclusions of the European Council meeting of 17 December 2004, |
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—

having regard to the conclusions of the European Council meeting of 17 December 2004,

| — | having regard to the draft framework for the accession negotiations with Turkey, as presented by the Commission on 29 June 2005, |
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—

having regard to the draft framework for the accession negotiations with Turkey, as presented by the Commission on 29 June 2005,

| — | having regard to the decisions taken by the European Council on the start of the accession negotiations with Turkey, |
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—

having regard to the decisions taken by the European Council on the start of the accession negotiations with Turkey,

| — | having regard to its resolution of 21 April 2004 on Cyprus (3), |
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—

having regard to its resolution of 21 April 2004 on Cyprus (3),

| — | having regard to Rule 103(4) of its Rules of Procedure, |
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—

having regard to Rule 103(4) of its Rules of Procedure,

| A. | whereas the Commission has concluded that Turkey has sufficiently fulfilled the Copenhagen political criteria and has recommended that accession negotiations be opened, |
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A.

whereas the Commission has concluded that Turkey has sufficiently fulfilled the Copenhagen political criteria and has recommended that accession negotiations be opened,

| B. | whereas the European Council decided in 2002 that if Turkey fulfilled the Copenhagen political criteria the European Union would open accession negotiations without delay, |
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B.

whereas the European Council decided in 2002 that if Turkey fulfilled the Copenhagen political criteria the European Union would open accession negotiations without delay,

| C. | whereas the European Parliament considered on 15 December 2004 that the opening of accession negotiations is to be recommended so long as it is agreed that in the first phase of the negotiations priority is given to the full implementation of the political criteria; that therefore the agenda of negotiations at ministerial level will start with the assessment of the fulfilment of the political criteria, especially in the area of human rights and full fundamental freedoms in both theory and practice, in the meantime opening up the opportunity to put other chapters on the agenda of the negotiations, |
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C.

whereas the European Parliament considered on 15 December 2004 that the opening of accession negotiations is to be recommended so long as it is agreed that in the first phase of the negotiations priority is given to the full implementation of the political criteria; that therefore the agenda of negotiations at ministerial level will start with the assessment of the fulfilment of the political criteria, especially in the area of human rights and full fundamental freedoms in both theory and practice, in the meantime opening up the opportunity to put other chapters on the agenda of the negotiations,

| D. | whereas on that occasion the European Parliament, whilst respecting the democratic will of the Greek Cypriot community, expressed its regret that it had not been able to reach a solution, and called on the Turkish authorities to maintain their constructive attitude in finding a settlement of the Cyprus question leading to an equitable solution, to be negotiated on the basis of the Annan planand the principles upon which the EU is founded, and to effect an early withdrawal, pursuant to the relevant UN resolutions, of their forces in accordance with a specific timetable; whereas it expressed its belief that such a withdrawal of Turkish forces is a necessary step forward on the way to further easing tension, resuming dialogue between the parties and preparing for a lasting solution; whereas it called on the Turkish authorities to recognise the Republic of Cyprus; whereas it drew the attention of the Turkish authorities to the fact that the negotiations concerned are intergovernmental negotiations between Turkey on the one hand and the 25 Member States of the EU on the other, the Republic of Cyprus being one of those Member States; whereas it noted that the opening of negotiations obviously implies the recognition of Cyprus by Turkey, |
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D.

whereas on that occasion the European Parliament, whilst respecting the democratic will of the Greek Cypriot community, expressed its regret that it had not been able to reach a solution, and called on the Turkish authorities to maintain their constructive attitude in finding a settlement of the Cyprus question leading to an equitable solution, to be negotiated on the basis of the Annan planand the principles upon which the EU is founded, and to effect an early withdrawal, pursuant to the relevant UN resolutions, of their forces in accordance with a specific timetable; whereas it expressed its belief that such a withdrawal of Turkish forces is a necessary step forward on the way to further easing tension, resuming dialogue between the parties and preparing for a lasting solution; whereas it called on the Turkish authorities to recognise the Republic of Cyprus; whereas it drew the attention of the Turkish authorities to the fact that the negotiations concerned are intergovernmental negotiations between Turkey on the one hand and the 25 Member States of the EU on the other, the Republic of Cyprus being one of those Member States; whereas it noted that the opening of negotiations obviously implies the recognition of Cyprus by Turkey,

| E. | whereas the European Parliament also invited the Turkish authorities to abolish all existing restrictions applying to ships flying the Cypriot flag and involved in trade relating to a Member State of the EU, |
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E.

whereas the European Parliament also invited the Turkish authorities to abolish all existing restrictions applying to ships flying the Cypriot flag and involved in trade relating to a Member State of the EU,

| F. | whereas the European Council concluded on 17 December 2004 that Turkey fulfilled the Copenhagen criteria sufficiently well to start the accession negotiations on 3 October 2005, provided that it brought into force six outstanding pieces of legislation and that it signed, in accordance with its own commitment, the protocol extending the Ankara Agreement to the ten new Member States, and whereas the European Union must abide by previous commitments, |
| --- | --- |

F.

whereas the European Council concluded on 17 December 2004 that Turkey fulfilled the Copenhagen criteria sufficiently well to start the accession negotiations on 3 October 2005, provided that it brought into force six outstanding pieces of legislation and that it signed, in accordance with its own commitment, the protocol extending the Ankara Agreement to the ten new Member States, and whereas the European Union must abide by previous commitments,

| G. | whereas on 1 June 2005 Turkey brought into force the six outstanding pieces of legislation it was required to do, |
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G.

whereas on 1 June 2005 Turkey brought into force the six outstanding pieces of legislation it was required to do,

| H. | whereas on 29 July 2005 Turkey signed the Protocol extending the Ankara Agreement to the ten new Member States but at the same time, along with the Protocol, released a statement saying that the signing, ratification and implementation of this protocol did not amount to any form of recognition of the Republic of Cyprus referred to in the Protocol, |
| --- | --- |

H.

whereas on 29 July 2005 Turkey signed the Protocol extending the Ankara Agreement to the ten new Member States but at the same time, along with the Protocol, released a statement saying that the signing, ratification and implementation of this protocol did not amount to any form of recognition of the Republic of Cyprus referred to in the Protocol,

| I. | whereas at the same time Turkey is continuing the embargo on vessels flying the Cypriot flag as well as vessels approaching from harbours in the Republic of Cyprus, denying them access to Turkish ports, and on Cypriot airplanes, denying them overflight rights and landing rights at Turkish airports, |
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I.

whereas at the same time Turkey is continuing the embargo on vessels flying the Cypriot flag as well as vessels approaching from harbours in the Republic of Cyprus, denying them access to Turkish ports, and on Cypriot airplanes, denying them overflight rights and landing rights at Turkish airports,

| J. | whereas the Turkish authorities have also still not complied with demands regarding Armenian issues, as expressed by the European Parliament in its resolution of 18 June 1987 (4), |
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J.

whereas the Turkish authorities have also still not complied with demands regarding Armenian issues, as expressed by the European Parliament in its resolution of 18 June 1987 (4),

| K. | whereas a democratic and economically stable Turkey would substantially benefit the whole of Europe, |
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K.

whereas a democratic and economically stable Turkey would substantially benefit the whole of Europe,

| L. | whereas only by demonstrating readiness to embrace EU values through determined implementation and continued reform will Turkey be able to ensure the irreversibility of the process of reform and to gather the necessary support amongst the body of EU public opinion, |
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L.

whereas only by demonstrating readiness to embrace EU values through determined implementation and continued reform will Turkey be able to ensure the irreversibility of the process of reform and to gather the necessary support amongst the body of EU public opinion,

| M. | whereas the European Union's capacity to cope with enlargement is considered a prerequisite, as part of the Copenhagen criteria, and whereas, therefore, the European Union, for its part, must demonstrate that it is capable of political and institutional reform, |
| --- | --- |

M.

whereas the European Union's capacity to cope with enlargement is considered a prerequisite, as part of the Copenhagen criteria, and whereas, therefore, the European Union, for its part, must demonstrate that it is capable of political and institutional reform,

| 1. | Notes that the Commission and the Council take the view that Turkey has formally fulfilled the last conditions for starting the accession negotiations on 3 October 2005, namely the bringing into force of the six outstanding pieces of legislation and the signing, in accordance with its own undertaking, of the protocol extending the Ankara Agreement to the ten new Member States; is of the opinion that, on these and other points, the implementation still has to be fulfilled; |
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1.

Notes that the Commission and the Council take the view that Turkey has formally fulfilled the last conditions for starting the accession negotiations on 3 October 2005, namely the bringing into force of the six outstanding pieces of legislation and the signing, in accordance with its own undertaking, of the protocol extending the Ankara Agreement to the ten new Member States; is of the opinion that, on these and other points, the implementation still has to be fulfilled;

| 2. | Sincerely deplores the fact that Turkey has cast serious doubt on its willingness fully to implement all provisions of the Protocol by releasing at the same time, together with the Protocol, a statement saying that the signing, ratification and implementation of that Protocol does not amount to any form of recognition of the Republic of Cyprus referred to in the Protocol; reminds the Commission to provide Parliament with an answer from the Turkish Government as to whether the unilateral declaration is part of the ratification process in the Turkish Parliament; |
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2.

Sincerely deplores the fact that Turkey has cast serious doubt on its willingness fully to implement all provisions of the Protocol by releasing at the same time, together with the Protocol, a statement saying that the signing, ratification and implementation of that Protocol does not amount to any form of recognition of the Republic of Cyprus referred to in the Protocol; reminds the Commission to provide Parliament with an answer from the Turkish Government as to whether the unilateral declaration is part of the ratification process in the Turkish Parliament;

| 3. | Stresses that this unilateral declaration by Turkey does not form part of the Protocol and has no legal effect on Turkey's obligations under the Protocol, and should not be sent to the Grand National Assembly for ratification; |
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3.

Stresses that this unilateral declaration by Turkey does not form part of the Protocol and has no legal effect on Turkey's obligations under the Protocol, and should not be sent to the Grand National Assembly for ratification;

| 4. | Reminds Turkey that by maintaining restrictions against vessels flying the Cypriot flag and vessels approaching from harbours in the Republic of Cyprus, in the form of denial of access to Turkish ports, and against Cypriot aircraft, by denying them overflight rights and landing rights at Turkish airports, Turkey is in breach of the Ankara Agreement and the related Customs Union irrespective of the Protocol, as this practice infringes the principle of the free movement of goods; calls, therefore, on Turkey fully to implement all the provisions of the Protocol; |
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4.

Reminds Turkey that by maintaining restrictions against vessels flying the Cypriot flag and vessels approaching from harbours in the Republic of Cyprus, in the form of denial of access to Turkish ports, and against Cypriot aircraft, by denying them overflight rights and landing rights at Turkish airports, Turkey is in breach of the Ankara Agreement and the related Customs Union irrespective of the Protocol, as this practice infringes the principle of the free movement of goods; calls, therefore, on Turkey fully to implement all the provisions of the Protocol;

| 5. | Calls on Turkey to recognise the Armenian genocide; considers this recognition to be a prerequisite for accession to the European Union; |
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5.

Calls on Turkey to recognise the Armenian genocide; considers this recognition to be a prerequisite for accession to the European Union;

| 6. | Calls on the Commission to make, by the end of 2006, a full assessment of the implementation of the extended Ankara Agreement, and stresses that failure in the implementation of this agreement will have serious implications for the negotiation process and could even lead to a halting of the negotiation process; demands, therefore, that the implementation of the Customs Union be amongst the first chapters to be dealt with in the accession negotiations in 2006; |
| --- | --- |

6.

Calls on the Commission to make, by the end of 2006, a full assessment of the implementation of the extended Ankara Agreement, and stresses that failure in the implementation of this agreement will have serious implications for the negotiation process and could even lead to a halting of the negotiation process; demands, therefore, that the implementation of the Customs Union be amongst the first chapters to be dealt with in the accession negotiations in 2006;

| 7. | Expresses once again, whilst respecting the democratic will of the Greek Cypriot community, its regret that it has not been able to reach a solution, and calls on the Turkish authorities to maintain their constructive attitude in finding a settlement of the Cyprus question leading to an equitable solution, to be negotiated on the basis of the Annan plan and the principles upon which the EU is founded, and to effect an early withdrawal, pursuant to the relevant UN resolutions, of their forces in accordance with a specific timetable; believes that such a withdrawal of Turkish forces is a necessary step forward on the way to further easing tension, resuming dialogue between the parties and preparing for a lasting solution; calls once again on all parties in Cyprus to resume the UN-led talks on a comprehensive settlement to the conflict; |
| --- | --- |

7.

Expresses once again, whilst respecting the democratic will of the Greek Cypriot community, its regret that it has not been able to reach a solution, and calls on the Turkish authorities to maintain their constructive attitude in finding a settlement of the Cyprus question leading to an equitable solution, to be negotiated on the basis of the Annan plan and the principles upon which the EU is founded, and to effect an early withdrawal, pursuant to the relevant UN resolutions, of their forces in accordance with a specific timetable; believes that such a withdrawal of Turkish forces is a necessary step forward on the way to further easing tension, resuming dialogue between the parties and preparing for a lasting solution; calls once again on all parties in Cyprus to resume the UN-led talks on a comprehensive settlement to the conflict;

| 8. | Emphasises that a rapid normalisation of relations between Turkey and all EU Member States, including Turkey's recognition of the Republic of Cyprus, is a necessary component of the accession process; stresses that Turkey's recognition of the Republic of Cyprus can in no way be the subject of the negotiations; calls on the Turkish authorities to normalise relations between Turkey and all EU Member States and recognise the Republic of Cyprus as soon as possible, and stresses that failure to do so will have serious implications for the negotiation process and could even lead to a halting of the negotiation process; |
| --- | --- |

8.

Emphasises that a rapid normalisation of relations between Turkey and all EU Member States, including Turkey's recognition of the Republic of Cyprus, is a necessary component of the accession process; stresses that Turkey's recognition of the Republic of Cyprus can in no way be the subject of the negotiations; calls on the Turkish authorities to normalise relations between Turkey and all EU Member States and recognise the Republic of Cyprus as soon as possible, and stresses that failure to do so will have serious implications for the negotiation process and could even lead to a halting of the negotiation process;

| 9. | Calls on the Council also to deliver on promises and to put an end to the isolation of the Turkish Cypriot community; calls on the Council, under the current UK Presidency, to make renewed efforts to reach agreement on the financial aid package and on trade facilitation regulations concerning the northern part of Cyprus in order that the EU honour its own commitments with respect to the Turkish Cypriot community; |
| --- | --- |

9.

Calls on the Council also to deliver on promises and to put an end to the isolation of the Turkish Cypriot community; calls on the Council, under the current UK Presidency, to make renewed efforts to reach agreement on the financial aid package and on trade facilitation regulations concerning the northern part of Cyprus in order that the EU honour its own commitments with respect to the Turkish Cypriot community;

| 10. | Welcomes the adoption and entry into force on 1 June 2005 of six important pieces of legislation, a step which was established by the European Council in December 2004 as a condition for the opening of the negotiations; notes that concerns remain about certain elements of the laws adopted; is in particular concerned about the complaints made by the public prosecutor against Orhan Pamuk which are in breach of the European Convention for the Protection of Human Rights and Fundamental Freedoms, and calls on the Turkish Government to guarantee freedom of opinion and to further reform the penal code with regard, in particular, to Article 301/1 thereof; also expresses its concern about Article 305 of the Turkish Penal Code, which criminalises ‘acts against the fundamental national interest’, and a regulation implementing the law on associations, which retains a number of restrictions, including a priori authorisation of foreign funding; notes that serious concerns also remain regarding the insufficient legal proposals regarding the functioning of religious communities (Law on Foundations); |
| --- | --- |

10.

Welcomes the adoption and entry into force on 1 June 2005 of six important pieces of legislation, a step which was established by the European Council in December 2004 as a condition for the opening of the negotiations; notes that concerns remain about certain elements of the laws adopted; is in particular concerned about the complaints made by the public prosecutor against Orhan Pamuk which are in breach of the European Convention for the Protection of Human Rights and Fundamental Freedoms, and calls on the Turkish Government to guarantee freedom of opinion and to further reform the penal code with regard, in particular, to Article 301/1 thereof; also expresses its concern about Article 305 of the Turkish Penal Code, which criminalises ‘acts against the fundamental national interest’, and a regulation implementing the law on associations, which retains a number of restrictions, including a priori authorisation of foreign funding; notes that serious concerns also remain regarding the insufficient legal proposals regarding the functioning of religious communities (Law on Foundations);

| 11. | Insists that the negotiating framework should reflect the political priorities referred to by the European Parliament in its various resolutions calling on Turkey to satisfy fully the following political criteria: stability of institutions guaranteeing democracy, the rule of law, human rights and respect for, and protection of, minorities; asks therefore for each session of the negotiations at ministerial level to be preceded by an assessment of the political criteria in both theory and practice, thus exerting permanent pressure on the Turkish authorities to maintain the pace of the necessary reforms; considers, furthermore, that a full programme of clear targets, timeframes and deadlines should be fixed for the fulfilment of political criteria; |
| --- | --- |

11.

Insists that the negotiating framework should reflect the political priorities referred to by the European Parliament in its various resolutions calling on Turkey to satisfy fully the following political criteria: stability of institutions guaranteeing democracy, the rule of law, human rights and respect for, and protection of, minorities; asks therefore for each session of the negotiations at ministerial level to be preceded by an assessment of the political criteria in both theory and practice, thus exerting permanent pressure on the Turkish authorities to maintain the pace of the necessary reforms; considers, furthermore, that a full programme of clear targets, timeframes and deadlines should be fixed for the fulfilment of political criteria;

| 12. | Calls on the Council to respect fully all elements of the framework for negotiations as laid down in the conclusions of the meeting of the European Council of 17 December 2004; emphasises in particular in this framework that the shared objective of the negotiations is accession, that these negotiations are an open-ended process, the outcome of which cannot be guaranteed in advance, and that, while taking account of all Copenhagen criteria, if the candidate State is not in a position to assume in full all the obligations of membership, it must be ensured that the candidate State concerned is fully anchored in the European structures through the strongest possible bond; |
| --- | --- |

12.

Calls on the Council to respect fully all elements of the framework for negotiations as laid down in the conclusions of the meeting of the European Council of 17 December 2004; emphasises in particular in this framework that the shared objective of the negotiations is accession, that these negotiations are an open-ended process, the outcome of which cannot be guaranteed in advance, and that, while taking account of all Copenhagen criteria, if the candidate State is not in a position to assume in full all the obligations of membership, it must be ensured that the candidate State concerned is fully anchored in the European structures through the strongest possible bond;

| 13. | Calls on the Council and the Commission in this context to report annually to the European Parliament and the national parliaments of the EU Member States on the progress made by Turkey in fulfilling the political criteria, and to include in this report all verified cases of torture reported in that year and the number of Turkish asylum seekers accepted by the EU Member States during that year; |
| --- | --- |

13.

Calls on the Council and the Commission in this context to report annually to the European Parliament and the national parliaments of the EU Member States on the progress made by Turkey in fulfilling the political criteria, and to include in this report all verified cases of torture reported in that year and the number of Turkish asylum seekers accepted by the EU Member States during that year;

| 14. | Urges the Commission, once the negotiations on the various chapters have started, to recommend, in the event of a serious and persistent breach of the principles of liberty, democracy, respect for human rights and fundamental freedoms, the rights of minorities and the rule of law, and after consultation of the European Parliament, the suspension of negotiations, in line with the Treaty on European Union; |
| --- | --- |

14.

Urges the Commission, once the negotiations on the various chapters have started, to recommend, in the event of a serious and persistent breach of the principles of liberty, democracy, respect for human rights and fundamental freedoms, the rights of minorities and the rule of law, and after consultation of the European Parliament, the suspension of negotiations, in line with the Treaty on European Union;

| 15. | Notes that the budgetary impact of Turkey's accession to the EU can only be fully assessed once the parameters for the financial negotiations with Turkey have been defined in the context of the financial perspective from 2014 onwards; |
| --- | --- |

15.

Notes that the budgetary impact of Turkey's accession to the EU can only be fully assessed once the parameters for the financial negotiations with Turkey have been defined in the context of the financial perspective from 2014 onwards;

| 16. | Stresses that the Commission's recommendation to negotiate long transition periods, specific arrangements in areas such as structural policies and agriculture and permanent safeguards for the free movement of workers in the accession agreement should not have a negative impact on Turkey's efforts to align with the acquis; |
| --- | --- |

16.

Stresses that the Commission's recommendation to negotiate long transition periods, specific arrangements in areas such as structural policies and agriculture and permanent safeguards for the free movement of workers in the accession agreement should not have a negative impact on Turkey's efforts to align with the acquis;

| 17. | Stresses that the opening of negotiations will be the starting point for a long-lasting process, which by its very nature is an open-ended process and does not lead ‘a priori’ and automatically to accession; emphasises, however, that the objective of the negotiations is Turkish EU membership, but that the realisation of this ambition will depend on the efforts of both sides; accession is thus not the automatic consequence of the start of the negotiations; |
| --- | --- |

17.

Stresses that the opening of negotiations will be the starting point for a long-lasting process, which by its very nature is an open-ended process and does not lead ‘a priori’ and automatically to accession; emphasises, however, that the objective of the negotiations is Turkish EU membership, but that the realisation of this ambition will depend on the efforts of both sides; accession is thus not the automatic consequence of the start of the negotiations;

| 18. | Emphasises that the Nice Treaty is not an acceptable basis for further decisions on the accession of any further new Member States and therefore insists that the necessary reforms be brought into force within the framework of the constitutional process; |
| --- | --- |

18.

Emphasises that the Nice Treaty is not an acceptable basis for further decisions on the accession of any further new Member States and therefore insists that the necessary reforms be brought into force within the framework of the constitutional process;

| 19. | Recalls that, in accordance with the conclusions of the Copenhagen European Council in 1993, the Union's capacity to absorb Turkey while maintaining the momentum of European integration is an important consideration in the general interest of both the Union and Turkey; supports the Commission in monitoring during the negotiations the Union's capacity to absorb Turkey, and therefore reminds the Commission of its demand, included in the last European Parliament resolution on Turkey's progress towards accession, adopted on 15 December 2004, to receive the follow-up to the impact study in 2005, which would provide useful information about this important aspect of the question; |
| --- | --- |

19.

Recalls that, in accordance with the conclusions of the Copenhagen European Council in 1993, the Union's capacity to absorb Turkey while maintaining the momentum of European integration is an important consideration in the general interest of both the Union and Turkey; supports the Commission in monitoring during the negotiations the Union's capacity to absorb Turkey, and therefore reminds the Commission of its demand, included in the last European Parliament resolution on Turkey's progress towards accession, adopted on 15 December 2004, to receive the follow-up to the impact study in 2005, which would provide useful information about this important aspect of the question;

| 20. | Instructs its President to forward this resolution to the Council, the Commission, the Secretary General of the Council of Europe, the President of the European Court of Human Rights and the Government and Parliament of Turkey. |
| --- | --- |

20.

Instructs its President to forward this resolution to the Council, the Commission, the Secretary General of the Council of Europe, the President of the European Court of Human Rights and the Government and Parliament of Turkey.

---

(1)  OJ C 226 E, 15.9.2005, p. 189.

(2)  Texts Adopted, P6_TA(2005)0287.

(3)  OJ C 104 E, 30.4.2004, p. 720.

(4)  OJ C 190, 20.7.1987, p. 119.

P6_TA(2005)0351

Taking up and pursuit of the business of credit institutions ***I

European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council re-casting Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (COM(2004)0486 — C6-0141/2004 — 2004/0155(COD))

(Codecision procedure: first reading)

The European Parliament,

| — | having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0486) (1), |
| --- | --- |

—

having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0486) (1),

| — | having regard to Article 251(2) and Article 47(2) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0141/2004), |
| --- | --- |

—

having regard to Article 251(2) and Article 47(2) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0141/2004),

| — | having regard to Rule 51 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 51 of its Rules of Procedure,

| — | having regard to the report of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Legal Affairs (A6-0257/2005), |
| --- | --- |

—

having regard to the report of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Legal Affairs (A6-0257/2005),

| 1. | Approves the Commission proposal as amended; |
| --- | --- |

1.

Approves the Commission proposal as amended;

| 2. | Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text; |
| --- | --- |

2.

Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

| 3. | Instructs its President to forward its position to the Council and Commission. |
| --- | --- |

3.

Instructs its President to forward its position to the Council and Commission.

---

(1)  Not yet published in OJ.

P6_TC1-COD(2004)0155

Position of the European Parliament adopted at first reading on 28 September 2005 with a view to the adoption of Directive 2006/.../ΕC of the European Parliament and of the Council relating to the taking up and pursuit of the business of credit institutions (recast)

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular the first and third sentences of Article 47(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the Opinion of the European Economic and Social Committee (1),

Having regard to the Opinion of the European Central Bank (2),

Acting in accordance with the procedure laid down in Article 251 of the Treaty (3),

Whereas:

| (1) | Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (4) has been significantly amended on several occasions. Now that new amendments are being made to the said Directive, it is desirable, in order to clarify matters, that it should be recast. |
| --- | --- |

(1)

Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (4) has been significantly amended on several occasions. Now that new amendments are being made to the said Directive, it is desirable, in order to clarify matters, that it should be recast.

| (2) | In order to make it easier to take up and pursue the business of credit institutions, it is necessary to eliminate the most obstructive differences between the laws of the Member States as regards the rules to which these institutions are subject. |
| --- | --- |

(2)

In order to make it easier to take up and pursue the business of credit institutions, it is necessary to eliminate the most obstructive differences between the laws of the Member States as regards the rules to which these institutions are subject.

| (3) | This Directive constitutes the essential instrument for the achievement of the internal market from the point of view of both the freedom of establishment and the freedom to provide financial services, in the field of credit institutions. |
| --- | --- |

(3)

This Directive constitutes the essential instrument for the achievement of the internal market from the point of view of both the freedom of establishment and the freedom to provide financial services, in the field of credit institutions.

| (4) | The Commission Communication of 11 May 1999 entitled ‘Implementing the framework for financial markets: Action plan’, listed a number of goals that need to be achieved in order to complete the internal market in financial services. The Lisbon European Council of 23 and 24 March 2000 set the goal of implementing the action plan by 2005. Recasting of the provisions on own funds is a key element of the action plan. |
| --- | --- |

(4)

The Commission Communication of 11 May 1999 entitled ‘Implementing the framework for financial markets: Action plan’, listed a number of goals that need to be achieved in order to complete the internal market in financial services. The Lisbon European Council of 23 and 24 March 2000 set the goal of implementing the action plan by 2005. Recasting of the provisions on own funds is a key element of the action plan.

| (5) | Measures to coordinate credit institutions should, both in order to protect savings and to create equal conditions of competition between these institutions, apply to all of them. Due regard should however be had to the objective differences in their statutes and their proper aims as laid down by national laws. |
| --- | --- |

(5)

Measures to coordinate credit institutions should, both in order to protect savings and to create equal conditions of competition between these institutions, apply to all of them. Due regard should however be had to the objective differences in their statutes and their proper aims as laid down by national laws.

| (6) | The scope of those measures should therefore be as broad as possible, covering all institutions whose business is to receive repayable funds from the public, whether in the form of deposits or in other forms such as the continuing issue of bonds and other comparable securities and to grant credits for their own account. Exceptions should be provided for in the case of certain credit institutions to which this Directive cannot apply. The provisions of this Directive should not prejudice the application of national laws which provide for special supplementary authorisations permitting credit institutions to carry on specific activities or undertake specific kinds of operations. |
| --- | --- |

(6)

The scope of those measures should therefore be as broad as possible, covering all institutions whose business is to receive repayable funds from the public, whether in the form of deposits or in other forms such as the continuing issue of bonds and other comparable securities and to grant credits for their own account. Exceptions should be provided for in the case of certain credit institutions to which this Directive cannot apply. The provisions of this Directive should not prejudice the application of national laws which provide for special supplementary authorisations permitting credit institutions to carry on specific activities or undertake specific kinds of operations.

| (7) | It is appropriate to effect only the essential harmonisation necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision systems, making possible the granting of a single licence recognised throughout the Community and the application of the principle of home Member State prudential supervision. Therefore, the requirement that a programme of operations be produced should be seen merely as a factor enabling the competent authorities to decide on the basis of more precise information using objective criteria. A measure of flexibility should nonetheless be possible as regards the requirements on the legal form of credit institutions concerning the protection of banking names. |
| --- | --- |

(7)

It is appropriate to effect only the essential harmonisation necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision systems, making possible the granting of a single licence recognised throughout the Community and the application of the principle of home Member State prudential supervision. Therefore, the requirement that a programme of operations be produced should be seen merely as a factor enabling the competent authorities to decide on the basis of more precise information using objective criteria. A measure of flexibility should nonetheless be possible as regards the requirements on the legal form of credit institutions concerning the protection of banking names.

| (8) | Since the objectives of this Directive, namely the introduction of rules concerning the taking up and pursuit of the business of credit institutions, and their prudential supervision, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and the effects of the proposed action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives. |
| --- | --- |

(8)

Since the objectives of this Directive, namely the introduction of rules concerning the taking up and pursuit of the business of credit institutions, and their prudential supervision, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and the effects of the proposed action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

| (9) | Equivalent financial requirements for credit institutions are necessary to ensure similar safeguards for savers and fair conditions of competition between comparable groups of credit institutions. Pending further coordination, appropriate structural ratios should be formulated making it possible within the framework of cooperation between national authorities to observe, in accordance with standard methods, the position of comparable types of credit institutions. This procedure should help to bring about the gradual approximation of the systems of coefficients established and applied by the Member States. It is necessary, however to make a distinction between coefficients intended to ensure the sound management of credit institutions and those established for the purposes of economic and monetary policy. |
| --- | --- |

(9)

Equivalent financial requirements for credit institutions are necessary to ensure similar safeguards for savers and fair conditions of competition between comparable groups of credit institutions. Pending further coordination, appropriate structural ratios should be formulated making it possible within the framework of cooperation between national authorities to observe, in accordance with standard methods, the position of comparable types of credit institutions. This procedure should help to bring about the gradual approximation of the systems of coefficients established and applied by the Member States. It is necessary, however to make a distinction between coefficients intended to ensure the sound management of credit institutions and those established for the purposes of economic and monetary policy.

| (10) | The principles of mutual recognition and home Member State supervision require that Member States' competent authorities should not grant or should withdraw an authorisation where factors such as the content of the activities programmes, the geographical distribution of activities or the activities actually carried on indicate clearly that a credit institution has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it carries on or intends to carry on the greater Part of its activities. Where there is no such clear indication, but the majority of the total assets of the entities in a banking group are located in another Member State the competent authorities of which are responsible for exercising supervision on a consolidated basis, in the context of Articles 125 and 126 responsibility for exercising supervision on a consolidated basis should be changed only with the agreement of those competent authorities. A credit institution which is a legal person should be authorised in the Member State in which it has its registered office. A credit institution which is not a legal person should have its head office in the Member State in which it has been authorised. In addition, Member States should require that a credit institution's head office always be situated in its home Member State and that it actually operates there. |
| --- | --- |

(10)

The principles of mutual recognition and home Member State supervision require that Member States' competent authorities should not grant or should withdraw an authorisation where factors such as the content of the activities programmes, the geographical distribution of activities or the activities actually carried on indicate clearly that a credit institution has opted for the legal system of one Member State for the purpose of evading the stricter standards in force in another Member State within whose territory it carries on or intends to carry on the greater Part of its activities. Where there is no such clear indication, but the majority of the total assets of the entities in a banking group are located in another Member State the competent authorities of which are responsible for exercising supervision on a consolidated basis, in the context of Articles 125 and 126 responsibility for exercising supervision on a consolidated basis should be changed only with the agreement of those competent authorities. A credit institution which is a legal person should be authorised in the Member State in which it has its registered office. A credit institution which is not a legal person should have its head office in the Member State in which it has been authorised. In addition, Member States should require that a credit institution's head office always be situated in its home Member State and that it actually operates there.

| (11) | The competent authorities should not authorise or continue the authorisation of a credit institution where they are liable to be prevented from effectively exercising their supervisory functions by the close links between that institution and other natural or legal persons. Credit institutions already authorised should also satisfy the competent authorities in that respect. |
| --- | --- |

(11)

The competent authorities should not authorise or continue the authorisation of a credit institution where they are liable to be prevented from effectively exercising their supervisory functions by the close links between that institution and other natural or legal persons. Credit institutions already authorised should also satisfy the competent authorities in that respect.

| (12) | The reference to the supervisory authorities' effective exercise of their supervisory functions covers supervision on a consolidated basis which should be exercised over a credit institution where the provisions of Community law so provide. In such cases, the authorities applied to for authorisation should be able to identify the authorities competent to exercise supervision on a consolidated basis over that credit institution. |
| --- | --- |

(12)

The reference to the supervisory authorities' effective exercise of their supervisory functions covers supervision on a consolidated basis which should be exercised over a credit institution where the provisions of Community law so provide. In such cases, the authorities applied to for authorisation should be able to identify the authorities competent to exercise supervision on a consolidated basis over that credit institution.

| (13) | This Directive enables Member States and/or competent authorities to apply capital requirements on a solo and consolidated basis, and to disapply solo where they deem this appropriate. Solo, consolidated and cross-border consolidated supervision are useful tools in overseeing credit institutions. This Directive enables competent authorities to support cross border institutions by facilitating cooperation between them. In particular, the competent authorities should continue to make use of Articles 42, 131 and 141 to coordinate their activities and information requests. |
| --- | --- |

(13)

This Directive enables Member States and/or competent authorities to apply capital requirements on a solo and consolidated basis, and to disapply solo where they deem this appropriate. Solo, consolidated and cross-border consolidated supervision are useful tools in overseeing credit institutions. This Directive enables competent authorities to support cross border institutions by facilitating cooperation between them. In particular, the competent authorities should continue to make use of Articles 42, 131 and 141 to coordinate their activities and information requests.

| (14) | Credit institutions authorised in their home Member States should be allowed to carry on, throughout the Community, any or all of the activities listed in Annex I by establishing branches or by providing services. |
| --- | --- |

(14)

Credit institutions authorised in their home Member States should be allowed to carry on, throughout the Community, any or all of the activities listed in Annex I by establishing branches or by providing services.

| (15) | The Member States may also establish stricter rules than those laid down in Article 9(1), first subparagraph, Article 9(2) and Articles 12, 19 to 21, 44 to 52, 75 and 120 to 122 for credit institutions authorised by their competent authorities. The Member States may also require that Article 123 be complied with on an individual or other basis, and that the sub-consolidation described in Article 73(2) be applied to other levels within a group. |
| --- | --- |

(15)

The Member States may also establish stricter rules than those laid down in Article 9(1), first subparagraph, Article 9(2) and Articles 12, 19 to 21, 44 to 52, 75 and 120 to 122 for credit institutions authorised by their competent authorities. The Member States may also require that Article 123 be complied with on an individual or other basis, and that the sub-consolidation described in Article 73(2) be applied to other levels within a group.

| (16) | It is appropriate to extend mutual recognition to the activities listed in Annex I when they are carried on by financial institutions which are subsidiaries of credit institutions, provided that such subsidiaries are covered by the consolidated supervision of their parent undertakings and meet certain strict conditions. |
| --- | --- |

(16)

It is appropriate to extend mutual recognition to the activities listed in Annex I when they are carried on by financial institutions which are subsidiaries of credit institutions, provided that such subsidiaries are covered by the consolidated supervision of their parent undertakings and meet certain strict conditions.

| (17) | The host Member State should be able, in connection with the exercise of the right of establishment and the freedom to provide services, to require compliance with specific provisions of its own national laws or regulations on the Part of institutions not authorised as credit institutions in their home Member States and with regard to activities not listed in Annex I provided that, on the one hand, such provisions are compatible with Community law and are intended to protect the general good and that, on the other hand, such institutions or such activities are not subject to equivalent rules under this legislation or regulations of their home Member States. |
| --- | --- |

(17)

The host Member State should be able, in connection with the exercise of the right of establishment and the freedom to provide services, to require compliance with specific provisions of its own national laws or regulations on the Part of institutions not authorised as credit institutions in their home Member States and with regard to activities not listed in Annex I provided that, on the one hand, such provisions are compatible with Community law and are intended to protect the general good and that, on the other hand, such institutions or such activities are not subject to equivalent rules under this legislation or regulations of their home Member States.

| (18) | The Member States should ensure that there are no obstacles to carrying on activities receiving mutual recognition in the same manner as in the home Member State, as long as the latter do not conflict with legal provisions protecting the general good in the host Member State. |
| --- | --- |

(18)

The Member States should ensure that there are no obstacles to carrying on activities receiving mutual recognition in the same manner as in the home Member State, as long as the latter do not conflict with legal provisions protecting the general good in the host Member State.

| (19) | The rules governing branches of credit institutions having their head office outside the Community should be analogous in all Member States. It is important to provide that such rules may not be more favourable than those for branches of institutions from another Member State. The Community should be able to conclude agreements with third countries providing for the application of rules which accord such branches the same treatment throughout its territory. The branches of credit institutions authorised in third countries should not enjoy the freedom to provide services under the second paragraph of Article 49 of the Treaty or the freedom of establishment in Member States other than those in which they are established. |
| --- | --- |

(19)

The rules governing branches of credit institutions having their head office outside the Community should be analogous in all Member States. It is important to provide that such rules may not be more favourable than those for branches of institutions from another Member State. The Community should be able to conclude agreements with third countries providing for the application of rules which accord such branches the same treatment throughout its territory. The branches of credit institutions authorised in third countries should not enjoy the freedom to provide services under the second paragraph of Article 49 of the Treaty or the freedom of establishment in Member States other than those in which they are established.

| (20) | Agreement should be reached, on the basis of reciprocity, between the Community and third countries with a view to allowing the practical exercise of consolidated supervision over the largest possible geographical area. |
| --- | --- |

(20)

Agreement should be reached, on the basis of reciprocity, between the Community and third countries with a view to allowing the practical exercise of consolidated supervision over the largest possible geographical area.

| (21) | Responsibility for supervising the financial soundness of a credit institution, and in particular its solvency, should lay with its home Member State. The host Member State's competent authorities should be responsible for the supervision of the liquidity of the branches and monetary policies. The supervision of market risk should be the subject of close cooperation between the competent authorities of the home and host Member States. |
| --- | --- |

(21)

Responsibility for supervising the financial soundness of a credit institution, and in particular its solvency, should lay with its home Member State. The host Member State's competent authorities should be responsible for the supervision of the liquidity of the branches and monetary policies. The supervision of market risk should be the subject of close cooperation between the competent authorities of the home and host Member States.

| (22) | The smooth operation of the internal banking market requires not only legal rules but also close and regular cooperation and significantly enhanced convergence of regulatory and supervisory practices between the competent authorities of the Member States. To this end, in particular, consideration of problems concerning individual credit institutions and the mutual exchange of information should take place in the Committee of European Banking Supervisors set up by Commission Decision 2004/5/EC (5). That mutual information procedure should not in any case replace bilateral cooperation. Without prejudice to their own powers of control, the competent authorities of the host Member States should be able, in an emergency, on their own initiative or following the initiative of the competent authorities of home Member State, to verify that the activities of a credit institution established within their territories comply with the relevant laws and with the principles of sound administrative and accounting procedures and adequate internal control. |
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(22)

The smooth operation of the internal banking market requires not only legal rules but also close and regular cooperation and significantly enhanced convergence of regulatory and supervisory practices between the competent authorities of the Member States. To this end, in particular, consideration of problems concerning individual credit institutions and the mutual exchange of information should take place in the Committee of European Banking Supervisors set up by Commission Decision 2004/5/EC (5). That mutual information procedure should not in any case replace bilateral cooperation. Without prejudice to their own powers of control, the competent authorities of the host Member States should be able, in an emergency, on their own initiative or following the initiative of the competent authorities of home Member State, to verify that the activities of a credit institution established within their territories comply with the relevant laws and with the principles of sound administrative and accounting procedures and adequate internal control.

| (23) | It is appropriate to allow the exchange of information between the competent authorities and authorities or bodies which, by virtue of their function, help to strengthen the stability of the financial system. In order to preserve the confidential nature of the information forwarded, the list of addressees should remain within strict limits. |
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(23)

It is appropriate to allow the exchange of information between the competent authorities and authorities or bodies which, by virtue of their function, help to strengthen the stability of the financial system. In order to preserve the confidential nature of the information forwarded, the list of addressees should remain within strict limits.

| (24) | Certain behaviour, such as fraud and insider offences, is liable to affect the stability, including the integrity, of the financial system, even when involving institutions other than credit institutions. It is necessary to specify the conditions under which exchange of information in such cases is authorised. |
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(24)

Certain behaviour, such as fraud and insider offences, is liable to affect the stability, including the integrity, of the financial system, even when involving institutions other than credit institutions. It is necessary to specify the conditions under which exchange of information in such cases is authorised.

| (25) | Where it is stipulated that information may be disclosed only with the express agreement of the competent authorities, these should be able, where appropriate, to make their agreement subject to compliance with strict conditions. |
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(25)

Where it is stipulated that information may be disclosed only with the express agreement of the competent authorities, these should be able, where appropriate, to make their agreement subject to compliance with strict conditions.

| (26) | Exchanges of information between, on the one hand, the competent authorities and, on the other, central banks and other bodies with a similar function in their capacity as monetary authorities and, where appropriate, other public authorities responsible for supervising payment systems should also be authorised. |
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(26)

Exchanges of information between, on the one hand, the competent authorities and, on the other, central banks and other bodies with a similar function in their capacity as monetary authorities and, where appropriate, other public authorities responsible for supervising payment systems should also be authorised.

| (27) | For the purpose of strengthening the prudential supervision of credit institutions and the protection of clients of credit institutions, auditors should have a duty to report promptly to the competent authorities, wherever, during the performance of their tasks, they become aware of certain facts which are liable to have a serious effect on the financial situation or the administrative and accounting organisation of a credit institution. For the same reason Member States should also provide that such a duty applies in all circumstances where such facts are discovered by an auditor during the performance of his tasks in an undertaking which has close links with a credit institution. The duty of auditors to communicate, where appropriate, to the competent authorities certain facts and decisions concerning a credit institution which they discover during the performance of their tasks in a non-financial undertaking should not in itself change the nature of their tasks in that undertaking nor the manner in which they should perform those tasks in that undertaking. |
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(27)

For the purpose of strengthening the prudential supervision of credit institutions and the protection of clients of credit institutions, auditors should have a duty to report promptly to the competent authorities, wherever, during the performance of their tasks, they become aware of certain facts which are liable to have a serious effect on the financial situation or the administrative and accounting organisation of a credit institution. For the same reason Member States should also provide that such a duty applies in all circumstances where such facts are discovered by an auditor during the performance of his tasks in an undertaking which has close links with a credit institution. The duty of auditors to communicate, where appropriate, to the competent authorities certain facts and decisions concerning a credit institution which they discover during the performance of their tasks in a non-financial undertaking should not in itself change the nature of their tasks in that undertaking nor the manner in which they should perform those tasks in that undertaking.

| (28) | This Directive specifies that for certain own funds items qualifying criteria should be specified, without prejudice to the possibility of Member States to apply more stringent provisions. |
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(28)

This Directive specifies that for certain own funds items qualifying criteria should be specified, without prejudice to the possibility of Member States to apply more stringent provisions.

| (29) | According to the nature of the items constituting own funds, this Directive distinguishes between on the one hand, items constituting original own funds and, on the other, those constituting additional own funds. |
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(29)

According to the nature of the items constituting own funds, this Directive distinguishes between on the one hand, items constituting original own funds and, on the other, those constituting additional own funds.

| (30) | To reflect the fact that items constituting additional own funds are not of the same nature as those constituting original own funds, the amount of the former included in own funds should not exceed the original own funds. Moreover, the amount of certain items of additional own funds included should not exceed one half of the original own funds. |
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(30)

To reflect the fact that items constituting additional own funds are not of the same nature as those constituting original own funds, the amount of the former included in own funds should not exceed the original own funds. Moreover, the amount of certain items of additional own funds included should not exceed one half of the original own funds.

| (31) | In order to avoid distortions of competition, public credit institutions should not include in their own funds guarantees granted them by the Member States or local authorities. |
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(31)

In order to avoid distortions of competition, public credit institutions should not include in their own funds guarantees granted them by the Member States or local authorities.

| (32) | Whenever in the course of supervision it is necessary to determine the amount of the consolidated own funds of a group of credit institutions, the calculation should be effected in accordance with this Directive. |
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(32)

Whenever in the course of supervision it is necessary to determine the amount of the consolidated own funds of a group of credit institutions, the calculation should be effected in accordance with this Directive.

| (33) | The precise accounting technique to be used for the calculation of own funds, their adequacy for the risk to which a credit institution is exposed, and for the assessment of the concentration of exposures should take account of the provisions of Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (6), which incorporates certain adaptations of the provisions of Seventh Council Directive 83/349/EEC of 13 June 1983 on consolidated accounts (7) or of Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (8), whichever governs the accounting of the credit institutions under national law. |
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(33)

The precise accounting technique to be used for the calculation of own funds, their adequacy for the risk to which a credit institution is exposed, and for the assessment of the concentration of exposures should take account of the provisions of Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (6), which incorporates certain adaptations of the provisions of Seventh Council Directive 83/349/EEC of 13 June 1983 on consolidated accounts (7) or of Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application of international accounting standards (8), whichever governs the accounting of the credit institutions under national law.

| (34) | Minimum capital requirements play a central role in the supervision of credit institutions and in the mutual recognition of supervisory techniques. In that respect, the provisions on minimum capital requirements should be considered in conjunction with other specific instruments also harmonising the fundamental techniques for the supervision of credit institutions. |
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(34)

Minimum capital requirements play a central role in the supervision of credit institutions and in the mutual recognition of supervisory techniques. In that respect, the provisions on minimum capital requirements should be considered in conjunction with other specific instruments also harmonising the fundamental techniques for the supervision of credit institutions.

| (35) | In order to prevent distortions of competition and to strengthen the banking system in the internal market, it is appropriate to lay down common minimum capital requirements. |
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(35)

In order to prevent distortions of competition and to strengthen the banking system in the internal market, it is appropriate to lay down common minimum capital requirements.

| (36) | For the purposes of ensuring adequate solvency it is important to lay down minimum capital requirements which weight assets and off-balance-sheet items according to the degree of risk. |
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(36)

For the purposes of ensuring adequate solvency it is important to lay down minimum capital requirements which weight assets and off-balance-sheet items according to the degree of risk.

| (37) | On this point, on 26 June 2004 the Basel Committee on Banking Supervision adopted a framework agreement on the international convergence of capital measurement and capital requirements. The provisions in this Directive on the minimum capital requirements of credit institutions, and the minimum capital provisions in Directive 2006/.../EC of the European Parliament and of the Council of ... on the capital adequacy of investment firms and credit institutions (9), form an equivalent to the provisions of the Basel framework agreement. |
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(37)

On this point, on 26 June 2004 the Basel Committee on Banking Supervision adopted a framework agreement on the international convergence of capital measurement and capital requirements. The provisions in this Directive on the minimum capital requirements of credit institutions, and the minimum capital provisions in Directive 2006/.../EC of the European Parliament and of the Council of ... on the capital adequacy of investment firms and credit institutions (9), form an equivalent to the provisions of the Basel framework agreement.

| (38) | It is essential to take account of the diversity of credit institutions in the Community by providing alternative approaches to the calculation of minimum capital requirements for credit risk incorporating different levels of risk-sensitivity and requiring different degrees of sophistication. Use of external ratings and credit institutions' own estimates of individual credit risk parameters represents a significant enhancement in the risk-sensitivity and prudential soundness of the credit risk rules. There should be appropriate incentives for credit institutions to move towards the more risk-sensitive approaches. In producing the estimates needed to apply the approaches to credit risk of this Directive, credit institutions will have to adjust their data processing needs to their clients' legitimate data protection interests as governed by the existing Community legislation on data protection, while enhancing credit risk measurement and management processes of credit institutions to make methods for determining credit institutions' regulatory own funds requirements available that reflect the sophistication of individual credit institutions' processes. The processing of data should be in accordance with the rules on transfer of personal data laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (10). In this regard, the processing of data in connection with the incurring and management of exposures to customers should be considered to include the development and validation of credit risk management and measurement systems. That serves not only to fulfil the legitimate interest of credit institutions but also the purpose of this Directive, to use better methods for risk measurement and management and also use them for regulatory own funds purposes. |
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(38)

It is essential to take account of the diversity of credit institutions in the Community by providing alternative approaches to the calculation of minimum capital requirements for credit risk incorporating different levels of risk-sensitivity and requiring different degrees of sophistication. Use of external ratings and credit institutions' own estimates of individual credit risk parameters represents a significant enhancement in the risk-sensitivity and prudential soundness of the credit risk rules. There should be appropriate incentives for credit institutions to move towards the more risk-sensitive approaches. In producing the estimates needed to apply the approaches to credit risk of this Directive, credit institutions will have to adjust their data processing needs to their clients' legitimate data protection interests as governed by the existing Community legislation on data protection, while enhancing credit risk measurement and management processes of credit institutions to make methods for determining credit institutions' regulatory own funds requirements available that reflect the sophistication of individual credit institutions' processes. The processing of data should be in accordance with the rules on transfer of personal data laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (10). In this regard, the processing of data in connection with the incurring and management of exposures to customers should be considered to include the development and validation of credit risk management and measurement systems. That serves not only to fulfil the legitimate interest of credit institutions but also the purpose of this Directive, to use better methods for risk measurement and management and also use them for regulatory own funds purposes.

| (39) | With regard to the use of both external and an institution's own estimates or internal ratings, account should be taken of the fact that, at present, only the latter are drawn up by an entity — the financial institution itself — which is subject to a Community authorisation process. In the case of external ratings use is made of the products of what are known as recognised rating agencies, which in the Community are not currently subject to an authorisation process. In view of the importance of external ratings in connection with the calculation of capital requirements under this Directive, appropriate future authorisation and supervisory process for rating agencies need to be kept under review. |
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(39)

With regard to the use of both external and an institution's own estimates or internal ratings, account should be taken of the fact that, at present, only the latter are drawn up by an entity — the financial institution itself — which is subject to a Community authorisation process. In the case of external ratings use is made of the products of what are known as recognised rating agencies, which in the Community are not currently subject to an authorisation process. In view of the importance of external ratings in connection with the calculation of capital requirements under this Directive, appropriate future authorisation and supervisory process for rating agencies need to be kept under review.

| (40) | The minimum capital requirements should be proportionate to the risks addressed. In particular the reduction in risk levels deriving from having a large number of relatively small exposures should be reflected in the requirements. |
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(40)

The minimum capital requirements should be proportionate to the risks addressed. In particular the reduction in risk levels deriving from having a large number of relatively small exposures should be reflected in the requirements.

| (41) | The provisions of this Directive respect the principle of proportionality, having regard in particular to the diversity in size and scale of operations and to the range of activities of credit institutions. Respect of the principle of proportionality also means that the simplest possible rating procedures, even in the Internal Ratings Based Approach (‘IRB Approach’), are recognised for retail exposures. |
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(41)

The provisions of this Directive respect the principle of proportionality, having regard in particular to the diversity in size and scale of operations and to the range of activities of credit institutions. Respect of the principle of proportionality also means that the simplest possible rating procedures, even in the Internal Ratings Based Approach (‘IRB Approach’), are recognised for retail exposures.

| (42) | The ‘evolutionary’ nature of this Directive enables credit institutions to choose amongst three approaches of varying complexity. In order to allow especially small credit institutions to opt for the more risk-sensitive IRB Approach, the competent authorities should implement the provisions of Article 89(1)(a) and (b) whenever appropriate. Those provisions should be read as such that exposure classes referred to in Article 86(1)(a) and (b) include all exposures that are, directly or indirectly, put on a par with them throughout this Directive. As a general rule, the competent authorities should not discriminate between the three approaches with regard to the Supervisory Review Process, i.e. credit institutions operating according to the provisions of the Standardised Approach should not for that reason alone be supervised on a stricter basis. |
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(42)

The ‘evolutionary’ nature of this Directive enables credit institutions to choose amongst three approaches of varying complexity. In order to allow especially small credit institutions to opt for the more risk-sensitive IRB Approach, the competent authorities should implement the provisions of Article 89(1)(a) and (b) whenever appropriate. Those provisions should be read as such that exposure classes referred to in Article 86(1)(a) and (b) include all exposures that are, directly or indirectly, put on a par with them throughout this Directive. As a general rule, the competent authorities should not discriminate between the three approaches with regard to the Supervisory Review Process, i.e. credit institutions operating according to the provisions of the Standardised Approach should not for that reason alone be supervised on a stricter basis.

| (43) | Increased recognition should be given to techniques of credit risk mitigation within a framework of rules designed to ensure that solvency is not undermined by undue recognition. The relevant Member States' current customary banking collateral for mitigating credit risks should wherever possible be recognised in the Standardised Approach, but also in the other approaches. |
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(43)

Increased recognition should be given to techniques of credit risk mitigation within a framework of rules designed to ensure that solvency is not undermined by undue recognition. The relevant Member States' current customary banking collateral for mitigating credit risks should wherever possible be recognised in the Standardised Approach, but also in the other approaches.

| (44) | In order to ensure that the risks and risk reductions arising from credit institutions' securitisation activities and investments are appropriately reflected in the minimum capital requirements of credit institutions it is necessary to include rules providing for a risk-sensitive and prudentially sound treatment of such activities and investments. |
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(44)

In order to ensure that the risks and risk reductions arising from credit institutions' securitisation activities and investments are appropriately reflected in the minimum capital requirements of credit institutions it is necessary to include rules providing for a risk-sensitive and prudentially sound treatment of such activities and investments.

| (45) | Operational risk is a significant risk faced by credit institutions requiring coverage by own funds. It is essential to take account of the diversity of credit institutions in the Community by providing alternative approaches to the calculation of operational risk requirements incorporating different levels of risk-sensitivity and requiring different degrees of sophistication. There should be appropriate incentives for credit institutions to move towards the more risk-sensitive approaches. In view of the emerging state of the art for the measurement and management of operational risk the rules should be kept under review and updated as appropriate including in relation to the charges for different business lines and the recognition of risk mitigation techniques. Particular attention should be paid in this regard to taking insurance into account in the simple approaches to calculating capital requirements for operational risk. |
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(45)

Operational risk is a significant risk faced by credit institutions requiring coverage by own funds. It is essential to take account of the diversity of credit institutions in the Community by providing alternative approaches to the calculation of operational risk requirements incorporating different levels of risk-sensitivity and requiring different degrees of sophistication. There should be appropriate incentives for credit institutions to move towards the more risk-sensitive approaches. In view of the emerging state of the art for the measurement and management of operational risk the rules should be kept under review and updated as appropriate including in relation to the charges for different business lines and the recognition of risk mitigation techniques. Particular attention should be paid in this regard to taking insurance into account in the simple approaches to calculating capital requirements for operational risk.

| (46) | In order to ensure adequate solvency of credit institutions within a group it is essential that the minimum capital requirements apply on the basis of the consolidated financial situation of the group. In order to ensure that own funds are appropriately distributed within the group and available to protect savings where needed, the minimum capital requirements should apply to individual credit institutions within a group, unless this objective can be effectively otherwise achieved. |
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(46)

In order to ensure adequate solvency of credit institutions within a group it is essential that the minimum capital requirements apply on the basis of the consolidated financial situation of the group. In order to ensure that own funds are appropriately distributed within the group and available to protect savings where needed, the minimum capital requirements should apply to individual credit institutions within a group, unless this objective can be effectively otherwise achieved.

| (47) | The essential rules for monitoring large exposures of credit institutions should be harmonised. Member States should still be able to adopt provisions more stringent than those provided for by this Directive. |
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(47)

The essential rules for monitoring large exposures of credit institutions should be harmonised. Member States should still be able to adopt provisions more stringent than those provided for by this Directive.

| (48) | The monitoring and control of a credit institution's exposures should be an integral Part of its supervision. Therefore, excessive concentration of exposures to a single client or group of connected clients may result in an unacceptable risk of loss. Such a situation can be considered prejudicial to the solvency of a credit institution. |
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(48)

The monitoring and control of a credit institution's exposures should be an integral Part of its supervision. Therefore, excessive concentration of exposures to a single client or group of connected clients may result in an unacceptable risk of loss. Such a situation can be considered prejudicial to the solvency of a credit institution.

| (49) | Since credit institutions in the internal market are engaged in direct competition, monitoring requirements should be equivalent throughout the Community. |
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(49)

Since credit institutions in the internal market are engaged in direct competition, monitoring requirements should be equivalent throughout the Community.

| (50) | While it is appropriate to base the definition of exposures for the purposes of limits to large exposures on that provided for the purposes of minimum own funds requirements for credit risk, it is not appropriate to refer on principle to the weightings or degrees of risk. Those weightings and degrees of risk were devised for the purpose of establishing a general solvency requirement to cover the credit risk of credit institutions. In order to limit the maximum loss that a credit institution may incur through any single client or group of connected clients it is appropriate to adopt rules for the determination of large exposures which take account of the nominal value of the exposure without applying weightings or degrees of risk. |
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(50)

While it is appropriate to base the definition of exposures for the purposes of limits to large exposures on that provided for the purposes of minimum own funds requirements for credit risk, it is not appropriate to refer on principle to the weightings or degrees of risk. Those weightings and degrees of risk were devised for the purpose of establishing a general solvency requirement to cover the credit risk of credit institutions. In order to limit the maximum loss that a credit institution may incur through any single client or group of connected clients it is appropriate to adopt rules for the determination of large exposures which take account of the nominal value of the exposure without applying weightings or degrees of risk.

| (51) | While it is desirable, pending further review of the large exposures provisions, to permit the recognition of the effects of credit risk mitigation in a manner similar to that permitted for minimum capital requirement purposes in order to limit the calculation requirements, the rules on credit risk mitigation were designed in the context of the general diversified credit risk arising from exposures to a large number of counterparties. Accordingly, recognition of the effects of such techniques for the purposes of limits to large exposures designed to limit the maximum loss that may be incurred through any single client or group of connected clients should be subject to prudential safeguards. |
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(51)

While it is desirable, pending further review of the large exposures provisions, to permit the recognition of the effects of credit risk mitigation in a manner similar to that permitted for minimum capital requirement purposes in order to limit the calculation requirements, the rules on credit risk mitigation were designed in the context of the general diversified credit risk arising from exposures to a large number of counterparties. Accordingly, recognition of the effects of such techniques for the purposes of limits to large exposures designed to limit the maximum loss that may be incurred through any single client or group of connected clients should be subject to prudential safeguards.

| (52) | When a credit institution incurs an exposure to its own parent undertaking or to other subsidiaries of its parent undertaking, particular prudence is necessary. The management of exposures incurred by credit institutions should be carried out in a fully autonomous manner, in accordance with the principles of sound banking management, without regard to any other considerations. Where the influence exercised by persons directly or indirectly holding a qualifying participation in a credit institution is likely to operate to the detriment of the sound and prudent management of that institution, the competent authorities should take appropriate measures to put an end to that situation. In the field of large exposures, specific standards, including more stringent restrictions, should be laid down for exposures incurred by a credit institution to its own group. Such standards need not, however be applied where the parent undertaking is a financial holding company or a credit institution or where the other subsidiaries are either credit or financial institutions or undertakings offering ancillary services, provided that all such undertakings are covered by the supervision of the credit institution on a consolidated basis. |
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(52)

When a credit institution incurs an exposure to its own parent undertaking or to other subsidiaries of its parent undertaking, particular prudence is necessary. The management of exposures incurred by credit institutions should be carried out in a fully autonomous manner, in accordance with the principles of sound banking management, without regard to any other considerations. Where the influence exercised by persons directly or indirectly holding a qualifying participation in a credit institution is likely to operate to the detriment of the sound and prudent management of that institution, the competent authorities should take appropriate measures to put an end to that situation. In the field of large exposures, specific standards, including more stringent restrictions, should be laid down for exposures incurred by a credit institution to its own group. Such standards need not, however be applied where the parent undertaking is a financial holding company or a credit institution or where the other subsidiaries are either credit or financial institutions or undertakings offering ancillary services, provided that all such undertakings are covered by the supervision of the credit institution on a consolidated basis.

| (53) | Credit institutions should ensure that they have internal capital that, having regard to the risks to which they are or may be exposed, is adequate in quantity, quality and distribution. Accordingly, credit institutions should have strategies and processes in place for assessing and maintaining the adequacy of their internal capital. |
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(53)

Credit institutions should ensure that they have internal capital that, having regard to the risks to which they are or may be exposed, is adequate in quantity, quality and distribution. Accordingly, credit institutions should have strategies and processes in place for assessing and maintaining the adequacy of their internal capital.

| (54) | Competent authorities have responsibility to be satisfied that credit institutions have good organisation and adequate own funds, having regard to the risks to which the credit institutions are or might be exposed. |
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(54)

Competent authorities have responsibility to be satisfied that credit institutions have good organisation and adequate own funds, having regard to the risks to which the credit institutions are or might be exposed.

| (55) | In order for the internal banking market to operate effectively the Committee of European Banking Supervisors should contribute to the consistent application of this Directive and to the convergence of supervisory practices throughout the Community, and should report on a yearly basis to the Community institutions on progress made. |
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(55)

In order for the internal banking market to operate effectively the Committee of European Banking Supervisors should contribute to the consistent application of this Directive and to the convergence of supervisory practices throughout the Community, and should report on a yearly basis to the Community institutions on progress made.

| (56) | For the same reason, and to ensure that Community credit institutions which are active in several Member States are not disproportionately burdened as a result of the continued responsibilities of individual Member State competent authorities for authorisation and supervision, it is essential to significantly enhance the cooperation between competent authorities. In this context, the role of the consolidating supervisor should be strengthened. The Committee of European Banking Supervisors should support and enhance such cooperation. |
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(56)

For the same reason, and to ensure that Community credit institutions which are active in several Member States are not disproportionately burdened as a result of the continued responsibilities of individual Member State competent authorities for authorisation and supervision, it is essential to significantly enhance the cooperation between competent authorities. In this context, the role of the consolidating supervisor should be strengthened. The Committee of European Banking Supervisors should support and enhance such cooperation.

| (57) | Supervision of credit institutions on a consolidated basis aims at, in particular, protecting the interests of the depositors of credit institutions and at ensuring the stability of the financial system. |
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(57)

Supervision of credit institutions on a consolidated basis aims at, in particular, protecting the interests of the depositors of credit institutions and at ensuring the stability of the financial system.

| (58) | In order to be effective, supervision on a consolidated basis should therefore be applied to all banking groups, including those the parent undertakings of which are not credit institutions. The competent authorities should hold the necessary legal instruments to be able to exercise such supervision. |
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(58)

In order to be effective, supervision on a consolidated basis should therefore be applied to all banking groups, including those the parent undertakings of which are not credit institutions. The competent authorities should hold the necessary legal instruments to be able to exercise such supervision.

| (59) | In the case of groups with diversified activities where parent undertakings control at least one credit institution subsidiary, the competent authorities should be able to assess the financial situation of a credit institution in such a group. The competent authorities should at least have the means of obtaining from all undertakings within a group the information necessary for the performance of their function. Cooperation between the authorities responsible for the supervision of different financial sectors should be established in the case of groups of undertakings carrying on a range of financial activities. Pending subsequent coordination, the Member States should be able to lay down appropriate methods of consolidation for the achievement of the objective of this Directive. |
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(59)

In the case of groups with diversified activities where parent undertakings control at least one credit institution subsidiary, the competent authorities should be able to assess the financial situation of a credit institution in such a group. The competent authorities should at least have the means of obtaining from all undertakings within a group the information necessary for the performance of their function. Cooperation between the authorities responsible for the supervision of different financial sectors should be established in the case of groups of undertakings carrying on a range of financial activities. Pending subsequent coordination, the Member States should be able to lay down appropriate methods of consolidation for the achievement of the objective of this Directive.

| (60) | The Member States should be able to refuse or withdraw banking authorisation in the case of certain group structures considered inappropriate for carrying on banking activities, in particular because such structures could not be supervised effectively. In this respect the competent authorities should have the necessary powers to ensure the sound and prudent management of credit institutions. |
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(60)

The Member States should be able to refuse or withdraw banking authorisation in the case of certain group structures considered inappropriate for carrying on banking activities, in particular because such structures could not be supervised effectively. In this respect the competent authorities should have the necessary powers to ensure the sound and prudent management of credit institutions.

| (61) | In order for the internal banking market to operate with increasing effectiveness and for citizens of the Community to be afforded adequate levels of transparency, it is necessary that competent authorities disclose publicly and in a way which allows for meaningful comparison the manner in which this Directive is implemented. |
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(61)

In order for the internal banking market to operate with increasing effectiveness and for citizens of the Community to be afforded adequate levels of transparency, it is necessary that competent authorities disclose publicly and in a way which allows for meaningful comparison the manner in which this Directive is implemented.

| (62) | In order to strengthen market discipline and stimulate credit institutions to improve their market strategy, risk control and internal management organization, appropriate public disclosure by credit institutions should be provided for. |
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(62)

In order to strengthen market discipline and stimulate credit institutions to improve their market strategy, risk control and internal management organization, appropriate public disclosure by credit institutions should be provided for.

| (63) | The examination of problems connected with matters covered by this Directive, as well as by other Directives on the business of credit institutions, requires cooperation between the competent authorities and the Commission, particularly when conducted with a view to closer coordination. |
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(63)

The examination of problems connected with matters covered by this Directive, as well as by other Directives on the business of credit institutions, requires cooperation between the competent authorities and the Commission, particularly when conducted with a view to closer coordination.

| (64) | The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (11). |
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(64)

The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (11).

| (65) | In its resolution of 5 February 2002 on the implementation of financial services legislation (12) the Parliament requested that it and the Council should have an equal role in supervising the way in which the Commission exercises its executive role in order to reflect the legislative powers of Parliament under Article 251 of the Treaty. In the solemn declaration made before the Parliament the same day by its President, the Commission supported this request. On 11 December 2002 the Commission proposed amendments to Decision 1999/468/EC, and then submitted an amended proposal on 22 April 2004. The Parliament does not consider that this proposal preserves its legislative prerogatives. In the view of the Parliament, it and the Council should have the opportunity of evaluating the conferral of implementing powers on the Commission within a determined period. It is therefore appropriate to limit the period during which the Commission may adopt implementing measures. |
| --- | --- |

(65)

In its resolution of 5 February 2002 on the implementation of financial services legislation (12) the Parliament requested that it and the Council should have an equal role in supervising the way in which the Commission exercises its executive role in order to reflect the legislative powers of Parliament under Article 251 of the Treaty. In the solemn declaration made before the Parliament the same day by its President, the Commission supported this request. On 11 December 2002 the Commission proposed amendments to Decision 1999/468/EC, and then submitted an amended proposal on 22 April 2004. The Parliament does not consider that this proposal preserves its legislative prerogatives. In the view of the Parliament, it and the Council should have the opportunity of evaluating the conferral of implementing powers on the Commission within a determined period. It is therefore appropriate to limit the period during which the Commission may adopt implementing measures.

| (66) | The Parliament should be given a period of three months from the first transmission of draft amendments and implementing measures to allow it to examine them and to give its opinion. However, in urgent and duly justified cases, it should be possible to shorten this period. If, within that period, a resolution is adopted by the Parliament, the Commission should re-examine the draft amendments or measures. |
| --- | --- |

(66)

The Parliament should be given a period of three months from the first transmission of draft amendments and implementing measures to allow it to examine them and to give its opinion. However, in urgent and duly justified cases, it should be possible to shorten this period. If, within that period, a resolution is adopted by the Parliament, the Commission should re-examine the draft amendments or measures.

| (67) | In order to avoid disruption to markets and to ensure continuity in overall levels of own funds it is appropriate to provide for specific transitional arrangements. |
| --- | --- |

(67)

In order to avoid disruption to markets and to ensure continuity in overall levels of own funds it is appropriate to provide for specific transitional arrangements.

| (68) | In view of the risk-sensitivity of the rules relating to minimum capital requirements, it is desirable to keep under review whether these have significant effects on the economic cycle. The Commission, taking into account the contribution of the European Central Bank should report on these aspects to the European Parliament and to the Council. |
| --- | --- |

(68)

In view of the risk-sensitivity of the rules relating to minimum capital requirements, it is desirable to keep under review whether these have significant effects on the economic cycle. The Commission, taking into account the contribution of the European Central Bank should report on these aspects to the European Parliament and to the Council.

| (69) | The arrangements necessary for the supervision of liquidity risks should also be harmonised. |
| --- | --- |

(69)

The arrangements necessary for the supervision of liquidity risks should also be harmonised.

| (70) | This Directive respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union as general principles of Community law. |
| --- | --- |

(70)

This Directive respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union as general principles of Community law.

| (71) | The obligation to transpose this Directive into national law should be confined to those provisions which represent a substantive change as compared with earlier directives. The obligation to transpose the provisions which are unchanged exists under the earlier directives. |
| --- | --- |

(71)

The obligation to transpose this Directive into national law should be confined to those provisions which represent a substantive change as compared with earlier directives. The obligation to transpose the provisions which are unchanged exists under the earlier directives.

| (72) | This Directive should be without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Annex XIII, Part B, |
| --- | --- |

(72)

This Directive should be without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Annex XIII, Part B,

HAVE ADOPTED THIS DIRECTIVE:

TITLE I

SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1

1.   This Directive lays down rules concerning the taking up and pursuit of the business of credit institutions, and their prudential supervision.

2.   Article 39 and Title V, Chapter 4, Section 1 shall apply to financial holding companies and mixed-activity holding companies which have their head offices in the Community.

3.   The institutions permanently excluded pursuant to Article 2, with the exception, however, of the central banks of the Member States, shall be treated as financial institutions for the purposes of Article 39 and Title V, Chapter 4, Section 1.

Article 2

This Directive shall not apply to the following:

| — | the central banks of Member States, |
| --- | --- |

—

the central banks of Member States,

| — | post office giro institutions, |
| --- | --- |

—

post office giro institutions,

| — | in Belgium, the ‘Institut de Réescompte et de Garantie/Herdiscontering- en Waarborginstituut’, |
| --- | --- |

—

in Belgium, the ‘Institut de Réescompte et de Garantie/Herdiscontering- en Waarborginstituut’,

| — | in Denmark, the ‘Dansk Eksportfinansieringsfond’, the ‘Danmarks Skibskreditfond’, the ‘Dansk Landbrugs Realkreditfond’, and the ‘KommuneKredit’, |
| --- | --- |

—

in Denmark, the ‘Dansk Eksportfinansieringsfond’, the ‘Danmarks Skibskreditfond’, the ‘Dansk Landbrugs Realkreditfond’, and the ‘KommuneKredit’,

| — | in Germany, the ‘Kreditanstalt für Wiederaufbau’, undertakings which are recognised under the ‘Wohnungsgemeinnützigkeitsgesetz’ as bodies of State housing policy and are not mainly engaged in banking transactions, and undertakings recognised under that law as non-profit housing undertakings, |
| --- | --- |

—

in Germany, the ‘Kreditanstalt für Wiederaufbau’, undertakings which are recognised under the ‘Wohnungsgemeinnützigkeitsgesetz’ as bodies of State housing policy and are not mainly engaged in banking transactions, and undertakings recognised under that law as non-profit housing undertakings,

| — | in Greece, the ‘Ταμείο Παρακαταθηκών και Δανείων’ (Tamio Parakatathikon kai Danion), |
| --- | --- |

—

in Greece, the ‘Ταμείο Παρακαταθηκών και Δανείων’ (Tamio Parakatathikon kai Danion),

| — | in Spain, the ‘Instituto de Crédito Oficial’, |
| --- | --- |

—

in Spain, the ‘Instituto de Crédito Oficial’,

| — | in France, the ‘Caisse des dépôts et consignations’, |
| --- | --- |

—

in France, the ‘Caisse des dépôts et consignations’,

| — | in Ireland, credit unions and the friendly societies, |
| --- | --- |

—

in Ireland, credit unions and the friendly societies,

| — | in Italy, the ‘Cassa depositi e prestiti’, |
| --- | --- |

—

in Italy, the ‘Cassa depositi e prestiti’,

| — | in Latvia, the ‘krājaizdevu sabiedrības’, undertakings that are recognised under the ‘krājaizdevu sabiedrību likums’ as cooperative undertakings rendering financial services solely to their members, |
| --- | --- |

—

in Latvia, the ‘krājaizdevu sabiedrības’, undertakings that are recognised under the ‘krājaizdevu sabiedrību likums’ as cooperative undertakings rendering financial services solely to their members,

| — | in Lithuania, the ‘kredito unijos’ other than the ‘Centrine kredito unija’, |
| --- | --- |

—

in Lithuania, the ‘kredito unijos’ other than the ‘Centrine kredito unija’,

| — | in Hungary, the ‘Magyar Fejlesztési Bank Rt.’ and the ‘Magyar Export-Import Bank Rt.’, |
| --- | --- |

—

in Hungary, the ‘Magyar Fejlesztési Bank Rt.’ and the ‘Magyar Export-Import Bank Rt.’,

| — | in the Netherlands, the ‘Nederlandse Investeringsbank voor Ontwikkelingslanden NV’, the ‘NV Noordelijke Ontwikkelingsmaatschappij’, the ‘NV Industriebank Limburgs Instituut voor Ontwikkeling en Financiering’ and the ‘Overijsselse Ontwikkelingsmaatschappij NV’, |
| --- | --- |

—

in the Netherlands, the ‘Nederlandse Investeringsbank voor Ontwikkelingslanden NV’, the ‘NV Noordelijke Ontwikkelingsmaatschappij’, the ‘NV Industriebank Limburgs Instituut voor Ontwikkeling en Financiering’ and the ‘Overijsselse Ontwikkelingsmaatschappij NV’,

| — | in Austria, undertakings recognised as housing associations in the public interest and the ‘Österreichische Kontrollbank AG’, |
| --- | --- |

—

in Austria, undertakings recognised as housing associations in the public interest and the ‘Österreichische Kontrollbank AG’,

| — | in Poland, the ‘Spółdzielcze Kasy Oszczędnościowo — Kreditowe’ and the ‘Bank Gospodarstwa Krajowego’, |
| --- | --- |

—

in Poland, the ‘Spółdzielcze Kasy Oszczędnościowo — Kreditowe’ and the ‘Bank Gospodarstwa Krajowego’,

| — | in Portugal, ‘Caixas Económicas’ existing on 1 January 1986 with the exception of those incorporated as limited companies and of the ‘Caixa Económica Montepio Geral’, |
| --- | --- |

—

in Portugal, ‘Caixas Económicas’ existing on 1 January 1986 with the exception of those incorporated as limited companies and of the ‘Caixa Económica Montepio Geral’,

| — | in Finland, the ‘Teollisen yhteistyön rahasto Oy/Fonden för industriellt samarbete AB’, and the ‘Finnvera Oyj/Finnvera Abp’, |
| --- | --- |

—

in Finland, the ‘Teollisen yhteistyön rahasto Oy/Fonden för industriellt samarbete AB’, and the ‘Finnvera Oyj/Finnvera Abp’,

| — | in Sweden, the ‘Svenska Skeppshypotekskassan’, |
| --- | --- |

—

in Sweden, the ‘Svenska Skeppshypotekskassan’,

| — | in the United Kingdom, the National Savings Bank, the Commonwealth Development Finance Company Ltd, the Agricultural Mortgage Corporation Ltd, the Scottish Agricultural Securities Corporation Ltd, the Crown Agents for overseas governments and administrations, credit unions and municipal banks. |
| --- | --- |

—

in the United Kingdom, the National Savings Bank, the Commonwealth Development Finance Company Ltd, the Agricultural Mortgage Corporation Ltd, the Scottish Agricultural Securities Corporation Ltd, the Crown Agents for overseas governments and administrations, credit unions and municipal banks.

Article 3

1.   One or more credit institutions situated in the same Member State and which are permanently affiliated, on 15 December 1977, to a central body which supervises them and which is established in the same Member State, may be exempted from the requirements of Articles 7 and 11(1) if, no later than 15 December 1979, national law provides that:

| a) | the commitments of the central body and affiliated institutions are joint and several liabilities or the commitments of its affiliated institutions are entirely guaranteed by the central body; |
| --- | --- |

a)

the commitments of the central body and affiliated institutions are joint and several liabilities or the commitments of its affiliated institutions are entirely guaranteed by the central body;

| b) | the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts; and |
| --- | --- |

b)

the solvency and liquidity of the central body and of all the affiliated institutions are monitored as a whole on the basis of consolidated accounts; and

| c) | the management of the central body is empowered to issue instructions to the management of the affiliated institutions. |
| --- | --- |

c)

the management of the central body is empowered to issue instructions to the management of the affiliated institutions.

Credit institutions operating locally which are permanently affiliated, subsequent to 15 December 1977, to a central body within the meaning of the first subparagraph, may benefit from the conditions laid down therein if they constitute normal additions to the network belonging to that central body.

In the case of credit institutions other than those which are set up in areas newly reclaimed from the sea or have resulted from scission or mergers of existing institutions dependent or answerable to the central body, the Commission, pursuant to the procedure referred to in Article 151(2) may lay down additional rules for the application of the second subparagraph including the repeal of exemptions provided for in the first subparagraph, where it is of the opinion that the affiliation of new institutions benefiting from the arrangements laid down in the second subparagraph might have an adverse effect on competition.

2.   A credit institution referred to in the first subparagraph of paragraph 1, may also be exempted from the provisions of Articles 9 and 10, and also Title V, Chapter 2, Sections 2, 3, 4, 5 and 6 and Chapter 3 provided that, without prejudice to the application of those provisions to the central body, the whole as constituted by the central body together with its affiliated institutions is subject to those provisions on a consolidated basis.

In case of exemption, Articles 16, 23, 24, 25, 26(1) to (3) and 28 to 37 shall apply to the whole as constituted by the central body together with its affiliated institutions.

Article 4

For the purposes of this Directive, the following definitions shall apply:

| 1) | ‘credit institution’ means:






  a) | an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or |
| --- | --- | --- |

1)

‘credit institution’ means:

a)

an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account; or

| b) | an electronic money institution within the meaning of Directive 2000/46/EC (13); |
| --- | --- |

b)

an electronic money institution within the meaning of Directive 2000/46/EC (13);

| 2) | ‘authorisation’ means an instrument issued in any form by the authorities by which the right to carry on the business of a credit institution is granted; |
| --- | --- |

2)

‘authorisation’ means an instrument issued in any form by the authorities by which the right to carry on the business of a credit institution is granted;

| 3) | ‘branch’ means a place of business which forms a legally dependent Part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions; |
| --- | --- |

3)

‘branch’ means a place of business which forms a legally dependent Part of a credit institution and which carries out directly all or some of the transactions inherent in the business of credit institutions;

| 4) | ‘competent authorities’ means the national authorities which are empowered by law or regulation to supervise credit institutions; |
| --- | --- |

4)

‘competent authorities’ means the national authorities which are empowered by law or regulation to supervise credit institutions;

| 5) | ‘financial institution’ means an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to carry on one or more of the activities listed in points 2 to 12 of Annex I; |
| --- | --- |

5)

‘financial institution’ means an undertaking other than a credit institution, the principal activity of which is to acquire holdings or to carry on one or more of the activities listed in points 2 to 12 of Annex I;

| 6) | ‘institutions’, for the purposes of Sections 2 and 3 of Title V, Chapter 2, means institutions as defined in Article 3(1)(c) of Directive 2006/.../EC; |
| --- | --- |

6)

‘institutions’, for the purposes of Sections 2 and 3 of Title V, Chapter 2, means institutions as defined in Article 3(1)(c) of Directive 2006/.../EC;

| 7) | ‘home Member State’ means the Member State in which a credit institution has been authorised in accordance with Articles 6 to 9 and 11 to 14; |
| --- | --- |

7)

‘home Member State’ means the Member State in which a credit institution has been authorised in accordance with Articles 6 to 9 and 11 to 14;

| 8) | ‘host Member State’ means the Member State in which a credit institution has a branch or in which it provides services; |
| --- | --- |

8)

‘host Member State’ means the Member State in which a credit institution has a branch or in which it provides services;

| 9) | ‘control’ means the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking; |
| --- | --- |

9)

‘control’ means the relationship between a parent undertaking and a subsidiary, as defined in Article 1 of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking;

| 10) | ‘participation’ for the purposes of points (o) and (p) of Article 57, Articles 71 to 73 and Title V, Chapter 4 means participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies (14), or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking; |
| --- | --- |

10)

‘participation’ for the purposes of points (o) and (p) of Article 57, Articles 71 to 73 and Title V, Chapter 4 means participation within the meaning of the first sentence of Article 17 of Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies (14), or the ownership, direct or indirect, of 20 % or more of the voting rights or capital of an undertaking;

| 11) | ‘qualifying holding’ means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking; |
| --- | --- |

11)

‘qualifying holding’ means a direct or indirect holding in an undertaking which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of that undertaking;

| 12) | ‘parent undertaking’ means:






  a) | a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or |
| --- | --- | --- |

12)

‘parent undertaking’ means:

a)

a parent undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or

| b) | for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5 and Chapter 4, a parent undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking; |
| --- | --- |

b)

for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5 and Chapter 4, a parent undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking which, in the opinion of the competent authorities, effectively exercises a dominant influence over another undertaking;

| 13) | ‘subsidiary’ means:






  a) | a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or |
| --- | --- | --- |

13)

‘subsidiary’ means:

a)

a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC; or

| b) | for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5, and Chapter 4 a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence. |
| --- | --- |

b)

for the purposes of Articles 71 to 73, Title V, Chapter 2, Section 5, and Chapter 4 a subsidiary undertaking within the meaning of Article 1(1) of Directive 83/349/EEC and any undertaking over which, in the opinion of the competent authorities, a parent undertaking effectively exercises a dominant influence.

All subsidiaries of subsidiary undertakings shall also be considered subsidiaries of the undertaking that is their original parent;

| 14) | ‘parent credit institution in a Member State’ means a credit institution which has a credit institution or a financial institution as a subsidiary or which holds a participation in such an institution, and which is not itself a subsidiary of another credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State; |
| --- | --- |

14)

‘parent credit institution in a Member State’ means a credit institution which has a credit institution or a financial institution as a subsidiary or which holds a participation in such an institution, and which is not itself a subsidiary of another credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State;

| 15) | ‘parent financial holding company in a Member State’ means a financial holding company which is not itself a subsidiary of a credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State; |
| --- | --- |

15)

‘parent financial holding company in a Member State’ means a financial holding company which is not itself a subsidiary of a credit institution authorised in the same Member State, or of a financial holding company set up in the same Member State;

| (16) | ‘EU parent credit institution’ means a parent credit institution in a Member State which is not a subsidiary of another credit institution authorised in any Member State, or of a financial holding company set up in any Member State; |
| --- | --- |

(16)

‘EU parent credit institution’ means a parent credit institution in a Member State which is not a subsidiary of another credit institution authorised in any Member State, or of a financial holding company set up in any Member State;

| (17) | ‘EU parent financial holding company’ means a parent financial holding company in a Member State which is not a subsidiary of a credit institution authorised in any Member State or of another financial holding company set up in any Member State; |
| --- | --- |

(17)

‘EU parent financial holding company’ means a parent financial holding company in a Member State which is not a subsidiary of a credit institution authorised in any Member State or of another financial holding company set up in any Member State;

| 18) | ‘public sector entities’ means non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non-commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision; |
| --- | --- |

18)

‘public sector entities’ means non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non-commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision;

| 19) | ‘financial holding company’ means a financial institution, the subsidiary undertakings of which are either exclusively or mainly credit institutions or financial institutions, at least one of such subsidiaries being a credit institution, and which is not a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC (15); |
| --- | --- |

19)

‘financial holding company’ means a financial institution, the subsidiary undertakings of which are either exclusively or mainly credit institutions or financial institutions, at least one of such subsidiaries being a credit institution, and which is not a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC (15);

| 20) | ‘mixed-activity holding company’ means a parent undertaking, other than a financial holding company or a credit institution or a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC, the subsidiaries of which include at least one credit institution; |
| --- | --- |

20)

‘mixed-activity holding company’ means a parent undertaking, other than a financial holding company or a credit institution or a mixed financial holding company within the meaning of Article 2(15) of Directive 2002/87/EC, the subsidiaries of which include at least one credit institution;

| 21) | ‘ancillary services undertaking’ means an undertaking the principal activity of which consists in owning or managing property, managing data-processing services, or any other similar activity which is ancillary to the principal activity of one or more credit institutions; |
| --- | --- |

21)

‘ancillary services undertaking’ means an undertaking the principal activity of which consists in owning or managing property, managing data-processing services, or any other similar activity which is ancillary to the principal activity of one or more credit institutions;

| 22) | ‘operational risk’ means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk; |
| --- | --- |

22)

‘operational risk’ means the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events, and includes legal risk;

| 23) | ‘central banks’ include the European Central Bank unless otherwise indicated; |
| --- | --- |

23)

‘central banks’ include the European Central Bank unless otherwise indicated;

| 24) | ‘dilution risk’ means the risk that an amount receivable is reduced through cash or non-cash credits to the obligor; |
| --- | --- |

24)

‘dilution risk’ means the risk that an amount receivable is reduced through cash or non-cash credits to the obligor;

| 25) | ‘probability of default’ means the probability of default of a counterparty over a one year period; |
| --- | --- |

25)

‘probability of default’ means the probability of default of a counterparty over a one year period;

| 26) | ‘loss’, for the purposes of Title V, Chapter 2, Section 3, means economic loss, including material discount effects, and material direct and indirect costs associated with collecting on the instrument; |
| --- | --- |

26)

‘loss’, for the purposes of Title V, Chapter 2, Section 3, means economic loss, including material discount effects, and material direct and indirect costs associated with collecting on the instrument;

| 27) | ‘loss given default (LGD)’ means the ratio of the loss on an exposure due to the default of a counterparty to the amount outstanding at default; |
| --- | --- |

27)

‘loss given default (LGD)’ means the ratio of the loss on an exposure due to the default of a counterparty to the amount outstanding at default;

| 28) | ‘conversion factor’ means the ratio of the currently undrawn amount of a commitment that will be drawn and outstanding at default to the currently undrawn amount of the commitment, the extent of the commitment shall be determined by the advised limit, unless the unadvised limit is higher; |
| --- | --- |

28)

‘conversion factor’ means the ratio of the currently undrawn amount of a commitment that will be drawn and outstanding at default to the currently undrawn amount of the commitment, the extent of the commitment shall be determined by the advised limit, unless the unadvised limit is higher;

| 29) | ‘expected loss (EL)’, for the purposes of Title V, Chapter 2, Section 3, shall mean the ratio of the amount expected to be lost on an exposure from a potential default of a counterparty or dilution over a one year period to the amount outstanding at default; |
| --- | --- |

29)

‘expected loss (EL)’, for the purposes of Title V, Chapter 2, Section 3, shall mean the ratio of the amount expected to be lost on an exposure from a potential default of a counterparty or dilution over a one year period to the amount outstanding at default;

| 30) | ‘credit risk mitigation’ means a technique used by a credit institution to reduce the credit risk associated with an exposure or exposures which the credit institution continues to hold; |
| --- | --- |

30)

‘credit risk mitigation’ means a technique used by a credit institution to reduce the credit risk associated with an exposure or exposures which the credit institution continues to hold;

| 31) | ‘funded credit protection’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the right of the credit institution — in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the counterparty — to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the credit institution; |
| --- | --- |

31)

‘funded credit protection’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the right of the credit institution — in the event of the default of the counterparty or on the occurrence of other specified credit events relating to the counterparty — to liquidate, or to obtain transfer or appropriation of, or to retain certain assets or amounts, or to reduce the amount of the exposure to, or to replace it with, the amount of the difference between the amount of the exposure and the amount of a claim on the credit institution;

| 32) | ‘unfunded credit protection’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the undertaking of a third party to pay an amount in the event of the default of the borrower or on the occurrence of other specified credit events; |
| --- | --- |

32)

‘unfunded credit protection’ means a technique of credit risk mitigation where the reduction of the credit risk on the exposure of a credit institution derives from the undertaking of a third party to pay an amount in the event of the default of the borrower or on the occurrence of other specified credit events;

| 33) | ‘repurchase transaction’ means any transaction governed by an agreement falling within the definition of ‘repurchase agreement’ or ‘reverse repurchase agreement’ as defined in Article 3(1)(m) of Directive 2006/.../EC; |
| --- | --- |

33)

‘repurchase transaction’ means any transaction governed by an agreement falling within the definition of ‘repurchase agreement’ or ‘reverse repurchase agreement’ as defined in Article 3(1)(m) of Directive 2006/.../EC;

| 34) | ‘securities or commodities lending or borrowing transaction’ means any transaction falling within the definition of ‘securities or commodities lending’ or ‘securities or commodities borrowing’ as defined in Article 3(1)(n) of Directive 2006/.../EC; |
| --- | --- |

34)

‘securities or commodities lending or borrowing transaction’ means any transaction falling within the definition of ‘securities or commodities lending’ or ‘securities or commodities borrowing’ as defined in Article 3(1)(n) of Directive 2006/.../EC;

| 35) | ‘cash assimilated instrument’ means a certificate of deposit or other similar instrument issued by the lending credit institution; |
| --- | --- |

35)

‘cash assimilated instrument’ means a certificate of deposit or other similar instrument issued by the lending credit institution;

| 36) | ‘securitisation’ means a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having the following characteristics:






  a) | payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; and |
| --- | --- | --- |

36)

‘securitisation’ means a transaction or scheme, whereby the credit risk associated with an exposure or pool of exposures is tranched, having the following characteristics:

a)

payments in the transaction or scheme are dependent upon the performance of the exposure or pool of exposures; and

| b) | the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme; |
| --- | --- |

b)

the subordination of tranches determines the distribution of losses during the ongoing life of the transaction or scheme;

| 37) | ‘traditional securitisation’ means a securitisation involving the economic transfer of the exposures being securitised to a securitisation special purpose entity which issues securities. This shall be accomplished by the transfer of ownership of the securitised exposures from the originator credit institution or through sub-participation. The securities issued do not represent payment obligations of the originator credit institution; |
| --- | --- |

37)

‘traditional securitisation’ means a securitisation involving the economic transfer of the exposures being securitised to a securitisation special purpose entity which issues securities. This shall be accomplished by the transfer of ownership of the securitised exposures from the originator credit institution or through sub-participation. The securities issued do not represent payment obligations of the originator credit institution;

| 38) | ‘synthetic securitisation’ means a securitisation where the tranching is achieved by the use of credit derivatives or guarantees, and the pool of exposures is not removed from the balance sheet of the originator credit institution; |
| --- | --- |

38)

‘synthetic securitisation’ means a securitisation where the tranching is achieved by the use of credit derivatives or guarantees, and the pool of exposures is not removed from the balance sheet of the originator credit institution;

| 39) | ‘tranche’ means a contractually established segment of the credit risk associated with an exposure or number of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments; |
| --- | --- |

39)

‘tranche’ means a contractually established segment of the credit risk associated with an exposure or number of exposures, where a position in the segment entails a risk of credit loss greater than or less than a position of the same amount in each other such segment, without taking account of credit protection provided by third parties directly to the holders of positions in the segment or in other segments;

| 40) | ‘securitisation position’ shall mean an exposure to a securitisation; |
| --- | --- |

40)

‘securitisation position’ shall mean an exposure to a securitisation;

| 41) | ‘originator’ means either of the following:






  a) | an entity which, either itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised; or |
| --- | --- | --- |

41)

‘originator’ means either of the following:

a)

an entity which, either itself or through related entities, directly or indirectly, was involved in the original agreement which created the obligations or potential obligations of the debtor or potential debtor giving rise to the exposure being securitised; or

| b) | an entity which purchases a third party's exposures onto its balance sheet and then securitises them; |
| --- | --- |

b)

an entity which purchases a third party's exposures onto its balance sheet and then securitises them;

| 42) | ‘sponsor’ means a credit institution other than an originator credit institution that establishes and manages an asset-backed commercial paper programme or other securitisation scheme that purchases exposures from third party entities; |
| --- | --- |

42)

‘sponsor’ means a credit institution other than an originator credit institution that establishes and manages an asset-backed commercial paper programme or other securitisation scheme that purchases exposures from third party entities;

| 43) | ‘credit enhancement’ means a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection; |
| --- | --- |

43)

‘credit enhancement’ means a contractual arrangement whereby the credit quality of a position in a securitisation is improved in relation to what it would have been if the enhancement had not been provided, including the enhancement provided by more junior tranches in the securitisation and other types of credit protection;

| 44) | ‘securitisation special purpose entity (SSPE)’ means a corporation trust or other entity, other than a credit institution, organised for carrying on a securitisation or securitisations, the activities of which are limited to those appropriate to accomplishing that objective, the structure of which is intended to isolate the obligations of the SSPE from those of the originator credit institution, and the holders of the beneficial interests in which have the right to pledge or exchange those interests without restriction; |
| --- | --- |

44)

‘securitisation special purpose entity (SSPE)’ means a corporation trust or other entity, other than a credit institution, organised for carrying on a securitisation or securitisations, the activities of which are limited to those appropriate to accomplishing that objective, the structure of which is intended to isolate the obligations of the SSPE from those of the originator credit institution, and the holders of the beneficial interests in which have the right to pledge or exchange those interests without restriction;

| 45) | ‘group of connected clients’ means:






  a) | two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others; or |
| --- | --- | --- |

45)

‘group of connected clients’ means:

a)

two or more natural or legal persons who, unless it is shown otherwise, constitute a single risk because one of them, directly or indirectly, has control over the other or others; or

| b) | two or more natural or legal persons between whom there is no relationship of control as set out in point (a) but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties; |
| --- | --- |

b)

two or more natural or legal persons between whom there is no relationship of control as set out in point (a) but who are to be regarded as constituting a single risk because they are so interconnected that, if one of them were to experience financial problems, the other or all of the others would be likely to encounter repayment difficulties;

| 46) | ‘close links’ means a situation in which two or more natural or legal persons are linked in any of the following ways:






  a) | participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking; |
| --- | --- | --- |

46)

‘close links’ means a situation in which two or more natural or legal persons are linked in any of the following ways:

a)

participation in the form of ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking;

| b) | control; or |
| --- | --- |

b)

control; or

| c) | the fact that both or all are permanently linked to one and the same third person by a control relationship; |
| --- | --- |

c)

the fact that both or all are permanently linked to one and the same third person by a control relationship;

| 47) | ‘recognised exchanges’ means exchanges which are recognised as such by the competent authorities and which meet the following conditions:






  a) | they function regularly; |
| --- | --- | --- |

47)

‘recognised exchanges’ means exchanges which are recognised as such by the competent authorities and which meet the following conditions:

a)

they function regularly;

| b) | they have rules, issued or approved by the appropriate authorities of the home country of the exchange, defining the conditions for the operation of the exchange, the conditions of access to the exchange as well as the conditions that shall be satisfied by a contract before it can effectively be dealt on the exchange; and |
| --- | --- |

b)

they have rules, issued or approved by the appropriate authorities of the home country of the exchange, defining the conditions for the operation of the exchange, the conditions of access to the exchange as well as the conditions that shall be satisfied by a contract before it can effectively be dealt on the exchange; and

| c) | they have a clearing mechanism whereby contracts listed in Annex IV are subject to daily margin requirements which, in the opinion of the competent authorities, provide appropriate protection. |
| --- | --- |

c)

they have a clearing mechanism whereby contracts listed in Annex IV are subject to daily margin requirements which, in the opinion of the competent authorities, provide appropriate protection.

Article 5

Member States shall prohibit persons or undertakings that are not credit institutions from carrying on the business of taking deposits or other repayable funds from the public.

The first paragraph shall not apply to the taking of deposits or other funds repayable by a Member State or by a Member State's regional or local authorities or by public international bodies of which one or more Member States are members or to cases expressly covered by national or Community legislation, provided that those activities are subject to regulations and controls intended to protect depositors and investors and applicable to those cases.

TITLE II

REQUIREMENTS FOR ACCESS TO THE TAKING UP AND PURSUIT OF THE BUSINESS OF CREDIT INSTITUTIONS

Article 6

Member States shall require credit institutions to obtain authorisation before commencing their activities. Without prejudice to Articles 7 to 12, they shall lay down the requirements for such authorisation and notify them to the Commission.

Article 7

Member States shall require applications for authorisation to be accompanied by a programme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the credit institution.

Article 8

Member States may not require the application for authorisation to be examined in terms of the economic needs of the market.

Article 9

1.   Without prejudice to other general conditions laid down by national law, the competent authorities shall not grant authorisation when the credit institution does not possess separate own funds or in cases where initial capital is less than 5 million Euro.

‘Initial capital’ shall comprise capital and reserves as referred to in Article 57(a) and (b).

Member States may decide that credit institutions which do not fulfil the requirement of separate own funds and which were in existence on 15 December 1979 may continue to carry on their business. They may exempt such credit institutions from complying with the requirement contained in the first subparagraph of Article 11(1).

2.   Member States may, subject to the following conditions, grant authorisation to particular categories of credit institutions the initial capital of which is less than that specified in paragraph 1:

| a) | the initial capital shall be no less than 1 million Euro; |
| --- | --- |

a)

the initial capital shall be no less than 1 million Euro;

| b) | the Member States concerned shall notify the Commission of their reasons for exercising this option; and |
| --- | --- |

b)

the Member States concerned shall notify the Commission of their reasons for exercising this option; and

| c) | the name of each credit institution that does not have the minimum capital specified in paragraph 1 shall be annotated to that effect in the list referred to in Article 14. |
| --- | --- |

c)

the name of each credit institution that does not have the minimum capital specified in paragraph 1 shall be annotated to that effect in the list referred to in Article 14.

Article 10

1.   A credit institution's own funds may not fall below the amount of initial capital required under Article 9 at the time of its authorisation.

2.   Member States may decide that credit institutions already in existence on 1 January 1993, the own funds of which do not attain the levels specified for initial capital in Article 9, may continue to carry on their activities. In that event, their own funds may not fall below the highest level reached with effect from 22 December 1989.

3.   If control of a credit institution falling within the category referred to in paragraph 2 is taken by a natural or legal person other than the person who controlled the institution previously, the own funds of that credit institution shall attain at least the level specified for initial capital in Article 9.

4.   In certain specific circumstances and with the consent of the competent authorities, where there is a merger of two or more credit institutions falling within the category referred to in paragraph 2, the own funds of the credit institution resulting from the merger may not fall below the total own funds of the merged credit institutions at the time of the merger, as long as the appropriate levels specified in Article 9 have not been attained.

5.   If, in the cases referred to in paragraphs 1, 2 and 4, the own funds should be reduced, the competent authorities may, where the circumstances justify it, allow a credit institution a limited period in which to rectify its situation or cease its activities.

Article 11

1.   The competent authorities shall grant an authorisation to the credit institution only when there are at least two persons who effectively direct the business of the credit institution.

They shall not grant authorisation if these persons are not of sufficiently good repute or lack sufficient experience to perform such duties.

2.   Each Member State shall require that:

| a) | any credit institution which is a legal person and which, under its national law, has a registered office shall have its head office in the same Member State as its registered office; and |
| --- | --- |

a)

any credit institution which is a legal person and which, under its national law, has a registered office shall have its head office in the same Member State as its registered office; and

| b) | any other credit institution shall have its head office in the Member State which granted its authorisation and in which it actually carries on its business. |
| --- | --- |

b)

any other credit institution shall have its head office in the Member State which granted its authorisation and in which it actually carries on its business.

Article 12

1.   The competent authorities shall not grant authorisation for the taking-up of the business of credit institutions unless they have been informed of the identities of the shareholders or members, whether direct or indirect, natural or legal persons, that have qualifying holdings, and of the amounts of those holdings.

In determining a qualifying holding in the context of this Article, the voting rights referred to in Article 92 of Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission of securities to official stock exchange listing and on information to be published on those securities (16) shall be taken into consideration.

2.   The competent authorities shall not grant authorisation if, taking into account the need to ensure the sound and prudent management of a credit institution, they are not satisfied as to the suitability of the shareholders or members.

3.   Where close links exist between the credit institution and other natural or legal persons, the competent authorities shall grant authorisation only if those links do not prevent the effective exercise of their supervisory functions.

The competent authorities shall also not grant authorisation if the laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with which the credit institution has close links, or difficulties involved in the enforcement of those laws, regulations or administrative provisions, prevent the effective exercise of their supervisory functions.

The competent authorities shall require credit institutions to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis.

Article 13

Reasons shall be given whenever a decision not to grant an authorisation is taken and the applicant shall be notified thereof within six months of receipt of the application or, should the latter be incomplete, within six months of the applicant's sending the information required for the decision. A decision shall, in any case, be taken within 12 months of the receipt of the application.

Article 14

Every authorisation shall be notified to the Commission.

The name of each credit institution to which authorisation has been granted shall be entered in a list. The Commission shall publish that list in the Official Journal of the European Union and shall keep it up to date.

Article 15

1.   The competent authority shall, before granting authorisation to a credit institution, consult the competent authorities of the other Member State involved in the following cases:

| a) | the credit institution concerned is a subsidiary of a credit institution authorised in another Member State; |
| --- | --- |

a)

the credit institution concerned is a subsidiary of a credit institution authorised in another Member State;

| b) | the credit institution concerned is a subsidiary of the parent undertaking of a credit institution authorised in another Member State; or |
| --- | --- |

b)

the credit institution concerned is a subsidiary of the parent undertaking of a credit institution authorised in another Member State; or

| c) | the credit institution concerned is controlled by the same persons, whether natural or legal, as control a credit institution authorised in another Member State. |
| --- | --- |

c)

the credit institution concerned is controlled by the same persons, whether natural or legal, as control a credit institution authorised in another Member State.

2.   The competent authority shall, before granting authorisation to a credit institution, consult the competent authority of a Member State involved, responsible for the supervision of insurance undertakings or investment firms in the following cases:

| a) | the credit institution concerned is a subsidiary of an insurance undertaking or investment firm authorised in the Community; |
| --- | --- |

a)

the credit institution concerned is a subsidiary of an insurance undertaking or investment firm authorised in the Community;

| b) | the credit institution concerned is a subsidiary of the parent undertaking of an insurance undertaking or investment firm authorised in the Community; or |
| --- | --- |

b)

the credit institution concerned is a subsidiary of the parent undertaking of an insurance undertaking or investment firm authorised in the Community; or

| c) | the credit institution concerned is controlled by the same person, whether natural or legal, as controls an insurance undertaking or investment firm authorised in the Community. |
| --- | --- |

c)

the credit institution concerned is controlled by the same person, whether natural or legal, as controls an insurance undertaking or investment firm authorised in the Community.

3.   The relevant competent authorities referred to in paragraphs 1 and 2 shall in particular consult each other when assessing the suitability of the shareholders and the reputation and experience of directors involved in the management of another entity of the same group. They shall exchange any information regarding the suitability of shareholders and the reputation and experience of directors which is of relevance for the granting of an authorisation as well as for the ongoing assessment of compliance with operating conditions.

Article 16

Host Member States may not require authorisation or endowment capital for branches of credit institutions authorised in other Member States. The establishment and supervision of such branches shall be effected in accordance with Articles 22, 25, 26(1) to (3), 29 to 37 and 40.

Article 17

1.   The competent authorities may withdraw the authorisation granted to a credit institution only where such an institution:

| a) | does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased to engage in business for more than six months, if the Member State concerned has made no provision for the authorisation to lapse in such cases; |
| --- | --- |

a)

does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased to engage in business for more than six months, if the Member State concerned has made no provision for the authorisation to lapse in such cases;

| b) | has obtained the authorisation through false statements or any other irregular means; |
| --- | --- |

b)

has obtained the authorisation through false statements or any other irregular means;

| c) | no longer fulfils the conditions under which authorisation was granted; |
| --- | --- |

c)

no longer fulfils the conditions under which authorisation was granted;

| d) | no longer possesses sufficient own funds or can no longer be relied on to fulfil its obligations towards its creditors, and in particular no longer provides security for the assets entrusted to it; or |
| --- | --- |

d)

no longer possesses sufficient own funds or can no longer be relied on to fulfil its obligations towards its creditors, and in particular no longer provides security for the assets entrusted to it; or

| e) | falls within one of the other cases where national law provides for withdrawal of authorisation. |
| --- | --- |

e)

falls within one of the other cases where national law provides for withdrawal of authorisation.

2.   Reasons shall be given for any withdrawal of authorisation and those concerned informed thereof. Such withdrawal shall be notified to the Commission.

Article 18

For the purposes of exercising their activities, credit institutions may, notwithstanding any provisions in the host Member State concerning the use of the words ‘bank’, ‘savings bank’ or other banking names, use throughout the territory of the Community the same name as they use in the Member State in which their head office is situated. In the event of there being any danger of confusion, the host Member State may, for the purposes of clarification, require that the name be accompanied by certain explanatory particulars.

Article 19

1.   The Member States shall require any natural or legal person who proposes to hold, directly or indirectly, a qualifying holding in a credit institution first to inform the competent authorities, telling them of the size of the intended holding. Such a person shall likewise inform the competent authorities if he proposes to increase his qualifying holding so that the proportion of the voting rights or of the capital held by him would reach or exceed 20 %, 33 % or 50 % or so that the credit institution would become his subsidiary.

Without prejudice to paragraph 2, the competent authorities shall have a maximum of three months from the date of the notification provided for in the first and second subparagraphs to oppose such a plan if, in view of the need to ensure sound and prudent management of the credit institution, they are not satisfied as to the suitability of the person concerned. If they do not oppose the plan, they may fix a maximum period for its implementation.

2.   If the person proposing to acquire the holdings referred to in paragraph 1 is a credit institution, insurance undertaking or investment firm authorised in another Member State or the parent undertaking of a credit institution, insurance undertaking or investment firm authorised in another Member State or a natural or legal person controlling a credit institution, insurance undertaking or investment firm authorised in another Member State, and if, as a result of that acquisition, the credit institution in which the acquirer proposes to hold a holding would become a subsidiary or subject to the control of the acquirer, the assessment of the acquisition shall be subject to the prior consultation provided for in Article 15.

Article 20

The Member States shall require any natural or legal person who proposes to dispose, directly or indirectly, of a qualifying holding in a credit institution first to inform the competent authorities, telling them of the size of his intended holding. Such a person shall likewise inform the competent authorities if he proposes to reduce his qualifying holding so that the proportion of the voting rights or of the capital held by him would fall below 20 %, 33 % or 50 % or so that the credit institution would cease to be his subsidiary.

Article 21

1.   Credit institutions shall, on becoming aware of any acquisitions or disposals of holdings in their capital that cause holdings to exceed or fall below one of the thresholds referred to in Article 19(1) and Article 20, inform the competent authorities of those acquisitions or disposals.

They shall also, at least once a year, inform the competent authorities of the names of shareholders and members possessing qualifying holdings and the sizes of such holdings as shown, for example, by the information received at the annual general meetings of shareholders and members or as a result of compliance with the regulations relating to companies listed on stock exchanges.

2.   The Member States shall require that, where the influence exercised by the persons referred to in Article 19(1) is likely to operate to the detriment of the prudent and sound management of the institution, the competent authorities shall take appropriate measures to put an end to that situation. Such measures may consist in injunctions, sanctions against directors and managers, or the suspension of the exercise of the voting rights attaching to the shares held by the shareholders or members in question.

Similar measures shall apply to natural or legal persons who fail to comply with the obligation to provide prior information, as laid down in Article 19(1).

If a holding is acquired despite the opposition of the competent authorities, the Member States shall, regardless of any other sanctions to be adopted, provide either for exercise of the corresponding voting rights to be suspended, or for the nullity of votes cast or for the possibility of their annulment.

3.   In determining a qualifying holding and other levels of holding referred to in this Article, the voting rights referred to in Article 92 of Directive 2001/34/EC shall be taken into consideration.

Article 22

1.   Home Member State competent authorities shall require that every credit institution have robust governance arrangements, which include a clear organisational structure with well defined, transparent and consistent lines of responsibility, effective processes to identify, manage, monitor and report the risks it is or might be exposed to, and adequate internal control mechanisms, including sound administrative and accounting procedures.

2.   The arrangements, processes and mechanisms referred to in paragraph 1 shall be comprehensive and proportionate to the nature, scale and complexity of the credit institution's activities. The technical criteria laid down in Annex V shall be taken into account.

TITLE III

PROVISIONS CONCERNING THE FREEDOM OF ESTABLISHMENT AND THE FREEDOM TO PROVIDE SERVICES

Section 1

Credit institutions

Article 23

The Member States shall provide that the activities listed in Annex I may be carried on within their territories, in accordance with Articles 25, 26(1) to (3), 28(1) and (2) and 29 to 37 either by the establishment of a branch or by way of the provision of services, by any credit institution authorised and supervised by the competent authorities of another Member State, provided that such activities are covered by the authorisation.

Section 2

Financial institutions

Article 24

1.   The Member States shall provide that the activities listed in Annex I may be carried on within their territories, in accordance with Articles 25, 26(1) to (3), 28(1) and (2) and 29 to 37, either by the establishment of a branch or by way of the provision of services, by any financial institution from another Member State, whether a subsidiary of a credit institution or the jointly-owned subsidiary of two or more credit institutions, the memorandum and Articles of association of which permit the carrying on of those activities and which fulfils each of the following conditions:

| a) | the parent undertaking or undertakings shall be authorised as credit institutions in the Member State by the law of which the financial institution is governed; |
| --- | --- |

a)

the parent undertaking or undertakings shall be authorised as credit institutions in the Member State by the law of which the financial institution is governed;

| b) | the activities in question shall actually be carried on within the territory of the same Member State; |
| --- | --- |

b)

the activities in question shall actually be carried on within the territory of the same Member State;

| c) | the parent undertaking or undertakings shall hold 90 % or more of the voting rights attaching to shares in the capital of the financial institution; |
| --- | --- |

c)

the parent undertaking or undertakings shall hold 90 % or more of the voting rights attaching to shares in the capital of the financial institution;

| d) | the parent undertaking or undertakings shall satisfy the competent authorities regarding the prudent management of the financial institution and shall have declared, with the consent of the relevant home Member State competent authorities, that they jointly and severally guarantee the commitments entered into by the financial institution; and |
| --- | --- |

d)

the parent undertaking or undertakings shall satisfy the competent authorities regarding the prudent management of the financial institution and shall have declared, with the consent of the relevant home Member State competent authorities, that they jointly and severally guarantee the commitments entered into by the financial institution; and

| e) | the financial institution shall be effectively included, for the activities in question in particular, in the consolidated supervision of the parent undertaking, or of each of the parent undertakings, in accordance with Title V, Chapter 4, Section 1, in particular for the purposes of the minimum own funds requirements set out in Article 75 for the control of large exposures and for purposes of the limitation of holdings provided for in Articles 120 to 122. |
| --- | --- |

e)

the financial institution shall be effectively included, for the activities in question in particular, in the consolidated supervision of the parent undertaking, or of each of the parent undertakings, in accordance with Title V, Chapter 4, Section 1, in particular for the purposes of the minimum own funds requirements set out in Article 75 for the control of large exposures and for purposes of the limitation of holdings provided for in Articles 120 to 122.

Compliance with these conditions shall be verified by the competent authorities of the home Member State and the latter shall supply the financial institution with a certificate of compliance which shall form Part of the notification referred to in Articles 25 and 28.

The competent authorities of the home Member State shall ensure the supervision of the financial institution in accordance with Articles 10(1), 19 to 22, 40, 42 to 52 and 54.

2.   If a financial institution as referred to in the first subparagraph of paragraph 1 ceases to fulfil any of the conditions imposed, the home Member State shall notify the competent authorities of the host Member State and the activities carried on by that financial institution in the host Member State shall become subject to the legislation of the host Member State.

3.   Paragraphs 1 and 2 shall apply mutatis mutandis to subsidiaries of a financial institution as referred to in the first subparagraph of paragraph 1.

Section 3

Exercise of the right of establishment

Article 25

1.   A credit institution wishing to establish a branch within the territory of another Member State shall notify the competent authorities of its home Member State.

2.   Member States shall require every credit institution wishing to establish a branch in another Member State to provide the following information when effecting the notification referred to in paragraph 1:

| a) | the Member State within the territory of which it plans to establish a branch; |
| --- | --- |

a)

the Member State within the territory of which it plans to establish a branch;

| b) | a programme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the branch; |
| --- | --- |

b)

a programme of operations setting out, inter alia, the types of business envisaged and the structural organisation of the branch;

| c) | the address in the host Member State from which documents may be obtained; and |
| --- | --- |

c)

the address in the host Member State from which documents may be obtained; and

| d) | the names of those to be responsible for the management of the branch. |
| --- | --- |

d)

the names of those to be responsible for the management of the branch.

3.   Unless the competent authorities of the home Member State have reason to doubt the adequacy of the administrative structure or the financial situation of the credit institution, taking into account the activities envisaged, they shall within three months of receipt of the information referred to in paragraph 2 communicate that information to the competent authorities of the host Member State and shall inform the credit institution accordingly.

The home Member State's competent authorities shall also communicate the amount of own funds and the sum of the capital requirements under Article 75 of the credit institution.

By way of derogation from the second subparagraph, in the case referred to in Article 24, the home Member State's competent authorities shall communicate the amount of own funds of the financial institution and the sum of the consolidated own funds and consolidated capital requirements under Article 75 of the credit institution which is its parent undertaking.

4.   Where the competent authorities of the home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the host Member State, they shall give reasons for their refusal to the credit institution concerned within three months of receipt of all the information.

That refusal or a failure to reply, shall be subject to a right to apply to the courts in the home Member State.

Article 26

1.   Before the branch of a credit institution commences its activities the competent authorities of the host Member State shall, within two months of receiving the information referred to in Article 25, prepare for the supervision of the credit institution in accordance with Section 5 and if necessary indicate the conditions under which, in the interest of the general good, those activities shall be carried on in the host Member State.

2.   On receipt of a communication from the competent authorities of the host Member State, or in the event of the expiry of the period provided for in paragraph 1 without receipt of any communication from the latter, the branch may be established and may commence its activities.

3.   In the event of a change in any of the particulars communicated pursuant to points (b), (c) or (d) of Article 25(2), a credit institution shall give written notice of the change in question to the competent authorities of the home and host Member States at least one month before making the change so as to enable the competent authorities of the home Member State to take a decision pursuant to Article 25 and the competent authorities of the host Member State to take a decision on the change pursuant to paragraph 1 of this Article.

4.   Branches which have commenced their activities, in accordance with the provisions in force in their host Member States, before 1 January 1993, shall be presumed to have been subject to the procedure laid down in Article 25 and in paragraphs 1 and 2 of this Article. They shall be governed, from 1 January 1993, by paragraph 3 of this Article and by Articles 23 and 43 as well as Sections 2 and 5.

Article 27

Any number of places of business set up in the same Member State by a credit institution with headquarters in another Member State shall be regarded as a single branch.

Section 4

Exercise of the freedom to provide services

Article 28

1.   Any credit institution wishing to exercise the freedom to provide services by carrying on its activities within the territory of another Member State for the first time shall notify the competent authorities of the home Member State, of the activities on the list in Annex I which it intends to carry on.

2.   The competent authorities of the home Member State shall, within one month of receipt of the notification provided for in paragraph 1, send that notification to the competent authorities of the host Member State.

3.   This Article shall not affect rights acquired by credit institutions providing services before 1 January 1993.

Section 5

Powers of the competent authorities of the host Member State

Article 29

Host Member States may, for statistical purposes, require that all credit institutions having branches within their territories shall report periodically on their activities in those host Member States to the competent authorities of those host Member States.

In discharging the responsibilities imposed on them in Article 41, host Member States may require that branches of credit institutions from other Member States provide the same information as they require from national credit institutions for that purpose.

Article 30

1.   Where the competent authorities of a host Member State ascertain that a credit institution having a branch or providing services within its territory is not complying with the legal provisions adopted in that State pursuant to the provisions of this Directive involving powers of the host Member State's competent authorities, those authorities shall require the credit institution concerned to put an end to that irregular situation.

2.   If the credit institution concerned fails to take the necessary steps, the competent authorities of the host Member State shall inform the competent authorities of the home Member State accordingly.

The competent authorities of the home Member State shall, at the earliest opportunity, take all appropriate measures to ensure that the credit institution concerned puts an end to that irregular situation. The nature of those measures shall be communicated to the competent authorities of the host Member State.

3.   If, despite the measures taken by the home Member State or because such measures prove inadequate or are not available in the Member State in question, the credit institution persists in violating the legal rules referred to in paragraph 1 in force in the host Member State, the latter State may, after informing the competent authorities of the home Member State, take appropriate measures to prevent or to punish further irregularities and, in so far as is necessary, to prevent that credit institution from initiating further transactions within its territory. The Member States shall ensure that within their territories it is possible to serve the legal documents necessary for these measures on credit institutions.

Article 31

Articles 29 and 30 shall not affect the power of host Member States to take appropriate measures to prevent or to punish irregularities committed within their territories which are contrary to the legal rules they have adopted in the interests of the general good. This shall include the possibility of preventing offending credit institutions from initiating further transactions within their territories.

Article 32

Any measure taken pursuant to Article 30(2) and (3), or Article 31 involving penalties or restrictions on the exercise of the freedom to provide services shall be properly justified and communicated to the credit institution concerned. Every such measure shall be subject to a right of appeal to the courts in the Member State in which it was taken.

Article 33

Before following the procedure provided for in Article 30, the competent authorities of the host Member State may, in emergencies, take any precautionary measures necessary to protect the interests of depositors, investors and others to whom services are provided. The Commission and the competent authorities of the other Member States concerned shall be informed of such measures at the earliest opportunity.

The Commission may, after consulting the competent authorities of the Member States concerned, decide that the Member State in question shall amend or abolish those measures.

Article 34

Host Member States may exercise the powers conferred on them under this Directive by taking appropriate measures to prevent or to punish irregularities committed within their territories. This shall include the possibility of preventing offending credit institutions from initiating further transactions within their territories.

Article 35

In the event of the withdrawal of authorisation, the competent authorities of the host Member State shall be informed and shall take appropriate measures to prevent the credit institution concerned from initiating further transactions within its territory and to safeguard the interests of depositors.

Article 36

The Member States shall inform the Commission of the number and type of cases in which there has been a refusal pursuant to Articles 25 and 26(1) to (3) or in which measures have been taken in accordance with Article 30(3).

Article 37

This Section shall not prevent credit institutions with head offices in other Member States from advertising their services through all available means of communication in the host Member State, subject to any rules governing the form and the content of such advertising adopted in the interests of the general good.

TITLE IV

RELATIONS WITH THIRD COUNTRIES

Section 1

Notification in relation to third countries' undertakings and conditions of access to the markets of these countries

Article 38

1.   Member States shall not apply to branches of credit institutions having their head office outside the Community, when commencing or carrying on their business, provisions which result in more favourable treatment than that accorded to branches of credit institutions having their head office in the Community.

2.   The competent authorities shall notify the Commission and the European Banking Committee of all authorisations for branches granted to credit institutions having their head office outside the Community.

3.   Without prejudice to paragraph 1, the Community may, through agreements concluded with one or more third countries, agree to apply provisions which accord to branches of a credit institution having its head office outside the Community identical treatment throughout the territory of the Community.

Section 2

Cooperation with third countries' competent authorities regarding supervision on a consolidated basis

Article 39

1.   The Commission may submit proposals to the Council, either at the request of a Member State or on its own initiative, for the negotiation of agreements with one or more third countries regarding the means of exercising supervision on a consolidated basis over the following:

| a) | credit institutions the parent undertakings of which have their head offices in a third country; or |
| --- | --- |

a)

credit institutions the parent undertakings of which have their head offices in a third country; or

| b) | credit institutions situated in third countries the parent undertakings of which, whether credit institutions or financial holding companies, have their head offices in the Community. |
| --- | --- |

b)

credit institutions situated in third countries the parent undertakings of which, whether credit institutions or financial holding companies, have their head offices in the Community.

2.   The agreements referred to in paragraph 1 shall, in particular, seek to ensure the following:

| a) | that the competent authorities of the Member States are able to obtain the information necessary for the supervision, on the basis of their consolidated financial situations, of credit institutions or financial holding companies situated in the Community and which have as subsidiaries credit institutions or financial institutions situated outside the Community, or holding participation in such institutions; and |
| --- | --- |

a)

that the competent authorities of the Member States are able to obtain the information necessary for the supervision, on the basis of their consolidated financial situations, of credit institutions or financial holding companies situated in the Community and which have as subsidiaries credit institutions or financial institutions situated outside the Community, or holding participation in such institutions; and

| b) | that the competent authorities of third countries are able to obtain the information necessary for the supervision of parent undertakings the head offices of which are situated within their territories and which have as subsidiaries credit institutions or financial institutions situated in one or more Member States or holding participation in such institutions. |
| --- | --- |

b)

that the competent authorities of third countries are able to obtain the information necessary for the supervision of parent undertakings the head offices of which are situated within their territories and which have as subsidiaries credit institutions or financial institutions situated in one or more Member States or holding participation in such institutions.

3.   Without prejudice to Article 300(1) and (2) of the Treaty, the Commission shall, with the assistance of the European Banking Committee, examine the outcome of the negotiations referred to in paragraph 1 and the resulting situation.

TITLE V

PRINCIPLES AND TECHNICAL INSTRUMENTS FOR PRUDENTIAL SUPERVISION AND DISCLOSURE

Chapter 1

Principles of prudential supervision

Section 1

Competence of home and host Member State

Article 40

1.   The prudential supervision of a credit institution, including that of the activities it carries on accordance with Articles 23 and 24, shall be the responsibility of the competent authorities of the home Member State, without prejudice to those provisions of this Directive which give responsibility to the competent authorities of the host Member State.

2.   Paragraph 1 shall not prevent supervision on a consolidated basis pursuant to this Directive.

Article 41

Host Member States shall, pending further coordination, retain responsibility in cooperation with the competent authorities of the home Member State for the supervision of the liquidity of the branches of credit institutions.

Without prejudice to the measures necessary for the reinforcement of the European Monetary System, host Member States shall retain complete responsibility for the measures resulting from the implementation of their monetary policies.

Such measures may not provide for discriminatory or restrictive treatment based on the fact that a credit institution is authorised in another Member State.

Article 42

The competent authorities of the Member States concerned shall collaborate closely in order to supervise the activities of credit institutions operating, in particular through a branch, in one or more Member States other than that in which their head offices are situated. They shall supply one another with all information concerning the management and ownership of such credit institutions that is likely to facilitate their supervision and the examination of the conditions for their authorisation, and all information likely to facilitate the monitoring of such institutions, in particular with regard to liquidity, solvency, deposit guarantees, the limiting of large exposures, administrative and accounting procedures and internal control mechanisms.

Article 43

1.   Host Member States shall provide that, where a credit institution authorised in another Member State carries on its activities through a branch, the competent authorities of the home Member State may, after having first informed the competent authorities of the host Member State, carry out themselves or through the intermediary of persons they appoint for that purpose on-the-spot verification of the information referred to in Article 42.

2.   The competent authorities of the home Member State may also, for purposes of the verification of branches, have recourse to one of the other procedures laid down in Article 141.

3.   Paragraphs 1 and 2 shall not affect the right of the competent authorities of the host Member State to carry out, in the discharge of their responsibilities under this Directive, on-the-spot verifications of branches established within their territory.

Section 2

Exchange of information and professional secrecy

Article 44

1.   Member States shall provide that all persons working for or who have worked for the competent authorities, as well as auditors or experts acting on behalf of the competent authorities, shall be bound by the obligation of professional secrecy.

No confidential information which they may receive in the course of their duties may be divulged to any person or authority whatsoever, except in summary or collective form, such that individual credit institutions cannot be identified, without prejudice to cases covered by criminal law.

Nevertheless, where a credit institution has been declared bankrupt or is being compulsorily wound up, confidential information which does not concern third parties involved in attempts to rescue that credit institution may be divulged in civil or commercial proceedings.

2.   Paragraph 1 shall not prevent the competent authorities of the various Member States from exchanging information in accordance with this Directive and with other Directives applicable to credit institutions. That information shall be subject to the conditions of professional secrecy indicated in paragraph 1.

Article 45

Competent authorities receiving confidential information under Article 44 may use it only in the course of their duties and only for the following purposes:

| a) | to check that the conditions governing the taking-up of the business of credit institutions are met and to facilitate monitoring, on a non-consolidated or consolidated basis, of the conduct of such business, especially with regard to the monitoring of liquidity, solvency, large exposures, and administrative and accounting procedures and internal control mechanisms; |
| --- | --- |

a)

to check that the conditions governing the taking-up of the business of credit institutions are met and to facilitate monitoring, on a non-consolidated or consolidated basis, of the conduct of such business, especially with regard to the monitoring of liquidity, solvency, large exposures, and administrative and accounting procedures and internal control mechanisms;

| b) | to impose penalties; |
| --- | --- |

b)

to impose penalties;

| c) | in an administrative appeal against a decision of the competent authority; or |
| --- | --- |

c)

in an administrative appeal against a decision of the competent authority; or

| d) | in court proceedings initiated pursuant to Article 55 or to special provisions provided for in this in other Directives adopted in the field of credit institutions. |
| --- | --- |

d)

in court proceedings initiated pursuant to Article 55 or to special provisions provided for in this in other Directives adopted in the field of credit institutions.

Article 46

Member States may conclude cooperation agreements, providing for exchanges of information, with the competent authorities of third countries or with authorities or bodies of third countries as defined in Articles 47 and 48(1) only if the information disclosed is subject to guarantees of professional secrecy at least equivalent to those referred to in Article 44(1). Such exchange of information shall be for the purpose of performing the supervisory task of the authorities or bodies mentioned.

Where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.

Article 47

Articles 44(1) and 45 shall not preclude the exchange of information within a Member State, where there are two or more competent authorities in the same Member State, or between Member States, between competent authorities and the following:

| a) | authorities entrusted with the public duty of supervising other financial organisations and insurance companies and the authorities responsible for the supervision of financial markets; |
| --- | --- |

a)

authorities entrusted with the public duty of supervising other financial organisations and insurance companies and the authorities responsible for the supervision of financial markets;

| b) | bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures; and |
| --- | --- |

b)

bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures; and

| c) | persons responsible for carrying out statutory audits of the accounts of credit institutions and other financial institutions; |
| --- | --- |

c)

persons responsible for carrying out statutory audits of the accounts of credit institutions and other financial institutions;

in the discharge of their supervisory functions.

Articles 44(1) and 45 shall not preclude the disclosure to bodies which administer deposit-guarantee schemes of information necessary to the exercise of their functions.

In both cases, the information received shall be subject to the conditions of professional secrecy specified in Article 44(1).

Article 48

1.   Notwithstanding Articles 44 to 46, Member States may authorise exchange of information between the competent authorities and the following:

| a) | the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures; and |
| --- | --- |

a)

the authorities responsible for overseeing the bodies involved in the liquidation and bankruptcy of credit institutions and in other similar procedures; and

| b) | the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions. |
| --- | --- |

b)

the authorities responsible for overseeing persons charged with carrying out statutory audits of the accounts of insurance undertakings, credit institutions, investment firms and other financial institutions.

In such cases, Member States shall require fulfilment of at least the following conditions:

| a) | the information shall be for the purpose of performing the supervisory task referred to in the first subparagraph; |
| --- | --- |

a)

the information shall be for the purpose of performing the supervisory task referred to in the first subparagraph;

| b) | information received in this context shall be subject to the conditions of professional secrecy specified in Article 44(1); and |
| --- | --- |

b)

information received in this context shall be subject to the conditions of professional secrecy specified in Article 44(1); and

| c) | where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. |
| --- | --- |

c)

where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.

Member States shall communicate to the Commission and to the other Member States the names of the authorities which may receive information pursuant to this paragraph.

2.   Notwithstanding Articles 44 to 46, Member States may, with the aim of strengthening the stability, including integrity, of the financial system, authorise the exchange of information between the competent authorities and the authorities or bodies responsible under law for the detection and investigation of breaches of company law.

In such cases Member States shall require fulfilment of at least the following conditions:

| a) | the information is for the purpose of performing the task referred to in the first subparagraph; |
| --- | --- |

a)

the information is for the purpose of performing the task referred to in the first subparagraph;

| b) | information received in this context is subject to the conditions of professional secrecy specified in Article 44(1); and |
| --- | --- |

b)

information received in this context is subject to the conditions of professional secrecy specified in Article 44(1); and

| c) | where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement. |
| --- | --- |

c)

where the information originates in another Member State, it may not be disclosed without the express agreement of the competent authorities which have disclosed it and, where appropriate, solely for the purposes for which those authorities gave their agreement.

Where, in a Member State, the authorities or bodies referred to in the first subparagraph perform their task of detection or investigation with the aid, in view of their specific competence, of persons appointed for that purpose and not employed in the public sector, the possibility of exchanging information provided for in the first subparagraph may be extended to such persons under the conditions specified in the second subparagraph.

In order to implement the third subparagraph, the authorities or bodies referred to in the first subparagraph shall communicate to the competent authorities which have disclosed the information, the names and precise responsibilities of the persons to whom it is to be sent.

Member States shall communicate to the Commission and to the other Member States the names of the authorities or bodies which may receive information pursuant to this Article.

The Commission shall draw up a report on the application of the provisions of this Article.

Article 49

This Section shall not prevent a competent authority from transmitting information to the following for the purposes of their tasks:

| a) | central banks and other bodies with a similar function in their capacity as monetary authorities; and |
| --- | --- |

a)

central banks and other bodies with a similar function in their capacity as monetary authorities; and

| b) | where appropriate, to other public authorities responsible for overseeing payment systems. |
| --- | --- |

b)

where appropriate, to other public authorities responsible for overseeing payment systems.

This Section shall not prevent such authorities or bodies from communicating to the competent authorities such information as they may need for the purposes of Article 45.

Information received in this context shall be subject to the conditions of professional secrecy specified in Article 44(1).

Article 50

Notwithstanding Articles 44(1) and 45, the Member States may, by virtue of provisions laid down by law, authorise the disclosure of certain information to other departments of their central government administrations responsible for legislation on the supervision of credit institutions, financial institutions, investment services and insurance companies and to inspectors acting on behalf of those departments.

However, such disclosures may be made only where necessary for reasons of prudential control.

Article 51

The Member States shall provide that information received under Articles 44(2) and 47 and information obtained by means of the on-the-spot verification referred to in Article 43(1) and (2) may never be disclosed in the cases referred to in Article 50 except with the express consent of the competent authorities which disclosed the information or of the competent authorities of the Member State in which on-the-spot verification was carried out.

Article 52

This Section shall not prevent the competent authorities of a Member State from communicating the information referred to in Articles 44 to 46 to a clearing house or other similar body recognised under national law for the provision of clearing or settlement services for one of their national markets if they consider that it is necessary to communicate the information in order to ensure the proper functioning of those bodies in relation to defaults or potential defaults by market participants. The information received in this context shall be subject to the conditions of professional secrecy specified in Article 44(1).

The Member States shall, however, ensure that information received under Article 44(2) may not be disclosed in the circumstances referred to in this Article without the express consent of the competent authorities which disclosed it.

Section 3

Duty of persons responsible for the legal control of annual and consolidated accounts

Article 53

1.   Member States shall provide at least that any person authorised within the meaning of Directive 84/253/EEC (17) performing in a credit institution the task described in Article 51 of Directive 78/660/EEC, Article 37 of Directive 83/349/EEC or Article 31 of Directive 85/611/EEC (18), or any other statutory task, shall have a duty to report promptly to the competent authorities any fact or decision concerning that credit institution of which he has become aware while carrying out that task which is liable to:

| a) | constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of credit institutions; |
| --- | --- |

a)

constitute a material breach of the laws, regulations or administrative provisions which lay down the conditions governing authorisation or which specifically govern pursuit of the activities of credit institutions;

| b) | affect the continuous functioning of the credit institution; or |
| --- | --- |

b)

affect the continuous functioning of the credit institution; or

| c) | lead to refusal to certify the accounts or to the expression of reservations. |
| --- | --- |

c)

lead to refusal to certify the accounts or to the expression of reservations.

Member States shall provide at least that that person shall likewise have a duty to report any fact or decision of which he becomes aware in the course of carrying out a task as described in the first sub-paragraph in an undertaking having close links resulting from a control relationship with the credit institution within which he is carrying out that task.

2.   The disclosure in good faith to the competent authorities, by persons authorised within the meaning of Directive 84/253/EEC, of any fact or decision referred to in paragraph 1 shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision and shall not involve such persons in liability of any kind.

Section 4

Power of sanction and right to apply to the courts

Article 54

Without prejudice to the procedures for the withdrawal of authorisations and the provisions of criminal law, the Member States shall provide that their respective competent authorities may, as against credit institutions, or those who effectively control the business of credit institutions, which breach laws, regulations or administrative provisions concerning the supervision or pursuit of their activities, adopt or impose penalties or measures aimed specifically at ending the observed breaches or the causes of such breaches.

Article 55

Member States shall ensure that decisions taken in respect of a credit institution in pursuance of laws, regulations and administrative provisions adopted in accordance with this Directive may be subject to the right to apply to the courts. The same shall apply where no decision is taken, within six months of its submission, in respect of an application for authorisation which contains all the information required under the provisions in force.

Chapter 2

Technical instruments of prudential supervision

Section 1

Own funds

Article 56

Wherever a Member State lays down by law, regulation or administrative action a provision in implementation of Community legislation concerning the prudential supervision of an operative credit institution which uses the term or refers to the concept of own funds, it shall bring this term or concept into line with the definition given in Articles 57 to 61 and Articles 63 to 66.

Article 57

Subject to the limits imposed in Article 66, the unconsolidated own funds of credit institutions shall consist of the following items:

| a) | capital within the meaning of Article 22 of Directive 86/635/EEC, in so far as it has been paid up, plus share premium accounts but excluding cumulative preferential shares; |
| --- | --- |

a)

capital within the meaning of Article 22 of Directive 86/635/EEC, in so far as it has been paid up, plus share premium accounts but excluding cumulative preferential shares;

| b) | reserves within the meaning of Article 23 of Directive 86/635/EEC and profits and losses brought forward as a result of the application of the final profit or loss; |
| --- | --- |

b)

reserves within the meaning of Article 23 of Directive 86/635/EEC and profits and losses brought forward as a result of the application of the final profit or loss;

| c) | funds for general banking risks within the meaning of Article 38 of Directive 86/635/EEC; |
| --- | --- |

c)

funds for general banking risks within the meaning of Article 38 of Directive 86/635/EEC;

| d) | revaluation reserves within the meaning of Article 33 of Directive 78/660/EEC; |
| --- | --- |

d)

revaluation reserves within the meaning of Article 33 of Directive 78/660/EEC;

| e) | value adjustments within the meaning of Article 37(2) of Directive 86/635/EEC; |
| --- | --- |

e)

value adjustments within the meaning of Article 37(2) of Directive 86/635/EEC;

| f) | other items within the meaning of Article 63; |
| --- | --- |

f)

other items within the meaning of Article 63;

| g) | the commitments of the members of credit institutions set up as cooperative societies and the joint and several commitments of the borrowers of certain institutions organised as funds, as referred to in Article 64(1); and |
| --- | --- |

g)

the commitments of the members of credit institutions set up as cooperative societies and the joint and several commitments of the borrowers of certain institutions organised as funds, as referred to in Article 64(1); and

| h) | fixed-term cumulative preferential shares and subordinated loan capital as referred to in Article 64(3). |
| --- | --- |

h)

fixed-term cumulative preferential shares and subordinated loan capital as referred to in Article 64(3).

The following items shall be deducted in accordance with Article 66:

| i) | own shares at book value held by a credit institution; |
| --- | --- |

i)

own shares at book value held by a credit institution;

| j) | intangible assets within the meaning of Article 4(9) (‘Assets’) of Directive 86/635/EEC; |
| --- | --- |

j)

intangible assets within the meaning of Article 4(9) (‘Assets’) of Directive 86/635/EEC;

| k) | material losses of the current financial year; |
| --- | --- |

k)

material losses of the current financial year;

| l) | holdings in other credit and financial institutions amounting to more than 10 % of their capital; |
| --- | --- |

l)

holdings in other credit and financial institutions amounting to more than 10 % of their capital;

| m) | subordinated claims and instruments referred to in Article 63 and Article 64(3) which a credit institution holds in respect of credit and financial institutions in which it has holdings exceeding 10 % of the capital in each case; |
| --- | --- |

m)

subordinated claims and instruments referred to in Article 63 and Article 64(3) which a credit institution holds in respect of credit and financial institutions in which it has holdings exceeding 10 % of the capital in each case;

| n) | holdings in other credit and financial institutions of up to 10 % of their capital, the subordinated claims and the instruments referred to in Article 63 and Article 64(3) which a credit institution holds in respect of credit and financial institutions other than those referred to in points (l) and (m) in respect of the amount of the total of such holdings, subordinated claims and instruments which exceed 10 % of that credit institution's own funds calculated before the deduction of items in points (l) to (p); |
| --- | --- |

n)

holdings in other credit and financial institutions of up to 10 % of their capital, the subordinated claims and the instruments referred to in Article 63 and Article 64(3) which a credit institution holds in respect of credit and financial institutions other than those referred to in points (l) and (m) in respect of the amount of the total of such holdings, subordinated claims and instruments which exceed 10 % of that credit institution's own funds calculated before the deduction of items in points (l) to (p);

| o) | participations within the meaning of Article 4(10) which a credit institution holds in:






  i) | insurance undertakings within the meaning of Article 6 of Directive 73/239/EEC (19), Article 4 of Directive 2002/83/EC (20) or Article 1(b) of Directive 98/78/EC (21), |
| --- | --- | --- |

o)

participations within the meaning of Article 4(10) which a credit institution holds in:

i)

insurance undertakings within the meaning of Article 6 of Directive 73/239/EEC (19), Article 4 of Directive 2002/83/EC (20) or Article 1(b) of Directive 98/78/EC (21),

| ii) | reinsurance undertakings within the meaning of Article 1(c) of Directive 98/78/EC, or |
| --- | --- |

ii)

reinsurance undertakings within the meaning of Article 1(c) of Directive 98/78/EC, or

| iii) | insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC; |
| --- | --- |

iii)

insurance holding companies within the meaning of Article 1(i) of Directive 98/78/EC;

| p) | each of the following items which the credit institution holds in respect of the entities defined in point (o) in which it holds a participation:






  i) | instruments referred to in Article 16(3) of Directive 73/239/EEC, and |
| --- | --- | --- |

p)

each of the following items which the credit institution holds in respect of the entities defined in point (o) in which it holds a participation:

i)

instruments referred to in Article 16(3) of Directive 73/239/EEC, and

| ii) | instruments referred to in Article 27(3) of Directive 2002/83/EC; |
| --- | --- |

ii)

instruments referred to in Article 27(3) of Directive 2002/83/EC;

| q) | for credit institutions calculating risk-weighted exposure amounts under Section 3, Subsection 2, negative amounts resulting from the calculation in Annex VII, Part 1, point 36 and expected loss amounts calculated in accordance with Annex VII, Part 1 points 32 and 33; and |
| --- | --- |

q)

for credit institutions calculating risk-weighted exposure amounts under Section 3, Subsection 2, negative amounts resulting from the calculation in Annex VII, Part 1, point 36 and expected loss amounts calculated in accordance with Annex VII, Part 1 points 32 and 33; and

| r) | the exposure amount of securitisation positions which receive a risk weight of 1 250 % under Annex IX, Part 4, calculated in the manner there specified. |
| --- | --- |

r)

the exposure amount of securitisation positions which receive a risk weight of 1 250 % under Annex IX, Part 4, calculated in the manner there specified.

For the purposes of point (b), the Member States may permit inclusion of interim profits before a formal decision has been taken only if these profits have been verified by persons responsible for the auditing of the accounts and if it is proved to the satisfaction of the competent authorities that the amount thereof has been evaluated in accordance with the principles set out in Directive 86/635/EEC and is net of any foreseeable charge or dividend.

In the case of a credit institution which is the originator of a securitisation, net gains arising from the capitalisation of future income from the securitised assets and providing credit enhancement to positions in the securitisation shall be excluded from the item specified in point (b).

Article 58

Where shares in another credit institution, financial institution, insurance or reinsurance undertaking or insurance holding company are held temporarily for the purposes of a financial assistance operation designed to reorganise and save that entity, the competent authority may waive the provisions on deduction referred to in points (l) to (p) of Article 57.

Article 59

As an alternative to the deduction of the items referred to in points (o) and (p) of Article 57, Member States may allow their credit institutions to apply mutatis mutandis methods 1, 2 or 3 of Annex I to Directive 2002/87/EC. Method 1 (accounting consolidation) may be applied only if the competent authority is confident about the level of integrated management and internal control regarding the entities which would be included in the scope of consolidation. The method chosen shall be applied in a consistent manner over time.

Article 60

Member States may provide that for the calculation of own funds on a stand-alone basis, credit institutions subject to supervision on a consolidated basis in accordance with Chapter 4, Section 1, or to supplementary supervision in accordance with Directive 2002/87/EC, need not deduct the items referred to in points (l) to (p) of Article 57 which are held in credit institutions, financial institutions, insurance or reinsurance undertakings or insurance holding companies, which are included in the scope of consolidated or supplementary supervision.

This provision shall apply to all the prudential rules harmonised by Community acts.

Article 61

The concept of own funds as defined in points (a) to (h) of Article 57 embodies a maximum number of items and amounts. The use of those items and the fixing of lower ceilings, and the deduction of items other than those listed in points (i) to (r) of Article 57 shall be left to the discretion of the Member States.

The items listed in points (a) to (e) of Article 57 shall be available to a credit institution for unrestricted and immediate use to cover risks or losses as soon as these occur. The amount shall be net of any foreseeable tax charge at the moment of its calculation or be suitably adjusted in so far as such tax charges reduce the amount up to which these items may be applied to cover risks or losses.

Article 62

Member States may report to the Commission on the progress achieved in convergence with a view to a common definition of own funds. On the basis of these reports the Commission shall, if appropriate, by 1 January 2009, submit a proposal to the European Parliament and to the Council for amendment of this Section.

Article 63

1.   The concept of own funds used by a Member State may include other items provided that, whatever their legal or accounting designations might be, they have the following characteristics:

| a) | they are freely available to the credit institution to cover normal banking risks where revenue or capital losses have not yet been identified; |
| --- | --- |

a)

they are freely available to the credit institution to cover normal banking risks where revenue or capital losses have not yet been identified;

| b) | their existence is disclosed in internal accounting records; and |
| --- | --- |

b)

their existence is disclosed in internal accounting records; and

| c) | their amount is determined by the management of the credit institution, verified by independent auditors, made known to the competent authorities and placed under the supervision of the latter. |
| --- | --- |

c)

their amount is determined by the management of the credit institution, verified by independent auditors, made known to the competent authorities and placed under the supervision of the latter.

2.   Securities of indeterminate duration and other instruments that fulfil the following conditions may also be accepted as other items:

| a) | they may not be reimbursed on the bearer's initiative or without the prior agreement of the competent authority; |
| --- | --- |

a)

they may not be reimbursed on the bearer's initiative or without the prior agreement of the competent authority;

| b) | the debt agreement shall provide for the credit institution to have the option of deferring the payment of interest on the debt; |
| --- | --- |

b)

the debt agreement shall provide for the credit institution to have the option of deferring the payment of interest on the debt;

| c) | the lender's claims on the credit institution shall be wholly subordinated to those of all non-subordinated creditors; |
| --- | --- |

c)

the lender's claims on the credit institution shall be wholly subordinated to those of all non-subordinated creditors;

| d) | the documents governing the issue of the securities shall provide for debt and unpaid interest to be such as to absorb losses, whilst leaving the credit institution in a position to continue trading; and |
| --- | --- |

d)

the documents governing the issue of the securities shall provide for debt and unpaid interest to be such as to absorb losses, whilst leaving the credit institution in a position to continue trading; and

| e) | only fully paid-up amounts shall be taken into account. |
| --- | --- |

e)

only fully paid-up amounts shall be taken into account.

To these securities and other instruments may be added cumulative preferential shares other than those referred to in point (h) of Article 57.

3.   For credit institutions calculating risk-weighted exposure amounts under Section 3, Subsection 2, positive amounts resulting from the calculation in Annex VII, Part 1, point 36, may, up to 0,6 % of risk weighted exposure amounts calculated under Subsection 2, be accepted as other items. For these credit institutions value adjustments and provisions included in the calculation referred to in Annex VII, Part 1, point 36 and value adjustments and provisions for exposures referred to in point (e) of Article 57 shall not be included in own funds other than in accordance with this paragraph. For these purposes, risk-weighted exposure amounts shall not include those calculated in respect of securitisation positions which have a risk weight of 1 250 %.

Article 64

1.   The commitments of the members of credit institutions set up as cooperative societies referred to in point (g) of Article 57, shall comprise those societies' uncalled capital, together with the legal commitments of the members of those cooperative societies to make additional non-refundable payments should the credit institution incur a loss, in which case it shall be possible to demand those payments without delay.

The joint and several commitments of borrowers in the case of credit institutions organised as funds shall be treated in the same way as the preceding items.

All such items may be included in own funds in so far as they are counted as the own funds of institutions of this category under national law.

2.   Member States shall not include in the own funds of public credit institutions guarantees which they or their local authorities extend to such entities.

3.   Member States or the competent authorities may include fixed-term cumulative preferential shares referred to in point (h) of Article 57 and subordinated loan capital referred to in that provision in own funds, if binding agreements exist under which, in the event of the bankruptcy or liquidation of the credit institution, they rank after the claims of all other creditors and are not to be repaid until all other debts outstanding at the time have been settled.

Subordinated loan capital shall fulfil the following additional criteria:

| a) | only fully paid-up funds may be taken into account; |
| --- | --- |

a)

only fully paid-up funds may be taken into account;

| b) | the loans involved shall have an original maturity of at least five years, after which they may be repaid; |
| --- | --- |

b)

the loans involved shall have an original maturity of at least five years, after which they may be repaid;

| c) | the extent to which they may rank as own funds shall be gradually reduced during at least the last five years before the repayment date; and |
| --- | --- |

c)

the extent to which they may rank as own funds shall be gradually reduced during at least the last five years before the repayment date; and

| d) | the loan agreement shall not include any clause providing that in specified circumstances, other than the winding-up of the credit institution, the debt shall become repayable before the agreed repayment date. |
| --- | --- |

d)

the loan agreement shall not include any clause providing that in specified circumstances, other than the winding-up of the credit institution, the debt shall become repayable before the agreed repayment date.

For the purposes of point (b) of the second subparagraph, if the maturity of the debt is not fixed, the loans involved shall be repayable only subject to five years' notice unless the loans are no longer considered as own funds or unless the prior consent of the competent authorities is specifically required for early repayment. The competent authorities may grant permission for the early repayment of such loans provided the request is made at the initiative of the issuer and the solvency of the credit institution in question is not affected.

4.   Credit institutions shall not include in own funds either the fair value reserves related to gains or losses on cash flow hedges of financial instruments measured at amortised cost, or any gains or losses on their liabilities valued at fair value that are due to changes in the credit institutions' own credit standing.

Article 65

1.   Where the calculation is to be made on a consolidated basis, the consolidated amounts relating to the items listed under Article 57 shall be used in accordance with the rules laid down in Chapter 4, Section 1. Moreover, the following may, when they are credit (‘negative’) items, be regarded as consolidated reserves for the calculation of own funds:

| a) | any minority interests within the meaning of Article 21 of Directive 83/349/EEC, where the global integration method is used; |
| --- | --- |

a)

any minority interests within the meaning of Article 21 of Directive 83/349/EEC, where the global integration method is used;

| b) | the first consolidation difference within the meaning of Articles 19, 30 and 31 of Directive 83/349/EEC; |
| --- | --- |

b)

the first consolidation difference within the meaning of Articles 19, 30 and 31 of Directive 83/349/EEC;

| c) | the translation differences included in consolidated reserves in accordance with Article 39(6) of Directive 86/635/EEC; and |
| --- | --- |

c)

the translation differences included in consolidated reserves in accordance with Article 39(6) of Directive 86/635/EEC; and

| d) | any difference resulting from the inclusion of certain participating interests in accordance with the method prescribed in Article 33 of Directive 83/349/EEC. |
| --- | --- |

d)

any difference resulting from the inclusion of certain participating interests in accordance with the method prescribed in Article 33 of Directive 83/349/EEC.

2.   Where the items referred to in points (a) to (d) of paragraph 1 are debit (‘positive’) items, they shall be deducted in the calculation of consolidated own funds.

Article 66

1.   The items referred to in points (d) to (h) of Article 57, shall be subject to the following limits:

| a) | the total of the items in points (d) to (h) may not exceed a maximum of 100 % of the items in points (a) plus (b) and (c) minus (i) to (k); and |
| --- | --- |

a)

the total of the items in points (d) to (h) may not exceed a maximum of 100 % of the items in points (a) plus (b) and (c) minus (i) to (k); and

| b) | the total of the items in points (g) to (h) may not exceed a maximum of 50 % of the items in points (a) plus (b) and (c) minus (i) to (k). |
| --- | --- |

b)

the total of the items in points (g) to (h) may not exceed a maximum of 50 % of the items in points (a) plus (b) and (c) minus (i) to (k).

2.   The total of the items in points (l) to (r) of Article 57 shall be deducted half from the total of the items (a) to (c) minus (i) to (k), and half from the total of the items (d) to (h) of Article 57, after application of the limits laid down in paragraph 1 of this Article. To the extent that half of the total of the items (l) to (r) exceeds the total of the items (d) to (h) of Article 57, the excess shall be deducted from the total of the items (a) to (c) minus (i) to (k) of Article 57. Items in point (r) of Article 57 shall not be deducted if they have been included in the calculation of risk-weighted exposure amounts for the purposes of Article 75 as specified in Annex IX, Part 4.

3.   For the purposes of Sections 5 and 6, the provisions laid down in this Section shall be read without taking into account the items referred to in points (q) and (r) of Article 57 and Article 63(3).

4.   The competent authorities may authorise credit institutions to exceed the limits laid down in paragraph 1 in temporary and exceptional circumstances.

Article 67

Compliance with the conditions laid down in this Section shall be proved to the satisfaction of the competent authorities.

Section 2

Provision against risks

Subsection 1

Level of application

Article 68

1.   Credit institutions shall comply with the obligations laid down in Articles 22 and 75 and Section 5 on an individual basis.

2.   Every credit institution which is neither a subsidiary in the Member State where it is authorised and supervised, nor a parent undertaking, and every credit institution not included in the consolidation pursuant to Article 73, shall comply with the obligations laid down in Articles 120 and 123 on an individual basis.

3.   Every credit institution which is neither a parent undertaking, nor a subsidiary, and every credit institution not included in the consolidation pursuant to Article73, shall comply with the obligations laid down in Chapter 5 on an individual basis.

Article 69

1.   The Member States may choose not to apply Article 68(1) to any subsidiary of a credit institution, where both the subsidiary and the credit institution are subject to authorisation and supervision by the Member State concerned, and the subsidiary is included in the supervision on a consolidated basis of the credit institution which is the parent undertaking, and all of the following conditions are satisfied, in order to ensure that own funds are distributed adequately among the parent undertaking and the subsidiaries:

| a) | there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by its parent undertaking; |
| --- | --- |

a)

there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities by its parent undertaking;

| b) | either the parent undertaking satisfies the competent authority regarding the prudent management of the subsidiary and has declared, with the consent of the competent authority, that it guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of negligible interest; |
| --- | --- |

b)

either the parent undertaking satisfies the competent authority regarding the prudent management of the subsidiary and has declared, with the consent of the competent authority, that it guarantees the commitments entered into by the subsidiary, or the risks in the subsidiary are of negligible interest;

| c) | the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary; and |
| --- | --- |

c)

the risk evaluation, measurement and control procedures of the parent undertaking cover the subsidiary; and

| d) | the parent undertaking holds more than 50 % of the voting rights attaching to shares in the capital of the subsidiary and/or has the right to appoint or remove a majority of the members of the management body of the subsidiary described in Article 11. |
| --- | --- |

d)

the parent undertaking holds more than 50 % of the voting rights attaching to shares in the capital of the subsidiary and/or has the right to appoint or remove a majority of the members of the management body of the subsidiary described in Article 11.

2.   The Member States may exercise the option provided for in paragraph 1 where the parent undertaking is a financial holding company set up in the same Member State as the credit institution, provided that it is subject to the same supervision as that exercised over credit institutions, and in particular to the standards laid down in Article 71(1).

3.   The Member States may choose not to apply Article 68(1) to a parent credit institution in a Member State where that credit institution is subject to authorisation and supervision by the Member State concerned, and it is included in the supervision on a consolidated basis, and all the following conditions are satisfied, in order to ensure that own funds are distributed adequately among the parent undertaking and the subsidiaries:

| a) | there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities to the parent credit institution in a Member State; and |
| --- | --- |

a)

there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities to the parent credit institution in a Member State; and

| b) | the risk evaluation, measurement and control procedures relevant for consolidated supervision cover the parent credit institution in a Member State. |
| --- | --- |

b)

the risk evaluation, measurement and control procedures relevant for consolidated supervision cover the parent credit institution in a Member State.

The competent authority which makes use of this paragraph shall inform the competent authorities of all other Member States.

4.   Without prejudice to the generality of Article 144, the competent authority of the Member States exercising the discretion laid down in paragraph 3 shall publicly disclose, in the manner indicated in Article 144:

| a) | criteria it applies to determine that there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities; |
| --- | --- |

a)

criteria it applies to determine that there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities;

| b) | the number of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 3 and the number of these which incorporate subsidiaries in a third country; and |
| --- | --- |

b)

the number of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 3 and the number of these which incorporate subsidiaries in a third country; and

| c) | on an aggregate basis for the Member State:






  i) | the total amount of own funds on the consolidated basis of the parent credit institution in a Member State, which benefits from the exercise of the discretion laid down in paragraph 3, which are held in subsidiaries in a third country; |
| --- | --- | --- |

c)

on an aggregate basis for the Member State:

i)

the total amount of own funds on the consolidated basis of the parent credit institution in a Member State, which benefits from the exercise of the discretion laid down in paragraph 3, which are held in subsidiaries in a third country;

| ii) | the percentage of total own funds on the consolidated basis of parent credit institutions in a Member State which benefits from the exercise of the discretion laid down in paragraph 3, represented by own funds which are held in subsidiaries in a third country; and |
| --- | --- |

ii)

the percentage of total own funds on the consolidated basis of parent credit institutions in a Member State which benefits from the exercise of the discretion laid down in paragraph 3, represented by own funds which are held in subsidiaries in a third country; and

| iii) | the percentage of total minimum own funds required under Article 75 on the consolidated basis of parent credit institutions in a Member State, which benefits from the exercise of the discretion laid down in paragraph 3, represented by own funds which are held in subsidiaries in a third country. |
| --- | --- |

iii)

the percentage of total minimum own funds required under Article 75 on the consolidated basis of parent credit institutions in a Member State, which benefits from the exercise of the discretion laid down in paragraph 3, represented by own funds which are held in subsidiaries in a third country.

Article 70

1.   Subject to paragraphs 2 to 4 of this Article, the competent authorities may allow on a case by case basis parent credit institutions to incorporate in the calculation of their requirement under Article 68(1) subsidiaries which meet the conditions laid down in points (c) and (d) of Article 69(1), and whose material exposures or material liabilities are to that parent credit institution.

2.   The treatment in paragraph 1 shall be allowed only where the parent credit institution demonstrates fully to the competent authorities the circumstances and arrangements, including legal arrangements, by virtue of which there is no material practical or legal impediment, and none are foreseen, to the prompt transfer of own funds, or repayment of liabilities when due by the subsidiary to its parent undertaking.

3.   Where a competent authority exercises the discretion laid down in paragraph 1, it shall on a regular basis and not less than once a year inform the competent authorities of all the other Member States of the use made of paragraph 1 and of the circumstances and arrangements referred to in paragraph 2. Where the subsidiary is in a third country, the competent authorities shall provide the same information to the competent authorities of that third country as well.

4.   Without prejudice to the generality of Article 144, a competent authority which exercises the discretion laid down in paragraph 1 shall publicly disclose, in the manner indicated in Article 144:

| a) | the criteria it applies to determine that there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities; |
| --- | --- |

a)

the criteria it applies to determine that there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities;

| b) | the number of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 and the number of these which incorporate subsidiaries in a third country; and |
| --- | --- |

b)

the number of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 and the number of these which incorporate subsidiaries in a third country; and

| c) | on an aggregate basis for the Member State:






  i) | the total amount of own funds of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 which are held in subsidiaries in a third country; |
| --- | --- | --- |

c)

on an aggregate basis for the Member State:

i)

the total amount of own funds of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 which are held in subsidiaries in a third country;

| ii) | the percentage of total own funds of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 represented by own funds which are held in subsidiaries in a third country; and |
| --- | --- |

ii)

the percentage of total own funds of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 represented by own funds which are held in subsidiaries in a third country; and

| iii) | the percentage of total minimum own funds required under Article 75 of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 represented by own funds which are held in subsidiaries in a third country. |
| --- | --- |

iii)

the percentage of total minimum own funds required under Article 75 of parent credit institutions which benefit from the exercise of the discretion laid down in paragraph 1 represented by own funds which are held in subsidiaries in a third country.

Article 71

1.   Without prejudice to Articles 68 to 70, parent credit institutions in a Member State shall comply, to the extent and in the manner prescribed in Article 133, with the obligations laid down in Articles 75, 120, 123 and Section 5 on the basis of their consolidated financial situation.

2.   Without prejudice to Articles 68 to 70, credit institutions controlled by a parent financial holding company in a Member State shall comply, to the extent and in the manner prescribed in Article 133, with the obligations laid down in Articles 75, 120, 123 and Section 5 on the basis of the consolidated financial situation of that financial holding company.

Where more than one credit institution is controlled by a parent financial holding company in a Member State, the first subparagraph shall apply only to the credit institution to which supervision on a consolidated basis applies in accordance with Articles 125 and 126.

Article 72

1.   EU parent credit institutions shall comply with the obligations laid down in Chapter 5 on the basis of their consolidated financial situation.

Significant subsidiaries of EU parent credit institutions shall disclose the information specified in Annex XII, Part 1, point 5, on an individual or sub-consolidated basis.

2.   Credit institutions controlled by an EU parent financial holding company shall comply with the obligations laid down in Chapter 5 on the basis of the consolidated financial situation of that financial holding company.

Significant subsidiaries of EU parent financial holding companies shall disclose the information specified in Annex XII, Part 1, point 5, on an individual or sub-consolidated basis.

3.   The competent authorities responsible for exercising supervision on a consolidated basis pursuant to Articles 125 and 126 may decide not to apply in full or in part paragraphs 1 and 2 to the credit institutions which are included within comparable disclosures provided on a consolidated basis by a parent undertaking established in a third country.

Article 73

1.   The Member States or the competent authorities responsible for exercising supervision on a consolidated basis pursuant to Articles 125 and 126 may decide in the following cases that a credit institution, financial institution or ancillary services undertaking which is a subsidiary or in which a participation is held need not be included in the consolidation:

| a) | where the undertaking concerned is situated in a third country where there are legal impediments to the transfer of the necessary information; |
| --- | --- |

a)

where the undertaking concerned is situated in a third country where there are legal impediments to the transfer of the necessary information;

| b) | where, in the opinion of the competent authorities, the undertaking concerned is of negligible interest only with respect to the objectives of monitoring credit institutions and in any event where the balance-sheet total of the undertaking concerned is less than the smaller of the following two amounts:






  (i) | 10 million Euro, or |
| --- | --- | --- |

b)

where, in the opinion of the competent authorities, the undertaking concerned is of negligible interest only with respect to the objectives of monitoring credit institutions and in any event where the balance-sheet total of the undertaking concerned is less than the smaller of the following two amounts:

(i)

10 million Euro, or

| ii) | 1 % of the balance-sheet total of the parent undertaking or the undertaking that holds the participation, |
| --- | --- |

ii)

1 % of the balance-sheet total of the parent undertaking or the undertaking that holds the participation,

| c) | where, in the opinion of the competent authorities responsible for exercising supervision on a consolidated basis, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of credit institutions are concerned. |
| --- | --- |

c)

where, in the opinion of the competent authorities responsible for exercising supervision on a consolidated basis, the consolidation of the financial situation of the undertaking concerned would be inappropriate or misleading as far as the objectives of the supervision of credit institutions are concerned.

If, in the cases referred to in point (b) of the first subparagraph, several undertakings meet the above criteria set out therein, they shall nevertheless be included in the consolidation where collectively they are of non-negligible interest with respect to the specified objectives.

2.   Competent authorities shall require subsidiary credit institutions to apply the requirements laid down in Articles 75, 120 and 123 and Section 5 on a sub-consolidated basis if those credit institutions, or the parent undertaking where it is a financial holding company, have a credit institution or a financial institution or an asset management company as defined in Article 2(5) of Directive 2002/87/EC as a subsidiary in a third country, or hold a participation in such an undertaking.

3.   Competent authorities shall require the parent undertakings and subsidiaries subject to this Directive to meet the obligations laid down in Article 22 on a consolidated or sub-consolidated basis, to ensure that their arrangements, processes and mechanisms are consistent and well-integrated and that any data and information relevant to the purpose of supervision can be produced.

Subsection 2

Calculation of requirements

Article 74

1.   Save where otherwise provided, the valuation of assets and off-balance-sheet items shall be effected in accordance with the accounting framework to which the credit institution is subject under Regulation (EC) No 1606/2002 and Directive 86/635/EEC.

2.   Notwithstanding the requirements laid down in Articles 68 to 72, the calculations to verify the compliance of credit institutions with the obligations laid down in Article 75 shall be carried out not less than twice each year.

The credit institutions shall communicate the results and any component data required to the competent authorities.

Subsection 3

Minimum Level of Own Funds

Article 75

Without prejudice to Article 136, Member States shall require credit institutions to provide own funds which are at all times more than or equal to the sum of the following capital requirements:

| a) | for credit risk and dilution risk in respect of all of their business activities with the exception of their trading book business and illiquid assets if deducted from own funds under Article 13(2)(d) of Directive 2006/.../EC, 8 % of the total of their risk-weighted exposure amounts calculated in accordance with Section 3; |
| --- | --- |

a)

for credit risk and dilution risk in respect of all of their business activities with the exception of their trading book business and illiquid assets if deducted from own funds under Article 13(2)(d) of Directive 2006/.../EC, 8 % of the total of their risk-weighted exposure amounts calculated in accordance with Section 3;

| b) | in respect of their trading-book business, for position risk, settlement and counter-party risk and, in so far as the limits laid down in Articles 111 to 117 are authorised to be exceeded, for large exposures exceeding such limits, the capital requirements determined in accordance with Article 18 and Chapter V, Section 4 of Directive 2006/.../EC; |
| --- | --- |

b)

in respect of their trading-book business, for position risk, settlement and counter-party risk and, in so far as the limits laid down in Articles 111 to 117 are authorised to be exceeded, for large exposures exceeding such limits, the capital requirements determined in accordance with Article 18 and Chapter V, Section 4 of Directive 2006/.../EC;

| c) | in respect of all of their business activities, for foreign-exchange risk and for commodities risk, the capital requirements determined according to Article 18 of Directive 2006/.../EC; and |
| --- | --- |

c)

in respect of all of their business activities, for foreign-exchange risk and for commodities risk, the capital requirements determined according to Article 18 of Directive 2006/.../EC; and

| d) | in respect of all of their business activities, for operational risk, the capital requirements determined in accordance with Section 4. |
| --- | --- |

d)

in respect of all of their business activities, for operational risk, the capital requirements determined in accordance with Section 4.

Section 3

Minimum own funds requirements for credit risk

Article 76

Credit institutions shall apply either the Standardised Approach provided for in Articles 78 to 83 or, if permitted by the competent authorities in accordance with Article 84, the Internal Ratings Based Approach provided for in Articles 84 to 89 to calculate their risk-weighted exposure amounts for the purposes of Article 75(a).

Article 77

‘Exposure’ for the purposes of this Section means an asset or off-balance sheet item.

Subsection 1

Standardised Approach

Article 78

1.   Subject to paragraph 2, the exposure value of an asset item shall be its balance-sheet value and the exposure value of an off-balance sheet item listed in Annex II shall be the following percentage of its value: 100 % if it is a full-risk item, 50 % if it is a medium-risk item, 20 % if it is a medium/low-risk item, 0 % if it is a low-risk item. The off-balance sheet items referred to in the first sentence of this paragraph shall be assigned to risk categories as indicated in Annex II. In the case of a credit institution using the Financial Collateral Comprehensive Method under Annex VIII, Part 3, where an exposure takes the form of securities or commodities sold, posted or lent under a repurchase transaction or under a securities or commodities lending or borrowing transaction, and margin lending transactions the exposure value shall be increased by the volatility adjustment appropriate to such securities or commodities as prescribed in Annex VIII, Part 3, points 34 to 59.

2.   The exposure value of a derivative instrument listed in Annex IV shall be determined in accordance with Annex III with the effects of contracts of novation and other netting agreements taken into account for the purposes of those methods in accordance with Annex III. The exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions may be determined either in accordance with Annex III or Annex VIII.

3.   Where an exposure is subject to funded credit protection, the exposure value applicable to that item may be modified in accordance with Subsection 3.

4.   Notwithstanding paragraph 2, the exposure value of credit risk exposures outstanding, as determined by the competent authorities, with a central counterparty shall be determined in accordance with Annex III, Part 2, point 6, provided that the central counterparty's counterparty credit risk exposures with all participants in its arrangements are fully collateralised on a daily basis.

Article 79

1.   Each exposure shall be assigned to one of the following exposure classes:

| a) | claims or contingent claims on central governments or central banks; |
| --- | --- |

a)

claims or contingent claims on central governments or central banks;

| b) | claims or contingent claims on regional governments or local authorities; |
| --- | --- |

b)

claims or contingent claims on regional governments or local authorities;

| c) | claims or contingent claims on administrative bodies and non-commercial undertakings; |
| --- | --- |

c)

claims or contingent claims on administrative bodies and non-commercial undertakings;

| d) | claims or contingent claims on multilateral development banks; |
| --- | --- |

d)

claims or contingent claims on multilateral development banks;

| e) | claims or contingent claims on international organisations; |
| --- | --- |

e)

claims or contingent claims on international organisations;

| f) | claims or contingent claims on institutions; |
| --- | --- |

f)

claims or contingent claims on institutions;

| g) | claims or contingent claims on corporates; |
| --- | --- |

g)

claims or contingent claims on corporates;

| h) | retail claims or contingent retail claims; |
| --- | --- |

h)

retail claims or contingent retail claims;

| i) | claims or contingent claims secured on real estate property; |
| --- | --- |

i)

claims or contingent claims secured on real estate property;

| j) | past due items; |
| --- | --- |

j)

past due items;

| k) | items belonging to regulatory high-risk categories; |
| --- | --- |

k)

items belonging to regulatory high-risk categories;

| l) | claims in the form of covered bonds; |
| --- | --- |

l)

claims in the form of covered bonds;

| m) | securitisation positions; |
| --- | --- |

m)

securitisation positions;

| n) | short-term claims on institutions and corporate; |
| --- | --- |

n)

short-term claims on institutions and corporate;

| o) | claims in the form of collective investment undertakings (‘CIU’); or |
| --- | --- |

o)

claims in the form of collective investment undertakings (‘CIU’); or

| p) | other items. |
| --- | --- |

p)

other items.

2.   To be eligible for the retail exposure class referred to in point (h) of paragraph 1, an exposure shall meet the following conditions:

| a) | the exposure shall be either to an individual person or persons, or to a small or medium sized entity; |
| --- | --- |

a)

the exposure shall be either to an individual person or persons, or to a small or medium sized entity;

| b) | the exposure shall be one of a significant number of exposures with similar characteristics such that the risks associated with such lending are substantially reduced; and |
| --- | --- |

b)

the exposure shall be one of a significant number of exposures with similar characteristics such that the risks associated with such lending are substantially reduced; and

| c) | the total amount owed to the credit institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding claims or contingent claims secured on residential real estate collateral, shall not, to the knowledge of the credit institution, exceed 1 million Euro. The credit institution shall take reasonable steps to acquire this knowledge. |
| --- | --- |

c)

the total amount owed to the credit institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding claims or contingent claims secured on residential real estate collateral, shall not, to the knowledge of the credit institution, exceed 1 million Euro. The credit institution shall take reasonable steps to acquire this knowledge.

Securities shall not be eligible for the retail exposure class.

(3)   The present value of retail minimum lease payments is eligible for the retail exposure class.

Article 80

1.   To calculate risk-weighted exposure amounts, risk weights shall be applied to all exposures, unless deducted from own funds, in accordance with the provisions of Annex VI, Part 1. The application of risk weights shall be based on the exposure class to which the exposure is assigned and, to the extent specified in Annex VI, Part 1, its credit quality. Credit quality may be determined by reference to the credit assessments of External Credit Assessment Institutions (‘ECAIs’) in accordance with the provisions of Articles 81 to 83 or the credit assessments of Export Credit Agencies as described in Annex VI, Part 1.

2.   For the purposes of applying a risk weight, as referred to in paragraph 1, the exposure value shall be multiplied by the risk weight specified or determined in accordance with this Subsection.

3.   For the purposes of calculating risk-weighted exposure amounts for exposures to institutions, Member States shall decide whether to adopt the method based on the credit quality of the central government of the jurisdiction in which the institution is incorporated or the method based on the credit quality of the counterparty institution in accordance with Annex VI.

4.   Notwithstanding paragraph 1, where an exposure is subject to credit protection the risk weight applicable to that item may be modified in accordance with Subsection 3.

5.   Risk-weighted exposure amounts for securitised exposures shall be calculated in accordance with Subsection 4.

6.   Exposures the calculation of risk-weighted exposure amounts for which is not otherwise provided for under this Subsection shall be assigned a risk-weight of 100 %.

7.   With the exception of exposures giving rise to liabilities in the form of the items referred to in paragraphs (a) to (h) of Article 57, competent authorities may exempt from the requirements of paragraph 1 of this Article the exposures of a credit institution to a counterparty which is its parent undertaking, its subsidiary, a subsidiary of its parent undertaking or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC, provided that the following conditions are met:

| a) | the counterparty is an institution or a financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements; |
| --- | --- |

a)

the counterparty is an institution or a financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements;

| b) | the counterparty is included in the same consolidation as the credit institution on a full basis; |
| --- | --- |

b)

the counterparty is included in the same consolidation as the credit institution on a full basis;

| c) | the counterparty is subject to the same risk evaluation, measurement and control procedures as the credit institution; |
| --- | --- |

c)

the counterparty is subject to the same risk evaluation, measurement and control procedures as the credit institution;

| d) | the counterparty is established in the same Member State as the credit institution; and |
| --- | --- |

d)

the counterparty is established in the same Member State as the credit institution; and

| e) | there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities from the counterparty to the credit institution. |
| --- | --- |

e)

there is no current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities from the counterparty to the credit institution.

In such a case, a risk weight of 0 % shall be assigned.

8.   With the exception of exposures giving rise to liabilities in the form of the items referred to in points (a) to (h) of Article 57, competent authorities may exempt from the requirements of paragraph 1 of this Article the exposures to counterparties which are members of the same institutional protection scheme as the lending credit institution, provided that the following conditions are met:

| a) | the requirements set out in points (a), (d) and (e) of paragraph 7; |
| --- | --- |

a)

the requirements set out in points (a), (d) and (e) of paragraph 7;

| b) | the credit institution and the counterparty have entered into a contractual or statutory liability arrangement which protects those institutions and in particular ensures their liquidity and solvency to avoid bankruptcy in case it becomes necessary (referred to below as an institutional protection scheme); |
| --- | --- |

b)

the credit institution and the counterparty have entered into a contractual or statutory liability arrangement which protects those institutions and in particular ensures their liquidity and solvency to avoid bankruptcy in case it becomes necessary (referred to below as an institutional protection scheme);

| c) | the arrangements ensure that the institutional protection scheme will be able to grant support necessary under its commitment from funds readily available to it; |
| --- | --- |

c)

the arrangements ensure that the institutional protection scheme will be able to grant support necessary under its commitment from funds readily available to it;

| d) | the institutional protection scheme disposes of suitable and uniformly stipulated systems for the monitoring and classification of risk (which gives a complete overview of the risk situations of all the individual members and the institutional protection scheme as a whole) with corresponding possibilities to take influence; those systems shall suitably monitor defaulted exposures in accordance with Annex VII, Part 4, point 44; |
| --- | --- |

d)

the institutional protection scheme disposes of suitable and uniformly stipulated systems for the monitoring and classification of risk (which gives a complete overview of the risk situations of all the individual members and the institutional protection scheme as a whole) with corresponding possibilities to take influence; those systems shall suitably monitor defaulted exposures in accordance with Annex VII, Part 4, point 44;

| e) | the institutional protection scheme conducts its own risk review which is communicated to the individual members; |
| --- | --- |

e)

the institutional protection scheme conducts its own risk review which is communicated to the individual members;

| f) | the institutional protection scheme draws up and publishes once in a year either, a consolidated report comprising the balance sheet, the profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole, or a report comprising the aggregated balance sheet, the aggregated profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole; |
| --- | --- |

f)

the institutional protection scheme draws up and publishes once in a year either, a consolidated report comprising the balance sheet, the profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole, or a report comprising the aggregated balance sheet, the aggregated profit-and-loss account, the situation report and the risk report, concerning the institutional protection scheme as a whole;

| g) | members of the institutional protection scheme are obliged to give advance notice of at least 24 months if they wish to end the arrangements; |
| --- | --- |

g)

members of the institutional protection scheme are obliged to give advance notice of at least 24 months if they wish to end the arrangements;

| h) | the multiple use of elements eligible for the calculation of own funds (‘multiple gearing’) as well as any inappropriate creation of own funds between the members of the institutional protection scheme shall be eliminated; |
| --- | --- |

h)

the multiple use of elements eligible for the calculation of own funds (‘multiple gearing’) as well as any inappropriate creation of own funds between the members of the institutional protection scheme shall be eliminated;

| i) | the institutional protection scheme shall be based on a broad membership of credit institutions of a predominantly homogeneous business profile; and |
| --- | --- |

i)

the institutional protection scheme shall be based on a broad membership of credit institutions of a predominantly homogeneous business profile; and

| j) | the adequacy of the systems referred to in point (d) is approved and monitored at regular intervals by the relevant competent authorities. |
| --- | --- |

j)

the adequacy of the systems referred to in point (d) is approved and monitored at regular intervals by the relevant competent authorities.

In such a case, a risk weight of 0 % shall be assigned.

Article 81

1.   An external credit assessment may be used to determine the risk weight of an exposure in accordance with Article 80 only if the ECAI which provides it has been recognised as eligible for those purposes by the competent authorities (‘an eligible ECAI’ for the purposes of this Subsection).

2.   Competent authorities shall recognise an ECAI as eligible for the purposes of Article 80 only if they are satisfied that its assessment methodology complies with the requirements of objectivity, independence, ongoing review and transparency, and that the resulting credit assessments meet the requirements of credibility and transparency. For those purposes, the competent authorities shall take into account the technical criteria set out in Annex VI, Part 2.

3.   If an ECAI has been recognised as eligible by the competent authorities of a Member State, the competent authorities of other Member States may recognise that ECAI as eligible without carrying out their own evaluation process.

4.   Competent authorities shall make publicly available an explanation of the recognition process, and a list of eligible ECAIs.

Article 82

1.   The competent authorities shall determine, taking into account the technical criteria set out in Annex VI, Part 2, with which of the credit quality steps set out in Part 1 of that Annex the relevant credit assessments of an eligible ECAI are to be associated. Those determinations shall be objective and consistent.

2.   When the competent authorities of a Member State have made a determination under paragraph 1, the competent authorities of other Member States may recognise that determination without carrying out their own determination process.

Article 83

1.   The use of ECAI credit assessments for the calculation of a credit institution's risk-weighted exposure amounts shall be consistent and in accordance with Annex VI, Part 3. Credit assessments shall not be used selectively.

2.   Credit institutions shall use solicited credit assessments. However, with the permission of the relevant competent authority, they may use unsolicited assessments.

Subsection 2

Internal Ratings Based Approach

Article 84

1.   In accordance with this Subsection, the competent authorities may permit credit institutions to calculate their risk-weighted exposure amounts using the Internal Ratings Based Approach (‘IRB Approach’). Explicit permission shall be required in the case of each credit institution.

2.   Permission shall be given only if the competent authority is satisfied that the credit institution's systems for the management and rating of credit risk exposures are sound and implemented with integrity and, in particular, that they meet the following standards in accordance with Annex VII, Part 4:

| a) | the credit institution's rating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk; |
| --- | --- |

a)

the credit institution's rating systems provide for a meaningful assessment of obligor and transaction characteristics, a meaningful differentiation of risk and accurate and consistent quantitative estimates of risk;

| b) | internal ratings and default and loss estimates used in the calculation of capital requirements and associated systems and processes play an essential role in the risk management and decision-making process, and in the credit approval, internal capital allocation and corporate governance functions of the credit institution; |
| --- | --- |

b)

internal ratings and default and loss estimates used in the calculation of capital requirements and associated systems and processes play an essential role in the risk management and decision-making process, and in the credit approval, internal capital allocation and corporate governance functions of the credit institution;

| c) | the credit institution has a credit risk control unit responsible for its rating systems that is appropriately independent and free from undue influence; |
| --- | --- |

c)

the credit institution has a credit risk control unit responsible for its rating systems that is appropriately independent and free from undue influence;

| d) | the credit institution collects and stores all relevant data to provide effective support to its credit risk measurement and management process; and |
| --- | --- |

d)

the credit institution collects and stores all relevant data to provide effective support to its credit risk measurement and management process; and

| e) | the credit institution documents its rating systems and the rationale for their design and validates its rating systems. |
| --- | --- |

e)

the credit institution documents its rating systems and the rationale for their design and validates its rating systems.

Where an EU parent credit institution and its subsidiaries or an EU parent financial holding company and its subsidiaries use the IRB Approach on a unified basis, the competent authorities may allow minimum requirements of Annex VII, Part 4 to be met by the parent and its subsidiaries considered together.

3.   A credit institution applying for the use of the IRB Approach shall demonstrate that it has been using for the IRB exposure classes in question rating systems that were broadly in line with the minimum requirements set out in Annex VII, Part 4 for internal risk measurement and management purposes for at least three years prior to its qualification to use the IRB Approach.

4.   A credit institution applying for the use of own estimates of LGDs and/or conversion factors shall demonstrate that it has been estimating and employing own estimates of LGDs and/or conversion factors in a manner that was broadly consistent with the minimum requirements for use of own estimates of those parameters set out in Annex VII, Part 4 for at least three years prior to qualification to use own estimates of LGDs and/or conversion factors.

5.   If a credit institution ceases to comply with the requirements set out in this Subsection, it shall either present to the competent authority a plan for a timely return to compliance or demonstrate that the effect of non-compliance is immaterial.

6.   When the IRB Approach is intended to be used by the EU parent credit institution and its subsidiaries, or by the EU parent financial holding company and its subsidiaries, the competent authorities of the different legal entities shall cooperate closely as provided for in Articles 129 to 132.

Article 85

1.   Without prejudice to Article 89, credit institutions and any parent undertaking and its subsidiaries shall implement the IRB Approach for all exposures.

Subject to the approval of the competent authorities, implementation may be carried out sequentially across the different exposure classes, referred to in Article 86, within the same business unit, across different business units in the same group or for the use of own estimates of LGDs or conversion factors for the calculation of risk weights for exposures to corporates, institutions, and central governments and central banks.

In the case of the retail exposure class referred to in Article 86, implementation may be carried out sequentially across the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond.

2.   Implementation as referred to in paragraph 1 shall be carried out within a reasonable period of time to be agreed with the competent authorities. The implementation shall be carried out subject to strict conditions determined by the competent authorities. Those conditions shall be designed to ensure that the flexibility under paragraph 1 is not used selectively with the purpose of achieving reduced minimum capital requirements in respect of those exposure classes or business units that are yet to be included in the IRB Approach or in the use of own estimates of LGDs and/or conversion factors.

3.   Credit institutions using the IRB Approach for any exposure class shall at the same time use the IRB Approach for the equity exposure class.

4.   Subject to paragraphs 1 to 3 of this Article and Article 89, credit institutions which have obtained permission under Article 84 to use the IRB Approach shall not revert to the use of Subsection 1 for the calculation of risk-weighted exposure amounts except for demonstrated good cause and subject to the approval of the competent authorities.

5.   Subject to paragraphs 1 and 2 of this Article and Article 89, credit institutions which have obtained permission under Article 87(9) to use own estimates of LGDs and conversion factors, shall not revert to the use of LGD values and conversion factors referred to in Article 87(8) except for demonstrated good cause and subject to the approval of the competent authorities.

Article 86

1.   Each exposure shall be assigned to one of the following exposure classes:

| a) | claims or contingent claims on central governments and central banks; |
| --- | --- |

a)

claims or contingent claims on central governments and central banks;

| b) | claims or contingent claims on institutions; |
| --- | --- |

b)

claims or contingent claims on institutions;

| c) | claims or contingent claims on corporates; |
| --- | --- |

c)

claims or contingent claims on corporates;

| d) | retail claims or contingent retail claims; |
| --- | --- |

d)

retail claims or contingent retail claims;

| e) | equity claims; |
| --- | --- |

e)

equity claims;

| f) | securitisation positions; or |
| --- | --- |

f)

securitisation positions; or

| g) | other non credit-obligation assets. |
| --- | --- |

g)

other non credit-obligation assets.

2.   The following exposures shall be treated as exposures to central governments and central banks:

| a) | exposures to regional governments, local authorities or public sector entities which are treated as exposures to central governments under Subsection 1; and |
| --- | --- |

a)

exposures to regional governments, local authorities or public sector entities which are treated as exposures to central governments under Subsection 1; and

| b) | exposures to Multilateral Development Banks and International Organisations which attract a risk weight of 0 % under Subsection 1. |
| --- | --- |

b)

exposures to Multilateral Development Banks and International Organisations which attract a risk weight of 0 % under Subsection 1.

3.   The following exposures shall be treated as exposures to institutions:

| a) | exposures to regional governments and local authorities which are not treated as exposures to central governments under Subsection 1; |
| --- | --- |

a)

exposures to regional governments and local authorities which are not treated as exposures to central governments under Subsection 1;

| b) | exposures to Public Sector Entities which are treated as exposures to institutions under the Subsection 1; and |
| --- | --- |

b)

exposures to Public Sector Entities which are treated as exposures to institutions under the Subsection 1; and

| c) | exposures to Multilateral Development Banks which do not attract a 0 % risk weight under Subsection 1. |
| --- | --- |

c)

exposures to Multilateral Development Banks which do not attract a 0 % risk weight under Subsection 1.

4.   To be eligible for the retail exposure class referred to in point (d) of paragraph 1, exposures shall meet the following criteria:

| a) | they shall be either to an individual person or persons, or to a small or medium sized entity, provided in the latter case that the total amount owed to the credit institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding claims or contingent claims secured on residential real estate collateral, shall not, to the knowledge of the credit institution, which shall have taken reasonable steps to confirm the situation, exceed 1 million Euro; |
| --- | --- |

a)

they shall be either to an individual person or persons, or to a small or medium sized entity, provided in the latter case that the total amount owed to the credit institution and parent undertakings and its subsidiaries, including any past due exposure, by the obligor client or group of connected clients, but excluding claims or contingent claims secured on residential real estate collateral, shall not, to the knowledge of the credit institution, which shall have taken reasonable steps to confirm the situation, exceed 1 million Euro;

| b) | they are treated by the credit institution in its risk management consistently over time and in a similar manner; |
| --- | --- |

b)

they are treated by the credit institution in its risk management consistently over time and in a similar manner;

| c) | they are not managed just as individually as exposures in the corporate exposure class; and |
| --- | --- |

c)

they are not managed just as individually as exposures in the corporate exposure class; and

| d) | they each represent one of a significant number of similarly managed exposures. |
| --- | --- |

d)

they each represent one of a significant number of similarly managed exposures.

The present value of retail minimum lease payments is eligible for the retail exposure class.

5.   The following exposures shall be classed as equity exposures:

| a) | non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer; and |
| --- | --- |

a)

non-debt exposures conveying a subordinated, residual claim on the assets or income of the issuer; and

| b) | debt exposures the economic substance of which is similar to the exposures specified in point (a). |
| --- | --- |

b)

debt exposures the economic substance of which is similar to the exposures specified in point (a).

6.   Within the corporate exposure class, credit institutions shall separately identify as specialised lending exposures, exposures which possess the following characteristics:

| a) | the exposure is to an entity which was created specifically to finance and/or operate physical assets; |
| --- | --- |

a)

the exposure is to an entity which was created specifically to finance and/or operate physical assets;

| b) | the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate; and |
| --- | --- |

b)

the contractual arrangements give the lender a substantial degree of control over the assets and the income that they generate; and

| c) | the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise. |
| --- | --- |

c)

the primary source of repayment of the obligation is the income generated by the assets being financed, rather than the independent capacity of a broader commercial enterprise.

7.   Any credit obligation not assigned to the exposure classes referred to in points (a), (b) and (d) to (f) of paragraph 1 shall be assigned to the exposure class referred to in point (c) of that paragraph.

8.   The exposure class referred to in point (g) of paragraph 1 shall include the residual value of leased properties if not included in the lease exposure as defined in Annex VII, Part 3, paragraph 4.

9.   The methodology used by the credit institution for assigning exposures to different exposure classes shall be appropriate and consistent over time.

Article 87

1.   The risk-weighted exposure amounts for credit risk for exposures belonging to one of the exposure classes referred to in points (a) to (e) or (g) of Article 86(1) shall, unless deducted from own funds, be calculated in accordance with Annex VII, Part 1, points 1 to 27.

2.   The risk-weighted exposure amounts for dilution risk for purchased receivables shall be calculated according to Annex VII, Part 1, point 28. Where a credit institution has full recourse in respect of purchased receivables for default risk and for dilution risk, to the seller of the purchased receivables, the provisions of Articles 87 and 88 in relation to purchased receivables need not be applied. The exposure may instead be treated as a collateralised exposure.

3.   The calculation of risk-weighted exposure amounts for credit risk and dilution risk shall be based on the relevant parameters associated with the exposure in question. These shall include probability of default (PD), LGD, maturity (M) and exposure value of the exposure. PD and LGD may be considered separately or jointly, in accordance with Annex VII, Part 2.

4.   Notwithstanding paragraph 3, the calculation of risk-weighted exposure amounts for credit risk for all exposures belonging to the exposure class referred to in point (e) of Article 86(1) shall be calculated in accordance with Annex VII, Part 1, points 17 to 26 subject to approval of the competent authorities. Competent authorities shall only allow a credit institution to use the approach set out in Annex VII, Part 1, points 25 and 26 if the credit institution meets the minimum requirements set out in Annex VII, Part 4, points 115 to 123.

5.   Notwithstanding paragraph 3, the calculation of risk weighted exposure amounts for credit risk for specialised lending exposures may be calculated in accordance with Annex VII, Part 1, point 6. Competent authorities shall publish guidance on how credit institutions should assign risk weights to specialised lending exposures under Annex VII, Part 1, point 6 and shall approve credit institution assignment methodologies.

6.   For exposures belonging to the exposure classes referred to in points (a) to (d) of Article 86(1), credit institutions shall provide their own estimates of PDs in accordance with Article 84 and Annex VII, Part 4.

7.   For exposures belonging to the exposure class referred to in point (d) of Article 86(1), credit institutions shall provide own estimates of LGDs and conversion factors in accordance with Article 84 and Annex VII, Part 4.

8.   For exposures belonging to the exposure classes referred to in points (a) to (c) of Article 86(1), credit institutions shall apply the LGD values set out in Annex VII, Part 2, point 8, and the conversion factors set out in Annex VII, Part 3, point 9(a) to (d).

9.   Notwithstanding paragraph 8, for all exposures belonging to the exposure classes referred to in points (a) to (c) of Article 86(1), competent authorities may permit credit institutions to use own estimates of LGDs and conversion factors in accordance with Article 84 and Annex VII, Part 4.

10.   The risk-weighted exposure amounts for securitised exposures and for exposures belonging to the exposure class referred to in point (f) of Article 86(1) shall be calculated in accordance with Subsection 4.

11.   Where exposures in the form of a collective investment undertaking (CIU) meet the criteria set out in Annex VI, Part 1, points 77 and 78 and the credit institution is aware of all of the underlying exposures of the CIU, the credit institution shall look through to those underlying exposures in order to calculate risk-weighted exposure amounts and expected loss amounts in accordance with the methods set out in this Subsection.

Where the credit institution does not meet the conditions for using the methods set out in this Subsection, risk weighted exposure amounts and expected loss amounts shall be calculated in accordance with the following approaches:

| a) | for exposures belonging to the exposure class referred to in point (e) of Article 86(1), the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange- traded and other equity exposures, it shall treat the exposures concerned as other equity exposures; |
| --- | --- |

a)

for exposures belonging to the exposure class referred to in point (e) of Article 86(1), the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange- traded and other equity exposures, it shall treat the exposures concerned as other equity exposures;

| b) | for all other underlying exposures, the approach set out in Subsection 1, subject to the following modifications:






  i) | the exposures are assigned to the appropriate exposure class and attributed the risk weight of the credit quality step immediately above the credit quality step that would normally be assigned to the exposure, and |
| --- | --- | --- |

b)

for all other underlying exposures, the approach set out in Subsection 1, subject to the following modifications:

i)

the exposures are assigned to the appropriate exposure class and attributed the risk weight of the credit quality step immediately above the credit quality step that would normally be assigned to the exposure, and

| ii) | exposures assigned to the higher credit quality steps, to which a risk weight of 150 % would normally be attributed, are assigned a risk weight of 200 %. |
| --- | --- |

ii)

exposures assigned to the higher credit quality steps, to which a risk weight of 150 % would normally be attributed, are assigned a risk weight of 200 %.

12.   Where exposures in the form of a CIU do not meet the criteria set out in Annex VI, Part 1, points 77 and 78, or the credit institution is not aware of all of the underlying exposures of the CIU, the credit institution shall look through to the underlying exposures and calculate risk-weighted exposure amounts and expected loss amounts in accordance with the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange-traded and other equity exposures, it shall treat the exposures concerned as other equity exposures. For these purposes, non equity exposures are assigned to one of the classes (private equity, exchange traded equity or other equity) set out in Annex VII, Part 1, point 19 and unknown exposures are assigned to other equity class.

Alternatively to the method described above, credit institutions may calculate themselves or may rely on a third party to calculate and report the average risk weighted exposure amounts based on the CIU's underlying exposures in accordance with the following approaches, provided that the correctness of the calculation and the report is adequately ensured:

| a) | for exposures belonging to the exposure class referred to in point (e) of Article 86(1), the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange- traded and other equity exposures, it shall treat the exposures concerned as other equity exposures; or |
| --- | --- |

a)

for exposures belonging to the exposure class referred to in point (e) of Article 86(1), the approach set out in Annex VII, Part 1, points 19 to 21. If, for those purposes, the credit institution is unable to differentiate between private equity, exchange- traded and other equity exposures, it shall treat the exposures concerned as other equity exposures; or

| b) | for all other underlying exposures, the approach set out in Subsection 1, subject to the following modifications:






  i) | the exposures are assigned to the appropriate exposure class and attributed the risk weight of the credit quality step immediately above the credit quality step that would normally be assigned to the exposure, and |
| --- | --- | --- |

b)

for all other underlying exposures, the approach set out in Subsection 1, subject to the following modifications:

i)

the exposures are assigned to the appropriate exposure class and attributed the risk weight of the credit quality step immediately above the credit quality step that would normally be assigned to the exposure, and

| ii) | exposures assigned to the higher credit quality steps, to which a risk weight of 150 % would normally be attributed, are assigned a risk weight of 200 %. |
| --- | --- |

ii)

exposures assigned to the higher credit quality steps, to which a risk weight of 150 % would normally be attributed, are assigned a risk weight of 200 %.

Article 88

1.   The expected loss amounts for exposures belonging to one of the exposure classes referred to in points (a) to (e) of Article 86(1) shall be calculated in accordance with the methods set out in Annex VII, Part 1, points 29 to 35.

2.   The calculation of expected loss amounts in accordance with Annex VII, Part 1, points 29 to 35 shall be based on the same input figures of PD, LGD and the exposure value for each exposure as being used for the calculation of risk-weighted exposure amounts in accordance with Article 87. For defaulted exposures, where credit institutions use own estimates of LGDs, expected loss (‘EL’) shall be the credit institution's best estimate of EL (‘ELBE,’) for the defaulted exposure, in accordance with Annex VII, Part 4, point 80.

3.   The expected loss amounts for securitised exposures shall be calculated in accordance with Subsection 4.

4.   The expected loss amount for exposures belonging to the exposure class referred to in point (g) of Article 86(1) shall be zero.

5.   The expected loss amounts for dilution risk of purchased receivables shall be calculated in accordance with the methods set out in Annex VII, Part 1, point 35.

6.   The expected loss amounts for exposures referred to in Article 87(11) and (12) shall be calculated in accordance with the methods set out in Annex VII, Part 1, points 29 to 35.

Article 89

1.   Subject to the approval of the competent authorities, credit institutions permitted to use the IRB Approach in the calculation of risk-weighted exposure amounts and expected loss amounts for one or more exposure classes may apply Subsection 1 for the following:

| a) | the exposure class referred to in point (a) of Article 86(1), where the number of material counterparties is limited and it would be unduly burdensome for the credit institution to implement a rating system for these counterparties; |
| --- | --- |

a)

the exposure class referred to in point (a) of Article 86(1), where the number of material counterparties is limited and it would be unduly burdensome for the credit institution to implement a rating system for these counterparties;

| b) | the exposure class referred to in point (b) of Article 86(1), where the number of material counterparties is limited and it would be unduly burdensome for the credit institution to implement a rating system for these counterparties; |
| --- | --- |

b)

the exposure class referred to in point (b) of Article 86(1), where the number of material counterparties is limited and it would be unduly burdensome for the credit institution to implement a rating system for these counterparties;

| c) | exposures in non-significant business units as well as exposure classes that are immaterial in terms of size and perceived risk profile; |
| --- | --- |

c)

exposures in non-significant business units as well as exposure classes that are immaterial in terms of size and perceived risk profile;

| d) | exposures to central governments of the home Member State and to their regional governments, local authorities and administrative bodies, provided that:






  i) | there is no difference in risk between the exposures to that central government and those other exposures because of specific public arrangements, and |
| --- | --- | --- |

d)

exposures to central governments of the home Member State and to their regional governments, local authorities and administrative bodies, provided that:

i)

there is no difference in risk between the exposures to that central government and those other exposures because of specific public arrangements, and

| ii) | exposures to the central government are assigned a 0 % risk weight under Subsection 1; |
| --- | --- |

ii)

exposures to the central government are assigned a 0 % risk weight under Subsection 1;

| e) | exposures of a credit institution to a counterparty which is its parent undertaking, its subsidiary or a subsidiary of its parent undertaking provided that the counterparty is an institution or a financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC and exposures between credit institutions which meet the requirements set out in Article 80(8); |
| --- | --- |

e)

exposures of a credit institution to a counterparty which is its parent undertaking, its subsidiary or a subsidiary of its parent undertaking provided that the counterparty is an institution or a financial holding company, financial institution, asset management company or ancillary services undertaking subject to appropriate prudential requirements or an undertaking linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC and exposures between credit institutions which meet the requirements set out in Article 80(8);

| f) | equity exposures to entities whose credit obligations qualify for a 0 % risk weight under Subsection 1 (including those publicly sponsored entities where a zero risk weight can be applied); |
| --- | --- |

f)

equity exposures to entities whose credit obligations qualify for a 0 % risk weight under Subsection 1 (including those publicly sponsored entities where a zero risk weight can be applied);

| g) | equity exposures incurred under legislative programmes to promote specified sectors of the economy that provide significant subsidies for the investment to the credit institution and involve some form of government oversight and restrictions on the equity investments. This exclusion is limited to an aggregate of 10 % of original own funds plus additional own funds; |
| --- | --- |

g)

equity exposures incurred under legislative programmes to promote specified sectors of the economy that provide significant subsidies for the investment to the credit institution and involve some form of government oversight and restrictions on the equity investments. This exclusion is limited to an aggregate of 10 % of original own funds plus additional own funds;

| h) | the exposures identified in Annex VI, Part 1, point 40 meeting the conditions specified therein; or |
| --- | --- |

h)

the exposures identified in Annex VI, Part 1, point 40 meeting the conditions specified therein; or

| (i) | State and State-reinsured guarantees pursuant to Annex VIII, Part 2, point 19. |
| --- | --- |

(i)

State and State-reinsured guarantees pursuant to Annex VIII, Part 2, point 19.

This paragraph shall not prevent the competent authorities of other Member States to allow the application of the rules of Subsection 1 for equity exposures which have been allowed for this treatment in other Member States.

2.   For the purposes of paragraph 1, the equity exposure class of a credit institution shall be considered material if their aggregate value, excluding equity exposures incurred under legislative programmes as referred to in paragraph 1, point (g), exceeds, on average over the preceding year, 10 % of the credit institution's own funds. If the number of those equity exposures is less than 10 individual holdings, that threshold shall be 5 % of the credit institution's own funds.

Subsection 3

Credit risk mitigation

Article 90

For the purposes of this Subsection, ‘lending credit institution’ shall mean the credit institution which has the exposure in question, whether or not deriving from a loan.

Article 91

Credit institutions using the Standardised Approach under Articles 78 to 83 or using the IRB Approach under Articles 84 to 89, but not using their own estimates of LGD and conversion factors under Articles 87 and 88, may recognise credit risk mitigation in accordance with this Subsection in the calculation of risk-weighted exposure amounts for the purposes of Article 75 point (a) or as relevant expected loss amounts for the purposes of the calculation referred to in point (q) of Article 57, and Article 63(3).

Article 92

1.   The technique used to provide the credit protection together with the actions and steps taken and procedures and policies implemented by the lending credit institution shall be such as to result in credit protection arrangements which are legally effective and enforceable in all relevant jurisdictions.

2.   The lending credit institution shall take all appropriate steps to ensure the effectiveness of the credit protection arrangement and to address related risks.

3.   In the case of funded credit protection, to be eligible for recognition the assets relied upon shall be sufficiently liquid and their value over time sufficiently stable to provide appropriate certainty as to the credit protection achieved having regard to the approach used to calculate risk-weighted exposure amounts and to the degree of recognition allowed. Eligibility shall be limited to the assets set out in Annex VIII, Part 1.

4.   In the case of funded credit protection, the lending credit institution shall have the right to liquidate or retain, in a timely manner, the assets from which the protection derives in the event of the default, insolvency or bankruptcy of the obligor – or other credit event set out in the transaction documentation – and, where applicable, of the custodian holding the collateral. The degree of correlation between the value of the assets relied upon for protection and the credit quality of the obligor shall not be undue.

5.   In the case of unfunded credit protection, to be eligible for recognition the party giving the undertaking shall be sufficiently reliable, and the protection agreement legally effective and enforceable in the relevant jurisdictions, to provide appropriate certainty as to the credit protection achieved having regard to the approach used to calculate risk-weighted exposure amounts and to the degree of recognition allowed. Eligibility shall be limited to the protection providers and types of protection agreement set out in Annex VIII, Part 1.

6.   The minimum requirements set out in Annex VIII, Part 2 shall be complied with.

Article 93

1.   Where the requirements of Article 92 are met the calculation of risk-weighted exposure amounts, and, as relevant, expected loss amounts, may be modified in accordance with Annex VIII, Parts 3 to 6.

2.   No exposure in respect of which credit risk mitigation is obtained shall produce a higher risk-weighted exposure amount or expected loss amount than an otherwise identical exposure in respect of which there is no credit risk mitigation.

3.   Where the risk-weighted exposure amount already takes account of credit protection under Articles 78 to 83 or Articles 84 to 89, as relevant, the calculation of the credit protection shall not be further recognised under this Subsection.

Subsection 4

Securitisation

Article 94

Where a credit institution uses the Standardised Approach set out in Articles 78 to 83 for the calculation of risk-weighted exposure amounts for the exposure class to which the securitised exposures would be assigned under Article 79, it shall calculate the risk-weighted exposure amount for a securitisation position in accordance with Annex IX, Part 4, points 1 to 36.

In all other cases, it shall calculate the risk-weighted exposure amount in accordance with Annex IX, Part 4, points 1 to 5 and 37 to 76.

Article 95

1.   Where significant credit risk associated with securitised exposures has been transferred from the originator credit institution in accordance with the terms of Annex IX, Part 2, that credit institution may:

| a) | in the case of a traditional securitisation, exclude from its calculation of risk-weighted exposure amounts, and, as relevant, expected loss amounts, the exposures which it has securitised; and |
| --- | --- |

a)

in the case of a traditional securitisation, exclude from its calculation of risk-weighted exposure amounts, and, as relevant, expected loss amounts, the exposures which it has securitised; and

| b) | in the case of a synthetic securitisation, calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, in respect of the securitised exposures in accordance with Annex IX, Part 2. |
| --- | --- |

b)

in the case of a synthetic securitisation, calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, in respect of the securitised exposures in accordance with Annex IX, Part 2.

2.   Where paragraph 1 applies, the originator credit institution shall calculate the risk-weighted exposure amounts prescribed in Annex IX for the positions that it may hold in the securitisation.

Where the originator credit institution fails to transfer significant credit risk in accordance with paragraph 1, it need not calculate risk-weighted exposure amounts for any positions it may have in the securitisation in question.

Article 96

1.   To calculate the risk-weighted exposure amount of a securitisation position, risk weights shall be assigned to the exposure value of the position in accordance with Annex IX, based on the credit quality of the position, which may be determined by reference to an ECAI credit assessment or otherwise, as set out in Annex IX.

2.   Where there is an exposure to different tranches in a securitisation, the exposure to each tranche shall be considered a separate securitisation position. The providers of credit protection to securitisation positions shall be considered to hold positions in the securitisation. Securitisation positions shall include exposures to a securitisation arising from interest rate or currency derivative contracts.

3.   Where a securitisation position is subject to funded or unfunded credit protection the risk-weight to be applied to that position may be modified in accordance with Articles 90 to 93, read in conjunction with Annex IX.

4.   Subject to point (r) of Article 57 and Article 66(2), the risk-weighted exposure amount shall be included in the credit institution's total of risk-weighted exposure amounts for the purposes of Article 75(a).

Article 97

1.   An ECAI credit assessment may be used to determine the risk weight of a securitisation position in accordance with Article 96 only if the ECAI has been recognised as eligible by the competent authorities for this purpose (hereinafter ‘an eligible ECAI’).

2.   The competent authorities shall recognise an ECAI as eligible for the purposes of paragraph 1 only if they are satisfied as to its compliance with the requirements laid down in Article 81, taking into account the technical criteria in Annex VI, Part 2, and that it has a demonstrated ability in the area of securitisation, which may be evidenced by a strong market acceptance.

3.   If an ECAI has been recognised as eligible by the competent authorities of a Member State for the purposes of paragraph 1, the competent authorities of other Member States may recognise that ECAI as eligible for those purposes without carrying out their own evaluation process.

4.   The competent authorities shall make publicly available an explanation of the recognition process and a list of eligible ECAIs.

5.   To be used for the purposes of paragraph 1, a credit assessment of an eligible ECAI shall comply with the principles of credibility and transparency as elaborated in Annex IX, Part 3.

Article 98

1.   For the purposes of applying risk weights to securitisation positions, the competent authorities shall determine with which of the credit quality steps set out in Annex IX the relevant credit assessments of an eligible ECAI are to be associated. Those determinations shall be objective and consistent.

2.   When the competent authorities of a Member State have made a determination under paragraph 1, the competent authorities of other Member States may recognise that determination without carrying out their own determination process.

Article 99

The use of ECAI credit assessments for the calculation of a credit institution's risk-weighted exposure amounts under Article 96 shall be consistent and in accordance with Annex IX, Part 3. Credit assessments shall not be used selectively.

Article 100

1.   Where there is a securitisation of revolving exposures subject to an early amortisation provision, the originator credit institution shall calculate, in accordance with Annex IX, an additional risk-weighted exposure amount in respect of the risk that the levels of credit risk to which it is exposed may increase following the operation of the early amortisation provision.

2.   For those purposes, a ‘revolving exposure’ shall be an exposure whereby customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to an agreed limit, and an early amortisation provision shall be a contractual clause which requires, on the occurrence of defined events, investors' positions to be redeemed before the originally stated maturity of the securities issued.

Article 101

1.   An originator credit institution which, in respect of a securitisation, has made use of Article 95 in the calculation of risk-weighted exposure amounts or a sponsor credit institution shall not, with a view to reducing potential or actual losses to investors, provide support to the securitisation beyond its contractual obligations.

2.   If an originator credit institution or a sponsor credit institution fails to comply with paragraph 1 in respect of a securitisation, the competent authority shall require it at a minimum, to hold capital against all of the securitised exposures as if they had not been securitised. The credit institution shall disclose publicly that it has provided non-contractual support and the regulatory capital impact of having done so.

Section 4

Minimum own funds requirements for operational risk

Article 102

1.   Competent authorities shall require credit institutions to hold own funds against operational risk in accordance with the approaches set out in Articles 103, 104 and 105.

2.   Without prejudice to paragraph 4, credit institutions that use the approach set out in Article 104 shall not revert to the use of the approach set out in Article 103, except for demonstrated good cause and subject to approval by the competent authorities.

3.   Without prejudice to paragraph 4, credit institutions that use the approach set out in Article 105 shall not revert to the use of the approaches set out in Articles 103 or 104 except for demonstrated good cause and subject to approval by the competent authorities.

4.   Competent authorities may allow credit institutions to use a combination of approaches in accordance with Annex X, Part 4.

Article 103

The capital requirement for operational risk under the Basic Indicator Approach shall be a certain percentage of a relevant indicator, in accordance with the parameters set out in Annex X, Part 1.

Article 104

1.   Under the Standardised Approach, credit institutions shall divide their activities into a number of business lines as set out in Annex X, Part 2.

2.   For each business line, credit institutions shall calculate a capital requirement for operational risk as a certain percentage of a relevant indicator, in accordance with the parameters set out in Annex X, Part 2.

3.   For certain business lines, the competent authorities may under certain conditions authorise a credit institution to use an alternative relevant indicator for determining its capital requirement for operational risk as set out in Annex X, Part 2, points 5 to 11.

4.   The capital requirement for operational risk under the Standardised Approach shall be the sum of the capital requirements for operational risk across all individual business lines.

5.   The parameters for the Standardised Approach are set out in Annex X, Part 2.

6.   To qualify for use of the Standardised Approach, credit institutions shall meet the criteria set out in Annex X, Part 2.

Article 105

1.   Credit institutions may use Advanced Measurement Approaches based on their own operational risk measurement systems, provided that the competent authority expressly approves the use of the models concerned for calculating the own funds requirement.

2.   Credit institutions shall satisfy their competent authorities that they meet the qualifying criteria set out in Annex X, Part 3.

3.   When an Advanced Measurement Approach is intended to be used by an EU parent credit institution and its subsidiaries or by the subsidiaries of an EU parent financial holding company, the competent authorities of the different legal entities shall cooperate closely as provided for in Articles 129 to 132. The application shall include the elements listed in Annex X, Part 3.

4.   Where an EU parent credit institution and its subsidiaries or the subsidiaries of an EU parent financial holding company use an Advanced Measurement Approach on a unified basis, the competent authorities may allow the qualifying criteria set out in Annex X, Part 3 to be met by the parent and its subsidiaries considered together.

Section 5

Large exposures

Article 106

1.   ‘Exposures’, for the purposes of this Section, shall mean any asset or off-balance-sheet item referred to in Section 3, Subsection 1, without application of the risk weights or degrees of risk there provided for.

Exposures arising from the items referred to in Annex IV shall be calculated in accordance with one of the methods set out in Annex III. For the purposes of this Section, Annex III, Part 2, point 2 shall also apply.

All elements entirely covered by own funds may, with the agreement of the competent authorities, be excluded from the determination of exposures, provided that such own funds are not included in the credit institution's own funds for the purposes of Article 75 or in the calculation of other monitoring ratios provided for in this Directive and in other Community acts.

2.   Exposures shall not include either of the following:

| a) | in the case of foreign exchange transactions, exposures incurred in the ordinary course of settlement during the 48 hours following payment; or |
| --- | --- |

a)

in the case of foreign exchange transactions, exposures incurred in the ordinary course of settlement during the 48 hours following payment; or

| b) | in the case of transactions for the purchase or sale of securities, exposures incurred in the ordinary course of settlement during the five working days following payment or delivery of the securities, whichever is the earlier. |
| --- | --- |

b)

in the case of transactions for the purchase or sale of securities, exposures incurred in the ordinary course of settlement during the five working days following payment or delivery of the securities, whichever is the earlier.

Article 107

For the purposes of applying this Section, the term ‘credit institution’ shall cover the following:

| a) | a credit institution, including its branches in third countries; and |
| --- | --- |

a)

a credit institution, including its branches in third countries; and

| b) | any private or public undertaking, including its branches, which meets the definition of ‘credit institution’ and has been authorised in a third country. |
| --- | --- |

b)

any private or public undertaking, including its branches, which meets the definition of ‘credit institution’ and has been authorised in a third country.

Article 108

A credit institution's exposure to a client or group of connected clients shall be considered a large exposure where its value is equal to or exceeds 10 % of its own funds.

Article 109

The competent authorities shall require that every credit institution have sound administrative and accounting procedures and adequate internal control mechanisms for the purposes of identifying and recording all large exposures and subsequent changes to them, in accordance with this Directive, and for that of monitoring those exposures in the light of each credit institution's own exposure policies.

Article 110

1.   A credit institution shall report every large exposure to the competent authorities.

Member States shall provide that reporting is to be carried out, at their discretion, in accordance with one of the following two methods:

| a) | reporting of all large exposures at least once a year, combined with reporting during the year of all new large exposures and any increases in existing large exposures of at least 20 % with respect to the previous communication; or |
| --- | --- |

a)

reporting of all large exposures at least once a year, combined with reporting during the year of all new large exposures and any increases in existing large exposures of at least 20 % with respect to the previous communication; or

| b) | reporting of all large exposures at least four times a year. |
| --- | --- |

b)

reporting of all large exposures at least four times a year.

2.   Except in the case of credit institutions relying on Article 114 for the recognition of collateral in calculating the value of exposures for the purposes of paragraphs 1, 2 and 3 of Article 111, exposures exempted under Article 113(3)(a) to (d) and (f) to (h) need not be reported as laid down in paragraph 1 and the reporting frequency laid down in point (b) of paragraph 1 of this Article may be reduced to twice a year for the exposures referred to in Article 113(3)(e) and (i), and in Articles 115 and 116.

Where a credit institution invokes this paragraph, it shall keep a record of the grounds advanced for at least one year after the event giving rise to the dispensation, so that the competent authorities may establish whether it is justified.

3.   Member States may require credit institutions to analyse their exposures to collateral issuers for possible concentrations and where appropriate take action or report any significant findings to their competent authority.

Article 111

1.   A credit institution may not incur an exposure to a client or group of connected clients the value of which exceed 25 % of its own funds.

2.   Where that client or group of connected clients is the parent undertaking or subsidiary of the credit institution and/or one or more subsidiaries of that parent undertaking, the percentage laid down in paragraph 1 shall be reduced to 20 %. Member States may, however, exempt the exposures incurred to such clients from the 20 % limit if they provide for specific monitoring of such exposures by other measures or procedures. They shall inform the Commission and the European Banking Committee of the content of such measures or procedures.

3.   A credit institution may not incur large exposures which in total exceed 800 % of its own funds.

4.   A credit institution shall at all times comply with the limits laid down in paragraphs 1, 2 and 3 in respect of its exposures. If in an exceptional case exposures exceed those limits, that fact shall be reported without delay to the competent authorities which may, where the circumstances warrant it, allow the credit institution a limited period of time in which to comply with the limits.

Article 112

1.   For the purposes of Articles 113 to 117, the term ‘guarantee’ shall include credit derivatives recognised under Articles 90 to 93 other than credit linked notes.

2.   Subject to paragraph 3, where, under Articles 113 to 117, the recognition of funded or unfunded credit protection may be permitted, this shall be subject to compliance with the eligibility requirements and other minimum requirements, set out under Articles 90 to 93 for the purposes of calculating risk-weighted exposure amounts under Articles 78 to 83.

3.   Where a credit institution relies upon Article 114(2), the recognition of funded credit protection shall be subject to the relevant requirements under Articles 84 to 89.

Article 113

1.   Member States may impose limits more stringent than those laid down in Article 111.

2.   Member States may fully or partially exempt from the application of Article 111(1), (2) and (3) exposures incurred by a credit institution to its parent undertaking, to other subsidiaries of that parent undertaking or to its own subsidiaries, in so far as those undertakings are covered by the supervision on a consolidated basis to which the credit institution itself is subject, in accordance with this Directive or with equivalent standards in force in a third country.

3.   Member States may fully or partially exempt the following exposures from the application of Article 111:

| a) | asset items constituting claims on central governments or central banks which, unsecured, would be assigned a 0 % risk weight under Articles 78 to 83; |
| --- | --- |

a)

asset items constituting claims on central governments or central banks which, unsecured, would be assigned a 0 % risk weight under Articles 78 to 83;

| b) | asset items constituting claims on international organisations or multilateral development banks which, unsecured, would be assigned a 0 % risk weight under Articles 78 to 83; |
| --- | --- |

b)

asset items constituting claims on international organisations or multilateral development banks which, unsecured, would be assigned a 0 % risk weight under Articles 78 to 83;

| c) | asset items constituting claims carrying the explicit guarantees of central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity providing the guarantee would be assigned a 0 % risk weight under Articles 78 to 83; |
| --- | --- |

c)

asset items constituting claims carrying the explicit guarantees of central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity providing the guarantee would be assigned a 0 % risk weight under Articles 78 to 83;

| d) | other exposures attributable to, or guaranteed by, central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity to which the exposure is attributable or by which it is guaranteed would be assigned a 0 % risk weight under Articles 78 to 83; |
| --- | --- |

d)

other exposures attributable to, or guaranteed by, central governments, central banks, international organisations, multilateral development banks or public sector entities, where unsecured claims on the entity to which the exposure is attributable or by which it is guaranteed would be assigned a 0 % risk weight under Articles 78 to 83;

| e) | asset items constituting claims on and other exposures to central governments or central banks not mentioned in point (a) which are denominated and, where applicable, funded in the national currencies of the borrowers; |
| --- | --- |

e)

asset items constituting claims on and other exposures to central governments or central banks not mentioned in point (a) which are denominated and, where applicable, funded in the national currencies of the borrowers;

| f) | asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of debt securities issued by central governments or central banks, international organisations, multilateral development banks, Member States' regional governments, local authorities or public sector entities, which securities constitute claims on their issuer which would be assigned a 0 % risk weighting under Articles 78 to 83; |
| --- | --- |

f)

asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of debt securities issued by central governments or central banks, international organisations, multilateral development banks, Member States' regional governments, local authorities or public sector entities, which securities constitute claims on their issuer which would be assigned a 0 % risk weighting under Articles 78 to 83;

| g) | asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of cash deposits placed with the lending credit institution or with a credit institution which is the parent undertaking or a subsidiary of the lending institution; |
| --- | --- |

g)

asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of cash deposits placed with the lending credit institution or with a credit institution which is the parent undertaking or a subsidiary of the lending institution;

| h) | asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of certificates of deposit issued by the lending credit institution or by a credit institution which is the parent undertaking or a subsidiary of the lending credit institution and lodged with either of them; |
| --- | --- |

h)

asset items and other exposures secured, to the satisfaction of the competent authorities, by collateral in the form of certificates of deposit issued by the lending credit institution or by a credit institution which is the parent undertaking or a subsidiary of the lending credit institution and lodged with either of them;

| i) | asset items constituting claims on and other exposures to institutions, with a maturity of one year or less, but not constituting such institutions' own funds; |
| --- | --- |

i)

asset items constituting claims on and other exposures to institutions, with a maturity of one year or less, but not constituting such institutions' own funds;

| j) | asset items constituting claims on and other exposures to those institutions which are not credit institutions but which fulfil the conditions referred to in Annex VI, Part 1, point 85, with a maturity of one year or less, and secured in accordance with the same point; |
| --- | --- |

j)

asset items constituting claims on and other exposures to those institutions which are not credit institutions but which fulfil the conditions referred to in Annex VI, Part 1, point 85, with a maturity of one year or less, and secured in accordance with the same point;

| k) | bills of trade and other similar bills, with a maturity of one year or less, bearing the signatures of other credit institutions; |
| --- | --- |

k)

bills of trade and other similar bills, with a maturity of one year or less, bearing the signatures of other credit institutions;

| l) | covered bonds falling within the terms of Annex VI, Part 1, points 68 to 70; |
| --- | --- |

l)

covered bonds falling within the terms of Annex VI, Part 1, points 68 to 70;

| m) | pending subsequent coordination, holdings in the insurance companies referred to in Article 122(1) up to 40 % of the own funds of the credit institution acquiring such a holding; |
| --- | --- |

m)

pending subsequent coordination, holdings in the insurance companies referred to in Article 122(1) up to 40 % of the own funds of the credit institution acquiring such a holding;

| n) | asset items constituting claims on regional or central credit institutions with which the lending credit institution is associated in a network in accordance with legal or statutory provisions and which are responsible, under those provisions, for cash-clearing operations within the network; |
| --- | --- |

n)

asset items constituting claims on regional or central credit institutions with which the lending credit institution is associated in a network in accordance with legal or statutory provisions and which are responsible, under those provisions, for cash-clearing operations within the network;

| o) | exposures secured, to the satisfaction of the competent authorities, by collateral in the form of securities other than those referred to in point (f); |
| --- | --- |

o)

exposures secured, to the satisfaction of the competent authorities, by collateral in the form of securities other than those referred to in point (f);

| p) | loans secured, to the satisfaction of the competent authorities, by mortgages on residential property or by shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation and leasing transactions under which the lessor retains full ownership of the residential property leased for as long as the lessee has not exercised his option to purchase, in all cases up to 50 % of the value of the residential property concerned; |
| --- | --- |

p)

loans secured, to the satisfaction of the competent authorities, by mortgages on residential property or by shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation and leasing transactions under which the lessor retains full ownership of the residential property leased for as long as the lessee has not exercised his option to purchase, in all cases up to 50 % of the value of the residential property concerned;

| q) | the following, where they would receive a 50 % risk weight under Articles 78 to 83, and only up to 50 % of the value of the property concerned:






  i) | exposures secured by mortgages on offices or other commercial premises, or by shares in Finnish housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of offices or other commercial premises; and |
| --- | --- | --- |

q)

the following, where they would receive a 50 % risk weight under Articles 78 to 83, and only up to 50 % of the value of the property concerned:

i)

exposures secured by mortgages on offices or other commercial premises, or by shares in Finnish housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of offices or other commercial premises; and

| ii) | exposures related to property leasing transactions concerning offices or other commercial premises; |
| --- | --- |

ii)

exposures related to property leasing transactions concerning offices or other commercial premises;

for the purposes of point (ii), until 31 December 2011, the competent authorities of each Member State may allow credit institutions to recognise 100 % of the value of the property concerned. At the end of this period, this treatment shall be reviewed. Member States shall inform the Commission of the use they make of this preferential treatment;

| r) | 50 % of the medium/low-risk off-balance-sheet items referred to in Annex II; |
| --- | --- |

r)

50 % of the medium/low-risk off-balance-sheet items referred to in Annex II;

| s) | subject to the competent authorities' agreement, guarantees other than loan guarantees which have a legal or regulatory basis and are given for their members by mutual guarantee schemes possessing the status of credit institutions, subject to a weighting of 20 % of their amount; and |
| --- | --- |

s)

subject to the competent authorities' agreement, guarantees other than loan guarantees which have a legal or regulatory basis and are given for their members by mutual guarantee schemes possessing the status of credit institutions, subject to a weighting of 20 % of their amount; and

| t) | the low-risk off-balance-sheet items referred to in Annex II, to the extent that an agreement has been concluded with the client or group of connected clients under which the exposure may be incurred only if it has been ascertained that it will not cause the limits applicable under Article 111(1) to (3) to be exceeded. |
| --- | --- |

t)

the low-risk off-balance-sheet items referred to in Annex II, to the extent that an agreement has been concluded with the client or group of connected clients under which the exposure may be incurred only if it has been ascertained that it will not cause the limits applicable under Article 111(1) to (3) to be exceeded.

Cash received under a credit linked note issued by the credit institution and loans and deposits of a counterparty to or with the credit institution which are subject to an on-balance sheet netting agreement recognised under Articles 90 to 93 shall be deemed to fall under point (g).

For the purposes of point (o), the securities used as collateral shall be valued at market price, have a value that exceeds the exposures guaranteed and be either traded on a stock exchange or effectively negotiable and regularly quoted on a market operated under the auspices of recognised professional operators and allowing, to the satisfaction of the competent authorities of the Member State of origin of the credit institution, for the establishment of an objective price such that the excess value of the securities may be verified at any time. The excess value required shall be 100 %. It shall, however, be 150 % in the case of shares and 50 % in the case of debt securities issued by institutions, Member State regional governments or local authorities other than those referred to in sub-point (f), and in the case of debt securities issued by multilateral development banks other than those assigned a 0 % risk weight under Articles 78 to 83. Where there is a mismatch between the maturity of the exposure and the maturity of the credit protection, the collateral shall not be recognised. Securities used as collateral may not constitute credit institutions' own funds.

For the purposes of point (p), the value of the property shall be calculated, to the satisfaction of the competent authorities, on the basis of strict valuation standards laid down by law, regulation or administrative provisions. Valuation shall be carried out at least once a year. For the purposes of point (p), residential property shall mean a residence to be occupied or let by the borrower.

Member States shall inform the Commission of any exemption granted under point (s) in order to ensure that it does not result in a distortion of competition.

Article 114

1.   Subject to paragraph 3, for the purposes of calculating the value of exposures for the purposes of Article 111(1) to (3) Member States may, in respect of credit institutions using the Financial Collateral Comprehensive Method under Articles 90 to 93, in the alternative to availing of the full or partial exemptions permitted under points (f), (g), (h), and (o) of Article 113(3), permit such credit institutions to use a value lower than the value of the exposure, but no lower than the total of the fully-adjusted exposure values of their exposures to the client or group of connected clients.

For these purposes, ‘fully adjusted exposure value’ means that calculated under Articles 90 to 93 taking into account the credit risk mitigation, volatility adjustments, and any maturity mismatch (E*).

Where this paragraph is applied to a credit institution, points (f), (g), (h), and (o) of Article 113(3) shall not apply to the credit institution in question.

2.   Subject to paragraph 3, a credit institution permitted to use own estimates of LGDs and conversion factors for an exposure class under Articles 84 to 89 may be permitted, where it is able to the satisfaction of the competent authorities to estimate the effects of financial collateral on their exposures separately from other LGD-relevant aspects, to recognise such effects in calculating the value of exposures for the purposes of Article 111(1) to (3).

Competent authorities shall be satisfied as to the suitability of the estimates produced by the credit institution for use for the reduction of the exposure value for the purposes of compliance with the provisions of Article 111.

Where a credit institution is permitted to use its own estimates of the effects of financial collateral, it shall do so on a basis consistent with the approach adopted in the calculation of capital requirements.

Credit institutions permitted to use own estimates of LGDs and conversion factors for an exposure class under Articles 84 to 89 which do not calculate the value of their exposures using the method referred to in the first subparagraph may be permitted to use the approach set out in paragraph 1 or the exemption set out in Article 113(3)(o) for calculating the value of exposures. A credit institution shall use only one of these two methods.

3.   A credit institution that is permitted to use the methods described in paragraphs 1 and 2 in calculating the value of exposures for the purposes of Article 111(1) to (3), shall conduct periodic stress tests of their credit-risk concentrations, including in relation to the realisable value of any collateral taken.

These periodic stress tests shall address risks arising from potential changes in market conditions that could adversely impact the credit institutions' adequacy of own funds and risks arising from the realisation of collateral in stressed situations.

The credit institution shall satisfy the competent authorities that the stress tests carried out are adequate and appropriate for the assessment of such risks.

In the event that such a stress test indicates a lower realisable value of collateral taken than would be permitted to be taken into account under paragraphs 1 and 2 as appropriate, the value of collateral permitted to be recognised in calculating the value of exposures for the purposes of Article 111(1) to (3) shall be reduced accordingly.

Such credit institutions shall include the following in their strategies to address concentration risk:

| a) | policies and procedures to address risks arising from maturity mismatches between exposures and any credit protection on those exposures; |
| --- | --- |

a)

policies and procedures to address risks arising from maturity mismatches between exposures and any credit protection on those exposures;

| b) | policies and procedures in the event that a stress test indicates a lower realisable value of collateral than taken into account under paragraphs 1 and 2; and |
| --- | --- |

b)

policies and procedures in the event that a stress test indicates a lower realisable value of collateral than taken into account under paragraphs 1 and 2; and

| c) | policies and procedures relating to concentration risk arising from the application of credit risk mitigation techniques, and in particular large indirect credit exposures, for example to a single issuer of securities taken as collateral. |
| --- | --- |

c)

policies and procedures relating to concentration risk arising from the application of credit risk mitigation techniques, and in particular large indirect credit exposures, for example to a single issuer of securities taken as collateral.

4.   Where the effects of collateral are recognised under the terms of paragraphs 1 or 2, Member States may treat any covered Part of the exposure as having been incurred to the collateral issuer rather than to the client.

Article 115

1.   For the purposes of Article 111(1) to (3), Member States may assign a weighting of 20 % to asset items constituting claims on Member States' regional governments and local authorities where those claims would be assigned a 20 % risk weight under Articles 78 to 83 and to other exposures to or guaranteed by such governments and authorities claims on which are assigned a 20 % risk weight under Articles 78 to 83. However, Member States may reduce that rate to 0 % in respect of asset items constituting claims on Member States' regional governments and local authorities where those claims would be assigned a 0 % risk weight under Article 78 to 83 and to other exposures to or guaranteed by such governments and authorities claims on which are assigned a 0 % risk weight under Articles 78 to 83.

2.   For the purposes of Article 111(1) to (3), Member States may assign a weighting of 20 % to asset items constituting claims on and other exposures to institutions with a maturity of more than one but not more than three years and a weighting of 50 % to asset items constituting claims on institutions with a maturity of more than three years, provided that the latter are represented by debt instruments that were issued by a institution and that those debt instruments are, in the opinion of the competent authorities, effectively negotiable on a market made up of professional operators and are subject to daily quotation on that market, or the issue of which was authorised by the competent authorities of the Member State of origin of the issuing institutions. In no case may any of these items constitute own funds.

Article 116

By way of derogation from Article 113(3)(i) and Article 115(2), Member States may assign a weighting of 20 % to asset items constituting claims on and other exposures to institutions, regardless of their maturity.

Article 117

1.   Where an exposure to a client is guaranteed by a third party, or by collateral in the form of securities issued by a third party under the conditions laid down in Article 113(3)(o), Member States may:

| a) | treat the exposure as having been incurred to the guarantor rather than to the client; or |
| --- | --- |

a)

treat the exposure as having been incurred to the guarantor rather than to the client; or

| b) | treat the exposure as having been incurred to the third party rather than to the client, if the exposure defined in Article 113(3)(o) is guaranteed by collateral under the conditions there laid down. |
| --- | --- |

b)

treat the exposure as having been incurred to the third party rather than to the client, if the exposure defined in Article 113(3)(o) is guaranteed by collateral under the conditions there laid down.

2.   Where Member States apply the treatment provided for in point (a) of paragraph 1:

| a) | where the guarantee is denominated in a currency different from that in which the exposure is denominated the amount of the exposure deemed to be covered will be calculated in accordance with the provisions on the treatment of currency mismatch for unfunded credit protection in Annex VIII; |
| --- | --- |

a)

where the guarantee is denominated in a currency different from that in which the exposure is denominated the amount of the exposure deemed to be covered will be calculated in accordance with the provisions on the treatment of currency mismatch for unfunded credit protection in Annex VIII;

| b) | a mismatch between the maturity of the exposure and the maturity of the protection will be treated in accordance with the provisions on the treatment of maturity mismatch in Annex VIII; and |
| --- | --- |

b)

a mismatch between the maturity of the exposure and the maturity of the protection will be treated in accordance with the provisions on the treatment of maturity mismatch in Annex VIII; and

| c) | partial coverage may be recognised in accordance with the treatment set out in Annex VIII. |
| --- | --- |

c)

partial coverage may be recognised in accordance with the treatment set out in Annex VIII.

Article 118

Where compliance by a credit institution on an individual or sub-consolidated basis with the obligations imposed in this Section is disapplied under Article 69(1), or the provisions of Article 70 are applied in the case of parent credit institutions in a Member State, measures must be taken to ensure the satisfactory allocation of risks within the group.

Article 119

By 31 December 2007, the Commission shall submit to the European Parliament and to the Council a report on the functioning of this Section, together with any appropriate proposals.

Section 6

Qualifying holdings outside the financial sector

Article 120

1.   No credit institution may have a qualifying holding the amount of which exceeds 15 % of its own funds in an undertaking which is neither a credit institution, nor a financial institution, nor an undertaking carrying on activities which are a direct extension of banking or concern services ancillary to banking, such as leasing, factoring, the management of unit trusts, the management of data processing services or any other similar activity.

2.   The total amount of a credit institution's qualifying holdings in undertakings other than credit institutions, financial institutions or undertakings carrying on activities which are a direct extension of banking or concern services ancillary to banking, such as leasing, factoring, the management of unit trusts, the management of data processing services, or any other similar activity may not exceed 60 % of its own funds.

3.   The limits laid down in paragraphs 1 and 2 may be exceeded only in exceptional circumstances. In such cases, however, the competent authorities shall require a credit institution either to increase its own funds or to take other equivalent measures.

Article 121

Shares held temporarily during a financial reconstruction or rescue operation or during the normal course of underwriting or in an institution's own name on behalf of others shall not be counted as qualifying holdings for the purpose of calculating the limits laid down in Articles 120(1) and (2). Shares which are not financial fixed assets as defined in Article 35(2) of Directive 86/635/EEC shall not be included in the calculation.

Article 122

1.   The Member States need not apply the limits laid down in Articles 120(1) and (2) to holdings in insurance companies as defined in Directives 73/239/EEC and 2002/83/EC, or in reinsurance companies as defined in Directive 98/78/EC.

2.   The Member States may provide that the competent authorities are not to apply the limits laid down in Article 120(1) and (2) if they provide that 100 % of the amounts by which a credit institution's qualifying holdings exceed those limits shall be covered by own funds and that the latter shall not be included in the calculation required under Article 75. If both the limits laid down in Article 120(1) and (2) are exceeded, the amount to be covered by own funds shall be the greater of the excess amounts.

Chapter 3

Credit institutions' assessment process

Article 123

Credit institutions shall have in place sound, effective and complete strategies and processes to assess and maintain on an ongoing basis the amounts, types and distribution of internal capital that they consider adequate to cover the nature and level of the risks to which they are or might be exposed.

These strategies and processes shall be subject to regular internal review to ensure that they remain comprehensive and proportionate to the nature, scale and complexity of the activities of the credit institution concerned.

Chapter 4

Supervision and disclosure by competent authorities

Section 1

Supervision

Article 124

1.   Taking into account the technical criteria set out in Annex XI, the competent authorities shall review the arrangements, strategies, processes and mechanisms implemented by the credit institutions to comply with this Directive and evaluate the risks to which the credit institutions are or might be exposed.

2.   The scope of the review and evaluation referred to in paragraph 1 shall be that of the requirements of this Directive.

3.   On the basis of the review and evaluation referred to in paragraph 1, the competent authorities shall determine whether the arrangements, strategies, processes and mechanisms implemented by the credit institutions and the own funds held by these ensure a sound management and coverage of their risks.

4.   Competent authorities shall establish the frequency and intensity of the review and evaluation referred to in paragraph 1 having regard to the size, systemic importance, nature, scale and complexity of the activities of the credit institution concerned and taking into account the principle of proportionality. The review and evaluation shall be updated at least on an annual basis.

5.   The review and evaluation performed by competent authorities shall include the exposure of credit institutions to the interest rate risk arising from non-trading activities. Measures shall be required in the case of institutions whose economic value declines by more than 20 % of their own funds as a result of a sudden and unexpected change in interest rates the size of which shall be prescribed by the competent authorities and shall not differ between credit institutions.

Article 125

1.   Where a parent undertaking is a parent credit institution in a Member State or an EU parent credit institution, supervision on a consolidated basis shall be exercised by the competent authorities that authorised it under Article 6.

2.   Where the parent of a credit institution is a parent financial holding company in a Member State or an EU parent financial holding company, supervision on a consolidated basis shall be exercised by the competent authorities that authorised that credit institution under Article 6.

Article 126

1.   Where credit institutions authorised in two or more Member States have as their parent the same parent financial holding company in a Member State or the same EU parent financial holding company, supervision on a consolidated basis shall be exercised by the competent authorities of the credit institution authorised in the Member State in which the financial holding company was set up.

Where the parents of credit institutions authorised in two or more Member States comprise more than one financial holding company with head offices in different Member States and there is a credit institution in each of these States, supervision on a consolidated basis shall be exercised by the competent authority of the credit institution with the largest balance sheet total.

2.   Where more than one credit institution authorised in the Community has as its parent the same financial holding company and none of these credit institutions has been authorised in the Member State in which the financial holding company was set up, supervision on a consolidated basis shall be exercised by the competent authority that authorised the credit institution with the largest balance sheet total, which shall be considered, for the purposes of this Directive, as the credit institution controlled by an EU parent financial holding company.

3.   In particular cases, the competent authorities may by common agreement waive the criteria referred to in paragraphs 1 and 2 if their application would be inappropriate, taking into account the credit institutions and the relative importance of their activities in different countries, and appoint a different competent authority to exercise supervision on a consolidated basis. In these cases, before taking their decision, the competent authorities shall give the EU parent credit institution, or EU parent financial holding company, or credit institution with the largest balance sheet total, as appropriate, an opportunity to state its opinion on that decision.

4.   The competent authorities shall notify the Commission of any agreement falling within paragraph 3.

Article 127

1.   Member States shall adopt any measures necessary, where appropriate, to include financial holding companies in consolidated supervision. Without prejudice to Article 135, the consolidation of the financial situation of the financial holding company shall not in any way imply that the competent authorities are required to play a supervisory role in relation to the financial holding company on a stand-alone basis.

2.   When the competent authorities of a Member State do not include a credit institution subsidiary in supervision on a consolidated basis under one of the cases provided for in points (b) and (c) of Article 73(1), the competent authorities of the Member State in which that credit institution subsidiary is situated may ask the parent undertaking for information which may facilitate their supervision of that credit institution.

3.   Member States shall provide that their competent authorities responsible for exercising supervision on a consolidated basis may ask the subsidiaries of a credit institution or a financial holding company, which are not included within the scope of supervision on a consolidated basis for the information referred to in Article 137. In such a case, the procedures for transmitting and verifying the information laid down in that Article shall apply.

Article 128

Where Member States have more than one competent authority for the prudential supervision of credit institutions and financial institutions, Member States shall take the requisite measures to organise coordination between such authorities.

Article 129

1.   In addition to the obligations imposed by the provisions of this Directive, the competent authority responsible for the exercise of supervision on a consolidated basis of EU parent credit institutions and credit institutions controlled by EU parent financial holding companies shall carry out the following tasks:

| a) | coordination of the gathering and dissemination of relevant or essential information in going concern and emergency situations; and |
| --- | --- |

a)

coordination of the gathering and dissemination of relevant or essential information in going concern and emergency situations; and

| b) | planning and coordination of supervisory activities in going concern as well as in emergency situations, including in relation to the activities in Article 124, in cooperation with the competent authorities involved. |
| --- | --- |

b)

planning and coordination of supervisory activities in going concern as well as in emergency situations, including in relation to the activities in Article 124, in cooperation with the competent authorities involved.

2.   In the case of applications for the permissions referred to in Articles 84(1), 87(9) and 105 and in Annex III, Part 6, respectively, submitted by an EU parent credit institution and its subsidiaries, or jointly by the subsidiaries of an EU parent financial holding company, the competent authorities shall work together, in full consultation, to decide whether or not to grant the permission sought and to determine the terms and conditions, if any, to which such permission should be subject.

An application as referred to in the first subparagraph shall be submitted only to the competent authority referred to in paragraph 1.

The competent authorities shall do everything within their power to reach a joint decision on the application within six months. This joint decision shall be set out in a document containing the fully reasoned decision which shall be provided to the applicant by the competent authority referred to in paragraph 1.

The period referred to in subparagraph 3 shall begin on the date of receipt of the complete application by the competent authority referred to in paragraph 1. The competent authority referred to in paragraph 1 shall forward the complete application to the other competent authorities without delay.

In the absence of a joint decision between the competent authorities within six months, the competent authority referred to in paragraph 1 shall make its own decision on the application. The decision shall be set out in a document containing the fully reasoned decision and shall take into account the views and reservations of the other competent authorities expressed during the six months period. The decision shall be provided to the applicant and the other competent authorities by the competent authority referred to in paragraph 1.

The decisions referred to in the third and fifth subparagraphs shall be recognised as determinative and applied by the competent authorities in the Member States concerned.

Article 130

1.   Where an emergency situation arises within a banking group which potentially jeopardises the stability of the financial system in any of the Member States where entities of a group have been authorised, the competent authority responsible for the exercise of supervision on a consolidated basis shall alert as soon as is practicable, subject to Chapter 1, Section 2, the authorities referred to in Article 49(a) and Article 50. This obligation shall apply to all competent authorities identified under Articles 125 and 126 in relation to a particular group, and to the competent authority identified under Article 129(1). Where possible, the competent authority shall use existing defined channels of communication.

2.   The competent authority responsible for supervision on a consolidated basis shall, when it needs information which has already been given to another competent authority, contact this authority whenever possible in order to prevent duplication of reporting to the various authorities involved in supervision.

Article 131

In order to facilitate and establish effective supervision, the competent authority responsible for supervision on a consolidated basis and the other competent authorities shall have written coordination and cooperation arrangements in place.

Under these arrangements additional tasks may be entrusted to the competent authority responsible for supervision on a consolidated basis and procedures for the decision-making process and for cooperation with other competent authorities, may be specified.

The competent authorities responsible for authorising the subsidiary of a parent undertaking which is a credit institution may, by bilateral agreement, delegate their responsibility for supervision to the competent authorities which authorised and supervise the parent undertaking so that they assume responsibility for supervising the subsidiary in accordance with this Directive. The Commission shall be kept informed of the existence and content of such agreements. It shall forward such information to the competent authorities of the other Member States and to the European Banking Committee.

Article 132

1.   The competent authorities shall cooperate closely with each other. They shall provide one another with any information which is essential or relevant for the exercise of the other authorities' supervisory tasks under this Directive. In this regard, the competent authorities shall communicate on request all relevant information and shall communicate on their own initiative all essential information.

Information referred to in the first subparagraph shall be regarded as essential if it could materially influence the assessment of the financial soundness of a credit institution or financial institution in another Member State.

In particular, competent authorities responsible for consolidated supervision of EU parent credit institutions and credit institutions controlled by EU parent financial holding companies shall provide the competent authorities in other Member States who supervise subsidiaries of these parents with all relevant information. In determining the extent of relevant information, the importance of these subsidiaries within the financial system in those Member States shall be taken into account.

The essential information referred to in the first subparagraph shall include, in particular, the following items:

| a) | identification of the group structure of all major credit institutions in a group, as well as of the competent authorities of the credit institutions in the group; |
| --- | --- |

a)

identification of the group structure of all major credit institutions in a group, as well as of the competent authorities of the credit institutions in the group;

| b) | procedures for the collection of information from the credit institutions in a group, and the verification of that information; |
| --- | --- |

b)

procedures for the collection of information from the credit institutions in a group, and the verification of that information;

| c) | adverse developments in credit institutions or in other entities of a group, which could seriously affect the credit institutions; and |
| --- | --- |

c)

adverse developments in credit institutions or in other entities of a group, which could seriously affect the credit institutions; and

| d) | major sanctions and exceptional measures taken by competent authorities in accordance with this Directive, including the imposition of an additional capital charge under Article 136 and the imposition of any limitation on the use of the Advanced Measurement Approach for the calculation of the own funds requirements under Article 105. |
| --- | --- |

d)

major sanctions and exceptional measures taken by competent authorities in accordance with this Directive, including the imposition of an additional capital charge under Article 136 and the imposition of any limitation on the use of the Advanced Measurement Approach for the calculation of the own funds requirements under Article 105.

2.   The competent authorities responsible for the supervision of credit institutions controlled by an EU parent credit institution shall whenever possible contact the competent authority referred to in Article 129(1) when they need information regarding the implementation of approaches and methodologies set out in this Directive that may already be available to that competent authority.

3.   The competent authorities concerned shall, prior to their decision, consult each other with regard to the following items, where these decisions are of importance for other competent authorities' supervisory tasks:

| a) | changes in the shareholder, organisational or management structure of credit institutions in a group, which require the approval or authorisation of competent authorities; and |
| --- | --- |

a)

changes in the shareholder, organisational or management structure of credit institutions in a group, which require the approval or authorisation of competent authorities; and

| b) | major sanctions or exceptional measures taken by competent authorities, including the imposition of an additional capital charge under Article 136 and the imposition of any limitation on the use of the Advances Measurement Approaches for the calculation of the own funds requirements under Article 105. |
| --- | --- |

b)

major sanctions or exceptional measures taken by competent authorities, including the imposition of an additional capital charge under Article 136 and the imposition of any limitation on the use of the Advances Measurement Approaches for the calculation of the own funds requirements under Article 105.

For the purposes of point (b), the competent authority responsible for supervision on a consolidated basis shall always be consulted.

However, a competent authority may decide not to consult in cases of urgency or where such consultation may jeopardise the effectiveness of the decisions. In this case, the competent authority shall, without delay, inform the other competent authorities.

Article 133

1.   The competent authorities responsible for supervision on a consolidated basis shall, for the purposes of supervision, require full consolidation of all the credit institutions and financial institutions which are subsidiaries of a parent undertaking.

However, the competent authorities may require only proportional consolidation where, in their opinion, the liability of a parent undertaking holding a share of the capital is limited to that share of the capital in view of the liability of the other shareholders or members whose solvency is satisfactory. The liability of the other shareholders and members shall be clearly established, if necessary by means of formal signed commitments.

In the case where undertakings are linked by a relationship within the meaning of Article 12(1) of Directive 83/349/EEC, the competent authorities shall determine how consolidation is to be carried out.

2.   The competent authorities responsible for supervision on a consolidated basis shall require the proportional consolidation of participations in credit institutions and financial institutions managed by an undertaking included in the consolidation together with one or more undertakings not included in the consolidation, where those undertakings' liability is limited to the share of the capital they hold.

3.   In the case of participations or capital ties other than those referred to in paragraphs 1 and 2, the competent authorities shall determine whether and how consolidation is to be carried out. In particular, they may permit or require use of the equity method. That method shall not, however, constitute inclusion of the undertakings concerned in supervision on a consolidated basis.

Article 134

1.   Without prejudice to Article 133, the competent authorities shall determine whether and how consolidation is to be carried out in the following cases:

| a) | where, in the opinion of the competent authorities, a credit institution exercises a significant influence over one or more credit institutions or financial institutions, but without holding a participation or other capital ties in these institutions; and |
| --- | --- |

a)

where, in the opinion of the competent authorities, a credit institution exercises a significant influence over one or more credit institutions or financial institutions, but without holding a participation or other capital ties in these institutions; and

| b) | where two or more credit institutions or financial institutions are placed under single management other than pursuant to a contract or clauses of their memoranda or Articles of association. |
| --- | --- |

b)

where two or more credit institutions or financial institutions are placed under single management other than pursuant to a contract or clauses of their memoranda or Articles of association.

In particular, the competent authorities may permit, or require use of, the method provided for in Article 12 of Directive 83/349/EEC. That method shall not, however, constitute inclusion of the undertakings concerned in consolidated supervision.

2.   Where consolidated supervision is required pursuant to Articles 125 and 126, ancillary services undertakings and asset management companies as defined in Directive 2002/87/EC shall be included in consolidations in the cases, and in accordance with the methods, laid down in Article 133 and paragraph 1 of this Article.

Article 135

The Member States shall require that persons who effectively direct the business of a financial holding company be of sufficiently good repute and have sufficient experience to perform those duties.

Article 136

1.   Competent authorities shall require any credit institution that does not meet the requirements of this Directive to take the necessary actions or steps at an early stage to address the situation.

For those purposes, the measures available to the competent authorities shall include the following:

| a) | obliging credit institutions to hold own funds in excess of the minimum level laid down in Article 75; |
| --- | --- |

a)

obliging credit institutions to hold own funds in excess of the minimum level laid down in Article 75;

| b) | requiring the reinforcement of the arrangements, processes, mechanisms and strategies implemented to comply with Articles 22 and 123; |
| --- | --- |

b)

requiring the reinforcement of the arrangements, processes, mechanisms and strategies implemented to comply with Articles 22 and 123;

| c) | requiring credit institutions to apply a specific provisioning policy or treatment of assets in terms of own funds requirements; |
| --- | --- |

c)

requiring credit institutions to apply a specific provisioning policy or treatment of assets in terms of own funds requirements;

| d) | restricting or limiting the business, operations or network of credit institutions; and |
| --- | --- |

d)

restricting or limiting the business, operations or network of credit institutions; and

| e) | requiring the reduction of the risk inherent in the activities, products and systems of credit institutions. |
| --- | --- |

e)

requiring the reduction of the risk inherent in the activities, products and systems of credit institutions.

The adoption of these measures shall be subject to Chapter 1, Section 2.

2.   A specific own funds requirement in excess of the minimum level laid down in Article 75 shall be imposed by the competent authorities at least on the credit institutions which do not meet the requirements laid down in Articles 22, 109 and 123, or in respect of which a negative determination has been made on the issue described in Article 124, paragraph 3, if the sole application of other measures is unlikely to improve the arrangements, processes, mechanisms and strategies sufficiently within an appropriate timeframe.

Article 137

1.   Pending further coordination of consolidation methods, Member States shall provide that, where the parent undertaking of one or more credit institutions is a mixed-activity holding company, the competent authorities responsible for the authorisation and supervision of those credit institutions shall, by approaching the mixed-activity holding company and its subsidiaries either directly or via credit institution subsidiaries, require them to supply any information which would be relevant for the purpose of supervising the credit institution subsidiaries.

2.   Member States shall provide that their competent authorities may carry out, or have carried out by external inspectors, on-the-spot inspections to verify information received from mixed-activity holding companies and their subsidiaries. If the mixed-activity holding company or one of its subsidiaries is an insurance undertaking, the procedure laid down in Article 140(1) may also be used. If a mixed-activity holding company or one of its subsidiaries is situated in a Member State other than that in which the credit institution subsidiary is situated, on-the-spot verification of information shall be carried out in accordance with the procedure laid down in Article 141.

Article 138

1.   Without prejudice to Chapter 2, Section 5, Member States shall provide that, where the parent undertaking of one or more credit institutions is a mixed-activity holding company, the competent authorities responsible for the supervision of these credit institutions shall exercise general supervision over transactions between the credit institution and the mixed-activity holding company and its subsidiaries.

2.   Competent authorities shall require credit institutions to have in place adequate risk management processes and internal control mechanisms, including sound reporting and accounting procedures, in order to identify, measure, monitor and control transactions with their parent mixed-activity holding company and its subsidiaries appropriately. Competent authorities shall require the reporting by the credit institution of any significant transaction with these entities other than the one referred to in Article 110. These procedures and significant transactions shall be subject to overview by the competent authorities.

Where these intra-group transactions are a threat to a credit institution's financial position, the competent authority responsible for the supervision of the institution shall take appropriate measures.

Article 139

1.   Member States shall take the necessary steps to ensure that there are no legal impediments preventing the exchange, as between undertakings included within the scope of supervision on a consolidated basis, mixed-activity holding companies and their subsidiaries, or subsidiaries of the kind covered in Article 127(3), of any information which would be relevant for the purposes of supervision in accordance with Articles 124 to 138 and this Article.

2.   Where a parent undertaking and any of its subsidiaries that are credit institutions are situated in different Member States, the competent authorities of each Member State shall communicate to each other all relevant information which may allow or aid the exercise of supervision on a consolidated basis.

Where the competent authorities of the Member State in which a parent undertaking is situated do not themselves exercise supervision on a consolidated basis pursuant to Articles 125 and 126, they may be invited by the competent authorities responsible for exercising such supervision to ask the parent undertaking for any information which would be relevant for the purposes of supervision on a consolidated basis and to transmit it to these authorities.

3.   Member States shall authorise the exchange between their competent authorities of the information referred to in paragraph 2, on the understanding that, in the case of financial holding companies, financial institutions or ancillary services undertakings, the collection or possession of information shall not in any way imply that the competent authorities are required to play a supervisory role in relation to those institutions or undertakings standing alone.

Similarly, Member States shall authorise their competent authorities to exchange the information referred to in Article 137 on the understanding that the collection or possession of information does not in any way imply that the competent authorities play a supervisory role in relation to the mixed-activity holding company and those of its subsidiaries which are not credit institutions, or to subsidiaries of the kind covered in Article 127(3).

Article 140

1.   Where a credit institution, financial holding company or a mixed-activity holding company controls one or more subsidiaries which are insurance companies or other undertakings providing investment services which are subject to authorisation, the competent authorities and the authorities entrusted with the public task of supervising insurance undertakings or those other undertakings providing investment services shall cooperate closely. Without prejudice to their respective responsibilities, those authorities shall provide one another with any information likely to simplify their task and to allow supervision of the activity and overall financial situation of the undertakings they supervise.

2.   Information received, in the framework of supervision on a consolidated basis, and in particular any exchange of information between competent authorities which is provided for in this Directive, shall be subject to the obligation of professional secrecy defined in Chapter 1, Section 2.

3.   The competent authorities responsible for supervision on a consolidated basis shall establish lists of the financial holding companies referred to in Article 71(2) . Those lists shall be communicated to the competent authorities of the other Member States and to the Commission.

Article 141

Where, in applying this Directive, the competent authorities of one Member State wish in specific cases to verify the information concerning a credit institution, a financial holding company, a financial institution, an ancillary services undertaking, a mixed-activity holding company, a subsidiary of the kind covered in Article 137 or a subsidiary of the kind covered in Article 127(3), situated in another Member State, they shall ask the competent authorities of that other Member State to have that verification carried out. The authorities which receive such a request shall, within the framework of their competence, act upon it either by carrying out the verification themselves, by allowing the authorities who made the request to carry it out, or by allowing an auditor or expert to carry it out.1 The competent authority which made the request may, if it so wishes, participate in the verification when it does not carry out the verification itself.

Article 142

Without prejudice to their criminal law provisions, Member States shall ensure that penalties or measures aimed at ending observed breaches or the causes of such breaches may be imposed on financial holding companies and mixed-activity holding companies, or their effective managers, that infringe laws, regulation or administrative provisions enacted to implement Articles 124 to 141 and this Article. The competent authorities shall cooperate closely to ensure that those penalties or measures produce the desired results, especially when the central administration or main establishment of a financial holding company or of a mixed-activity holding company is not located at its head office.

Article 143

1.   Where a credit institution, the parent undertaking of which is a credit institution or a financial holding company, the head office of which is in a third country, is not subject to consolidated supervision under Articles 125 and 126, the competent authorities shall verify whether the credit institution is subject to consolidated supervision by a third-country competent authority which is equivalent to that governed by the principles laid down in this Directive.

The verification shall be carried out by the competent authority which would be responsible for consolidated supervision if paragraph 3 were to apply, at the request of the parent undertaking or of any of the regulated entities authorised in the Community or on its own initiative. That competent authority shall consult the other competent authorities involved.

2.   The Commission may request the European Banking Committee to give general guidance as to whether the consolidated supervision arrangements of competent authorities in third countries are likely to achieve the objectives of consolidated supervision as defined in this Chapter, in relation to credit institutions, the parent undertaking of which has its head office in a third country . The Committee shall keep any such guidance under review and take into account any changes to the consolidated supervision arrangements applied by such competent authorities.

The competent authority carrying out the verification specified in the first subparagraph of paragraph 1 shall take into account any such guidance. For this purpose the competent authority shall consult the Committee before taking a decision.

3.   In the absence of such equivalent supervision, Member States shall apply the provisions of this Directive to the credit institution by analogy or shall allow their competent authorities to apply other appropriate supervisory techniques which achieve the objectives of supervision on a consolidated basis of credit institutions.

Those supervisory techniques shall, after consultation with the other competent authorities involved, be agreed upon by the competent authority which would be responsible for consolidated supervision.

Competent authorities may in particular require the establishment of a financial holding company which has its head office in the Community, and apply the provisions on consolidated supervision to the consolidated position of that financial holding company.

The supervisory techniques shall be designed to achieve the objectives of consolidated supervision as defined in this Chapter and shall be notified to the other competent authorities involved and the Commission.

Section 2

Disclosure by competent authorities

Article 144

Competent authorities shall disclose the following information:

| a) | the texts of laws, regulations, administrative rules and general guidance adopted in their Member State in the field of prudential regulation; |
| --- | --- |

a)

the texts of laws, regulations, administrative rules and general guidance adopted in their Member State in the field of prudential regulation;

| b) | the manner of exercise of the options and discretions available in Community legislation; |
| --- | --- |

b)

the manner of exercise of the options and discretions available in Community legislation;

| c) | the general criteria and methodologies they use in the review and evaluation referred to in Article 124; and |
| --- | --- |

c)

the general criteria and methodologies they use in the review and evaluation referred to in Article 124; and

| d) | without prejudice to the provisions laid down in Chapter 1, Section 2, aggregate statistical data on key aspects of the implementation of the prudential framework in each Member State. |
| --- | --- |

d)

without prejudice to the provisions laid down in Chapter 1, Section 2, aggregate statistical data on key aspects of the implementation of the prudential framework in each Member State.

The disclosures provided for in the first subparagraph shall be sufficient to enable a meaningful comparison of the approaches adopted by the competent authorities of the different Member States. The disclosures shall be published with a common format, and updated regularly. The disclosures shall be accessible at a single electronic location.

Chapter 5

Disclosure by credit institutions

Article 145

1.   For the purposes of this Directive, credit institutions shall publicly disclose the information laid down in Annex XII, Part 2, subject to the provisions laid down in Article 146.

2.   Recognition by the competent authorities under Chapter 2, Section 3, Subsections 2 and 3 and Article 105 of the instruments and methodologies referred to in Annex XII, Part 3 shall be subject to the public disclosure by credit institutions of the information laid down therein.

3.   Credit institutions shall adopt a formal policy to comply with the disclosure requirements laid down in paragraphs 1 and 2, and have policies for assessing the appropriateness of their disclosures, including their verification and frequency.

4.   Credit institutions should, if requested, explain their rating decisions to SMEs and other corporate applicants for loans, providing an explanation in writing when asked. Should a voluntary undertaking by the sector in this regard prove inadequate, national measures shall be adopted. The administrative costs of the explanation have to be at an appropriate rate to the size of the loan.

Article 146

1.   Notwithstanding Article 145, credit institutions may omit one or more of the disclosures listed in Annex XII, Part 2 if the information provided by such disclosures is not, in the light of the criterion specified in Annex XII, Part 1, point 1, regarded as material.

2.   Notwithstanding Article 145, credit institutions may omit one or more items of information included in the disclosures listed in Annex XII, Parts 2 and 3 if those items include information which, in the light of the criteria specified in Annex XII, Part 1, points 2 and 3, is regarded as proprietary or confidential.

3.   In the exceptional cases referred to in paragraph 2, the credit institution concerned shall state in its disclosures the fact that the specific items of information are not disclosed, the reason for non-disclosure, and publish more general information about the subject matter of the disclosure requirement, except where these are to be classified as proprietary or confidential under the criteria set out in Annex XII, Part 1, points 2 and 3.

Article 147

1.   Credit institutions shall publish the disclosures required under Article 145 on an annual basis at a minimum. Disclosures shall be published as soon as practicable.

2.   Credit institutions shall also determine whether more frequent publication than is provided for in paragraph 1 is necessary in the light of the criteria set out in Annex XII, Part 1, point 4.

Article 148

1.   Credit institutions may determine the appropriate medium, location and means of verification to comply effectively with the disclosure requirements laid down in Article 145. To the degree feasible, all disclosures shall be provided in one medium or location.

2.   Equivalent disclosures made by credit institutions under accounting, listing or other requirements may be deemed to constitute compliance with Article 145. If disclosures are not included in the financial statements, credit institutions shall indicate where they can be found.

Article 149

Notwithstanding Articles 146 to 148, Member States shall empower the competent authorities to require credit institutions:

| a) | to make one or more of the disclosures referred to in Annex XII, Parts 2 and 3; |
| --- | --- |

a)

to make one or more of the disclosures referred to in Annex XII, Parts 2 and 3;

| b) | to publish one or more disclosures more frequently than annually, and to set deadlines for publication; |
| --- | --- |

b)

to publish one or more disclosures more frequently than annually, and to set deadlines for publication;

| c) | to use specific media and locations for disclosures other than the financial statements; and |
| --- | --- |

c)

to use specific media and locations for disclosures other than the financial statements; and

| d) | to use specific means of verification for the disclosures not covered by statutory audit. |
| --- | --- |

d)

to use specific means of verification for the disclosures not covered by statutory audit.

TITLE VI

POWERS OF EXECUTION

Article 150

1.   Without prejudice, regarding own funds, to the proposal that the Commission is to submit pursuant to Article 62, the technical adjustments in the following areas shall be adopted in accordance with the procedure referred to in Article 151(2):

| a) | clarification of the definitions in order to take account, in the application of this Directive, of developments on financial markets; |
| --- | --- |

a)

clarification of the definitions in order to take account, in the application of this Directive, of developments on financial markets;

| b) | clarification of the definitions to ensure uniform application of this Directive; |
| --- | --- |

b)

clarification of the definitions to ensure uniform application of this Directive;

| c) | the alignment of terminology on, and the framing of definitions in accordance with, subsequent acts on credit institutions and related matters; |
| --- | --- |

c)

the alignment of terminology on, and the framing of definitions in accordance with, subsequent acts on credit institutions and related matters;

| d) | technical adjustments to the list in Article 2; |
| --- | --- |

d)

technical adjustments to the list in Article 2;

| e) | alteration of the amount of initial capital prescribed in Article 9 to take account of developments in the economic and monetary field; |
| --- | --- |

e)

alteration of the amount of initial capital prescribed in Article 9 to take account of developments in the economic and monetary field;

| f) | expansion of the content of the list referred to in Articles 23 and 24 and set out in Annex I or adaptation of the terminology used in that list to take account of developments on financial markets; |
| --- | --- |

f)

expansion of the content of the list referred to in Articles 23 and 24 and set out in Annex I or adaptation of the terminology used in that list to take account of developments on financial markets;

| g) | the areas in which the competent authorities shall exchange information as listed in Article 42; |
| --- | --- |

g)

the areas in which the competent authorities shall exchange information as listed in Article 42;

| h) | technical adjustments in Articles 56 to 67 and in Article 74 as a result of developments in accounting standards or requirements which take account of Community legislation or with regard to convergence of supervisory practices; |
| --- | --- |

h)

technical adjustments in Articles 56 to 67 and in Article 74 as a result of developments in accounting standards or requirements which take account of Community legislation or with regard to convergence of supervisory practices;

| i) | amendment of the list of exposure classes in Articles 79 and 86 in order to take account of developments on financial markets; |
| --- | --- |

i)

amendment of the list of exposure classes in Articles 79 and 86 in order to take account of developments on financial markets;

| j) | the amount specified in Article 79(2)(c), Article 86(4)(a), Annex VII, Part 1, point 5 and Annex VII, Part 2, point 15 to take into account the effects of inflation; |
| --- | --- |

j)

the amount specified in Article 79(2)(c), Article 86(4)(a), Annex VII, Part 1, point 5 and Annex VII, Part 2, point 15 to take into account the effects of inflation;

| k) | the list and classification of off-balance-sheet items in Annexes II and IV and their treatment in the determination of exposure values for the purposes of Title V, Chapter 2, Section 3; or |
| --- | --- |

k)

the list and classification of off-balance-sheet items in Annexes II and IV and their treatment in the determination of exposure values for the purposes of Title V, Chapter 2, Section 3; or

| l) | adjustment of the provisions in Annexes V to XII in order to take account of developments on financial markets (in particular new financial products) or in accounting standards or requirements which take account of Community legislation, or with regard to convergence of supervisory practice. |
| --- | --- |

l)

adjustment of the provisions in Annexes V to XII in order to take account of developments on financial markets (in particular new financial products) or in accounting standards or requirements which take account of Community legislation, or with regard to convergence of supervisory practice.

2.   The Commission may adopt the following implementing measures in accordance with the procedure referred to in Article 151(2):

| a) | specification of the size of sudden and unexpected changes in the interest rates referred to in Article 124(5); |
| --- | --- |

a)

specification of the size of sudden and unexpected changes in the interest rates referred to in Article 124(5);

| b) | a temporary reduction in the minimum level of own funds laid down in Article 75 and/or the risk weights laid down in Title V, Chapter 2, Section 3 in order to take account of specific circumstances; |
| --- | --- |

b)

a temporary reduction in the minimum level of own funds laid down in Article 75 and/or the risk weights laid down in Title V, Chapter 2, Section 3 in order to take account of specific circumstances;

| c) | without prejudice to the report referred to in Article 119, clarification of exemptions provided for in Articles 111(4), 113, 115 and 116; |
| --- | --- |

c)

without prejudice to the report referred to in Article 119, clarification of exemptions provided for in Articles 111(4), 113, 115 and 116;

| d) | specification of the key aspects on which aggregate statistical data are to be disclosed under Article 144(1)(d); or |
| --- | --- |

d)

specification of the key aspects on which aggregate statistical data are to be disclosed under Article 144(1)(d); or

| e) | specification of the format, structure, contents list and annual publication date of the disclosures provided for in Article 144. |
| --- | --- |

e)

specification of the format, structure, contents list and annual publication date of the disclosures provided for in Article 144.

3.   None of the implementing measures enacted may change the essential provisions of this Directive.

4.   Without prejudice to the implementing measures already adopted, upon expiry of a two-year period following the adoption of this Directive, and by 1 April 2008 at the latest, the application of the provisions of this Directive requiring the adoption of technical rules, amendments and decisions in accordance with paragraph 2 shall be suspended. Acting on a proposal from the Commission and in accordance with the procedure laid down in Article 251 of the Treaty, the Parliament and the Council may renew those provisions and, to that end, shall review them prior to the expiry of the period or by the date referred to in this paragraph, whichever the earlier.

Article 151

1.   The Commission shall be assisted by the European Banking Committee established by Commission Decision 2004/10/EC (22).

2.   Where reference is made to this paragraph, the procedure laid down in Article 5 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 7(3) and Article 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC shall be three months.

3.   The Committee shall adopt its Rules of Procedure.

TITLE VII

TRANSITIONAL AND FINAL PROVISIONS

Chapter 1

Transitional provisions

Article 152

1.   Credit institutions calculating risk-weighted exposure amounts in accordance with Articles 84 to 89 shall during the first, second and third twelve-month periods after 31 December 2006 provide own funds which are at all times more than or equal to the amounts indicated in paragraphs 3, 4 and 5.

2.   Credit institutions using the Advanced Measurement Approaches as specified in Article 105 for the calculation of their capital requirements for operational risk shall, during the second and third twelve-month periods after 31 December 2006, provide own funds which are at all times more than or equal to the amounts indicated in paragraphs 4 and 5.

3.   For the first twelve-month period referred to in paragraph 1, the amount of own funds shall be 95 % of the total minimum amount of own funds that would be required to be held during that period by the credit institution under Article 4 of Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions (23) as that Directive and Directive 2000/12/EC stood prior to 1 January 2007.

4.   For the second twelve-month period referred to in paragraph 1, the amount of own funds shall be 90 % of the total minimum amount of own funds that would be required to be held during that period by the credit institution under Article 4 of Directive 93/6/EEC as that Directive and Directive 2000/12/EC stood prior to 1 January 2007.

5.   For the third twelve-month period referred to in paragraph 1, the amount of own funds shall be 80 % of the total minimum amount of own funds that would be required to be held during that period by the credit institution under Article 4 of Directive 93/6/EEC as that Directive and Directive 2000/12/EC stood prior to 1 January 2007.

6.   Compliance with the requirements of paragraphs 1 to 5 shall be on the basis of amounts of own funds fully adjusted to reflect differences in the calculation of own funds under Directive 2000/12/EC and Directive 93/6/EEC as those Directives stood prior to 1 January 2007 and the calculation of own funds under this Directive deriving from the separate treatments of expected loss and unexpected loss under Articles 84 to 89 of this Directive.

7.   For the purposes of paragraphs 1 to 6 of this Article, Articles 68 to 73 shall apply.

8.   Until 1 January 2008 credit institutions may treat the Articles constituting the Standardised Approach set out in Title V, Chapter 2, Section 3, Subsection 1 as being replaced by Articles 42 to 46 of Directive 2000/12/EC as those Articles stood prior to 1 January 2007.

9.   Where the discretion referred to in paragraph 8 is exercised, the following shall apply concerning the provisions of Directive 2000/12/EC:

| a) | the provisions of that Directive referred to in Articles 42 to 46 shall apply as they stood prior to 1 January 2007; |
| --- | --- |

a)

the provisions of that Directive referred to in Articles 42 to 46 shall apply as they stood prior to 1 January 2007;

| b) | ‘risk-adjusted value’ as referred to in Article 42(1) of that Directive shall mean ‘risk-weighted exposure amount’; |
| --- | --- |

b)

‘risk-adjusted value’ as referred to in Article 42(1) of that Directive shall mean ‘risk-weighted exposure amount’;

| c) | the figures produced by Article 42(2) of that Directive shall be considered risk-weighted exposure amounts; |
| --- | --- |

c)

the figures produced by Article 42(2) of that Directive shall be considered risk-weighted exposure amounts;

| d) | ‘credit derivatives’ shall be included in the list of ‘Full risk’ items in Annex II of that Directive; and |
| --- | --- |

d)

‘credit derivatives’ shall be included in the list of ‘Full risk’ items in Annex II of that Directive; and

| e) | the treatment set out in Article 43(3) of that Directive shall apply to derivative instruments listed in Annex IV of that Directive whether on- or off-balance sheet and the figures produced by the treatment set out in Annex III shall be considered risk-weighted exposure amounts. |
| --- | --- |

e)

the treatment set out in Article 43(3) of that Directive shall apply to derivative instruments listed in Annex IV of that Directive whether on- or off-balance sheet and the figures produced by the treatment set out in Annex III shall be considered risk-weighted exposure amounts.

10.   Where the discretion referred to in paragraph 8 is exercised, the following shall apply in relation to the treatment of exposures for which the Standardised Approach is used:

| (a) | Title V, Chapter 2, Section 3, Subsection 3 relating to the recognition of credit risk mitigation shall not apply; |
| --- | --- |

(a)

Title V, Chapter 2, Section 3, Subsection 3 relating to the recognition of credit risk mitigation shall not apply;

| (b) | Title V, Chapter 2, Section 3, Subsection 4 concerning the treatment of securitisation may be disapplied by competent authorities. |
| --- | --- |

(b)

Title V, Chapter 2, Section 3, Subsection 4 concerning the treatment of securitisation may be disapplied by competent authorities.

11.   Where the discretion referred to in paragraph 8 is exercised, the capital requirement for operational risk under Article 75(d) shall be reduced by the percentage representing the ratio of the value of the credit institution's exposures for which risk-weighted exposure amounts are calculated in accordance with the discretion referred to in paragraph 8 to the total value of its exposures.

12.   Where a credit institution calculates risk-weighted exposure amounts for all of its exposures in accordance with the discretion referred to in paragraph 8, Articles 48 to 50 of Directive 2000/12/EC relating to large exposures may apply as they stood prior to 1 January 2007.

13.   Where the discretion referred to in paragraph 8 is exercised, references to Articles 78 to 83 of this Directive shall be read as references to Articles 42 to 46 of Directive 2000/12/EC as those Articles stood prior to 1 January 2007.

14.   If the discretion referred to in paragraph 8 is exercised, Articles 123, 124, 145 and 149 shall not apply before the date referred to therein.

Article 153

In the calculation of risk-weighted exposure amounts for exposures arising from property leasing transactions concerning offices or other commercial premises situated in their territory and meeting the criteria set out in Annex VI, Part 1, point 54, the competent authorities may, until 31 December 2012 allow a 50 % risk weight to be assigned without the application of Annex VI, Part 1, points 55 and 56.

Until 31 December 2010, competent authorities may, for the purpose of defining the secured portion of a past due loan for the purposes of Annex VI, recognise collateral other than eligible collateral as set out under Articles 90 to 93.

In the calculation of risk weighted exposure amounts for the purposes of Annex VI, Part 1, point 4, until 31 December 2012 the same risk weight shall be assigned in relation to exposures to Member States' central governments or central banks denominated and funded in the domestic currency of any Member State as would be applied to such exposures denominated and funded in their domestic currency.

Article 154

1.   Until 31 December 2011, the competent authorities of each Member State may, for the purposes of Annex VI, Part 1, point 61, set the number of days past due up to a figure of 180 for exposures indicated in Annex VI, Part 1, points 12 to 17 and 41 to 43, to counterparties situated in their territory, if local conditions make it appropriate. The specific number may differ across product lines.

Competent authorities which do not exercise the discretion provided for in the first subparagraph in relation to exposures to counterparties situated in their territory may set a higher number of days for exposures to counterparties situated in the territories of other Member States, the competent authorities of which have exercised that discretion. The specific number shall fall within 90 days and such figures as the other competent authorities have set for exposures to such counterparties within their territory.

2.   For credit institutions applying for the use of the IRB Approach before 2010, subject to the approval of the competent authorities, the three-years' use requirement prescribed in Article 84(3) may be reduced to a period no shorter than one year until 31 December 2009.

3.   For credit institutions applying for the use of own estimates of LGDs and/or conversion factors, the three year use requirement prescribed in Article 84(4) may be reduced to two years until 31 December 2008.

4.   Until 31 December 2012, the competent authorities of each Member State may allow credit institutions to continue to apply to participations of the type set out in Article 57(o) acquired before (24) the treatment set out in Article 38 of Directive 2000/12/EC as that article stood prior to 1 January 2007.

5.   Until 31 December 2010 the exposure weighted average LGD for all retail exposures secured by residential properties and not benefiting from guarantees from central governments shall not be lower than 10 %.

6.   Until 31 December 2017, the competent authorities of the Member States may exempt from the IRB treatment certain equity exposures held by credit institutions and EU subsidiaries of credit institutions in that Member State at 31 December 2007.

The exempted position shall be measured as the number of shares as of 31 December 2007 and any additional share arising directly as a result of owning those holdings, as long as they do not increase the proportional share of ownership in a portfolio company.

If an acquisition increases the proportional share of ownership in a specific holding the exceeding Part of the holding shall not be subject to the exemption. Nor shall the exemption apply to holdings that were originally subject to the exemption, but have been sold and then bought back.

Equity exposures covered by this transitional provision shall be subject to the capital requirements calculated in accordance with Title V, Chapter 2, Section 3, Subsection 1.

7.   Until 31 December 2011, for corporate exposures, the competent authorities of each Member State may set the number of days past due that all credit institutions in its jurisdiction shall abide by under the definition of ‘default’ set out in Annex VII, Part 4, point 44 for exposures to such counterparts situated within this Member State. The specific number shall fall within 90- up to a figure of 180 days if local conditions make it appropriate. For exposures to such counterparts situated in the territories of other Member States, the competent authorities shall set a number of days past due which is not higher than the number set by the competent authority of the respective Member State.

Article 155

Until 31 December 2012, for credit institutions the relevant indicator for the trading and sales business line of which represents at least 50 % of the total of the relevant indicators for all of its business lines accordance with Annex X, Part 2, points 1 to 4, Member States may apply a percentage of 15 % to the business line ‘trading and sales’.

Chapter 2

Final provisions

Article 156

The Commission, in cooperation with Member States, and taking into account the contribution of the European Central Bank, shall periodically monitor whether this Directive taken as a whole, together with Directive 2006/.../EC, has significant effects on the economic cycle and, in the light of that examination, shall consider whether any remedial measures are justified.

Based on that analysis and taking into account the contribution of the European Central Bank, 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 1 January 2012 the Commission shall, review and report on the application of this Directive with particular attention to all aspects of Articles 68 to 73, 80(7), 80(8) and 129, and shall submit this report to the Parliament and the Council together with any appropriate proposals.

Article 157

1.   By 31 December 2006 Member States shall adopt and publish,, the laws, regulations and administrative provisions necessary to comply with Articles 4, 22, 57, 61 to 64, 66, 68 to 106, 108, 110 to 115, 117 to 119, 123 to 127, 129 to 132, 133, 136, 144 to 149 and 152 to 155, and Annexes II, III and V to XII. They shall forthwith communicate to the Commission the text of those provisions and a correlation table between those provisions and this Directive.

Notwithstanding paragraph 3, Member States shall apply those provisions from 1 January 2007.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. They shall also include a statement that references in existing laws, regulations and administrative provisions to the directives repealed by this Directive shall be construed as references to this Directive. Member States shall determine how such reference is to be made and how that statement is to be formulated.

2.   Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

3.   Member States shall apply, from 1 January 2008, and no earlier, the laws regulations and administrative provisions necessary to comply with Articles 87(9) and 105.

Article 158

1.   Directive 2000/12/EC as amended by the Directives set out in Annex XIII, Part A, is hereby repealed without prejudice to the obligations of the Member States concerning the deadlines for transposition of the said Directives listed in Annex XIII, Part B.

2.   References to the repealed Directives shall be construed as being made to this Directive and should be read in accordance with the correlation table in Annex XIV.

Article 159

This Directive shall enter into force on the 20th day following its publication in the Official Journal of the European Union.

Article 160

This Directive is addressed to the Member States.

Done at ...

For the European Parliament

The President

For the Council

The President

---

(1)  OJ C 234, 22.9.2005, p. 8.

1

(2)  OJ C 52, 2.3.2005, p. 37.

2

(3)  Position of the European Parliament of 28 September 2005.

3

(4)  OJ L 126, 26.5.2000, p. 1. Directive as last amended by Directive 2006/29/EC (OJ L 70, 9.3.2006, p. 50).

4

(5)  OJ L 3, 7.1.2004, p. 28.

5

(6)  OJ L 372, 31.12.1986, p. 1. Directive as last amended by Directive 2003/51/EC of the European Parliament and of the Council (OJ L 178, 17.7.2003, p. 16).

6

(7)  OJ L 193, 18.7.1983, p. 1. Directive as last amended by Directive 2003/51/EC.

7

(8)  OJ L 243, 11.9.2002, p. 1.

8

(9)  OJ L ...

9

(10)  OJ L 281, 23.11.1995, p. 31. Directive as amended by Regulation (EC) No 1882/2003 (OJ L 284, 31.10.2003, p. 1).

10

(11)  OJ L 184, 17.7.1999, p. 23.

11

(12)  OJ C 284 E, 21.11.2002, p. 115.

12

(13)  Directive 2000/46/EC of the European Parliament and of the Council of 18 September 2000 on the taking up, pursuit of and prudential supervision of the business of electronic money institutions (OJ L 275, 27.10.2000, p. 39).

13

(14)  OJ L 222, 14.8.1978, p. 11. Directive as last amended by Directive 2003/51/EC.

14

(15)  Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (OJ L 35, 11.2.2003, p. 1). Directive as amended by Directive 2005/1/EC.

15

(16)  OJ L 184, 6.7.2001, p. 1. Directive as last amended by Directive 2005/1/EC.

16

(17)  Eighth Council Directive 84/253/EEC of 10 April 1984 on the approval of persons responsible for carrying out the statutory audits of accounting documents (OJ L 126, 12.5.1984, p. 20).

17

(18)  Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 375, 31.12.1985, p. 3). Directive as last amended by Directive 2005/1/EC.

18

(19)  First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ L 228, 16.8.1973, p. 3). Directive as last amended by Directive 2005/1/EC.

19

(20)  Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (OJ L 345, 19.12.2002, p. 1). Directive as last amended by Directive 2005/1/EC.

20

(21)  Directive 98/78/EC of the European Parliament and of the Council of 27 October 1998 on the supplementary supervision of insurance undertakings in an insurance group (OJ L 330, 5.12.1998, p. 1). Directive as last amended by Directive 2005/1/EC.

21

(22)  OJ L 3, 7.1.2004, p. 36.

22

(23)  OJ L 141, 11.6.1993, p. 1. Directive as last amended by Directive 2005/1/EC.

23

(24)  date of the entry into force of this Directive.

24

ANNEX I

LIST OF ACTIVITIES SUBJECT TO MUTUAL RECOGNITION

| 1. | Acceptance of deposits and other repayable funds |
| --- | --- |

1.

Acceptance of deposits and other repayable funds

| 2. | Lending including, inter alia: consumer credit, mortgage credit, factoring, with or without recourse, financing of commercial transactions (including forfeiting) |
| --- | --- |

2.

Lending including, inter alia: consumer credit, mortgage credit, factoring, with or without recourse, financing of commercial transactions (including forfeiting)

| 3. | Financial leasing |
| --- | --- |

3.

Financial leasing

| 4. | Money transmission services |
| --- | --- |

4.

Money transmission services

| 5. | Issuing and administering means of payment (e.g. credit cards, travellers' cheques and bankers' drafts) |
| --- | --- |

5.

Issuing and administering means of payment (e.g. credit cards, travellers' cheques and bankers' drafts)

| 6. | Guarantees and commitments |
| --- | --- |

6.

Guarantees and commitments

| 7. | Trading for own account or for account of customers in:






  a) | money market instruments (cheques, bills, certificates of deposit, etc.); |
| --- | --- | --- |

7.

Trading for own account or for account of customers in:

a)

money market instruments (cheques, bills, certificates of deposit, etc.);

| b) | foreign exchange; |
| --- | --- |

b)

foreign exchange;

| c) | financial futures and options; |
| --- | --- |

c)

financial futures and options;

| d) | exchange and interest-rate instruments; or |
| --- | --- |

d)

exchange and interest-rate instruments; or

| e) | transferable securities. |
| --- | --- |

e)

transferable securities.

| 8. | Participation in securities issues and the provision of services related to such issues |
| --- | --- |

8.

Participation in securities issues and the provision of services related to such issues

| 9. | Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings |
| --- | --- |

9.

Advice to undertakings on capital structure, industrial strategy and related questions and advice as well as services relating to mergers and the purchase of undertakings

| 10. | Money broking |
| --- | --- |

10.

Money broking

| 11. | Portfolio management and advice |
| --- | --- |

11.

Portfolio management and advice

| 12. | Safekeeping and administration of securities |
| --- | --- |

12.

Safekeeping and administration of securities

| 13. | Credit reference services |
| --- | --- |

13.

Credit reference services

| 14. | Safe custody services
  The services and activities provided for in Sections A and B of Annex I to Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (1), when referring to the financial instruments provided for in Section C of Annex I of that Directive, are subject to mutual recognition according to this Directive. |
| --- | --- |

14.

Safe custody services

The services and activities provided for in Sections A and B of Annex I to Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (1), when referring to the financial instruments provided for in Section C of Annex I of that Directive, are subject to mutual recognition according to this Directive.

---

(1)  OJ L 145, 30.4.2004, p. 1. Directive as amended by Directive 2006/31/EC (OJ L 114, 27.4.2006, p. 60).

ANNEX II

CLASSIFICATION OF OFF-BALANCE-SHEET ITEMS

Full risk:

| — | Guarantees having the character of credit substitutes, |
| --- | --- |

—

Guarantees having the character of credit substitutes,

| — | Credit derivatives, |
| --- | --- |

—

Credit derivatives,

| — | Acceptances, |
| --- | --- |

—

Acceptances,

| — | Endorsements on bills not bearing the name of another credit institution, |
| --- | --- |

—

Endorsements on bills not bearing the name of another credit institution,

| — | Transactions with recourse, |
| --- | --- |

—

Transactions with recourse,

| — | Irrevocable standby letters of credit having the character of credit substitutes, |
| --- | --- |

—

Irrevocable standby letters of credit having the character of credit substitutes,

| — | Assets purchased under outright forward purchase agreements, |
| --- | --- |

—

Assets purchased under outright forward purchase agreements,

| — | Forward forward deposits, |
| --- | --- |

—

Forward forward deposits,

| — | The unpaid portion of partly-paid shares and securities, |
| --- | --- |

—

The unpaid portion of partly-paid shares and securities,

| — | Asset sale and repurchase agreements as defined in Article 12(3) and (5) of Directive 86/635/EEC, and |
| --- | --- |

—

Asset sale and repurchase agreements as defined in Article 12(3) and (5) of Directive 86/635/EEC, and

| — | Other items also carrying full risk. |
| --- | --- |

—

Other items also carrying full risk.

Medium risk:

| — | Documentary credits issued and confirmed (see also ‘Medium/low risk’), |
| --- | --- |

—

Documentary credits issued and confirmed (see also ‘Medium/low risk’),

| — | Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes, |
| --- | --- |

—

Warranties and indemnities (including tender, performance, customs and tax bonds) and guarantees not having the character of credit substitutes,

| — | Irrevocable standby letters of credit not having the character of credit substitutes, |
| --- | --- |

—

Irrevocable standby letters of credit not having the character of credit substitutes,

| — | Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year, |
| --- | --- |

—

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of more than one year,

| — | Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs), and |
| --- | --- |

—

Note issuance facilities (NIFs) and revolving underwriting facilities (RUFs), and

| — | Other items also carrying medium risk and as communicated to the Commission. |
| --- | --- |

—

Other items also carrying medium risk and as communicated to the Commission.

Medium/low risk:

| — | Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions, |
| --- | --- |

—

Documentary credits in which underlying shipment acts as collateral and other self-liquidating transactions,

| — | Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness, and |
| --- | --- |

—

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) with an original maturity of up to and including one year which may not be cancelled unconditionally at any time without notice or that do not effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness, and

| — | Other items also carrying medium/low risk and as communicated to the Commission. |
| --- | --- |

—

Other items also carrying medium/low risk and as communicated to the Commission.

Low risk:

| — | Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation, and |
| --- | --- |

—

Undrawn credit facilities (agreements to lend, purchase securities, provide guarantees or acceptance facilities) which may be cancelled unconditionally at any time without notice, or that do effectively provide for automatic cancellation due to deterioration in a borrower's creditworthiness. Retail credit lines may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation, and

| — | Other items also carrying low risk and as communicated to the Commission. |
| --- | --- |

—

Other items also carrying low risk and as communicated to the Commission.

ANNEX III

THE TREATMENT OF COUNTERPARTY CREDIT RISK OF DERIVATIVE INSTRUMENTS, REPURCHASE TRANSACTIONS, SECURITIES ORCOMMODITIES LENDING OR BORROWING TRANSACTIONS,LONG SETTLEMENT TRANSACTIONS AND MARGIN LENDING TRANSACTIONS

Part 1: Definitions

For the purposes of this Annex the following definitions shall apply:

General terms

| 1. | ‘Counterparty Credit Risk (CCR)’ means the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows. |
| --- | --- |

1.

‘Counterparty Credit Risk (CCR)’ means the risk that the counterparty to a transaction could default before the final settlement of the transaction's cash flows.

| 2. | ‘Central counterparty’ means an entity that legally interposes itself between counterparties to contracts traded within one or more financial markets, becoming the buyer to every seller and the seller to every buyer. |
| --- | --- |

2.

‘Central counterparty’ means an entity that legally interposes itself between counterparties to contracts traded within one or more financial markets, becoming the buyer to every seller and the seller to every buyer.

Transaction types

| 3. | ‘Long Settlement Transactions’ mean transactions where a counterparty undertakes to deliver a security, a commodity, or a foreign exchange amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date that is contractually specified as more than the lower of the market standard for this particular transaction and five business days after the date on which the credit institution enters into the transaction. |
| --- | --- |

3.

‘Long Settlement Transactions’ mean transactions where a counterparty undertakes to deliver a security, a commodity, or a foreign exchange amount against cash, other financial instruments, or commodities, or vice versa, at a settlement or delivery date that is contractually specified as more than the lower of the market standard for this particular transaction and five business days after the date on which the credit institution enters into the transaction.

| 4. | ‘Margin Lending Transactions’ mean transactions in which a credit institution extends credit in connection with the purchase, sale, carrying or trading of securities. Margin lending transactions do not include other loans that happen to be secured by securities collateral. |
| --- | --- |

4.

‘Margin Lending Transactions’ mean transactions in which a credit institution extends credit in connection with the purchase, sale, carrying or trading of securities. Margin lending transactions do not include other loans that happen to be secured by securities collateral.

Netting sets, hedging sets, and related terms

| 5. | ‘Netting Set’ means a group of transactions with a single counterparty that are subject to a legally enforceable bilateral netting arrangement and for which netting is recognised under Part 7 of this Annex and Articles 90 to 93. Each transaction that is not subject to a legally enforceable bilateral netting arrangement, which is recognised under Part 7 of this Annex, should be interpreted as its own netting set for the purpose of this Annex. |
| --- | --- |

5.

‘Netting Set’ means a group of transactions with a single counterparty that are subject to a legally enforceable bilateral netting arrangement and for which netting is recognised under Part 7 of this Annex and Articles 90 to 93. Each transaction that is not subject to a legally enforceable bilateral netting arrangement, which is recognised under Part 7 of this Annex, should be interpreted as its own netting set for the purpose of this Annex.

| 6. | ‘Risk Position’ means a risk number that is assigned to a transaction under the Standardised Method set out in Part 5 following a predetermined algorithm. |
| --- | --- |

6.

‘Risk Position’ means a risk number that is assigned to a transaction under the Standardised Method set out in Part 5 following a predetermined algorithm.

| 7. | ‘Hedging Set’ means a group of risk positions from the transactions within a single netting set for which only their balance is relevant for determining the exposure value under the Standardised Method set out in Part 5. |
| --- | --- |

7.

‘Hedging Set’ means a group of risk positions from the transactions within a single netting set for which only their balance is relevant for determining the exposure value under the Standardised Method set out in Part 5.

| 8. | ‘Margin Agreement’ means a contractual agreement or provisions of an agreement under which one counterparty shall supply collateral to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level. |
| --- | --- |

8.

‘Margin Agreement’ means a contractual agreement or provisions of an agreement under which one counterparty shall supply collateral to a second counterparty when an exposure of that second counterparty to the first counterparty exceeds a specified level.

| 9. | ‘Margin Threshold’ means the largest amount of an exposure that remains outstanding until one party has the right to call for collateral. |
| --- | --- |

9.

‘Margin Threshold’ means the largest amount of an exposure that remains outstanding until one party has the right to call for collateral.

| 10. | ‘Margin Period of Risk’ means the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterpart until that counterpart is closed out and the resulting market risk is re- hedged. |
| --- | --- |

10.

‘Margin Period of Risk’ means the time period from the last exchange of collateral covering a netting set of transactions with a defaulting counterpart until that counterpart is closed out and the resulting market risk is re- hedged.

| 11. | ‘Effective Maturity under the Internal Model Method, for a netting set with maturity greater than one year’ means the ratio of the sum of expected exposure over the life of the transactions in the netting set discounted at the risk-free rate of return divided by the sum of expected exposure over one year in a netting set discounted at the risk-free rate. This effective maturity may be adjusted to reflect rollover risk by replacing expected exposure with effective expected exposure for forecasting horizons under one year. |
| --- | --- |

11.

‘Effective Maturity under the Internal Model Method, for a netting set with maturity greater than one year’ means the ratio of the sum of expected exposure over the life of the transactions in the netting set discounted at the risk-free rate of return divided by the sum of expected exposure over one year in a netting set discounted at the risk-free rate. This effective maturity may be adjusted to reflect rollover risk by replacing expected exposure with effective expected exposure for forecasting horizons under one year.

| 12. | ‘Cross-Product Netting’ means the inclusion of transactions of different product categories within the same netting set pursuant to the Cross-Product Netting rules set out in this Annex. |
| --- | --- |

12.

‘Cross-Product Netting’ means the inclusion of transactions of different product categories within the same netting set pursuant to the Cross-Product Netting rules set out in this Annex.

| 13. | For the purposes of Part 5, ‘Current Market Value (CMV)’ refers to the net market value of the portfolio of transactions within the netting set with the counterparty. Both positive and negative market values are used in computing CMV. |
| --- | --- |

13.

For the purposes of Part 5, ‘Current Market Value (CMV)’ refers to the net market value of the portfolio of transactions within the netting set with the counterparty. Both positive and negative market values are used in computing CMV.

Distributions

| 14. | ‘Distribution of Market Values’ means the forecast of the probability distribution of net market values of transactions within a netting set for some future date (the forecasting horizon), given the realised market value of those transactions up to the present time. |
| --- | --- |

14.

‘Distribution of Market Values’ means the forecast of the probability distribution of net market values of transactions within a netting set for some future date (the forecasting horizon), given the realised market value of those transactions up to the present time.

| 15. | ‘Distribution of Exposures’ means the forecast of the probability distribution of market values that is generated by setting forecast instances of negative net market values equal to zero. |
| --- | --- |

15.

‘Distribution of Exposures’ means the forecast of the probability distribution of market values that is generated by setting forecast instances of negative net market values equal to zero.

| 16. | ‘Risk-Neutral Distribution’ means a distribution of market values or exposures at a future time period where the distribution is calculated using market implied values such as implied volatilities. |
| --- | --- |

16.

‘Risk-Neutral Distribution’ means a distribution of market values or exposures at a future time period where the distribution is calculated using market implied values such as implied volatilities.

| 17. | ‘Actual Distribution’ means a distribution of market values or exposures at a future time period where the distribution is calculated using historic or realised values such as volatilities calculated using past price or rate changes. |
| --- | --- |

17.

‘Actual Distribution’ means a distribution of market values or exposures at a future time period where the distribution is calculated using historic or realised values such as volatilities calculated using past price or rate changes.

Exposure measures and adjustments

| 18. | ‘Current Exposure’ means the larger of zero or the market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy. |
| --- | --- |

18.

‘Current Exposure’ means the larger of zero or the market value of a transaction or portfolio of transactions within a netting set with a counterparty that would be lost upon the default of the counterparty, assuming no recovery on the value of those transactions in bankruptcy.

| 19. | ‘Peak Exposure’ means a high percentile of the distribution of exposures at any particular future date before the maturity date of the longest transaction in the netting set. |
| --- | --- |

19.

‘Peak Exposure’ means a high percentile of the distribution of exposures at any particular future date before the maturity date of the longest transaction in the netting set.

| 20. | ‘Expected Exposure (EE)’ means the average of the distribution of exposures at any particular future date before the longest maturity transaction in the netting set matures. |
| --- | --- |

20.

‘Expected Exposure (EE)’ means the average of the distribution of exposures at any particular future date before the longest maturity transaction in the netting set matures.

| 21. | ‘Effective Expected Exposure (Effective EE) at a specific date’ means the maximum expected exposure that occurs at that date or any prior date. Alternatively, it may be defined for a specific date as the greater of the expected exposure at that date, or the effective exposure at the previous date. |
| --- | --- |

21.

‘Effective Expected Exposure (Effective EE) at a specific date’ means the maximum expected exposure that occurs at that date or any prior date. Alternatively, it may be defined for a specific date as the greater of the expected exposure at that date, or the effective exposure at the previous date.

| 22. | ‘Expected Positive Exposure (EPE)’ means the weighted average over time of expected exposures where the weights are the proportion that an individual expected exposure represents of the entire time interval. When calculating the minimum capital requirement, the average is taken over the first year or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set. |
| --- | --- |

22.

‘Expected Positive Exposure (EPE)’ means the weighted average over time of expected exposures where the weights are the proportion that an individual expected exposure represents of the entire time interval. When calculating the minimum capital requirement, the average is taken over the first year or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set.

| 23. | ‘Effective Expected Positive Exposure (Effective EPE)’ means the weighted average over time of effective expected exposure over the first year, or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set, where the weights are the proportion that an individual expected exposure represents of the entire time interval. |
| --- | --- |

23.

‘Effective Expected Positive Exposure (Effective EPE)’ means the weighted average over time of effective expected exposure over the first year, or, if all the contracts within the netting set mature within less than one year, over the time period of the longest maturity contract in the netting set, where the weights are the proportion that an individual expected exposure represents of the entire time interval.

| 24. | ‘Credit Valuation Adjustment’ means an adjustment to the mid-market valuation of the portfolio of transactions with a counterparty. This adjustment reflects the market value of the credit risk due to any failure to perform on contractual agreements with a counterparty. This adjustment may reflect the market value of the credit risk of the counterparty or the market value of the credit risk of both the credit institution and the counterparty. |
| --- | --- |

24.

‘Credit Valuation Adjustment’ means an adjustment to the mid-market valuation of the portfolio of transactions with a counterparty. This adjustment reflects the market value of the credit risk due to any failure to perform on contractual agreements with a counterparty. This adjustment may reflect the market value of the credit risk of the counterparty or the market value of the credit risk of both the credit institution and the counterparty.

| 25. | ‘One-Sided Credit Valuation Adjustment’ means a credit valuation adjustment that reflects the market value of the credit risk of the counterparty to the credit institution, but does not reflect the market value of the credit risk of the credit institution to the counterparty. |
| --- | --- |

25.

‘One-Sided Credit Valuation Adjustment’ means a credit valuation adjustment that reflects the market value of the credit risk of the counterparty to the credit institution, but does not reflect the market value of the credit risk of the credit institution to the counterparty.

CCR related risks

| 26. | ‘Rollover Risk’ means the amount by which expected positive exposure is understated when future transactions with a counterpart are expected to be conducted on an ongoing basis. The additional exposure generated by those future transactions is not included in calculation of EPE. |
| --- | --- |

26.

‘Rollover Risk’ means the amount by which expected positive exposure is understated when future transactions with a counterpart are expected to be conducted on an ongoing basis. The additional exposure generated by those future transactions is not included in calculation of EPE.

| 27. | ‘General Wrong-Way Risk’ arises when the PD of counterparties is positively correlated with general market risk factors. |
| --- | --- |

27.

‘General Wrong-Way Risk’ arises when the PD of counterparties is positively correlated with general market risk factors.

| 28. | ‘Specific Wrong-Way Risk’ arises when the exposure to a particular counterparty is positively correlated with the PD of the counterparty due to the nature of the transactions with the counterparty. A credit institution shall be considered to be exposed to Specific Wrong-Way Risk if the future exposure to a specific counterparty is expected to be high when the counterparty's PD is also high. |
| --- | --- |

28.

‘Specific Wrong-Way Risk’ arises when the exposure to a particular counterparty is positively correlated with the PD of the counterparty due to the nature of the transactions with the counterparty. A credit institution shall be considered to be exposed to Specific Wrong-Way Risk if the future exposure to a specific counterparty is expected to be high when the counterparty's PD is also high.

Part 2: Choice of the method

| 1. | Subject to paragraphs 2 to 7, credit institutions shall determine the exposure value for the contracts listed in Annex IV with one of the methods set out in Parts 3 to 6. Credit institutions which are not eligible for the treatment set out in Article 18(2) of Directive 2006/.../EC are not permitted to use the method set out in Part 4. To determine the exposure value for the contracts listed in point 3 of Annex IV, credit institutions are not permitted to use the method set out in Part 4.
  The combined use of the methods set out in Parts 3 to 6 shall be permitted on a permanent basis within a group, but not within a single legal entity. Combined use of the methods set out in Parts 3 and 5 within a legal entity shall be permitted where one of the methods is used for the cases set out in Part 5, point 19. |
| --- | --- |

1.

Subject to paragraphs 2 to 7, credit institutions shall determine the exposure value for the contracts listed in Annex IV with one of the methods set out in Parts 3 to 6. Credit institutions which are not eligible for the treatment set out in Article 18(2) of Directive 2006/.../EC are not permitted to use the method set out in Part 4. To determine the exposure value for the contracts listed in point 3 of Annex IV, credit institutions are not permitted to use the method set out in Part 4.

The combined use of the methods set out in Parts 3 to 6 shall be permitted on a permanent basis within a group, but not within a single legal entity. Combined use of the methods set out in Parts 3 and 5 within a legal entity shall be permitted where one of the methods is used for the cases set out in Part 5, point 19.

| 2. | Subject to the approval of the competent authorities, credit institutions may determine the exposure value for:






  i) | the contracts listed in Annex IV, |
| --- | --- | --- |

2.

Subject to the approval of the competent authorities, credit institutions may determine the exposure value for:

i)

the contracts listed in Annex IV,

| ii) | repurchase transactions, |
| --- | --- |

ii)

repurchase transactions,

| iii) | securities or commodities lending or borrowing transactions, |
| --- | --- |

iii)

securities or commodities lending or borrowing transactions,

| iv) | margin lending transactions, and |
| --- | --- |

iv)

margin lending transactions, and

| v) | long settlement transactions |
| --- | --- |

v)

long settlement transactions

using the Internal Model Method as set out in Part 6.

| 3. | When a credit institution purchases credit derivative protection against a non-trading book exposure, or against a CCR exposure, it may compute its capital requirement for the hedged asset in accordance with Annex VIII, Part 3, points 83 to 92, or subject to the approval of the competent authorities, in accordance with Annex VII, Part 1, point 4 or Annex VII, Part 4, points 96 to 104. In these cases, the exposure value for CCR for these credit derivatives is set to zero. |
| --- | --- |

3.

When a credit institution purchases credit derivative protection against a non-trading book exposure, or against a CCR exposure, it may compute its capital requirement for the hedged asset in accordance with Annex VIII, Part 3, points 83 to 92, or subject to the approval of the competent authorities, in accordance with Annex VII, Part 1, point 4 or Annex VII, Part 4, points 96 to 104. In these cases, the exposure value for CCR for these credit derivatives is set to zero.

| 4. | The exposure value for CCR from sold credit default swaps in the non-trading book, where they are treated as credit protection provided by the credit institution and subject to a capital requirement for credit risk for the full notional amount, is set to zero. |
| --- | --- |

4.

The exposure value for CCR from sold credit default swaps in the non-trading book, where they are treated as credit protection provided by the credit institution and subject to a capital requirement for credit risk for the full notional amount, is set to zero.

| 5. | Under all methods set out in Parts 3 to 6, the exposure value for a given counterparty is equal to the sum of the exposure values calculated for each netting set with that counterparty. |
| --- | --- |

5.

Under all methods set out in Parts 3 to 6, the exposure value for a given counterparty is equal to the sum of the exposure values calculated for each netting set with that counterparty.

| 6. | An exposure value of zero for CCR can be attributed to derivative contracts, or repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions outstanding with a central counterparty and that have not been rejected by the central counterparty. Furthermore, an exposure value of zero can be attributed to credit risk exposures to central counterparties that result from the derivative contracts, repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions or other exposures, as determined by the competent authorities, that the credit institution has outstanding with the central counterparty. The central counterparty CCR exposures with all participants in its arrangements shall be fully collateralised on a daily basis. |
| --- | --- |

6.

An exposure value of zero for CCR can be attributed to derivative contracts, or repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions outstanding with a central counterparty and that have not been rejected by the central counterparty. Furthermore, an exposure value of zero can be attributed to credit risk exposures to central counterparties that result from the derivative contracts, repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions or other exposures, as determined by the competent authorities, that the credit institution has outstanding with the central counterparty. The central counterparty CCR exposures with all participants in its arrangements shall be fully collateralised on a daily basis.

| 7. | Exposures arising from long settlement transactions can be determined using any of the methods set out in Parts 3 to 6, regardless of the methods chosen for treating OTC derivatives and repurchase transactions, securities or commodities lending or borrowing transactions, and margin lending transactions. In calculating capital requirements for long settlement transactions, credit institutions that use the approach set out in Articles 84 to 89 may assign the risk weights under the approach set out in Articles 78 to 83 on a permanent basis and irrespective of the materiality of such positions. |
| --- | --- |

7.

Exposures arising from long settlement transactions can be determined using any of the methods set out in Parts 3 to 6, regardless of the methods chosen for treating OTC derivatives and repurchase transactions, securities or commodities lending or borrowing transactions, and margin lending transactions. In calculating capital requirements for long settlement transactions, credit institutions that use the approach set out in Articles 84 to 89 may assign the risk weights under the approach set out in Articles 78 to 83 on a permanent basis and irrespective of the materiality of such positions.

| 8. | For the methods set out in Parts 3 and 4 the competent authorities must ensure that the notional amount to be taken into account is an appropriate yardstick for the risk inherent in the contract. Where, for instance, the contract provides for a multiplication of cash flows, the notional amount must be adjusted in order to take into account the effects of the multiplication on the risk structure of that contract. |
| --- | --- |

8.

For the methods set out in Parts 3 and 4 the competent authorities must ensure that the notional amount to be taken into account is an appropriate yardstick for the risk inherent in the contract. Where, for instance, the contract provides for a multiplication of cash flows, the notional amount must be adjusted in order to take into account the effects of the multiplication on the risk structure of that contract.

Part 3: Mark-to-Market Method

Step (a): by attaching current market values to contracts (mark-to-market), the current replacement cost of all contracts with positive values is obtained.

Step (b): to obtain a figure for potential future credit exposure, except in the case of single-currency ‘floating/floating’ interest rate swaps in which only the current replacement cost will be calculated, the notional principal amounts or underlying values are multiplied by the percentages in Table 1:

For the purpose of calculating the potential future credit exposure in accordance with step (b) the competent authorities may allow credit institutions to apply the percentages in Table 2 instead of those prescribed in Table 1 provided that the institutions make use of the option set out in Annex IV, point 21 to Directive 2006/.../EC for contracts relating to commodities other than gold within the meaning of paragraph 3 of Annex IV, to this Directive:

Step (c): the sum of current replacement cost and potential future credit exposure is the exposure value.

Part 4: Original Exposure Method

Step (a): the notional principal amount of each instrument is multiplied by the percentages given in Table 3.

Step (b): the original exposure thus obtained shall be the exposure value.

Part 5: Standardised Method

| 1. | The Standardised Method (SM) can be used only for OTC derivatives and long settlement transactions. The exposure value shall be calculated separately for each netting set. It shall be determined net of collateral, as follows:
  exposure value =



  where:
  CMV= current market value of the portfolio of transactions within the netting set with a counterparty gross of collateral, that is, where:



  where:
  CMVi= the current market value of transaction i;
  CMC= the current market value of the collateral assigned to the netting set, that is, where:FOR-CE2006227EN.01023701.notes.0003.xml.jpgwhere CMCl = the current market value of collateral l;
  i= index designating transaction;
  l= index designating collateral;
  j= index designating hedging set category. These hedging sets correspond to risk factors for which risk positions of opposite sign can be offset to yield a net risk position on which the exposure measure is then based;
  RPTij= risk position from transaction i with respect to hedging set j;
  RPClj= risk position from collateral l with respect to hedging set j;
  CCRMj= CCR Multiplier set out in Table 5 with respect to hedging set j;
  β= 1.4.
  Collateral received from a counterparty has a positive sign and collateral posted to a counterparty has a negative sign.
  Collateral that is recognised for this method is confined to the collateral that is eligible under point 11 of Part 1 of Annex VIII to this Directive and point 9 of Annex II to Directive 2006/.../EC. |
| --- | --- |

1.

The Standardised Method (SM) can be used only for OTC derivatives and long settlement transactions. The exposure value shall be calculated separately for each netting set. It shall be determined net of collateral, as follows:

exposure value =

Formula

where:

CMV= current market value of the portfolio of transactions within the netting set with a counterparty gross of collateral, that is, where:

Formula

where:

CMVi= the current market value of transaction i;

CMC= the current market value of the collateral assigned to the netting set, that is, where:

where CMCl = the current market value of collateral l;

i= index designating transaction;

l= index designating collateral;

j= index designating hedging set category. These hedging sets correspond to risk factors for which risk positions of opposite sign can be offset to yield a net risk position on which the exposure measure is then based;

RPTij= risk position from transaction i with respect to hedging set j;

RPClj= risk position from collateral l with respect to hedging set j;

CCRMj= CCR Multiplier set out in Table 5 with respect to hedging set j;

β= 1.4.

Collateral received from a counterparty has a positive sign and collateral posted to a counterparty has a negative sign.

Collateral that is recognised for this method is confined to the collateral that is eligible under point 11 of Part 1 of Annex VIII to this Directive and point 9 of Annex II to Directive 2006/.../EC.

| 2. | When an OTC derivative transaction with a linear risk profile stipulates the exchange of a financial instrument for a payment, the payment Part is referred to as the payment leg. Transactions that stipulate the exchange of payment against payment consist of two payment legs. The payment legs consist of the contractually agreed gross payments, including the notional amount of the transaction. Credit institutions may disregard the interest rate risk from payment legs with a remaining maturity of less than one year for the purposes of the following calculations. Credit institutions may treat transactions that consist of two payment legs that are denominated in the same currency, such as interest rate swaps, as a single aggregate transaction. The treatment for payment legs applies to the aggregate transaction. |
| --- | --- |

2.

When an OTC derivative transaction with a linear risk profile stipulates the exchange of a financial instrument for a payment, the payment Part is referred to as the payment leg. Transactions that stipulate the exchange of payment against payment consist of two payment legs. The payment legs consist of the contractually agreed gross payments, including the notional amount of the transaction. Credit institutions may disregard the interest rate risk from payment legs with a remaining maturity of less than one year for the purposes of the following calculations. Credit institutions may treat transactions that consist of two payment legs that are denominated in the same currency, such as interest rate swaps, as a single aggregate transaction. The treatment for payment legs applies to the aggregate transaction.

| 3. | Transactions with a linear risk profile with equities (including equity indices), gold, other precious metals or other commodities as the underlying financial instruments are mapped to a risk position in the respective equity (or equity index) or commodity (including gold and other precious metals) and an interest rate risk position for the payment leg. If the payment leg is denominated in a foreign currency, it is additionally mapped to a risk position in the respective currency. |
| --- | --- |

3.

Transactions with a linear risk profile with equities (including equity indices), gold, other precious metals or other commodities as the underlying financial instruments are mapped to a risk position in the respective equity (or equity index) or commodity (including gold and other precious metals) and an interest rate risk position for the payment leg. If the payment leg is denominated in a foreign currency, it is additionally mapped to a risk position in the respective currency.

| 4. | Transactions with a linear risk profile with a debt instrument as the underlying instrument are mapped to an interest rate risk position for the debt instrument and another interest rate risk position for the payment leg. Transactions with a linear risk profile that stipulate the exchange of payment against payment, including foreign exchange forwards, are mapped to an interest rate risk position for each of the payment legs. If the underlying debt instrument is denominated in a foreign currency, the debt instrument is mapped to a risk position in this currency. If a payment leg is denominated in foreign currency, the payment leg is again mapped to a risk position in this currency. The exposure value assigned to a foreign exchange basis swap transaction is zero. |
| --- | --- |

4.

Transactions with a linear risk profile with a debt instrument as the underlying instrument are mapped to an interest rate risk position for the debt instrument and another interest rate risk position for the payment leg. Transactions with a linear risk profile that stipulate the exchange of payment against payment, including foreign exchange forwards, are mapped to an interest rate risk position for each of the payment legs. If the underlying debt instrument is denominated in a foreign currency, the debt instrument is mapped to a risk position in this currency. If a payment leg is denominated in foreign currency, the payment leg is again mapped to a risk position in this currency. The exposure value assigned to a foreign exchange basis swap transaction is zero.

| 5. | The size of a risk position from a transaction with linear risk profile is the effective notional value (market price multiplied by quantity) of the underlying financial instruments (including commodities) converted to the credit institution's domestic currency, except for debt instruments. |
| --- | --- |

5.

The size of a risk position from a transaction with linear risk profile is the effective notional value (market price multiplied by quantity) of the underlying financial instruments (including commodities) converted to the credit institution's domestic currency, except for debt instruments.

| 6. | For debt instruments and for payment legs, the size of the risk position is the effective notional value of the outstanding gross payments (including the notional amount) converted to the credit institution's domestic currency, multiplied by the modified duration of the debt instrument, or payment leg, respectively. |
| --- | --- |

6.

For debt instruments and for payment legs, the size of the risk position is the effective notional value of the outstanding gross payments (including the notional amount) converted to the credit institution's domestic currency, multiplied by the modified duration of the debt instrument, or payment leg, respectively.

| 7. | The size of a risk position from a credit default swap is the notional value of the reference debt instrument multiplied by the remaining maturity of the credit default swap. |
| --- | --- |

7.

The size of a risk position from a credit default swap is the notional value of the reference debt instrument multiplied by the remaining maturity of the credit default swap.

| 8. | The size of a risk position from an OTC derivative with a non-linear risk profile, including options and swaptions, is equal to the delta equivalent effective notional value of the financial instrument that underlies the transaction, except in the case of an underlying debt instrument. |
| --- | --- |

8.

The size of a risk position from an OTC derivative with a non-linear risk profile, including options and swaptions, is equal to the delta equivalent effective notional value of the financial instrument that underlies the transaction, except in the case of an underlying debt instrument.

| 9. | The size of a risk position from an OTC derivative with a non-linear risk profile, including options and swaptions, of which the underlying is a debt instrument or a payment leg, is equal to the delta equivalent effective notional value of the financial instrument or payment leg multiplied by the modified duration of the debt instrument, or payment leg, respectively. |
| --- | --- |

9.

The size of a risk position from an OTC derivative with a non-linear risk profile, including options and swaptions, of which the underlying is a debt instrument or a payment leg, is equal to the delta equivalent effective notional value of the financial instrument or payment leg multiplied by the modified duration of the debt instrument, or payment leg, respectively.

| 10. | For the determination of risk positions, collateral received from a counterparty is to be treated as a claim on the counterparty under a derivative contract (long position) that is due today, while collateral posted is to be treated like an obligation to the counterparty (short position) that is due today. |
| --- | --- |

10.

For the determination of risk positions, collateral received from a counterparty is to be treated as a claim on the counterparty under a derivative contract (long position) that is due today, while collateral posted is to be treated like an obligation to the counterparty (short position) that is due today.

| 11. | Credit institutions may use the following formulae to determine the size and sign of a risk position: | for all instruments other than debt instruments: |
| --- | --- | --- |

11.

Credit institutions may use the following formulae to determine the size and sign of a risk position:

for all instruments other than debt instruments:

| | effective notional value, or |
| --- | --- |

effective notional value, or

| | delta equivalent |
| --- | --- |

delta equivalent

| | notional value =

  where:
  Pref= price of the underlying instrument, expressed in the reference currency;
  V= value of the financial instrument (in the case of an option this is the option price and in the case of a transaction with a linear risk profile this is the value of the underlying instrument itself);
  p= price of the underlying instrument, expressed in the same currency as V;
  for debt instruments and the payment legs of all transactions:
  effective notional value multiplied by the modified duration, or
  delta equivalent in notional value multiplied by the modified duration



  where:
  V= value of the financial instrument (in the case of an option this is the option price and in the case of a transaction with a linear risk profile this is the value of the underlying instrument itself or of the payment leg, respectively);
  r= interest rate level.
  If V is denominated in a currency other than the reference currency, the derivative must be converted into the reference currency by multiplication with the relevant exchange rate. |
| --- | --- |

notional value = Formula

where:

Pref= price of the underlying instrument, expressed in the reference currency;

V= value of the financial instrument (in the case of an option this is the option price and in the case of a transaction with a linear risk profile this is the value of the underlying instrument itself);

p= price of the underlying instrument, expressed in the same currency as V;

for debt instruments and the payment legs of all transactions:

effective notional value multiplied by the modified duration, or

delta equivalent in notional value multiplied by the modified duration

Formula

where:

V= value of the financial instrument (in the case of an option this is the option price and in the case of a transaction with a linear risk profile this is the value of the underlying instrument itself or of the payment leg, respectively);

r= interest rate level.

If V is denominated in a currency other than the reference currency, the derivative must be converted into the reference currency by multiplication with the relevant exchange rate.

| 12. | The risk positions are to be grouped into hedging sets. For each hedging set, the absolute value amount of the sum of the resulting risk positions is computed. This sum is termed the ‘net risk position’ and is represented by:



  in the formulae set out in paragraph 1. |
| --- | --- |

12.

The risk positions are to be grouped into hedging sets. For each hedging set, the absolute value amount of the sum of the resulting risk positions is computed. This sum is termed the ‘net risk position’ and is represented by:

Formula

in the formulae set out in paragraph 1.

| 13. | For interest rate risk positions from money deposits received from the counterparty as collateral, from payment legs and from underlying debt instruments, to which according to Table 1 of Annex I to Directive 2006/.../EC a capital charge of 1,60% or less applies, there are six hedging sets for each currency, as set out in Table 4 below. Hedging sets are defined by a combination of the criteria ‘maturity’ and ‘referenced interest rates’.
  Table 4 | Government referenced interest rates | Non-government referenced interest rates |
| --- | --- | --- | --- |
| Maturity | ≤ 1 year | ≤ 1 year |
| Maturity | > 1 - ≤ 5 years | > 1 - ≤ 5 years |
| Maturity | > 5 years | > 5 years |

13.

For interest rate risk positions from money deposits received from the counterparty as collateral, from payment legs and from underlying debt instruments, to which according to Table 1 of Annex I to Directive 2006/.../EC a capital charge of 1,60% or less applies, there are six hedging sets for each currency, as set out in Table 4 below. Hedging sets are defined by a combination of the criteria ‘maturity’ and ‘referenced interest rates’.

Table 4

Government referenced interest rates

Non-government referenced interest rates

Maturity

≤ 1 year

≤ 1 year

Maturity

> 1 - ≤ 5 years

> 1 - ≤ 5 years

Maturity

> 5 years

> 5 years

| 14. | For interest rate risk positions from underlying debt instruments or payment legs for which the interest rate is linked to a reference interest rate that represents a general market interest level, the remaining maturity is the length of the time interval up to the next re-adjustment of the interest rate. In all other cases, it is the remaining life of the underlying debt instrument or in the case of a payment leg, the remaining life of the transaction. |
| --- | --- |

14.

For interest rate risk positions from underlying debt instruments or payment legs for which the interest rate is linked to a reference interest rate that represents a general market interest level, the remaining maturity is the length of the time interval up to the next re-adjustment of the interest rate. In all other cases, it is the remaining life of the underlying debt instrument or in the case of a payment leg, the remaining life of the transaction.

| 15. | There is one hedging set for each issuer of a reference debt instrument that underlies a credit default swap. |
| --- | --- |

15.

There is one hedging set for each issuer of a reference debt instrument that underlies a credit default swap.

| 16. | For interest rate risk positions from money deposits that are posted with a counterparty as collateral when that counterparty does not have debt obligations of low specific risk outstanding and from underlying debt instruments, to which according to Table 1 of Annex I to Directive 2006/.../EC a capital charge of more than 1,60% applies, there is one hedging set for each issuer. When a payment leg emulates such a debt instrument, there is also one hedging set for each issuer of the reference debt instrument. Credit institutions may assign risk positions that arise from debt instruments of a certain issuer, or from reference debt instruments of the same issuer that are emulated by payment legs, or that underlie a credit default swap, to the same hedging set. |
| --- | --- |

16.

For interest rate risk positions from money deposits that are posted with a counterparty as collateral when that counterparty does not have debt obligations of low specific risk outstanding and from underlying debt instruments, to which according to Table 1 of Annex I to Directive 2006/.../EC a capital charge of more than 1,60% applies, there is one hedging set for each issuer. When a payment leg emulates such a debt instrument, there is also one hedging set for each issuer of the reference debt instrument. Credit institutions may assign risk positions that arise from debt instruments of a certain issuer, or from reference debt instruments of the same issuer that are emulated by payment legs, or that underlie a credit default swap, to the same hedging set.

| 17. | Underlying financial instruments other than debt instruments shall be assigned to the same respective hedging sets only if they are identical or similar instruments. In all other cases they shall be assigned to separate hedging sets.
  The similarity of instruments is established as follows:






  — | for equities, similar instruments are those of the same issuer. An equity index is treated as a separate issuer; |
| --- | --- | --- |

17.

Underlying financial instruments other than debt instruments shall be assigned to the same respective hedging sets only if they are identical or similar instruments. In all other cases they shall be assigned to separate hedging sets.

The similarity of instruments is established as follows:

—

for equities, similar instruments are those of the same issuer. An equity index is treated as a separate issuer;

| — | for precious metals, similar instruments are those of the same metal. A precious metal index is treated as a separate precious metal; |
| --- | --- |

—

for precious metals, similar instruments are those of the same metal. A precious metal index is treated as a separate precious metal;

| — | for electric power, similar instruments are those delivery rights and obligations that refer to the same peak or off-peak load time interval within any 24-hour interval; and |
| --- | --- |

—

for electric power, similar instruments are those delivery rights and obligations that refer to the same peak or off-peak load time interval within any 24-hour interval; and

| — | for commodities, similar instruments are those of the same commodity. A commodity index is treated as a separate commodity. |
| --- | --- |

—

for commodities, similar instruments are those of the same commodity. A commodity index is treated as a separate commodity.

| 18. | The CCR multipliers (CCRM) for the different hedging set categories are set out in Table 5 below:
  Table 5







  Hedging set categories | CCRM |
| --- | --- | --- |
| 1. | Interest Rates | 0,2 % |
| 2. | Interest Rates for risk positions from a reference debt instrument that underlies a credit default swap and to which a capital charge of 1,60 %, or less, applies under Table 1 of Annex I to Directive 2006/.../EC | 0,3 % |
| 3. | Interest Rates for risk positions from a debt instrument or reference debt instrument to which a capital charge of more than 1,60 % applies under Table 1 of Annex I to Directive 2006/.../EC | 0,6 % |
| 4. | Exchange Rates | 2,5 % |
| 5. | Electric Power | 4 % |
| 6. | Gold | 5 % |
| 7. | Equity | 7 % |
| 8. | Precious Metals (except gold) | 8,5 % |
| 9. | Other Commodities (excluding precious metals and electricity power) | 10 % |
| 10. | Underlying instruments of OTC derivatives that are not in any of the above categories | 10 % |

18.

The CCR multipliers (CCRM) for the different hedging set categories are set out in Table 5 below:

Table 5

Hedging set categories

CCRM

1.

Interest Rates

0,2 %

2.

Interest Rates for risk positions from a reference debt instrument that underlies a credit default swap and to which a capital charge of 1,60 %, or less, applies under Table 1 of Annex I to Directive 2006/.../EC

0,3 %

3.

Interest Rates for risk positions from a debt instrument or reference debt instrument to which a capital charge of more than 1,60 % applies under Table 1 of Annex I to Directive 2006/.../EC

0,6 %

4.

Exchange Rates

2,5 %

5.

Electric Power

4 %

6.

Gold

5 %

7.

Equity

7 %

8.

Precious Metals (except gold)

8,5 %

9.

Other Commodities (excluding precious metals and electricity power)

10 %

10.

Underlying instruments of OTC derivatives that are not in any of the above categories

10 %

Underlying instruments of OTC derivatives, as referred to in point 10 of Table 5, shall be assigned to separate individual hedging sets for each category of underlying instrument.

| 19. | For transactions with a non-linear risk profile or for payment legs and transactions with debt instruments as underlying for which the credit institution cannot determine the delta or the modified duration, respectively, with an instrument model that the competent authority has approved for the purposes of determining the minimum capital requirements for market risk, the competent authority shall determine the size of the risk positions and the applicable CCRMjs conservatively. Alternatively, competent authorities may require the use of the method set out in Part 3. Netting shall not be recognised (that is, the exposure value shall be determined as if there were a netting set that comprises just the individual transaction). |
| --- | --- |

19.

For transactions with a non-linear risk profile or for payment legs and transactions with debt instruments as underlying for which the credit institution cannot determine the delta or the modified duration, respectively, with an instrument model that the competent authority has approved for the purposes of determining the minimum capital requirements for market risk, the competent authority shall determine the size of the risk positions and the applicable CCRMjs conservatively. Alternatively, competent authorities may require the use of the method set out in Part 3. Netting shall not be recognised (that is, the exposure value shall be determined as if there were a netting set that comprises just the individual transaction).

| 20. | A credit institution shall have internal procedures to verify that, prior to including a transaction in a hedging set, the transaction is covered by a legally enforceable netting contract that meets the requirements set out in Part 7. |
| --- | --- |

20.

A credit institution shall have internal procedures to verify that, prior to including a transaction in a hedging set, the transaction is covered by a legally enforceable netting contract that meets the requirements set out in Part 7.

| 21. | A credit institution that makes use of collateral to mitigate its CCR shall have internal procedures to verify that, prior to recognising the effect of collateral in its calculations, the collateral meets the legal certainty standards set out in Annex VIII. |
| --- | --- |

21.

A credit institution that makes use of collateral to mitigate its CCR shall have internal procedures to verify that, prior to recognising the effect of collateral in its calculations, the collateral meets the legal certainty standards set out in Annex VIII.

Part 6: Internal Model Method

| 1. | Subject to the approval of the competent authorities, a credit institution may use the Internal Model Method (IMM) to calculate the exposure value for the transactions in Part 2, paragraph 2(i), or for the transactions in Part 2, point 2(ii), (iii) and (iv), or for the transactions in Part 2, point 2(i) to (iv). In each of these cases the transactions in Part 2, point 2(v) may be included as well. Notwithstanding Part 2, point 1, second paragraph, credit institutions may choose not to apply this method to exposures that are immaterial in size and risk. To apply the IMM, a credit institution shall meet the requirements set out in this Part. |
| --- | --- |

1.

Subject to the approval of the competent authorities, a credit institution may use the Internal Model Method (IMM) to calculate the exposure value for the transactions in Part 2, paragraph 2(i), or for the transactions in Part 2, point 2(ii), (iii) and (iv), or for the transactions in Part 2, point 2(i) to (iv). In each of these cases the transactions in Part 2, point 2(v) may be included as well. Notwithstanding Part 2, point 1, second paragraph, credit institutions may choose not to apply this method to exposures that are immaterial in size and risk. To apply the IMM, a credit institution shall meet the requirements set out in this Part.

| 2. | Subject to the approval of the competent authorities, implementation of the IMM may be carried out sequentially across different transaction types, and during this period a credit institution may use the methods set out in Part 3 or Part 5. Notwithstanding the remainder of this Part, credit institutions shall not be required to use a specific type of model. |
| --- | --- |

2.

Subject to the approval of the competent authorities, implementation of the IMM may be carried out sequentially across different transaction types, and during this period a credit institution may use the methods set out in Part 3 or Part 5. Notwithstanding the remainder of this Part, credit institutions shall not be required to use a specific type of model.

| 3. | For all OTC derivative transactions and for long settlement transactions for which a credit institution has not received approval to use the IMM, the credit institution shall use the methods set out in Part 3 or Part 5. Combined use of these two methods is permitted on a permanent basis within a group. Combined use of these two methods within a legal entity is only permitted where one of the methods is used for the cases set out in Part 5, point 19. |
| --- | --- |

3.

For all OTC derivative transactions and for long settlement transactions for which a credit institution has not received approval to use the IMM, the credit institution shall use the methods set out in Part 3 or Part 5. Combined use of these two methods is permitted on a permanent basis within a group. Combined use of these two methods within a legal entity is only permitted where one of the methods is used for the cases set out in Part 5, point 19.

| 4. | Credit institutions which have obtained permission to use the IMM shall not revert to the use of the methods set out in Part 3 or Part 5 except for demonstrated good cause and subject to approval of the competent authorities. If a credit institution ceases to comply with the requirements set out in this Part, it shall either present to the competent authority a plan for a timely return to compliance or demonstrate that the effect of non-compliance is immaterial. |
| --- | --- |

4.

Credit institutions which have obtained permission to use the IMM shall not revert to the use of the methods set out in Part 3 or Part 5 except for demonstrated good cause and subject to approval of the competent authorities. If a credit institution ceases to comply with the requirements set out in this Part, it shall either present to the competent authority a plan for a timely return to compliance or demonstrate that the effect of non-compliance is immaterial.

Exposure value

| 5. | The exposure value shall be measured at the level of the netting set. The model shall specify the forecasting distribution for changes in the market value of the netting set attributable to changes in market variables, such as interest rates, foreign exchange rates. The model shall then compute the exposure value for the netting set at each future date given the changes in the market variables. For margined counterparties, the model may also capture future collateral movements. |
| --- | --- |

5.

The exposure value shall be measured at the level of the netting set. The model shall specify the forecasting distribution for changes in the market value of the netting set attributable to changes in market variables, such as interest rates, foreign exchange rates. The model shall then compute the exposure value for the netting set at each future date given the changes in the market variables. For margined counterparties, the model may also capture future collateral movements.

| 6. | Credit institutions may include eligible financial collateral as defined in point 11 of Part 1 of Annex VIII to this Directive and point 9 of Annex II to Directive 2006/.../EC in their forecasting distributions for changes in the market value of the netting set, if the quantitative, qualitative and data requirements for the IMM are met for the collateral. |
| --- | --- |

6.

Credit institutions may include eligible financial collateral as defined in point 11 of Part 1 of Annex VIII to this Directive and point 9 of Annex II to Directive 2006/.../EC in their forecasting distributions for changes in the market value of the netting set, if the quantitative, qualitative and data requirements for the IMM are met for the collateral.

| 7. | The exposure value shall be calculated as the product of α times Effective EPE, as follows:
  Exposure value = α × Effective EPE
  where:
  alpha (α) shall be 1.4, but competent authorities may require a higher α, and Effective EPE shall be computed by estimating expected exposure (EEt) as the average exposure at future date t, where the average is taken across possible future values of relevant market risk factors. The model estimates EE at a series of future dates t1, t2, t3, etc. |
| --- | --- |

7.

The exposure value shall be calculated as the product of α times Effective EPE, as follows:

Exposure value = α × Effective EPE

where:

alpha (α) shall be 1.4, but competent authorities may require a higher α, and Effective EPE shall be computed by estimating expected exposure (EEt) as the average exposure at future date t, where the average is taken across possible future values of relevant market risk factors. The model estimates EE at a series of future dates t1, t2, t3, etc.

| 8. | Effective EE shall be computed recursively as:
  Effective EEtk = max(Effective EEtk-1; EEtk)
  where:
  the current date is denoted as t0 and Effective EEt0 equals current exposure. |
| --- | --- |

8.

Effective EE shall be computed recursively as:

Effective EEtk = max(Effective EEtk-1; EEtk)

where:

the current date is denoted as t0 and Effective EEt0 equals current exposure.

| 9. | In this regard, Effective EPE is the average Effective EE during the first year of future exposure. If all contracts in the netting set mature within less than one year, EPE is the average of EE until all contracts in the netting set mature. Effective EPE is computed as a weighted average of Effective EE:



  where:
  the weights Δtk = tk - tk-1 allow for the case when future exposure is calculated at dates that are not equally spaced over time. |
| --- | --- |

9.

In this regard, Effective EPE is the average Effective EE during the first year of future exposure. If all contracts in the netting set mature within less than one year, EPE is the average of EE until all contracts in the netting set mature. Effective EPE is computed as a weighted average of Effective EE:

Formula

where:

the weights Δtk = tk - tk-1 allow for the case when future exposure is calculated at dates that are not equally spaced over time.

| 10. | EE or peak exposure measures shall be calculated based on a distribution of exposures that accounts for the possible non-normality of the distribution of exposures. |
| --- | --- |

10.

EE or peak exposure measures shall be calculated based on a distribution of exposures that accounts for the possible non-normality of the distribution of exposures.

| 11. | Credit institutions may use a measure that is more conservative than α multiplied by Effective EPE as calculated according to the equation above for every counterparty. |
| --- | --- |

11.

Credit institutions may use a measure that is more conservative than α multiplied by Effective EPE as calculated according to the equation above for every counterparty.

| 12. | Notwithstanding point 7, competent authorities may permit credit institutions to use their own estimates of α, subject to a floor of 1.2, where α shall equal the ratio of internal capital from a full simulation of CCR exposure across counterparties (numerator) and internal capital based on EPE (denominator). In the denominator, EPE shall be used as if it were a fixed outstanding amount. Credit institutions shall demonstrate that their internal estimates of α capture in the numerator material sources of stochastic dependency of distribution of market values of transactions or of portfolios of transactions across counterparties. Internal estimates of α shall take account of the granularity of portfolios. |
| --- | --- |

12.

Notwithstanding point 7, competent authorities may permit credit institutions to use their own estimates of α, subject to a floor of 1.2, where α shall equal the ratio of internal capital from a full simulation of CCR exposure across counterparties (numerator) and internal capital based on EPE (denominator). In the denominator, EPE shall be used as if it were a fixed outstanding amount. Credit institutions shall demonstrate that their internal estimates of α capture in the numerator material sources of stochastic dependency of distribution of market values of transactions or of portfolios of transactions across counterparties. Internal estimates of α shall take account of the granularity of portfolios.

| 13. | A credit institution shall ensure that the numerator and denominator of α are computed in a consistent fashion with respect to the modelling methodology, parameter specifications and portfolio composition. The approach used shall be based on the credit institution's internal capital approach, be well documented and be subject to independent validation. In addition, credit institutions shall review their estimates on at least a quarterly basis, and more frequently when the composition of the portfolio varies over time. Credit institutions shall also assess the model risk. |
| --- | --- |

13.

A credit institution shall ensure that the numerator and denominator of α are computed in a consistent fashion with respect to the modelling methodology, parameter specifications and portfolio composition. The approach used shall be based on the credit institution's internal capital approach, be well documented and be subject to independent validation. In addition, credit institutions shall review their estimates on at least a quarterly basis, and more frequently when the composition of the portfolio varies over time. Credit institutions shall also assess the model risk.

| 14. | Where appropriate, volatilities and correlations of market risk factors used in the joint simulation of market and credit risk should be conditioned on the credit risk factor to reflect potential increases in volatility or correlation in an economic downturn. |
| --- | --- |

14.

Where appropriate, volatilities and correlations of market risk factors used in the joint simulation of market and credit risk should be conditioned on the credit risk factor to reflect potential increases in volatility or correlation in an economic downturn.

| 15. | If the netting set is subject to a margin agreement, credit institutions shall use one of the following EPE measures:






  (a) | Effective EPE without taking into account the margin agreement; |
| --- | --- | --- |

15.

If the netting set is subject to a margin agreement, credit institutions shall use one of the following EPE measures:

(a)

Effective EPE without taking into account the margin agreement;

| b) | the threshold, if positive, under the margin agreement plus an add-on that reflects the potential increase in exposure over the margin period of risk. The add-on is computed as the expected increase in the netting set's exposure beginning from a current exposure of zero over the margin period of risk. A floor of five business days for netting sets consisting only of repo-style transactions subject to daily remargining and daily mark-to-market, and ten business days for all other netting sets is imposed on the margin period of risk used for this purpose; or |
| --- | --- |

b)

the threshold, if positive, under the margin agreement plus an add-on that reflects the potential increase in exposure over the margin period of risk. The add-on is computed as the expected increase in the netting set's exposure beginning from a current exposure of zero over the margin period of risk. A floor of five business days for netting sets consisting only of repo-style transactions subject to daily remargining and daily mark-to-market, and ten business days for all other netting sets is imposed on the margin period of risk used for this purpose; or

| c) | if the model captures the effects of margining when estimating EE, the model's EE measure may be used directly in the equation in point 8 subject to the approval of the competent authorities. |
| --- | --- |

c)

if the model captures the effects of margining when estimating EE, the model's EE measure may be used directly in the equation in point 8 subject to the approval of the competent authorities.

Minimum requirements for EPE models

| 16. | A credit institution's EPE model shall meet the operational requirements set out in points 17 to 41. |
| --- | --- |

16.

A credit institution's EPE model shall meet the operational requirements set out in points 17 to 41.

CCR control

| 17. | The credit institution shall have a control unit that is responsible for the design and implementation of its CCR management system, including the initial and on-going validation of the model. This unit shall control input data integrity and produce and analyse reports on the output of the credit institution's risk measurement model, including an evaluation of the relationship between measures of risk exposure and credit and trading limits. This unit shall be independent from units responsible for originating, renewing or trading exposures and free from undue influence; it shall be adequately staffed; it shall report directly to the senior management of the credit institution. The work of this unit shall be closely integrated into the day-to-day credit risk management process of the credit institution. Its output shall, accordingly, be an integral Part of the process of planning, monitoring and controlling the credit institution's credit and overall risk profile. |
| --- | --- |

17.

The credit institution shall have a control unit that is responsible for the design and implementation of its CCR management system, including the initial and on-going validation of the model. This unit shall control input data integrity and produce and analyse reports on the output of the credit institution's risk measurement model, including an evaluation of the relationship between measures of risk exposure and credit and trading limits. This unit shall be independent from units responsible for originating, renewing or trading exposures and free from undue influence; it shall be adequately staffed; it shall report directly to the senior management of the credit institution. The work of this unit shall be closely integrated into the day-to-day credit risk management process of the credit institution. Its output shall, accordingly, be an integral Part of the process of planning, monitoring and controlling the credit institution's credit and overall risk profile.

| 18. | A credit institution shall have CCR management policies, processes and systems that are conceptually sound and implemented with integrity. A sound CCR management framework shall include the identification, measurement, management, approval and internal reporting of CCR. |
| --- | --- |

18.

A credit institution shall have CCR management policies, processes and systems that are conceptually sound and implemented with integrity. A sound CCR management framework shall include the identification, measurement, management, approval and internal reporting of CCR.

| 19. | A credit institution's risk management policies shall take account of market, liquidity, and legal and operational risks that can be associated with CCR. The credit institution shall not undertake business with a counterparty without assessing its creditworthiness and shall take due account of settlement and pre-settlement credit risk. These risks shall be managed as comprehensively as practicable at the counterparty level (aggregating CCR exposures with other credit exposures) and at the firm-wide level. |
| --- | --- |

19.

A credit institution's risk management policies shall take account of market, liquidity, and legal and operational risks that can be associated with CCR. The credit institution shall not undertake business with a counterparty without assessing its creditworthiness and shall take due account of settlement and pre-settlement credit risk. These risks shall be managed as comprehensively as practicable at the counterparty level (aggregating CCR exposures with other credit exposures) and at the firm-wide level.

| 20. | A credit institution's board of directors and senior management shall be actively involved in the CCR control process and shall regard this as an essential aspect of the business to which significant resources need to be devoted. Senior management shall be aware of the limitations and assumptions of the model used and the impact these can have on the reliability of the output. Senior management shall also consider the uncertainties of the market environment and operational issues and be aware of how these are reflected in the model. |
| --- | --- |

20.

A credit institution's board of directors and senior management shall be actively involved in the CCR control process and shall regard this as an essential aspect of the business to which significant resources need to be devoted. Senior management shall be aware of the limitations and assumptions of the model used and the impact these can have on the reliability of the output. Senior management shall also consider the uncertainties of the market environment and operational issues and be aware of how these are reflected in the model.

| 21. | The daily reports prepared on a credit institution's exposures to CCR shall be reviewed by a level of management with sufficient seniority and authority to enforce both reductions of positions taken by individual credit managers or traders and reductions in the credit institution's overall CCR exposure. |
| --- | --- |

21.

The daily reports prepared on a credit institution's exposures to CCR shall be reviewed by a level of management with sufficient seniority and authority to enforce both reductions of positions taken by individual credit managers or traders and reductions in the credit institution's overall CCR exposure.

| 22. | A credit institution's CCR management system shall be used in conjunction with internal credit and trading limits. Credit and trading limits shall be related to the credit institution's risk measurement model in a manner that is consistent over time and that is well understood by credit managers, traders and senior management. |
| --- | --- |

22.

A credit institution's CCR management system shall be used in conjunction with internal credit and trading limits. Credit and trading limits shall be related to the credit institution's risk measurement model in a manner that is consistent over time and that is well understood by credit managers, traders and senior management.

| 23. | A credit institution's measurement of CCR shall include measuring daily and intra-day usage of credit lines. The credit institution shall measure current exposure gross and net of collateral. At portfolio and counterparty level, the credit institution shall calculate and monitor peak exposure or PFE at the confidence interval chosen by the credit institution. The credit institution shall take account of large or concentrated positions, including by groups of related counterparties, by industry, by market, etc. |
| --- | --- |

23.

A credit institution's measurement of CCR shall include measuring daily and intra-day usage of credit lines. The credit institution shall measure current exposure gross and net of collateral. At portfolio and counterparty level, the credit institution shall calculate and monitor peak exposure or PFE at the confidence interval chosen by the credit institution. The credit institution shall take account of large or concentrated positions, including by groups of related counterparties, by industry, by market, etc.

| 24. | A credit institution shall have a routine and rigorous program of stress testing in place as a supplement to the CCR analysis based on the day-to-day output of the credit institution's risk measurement model. The results of this stress testing shall be reviewed periodically by senior management and shall be reflected in the CCR policies and limits set by management and the board of directors. Where stress tests reveal particular vulnerability to a given set of circumstances, prompt steps shall be taken to manage those risks appropriately. |
| --- | --- |

24.

A credit institution shall have a routine and rigorous program of stress testing in place as a supplement to the CCR analysis based on the day-to-day output of the credit institution's risk measurement model. The results of this stress testing shall be reviewed periodically by senior management and shall be reflected in the CCR policies and limits set by management and the board of directors. Where stress tests reveal particular vulnerability to a given set of circumstances, prompt steps shall be taken to manage those risks appropriately.

| 25. | A credit institution shall have a routine in place for ensuring compliance with a documented set of internal policies, controls and procedures concerning the operation of the CCR management system. The credit institution's CCR management system shall be well documented and shall provide an explanation of the empirical techniques used to measure CCR. |
| --- | --- |

25.

A credit institution shall have a routine in place for ensuring compliance with a documented set of internal policies, controls and procedures concerning the operation of the CCR management system. The credit institution's CCR management system shall be well documented and shall provide an explanation of the empirical techniques used to measure CCR.

| 26. | A credit institution shall conduct an independent review of its CCR management system regularly through its own internal auditing process. This review shall include both the activities of the business units referred to in point 17 and of the independent CCR control unit. A review of the overall CCR management process shall take place at regular intervals and shall specifically address, at a minimum:






  a) | the adequacy of the documentation of the CCR management system and process; |
| --- | --- | --- |

26.

A credit institution shall conduct an independent review of its CCR management system regularly through its own internal auditing process. This review shall include both the activities of the business units referred to in point 17 and of the independent CCR control unit. A review of the overall CCR management process shall take place at regular intervals and shall specifically address, at a minimum:

a)

the adequacy of the documentation of the CCR management system and process;

| b) | the organisation of the CCR control unit; |
| --- | --- |

b)

the organisation of the CCR control unit;

| c) | the integration of CCR measures into daily risk management; |
| --- | --- |

c)

the integration of CCR measures into daily risk management;

| d) | the approval process for risk pricing models and valuation systems used by front and back-office personnel; |
| --- | --- |

d)

the approval process for risk pricing models and valuation systems used by front and back-office personnel;

| e) | the validation of any significant change in the CCR measurement process; |
| --- | --- |

e)

the validation of any significant change in the CCR measurement process;

| f) | the scope of CCR captured by the risk measurement model; |
| --- | --- |

f)

the scope of CCR captured by the risk measurement model;

| g) | the integrity of the management information system; |
| --- | --- |

g)

the integrity of the management information system;

| h) | th accuracy and completeness of CCR data; |
| --- | --- |

h)

th accuracy and completeness of CCR data;

| i) | the verification of the consistency, timeliness and reliability of data sources used to run models, including the independence of such data sources; |
| --- | --- |

i)

the verification of the consistency, timeliness and reliability of data sources used to run models, including the independence of such data sources;

| j) | the accuracy and appropriateness of volatility and correlation assumptions; |
| --- | --- |

j)

the accuracy and appropriateness of volatility and correlation assumptions;

| k) | the accuracy of valuation and risk transformation calculations; and |
| --- | --- |

k)

the accuracy of valuation and risk transformation calculations; and

| l) | the verification of the model's accuracy through frequent back-testing. |
| --- | --- |

l)

the verification of the model's accuracy through frequent back-testing.

Use test

| 27. | The distribution of exposures generated by the model used to calculate effective EPE shall be closely integrated into the day-to-day CCR management process of the credit institution. The model's output shall accordingly play an essential role in the credit approval, CCR management, internal capital allocation and corporate governance of the credit institution. |
| --- | --- |

27.

The distribution of exposures generated by the model used to calculate effective EPE shall be closely integrated into the day-to-day CCR management process of the credit institution. The model's output shall accordingly play an essential role in the credit approval, CCR management, internal capital allocation and corporate governance of the credit institution.

| 28. | A credit institution shall have a track record in the use of models that generate a distribution of exposures to CCR. Thus, the credit institution shall demonstrate that it has been using a model to calculate the distributions of exposures upon which the EPE calculation is based that meets, broadly, the minimum requirements set out in this Part for at least one year prior to approval by the competent authorities. |
| --- | --- |

28.

A credit institution shall have a track record in the use of models that generate a distribution of exposures to CCR. Thus, the credit institution shall demonstrate that it has been using a model to calculate the distributions of exposures upon which the EPE calculation is based that meets, broadly, the minimum requirements set out in this Part for at least one year prior to approval by the competent authorities.

| 29. | The model used to generate a distribution of exposures to CCR shall be Part of a CCR management framework that includes the identification, measurement, management, approval and internal reporting of CCR. This framework shall include the measurement of usage of credit lines (aggregating CCR exposures with other credit exposures) and internal capital allocation. In addition to EPE, a credit institution shall measure and manage current exposures. Where appropriate, the credit institution shall measure current exposure gross and net of collateral. The use test is satisfied if a credit institution uses other CCR measures, such as peak exposure or (PFE), based on the distribution of exposures generated by the same model to compute EPE. |
| --- | --- |

29.

The model used to generate a distribution of exposures to CCR shall be Part of a CCR management framework that includes the identification, measurement, management, approval and internal reporting of CCR. This framework shall include the measurement of usage of credit lines (aggregating CCR exposures with other credit exposures) and internal capital allocation. In addition to EPE, a credit institution shall measure and manage current exposures. Where appropriate, the credit institution shall measure current exposure gross and net of collateral. The use test is satisfied if a credit institution uses other CCR measures, such as peak exposure or (PFE), based on the distribution of exposures generated by the same model to compute EPE.

| 30. | A credit institution shall have the systems capability to estimate EE daily if necessary, unless it demonstrates to its competent authorities that its exposures to CCR warrant less frequent calculation. The credit institution shall compute EE along a time profile of forecasting horizons that adequately reflects the time structure of future cash flows and maturity of the contracts and in a manner that is consistent with the materiality and composition of the exposures. |
| --- | --- |

30.

A credit institution shall have the systems capability to estimate EE daily if necessary, unless it demonstrates to its competent authorities that its exposures to CCR warrant less frequent calculation. The credit institution shall compute EE along a time profile of forecasting horizons that adequately reflects the time structure of future cash flows and maturity of the contracts and in a manner that is consistent with the materiality and composition of the exposures.

| 31. | Exposure shall be measured, monitored and controlled over the life of all contracts in the netting set (not just to the one year horizon). The credit institution shall have procedures in place to identify and control the risks for counterparties where the exposure rises beyond the one-year horizon. The forecast increase in exposure shall be an input into the credit institution's internal capital model. |
| --- | --- |

31.

Exposure shall be measured, monitored and controlled over the life of all contracts in the netting set (not just to the one year horizon). The credit institution shall have procedures in place to identify and control the risks for counterparties where the exposure rises beyond the one-year horizon. The forecast increase in exposure shall be an input into the credit institution's internal capital model.

Stress testing

| 32. | A credit institution shall have in place sound stress testing processes for use in the assessment of capital adequacy for CCR. These stress measures shall be compared with the measure of EPE and considered by the credit institution as Part of the process set out in Article 123. Stress testing shall also involve identifying possible events or future changes in economic conditions that could have unfavourable effects on a credit institution's credit exposures and an assessment of the credit institution's ability to withstand such changes. |
| --- | --- |

32.

A credit institution shall have in place sound stress testing processes for use in the assessment of capital adequacy for CCR. These stress measures shall be compared with the measure of EPE and considered by the credit institution as Part of the process set out in Article 123. Stress testing shall also involve identifying possible events or future changes in economic conditions that could have unfavourable effects on a credit institution's credit exposures and an assessment of the credit institution's ability to withstand such changes.

| 33. | The credit institution shall stress test its CCR exposures, including jointly stressing market and credit risk factors. Stress tests of CCR shall consider concentration risk (to a single counterparty or groups of counterparties), correlation risk across market and credit risk, and the risk that liquidating the counterparty's positions could move the market. Stress tests shall also consider the impact on the credit institution's own positions of such market moves and integrate that impact in its assessment of CCR. |
| --- | --- |

33.

The credit institution shall stress test its CCR exposures, including jointly stressing market and credit risk factors. Stress tests of CCR shall consider concentration risk (to a single counterparty or groups of counterparties), correlation risk across market and credit risk, and the risk that liquidating the counterparty's positions could move the market. Stress tests shall also consider the impact on the credit institution's own positions of such market moves and integrate that impact in its assessment of CCR.

Wrong-Way Risk

| 34. | Credit institutions shall give due consideration to exposures that give rise to a significant degree of General Wrong-Way Risk. |
| --- | --- |

34.

Credit institutions shall give due consideration to exposures that give rise to a significant degree of General Wrong-Way Risk.

| 35. | Credit institutions shall have procedures in place to identify, monitor and control cases of Specific Wrong-Way Risk, beginning at the inception of a transaction and continuing through the life of the transaction. |
| --- | --- |

35.

Credit institutions shall have procedures in place to identify, monitor and control cases of Specific Wrong-Way Risk, beginning at the inception of a transaction and continuing through the life of the transaction.

Integrity of the modelling process

| 36. | The model shall reflect transaction terms and specifications in a timely, complete, and conservative fashion. Such terms shall include at least contract notional amounts, maturity, reference assets, margining arrangements, netting arrangements. The terms and specifications shall be maintained in a database that is subject to formal and periodic audit. The process for recognising netting arrangements shall require signoff by legal staff to verify the legal enforceability of netting and be input into the database by an independent unit. The transmission of transaction terms and specifications data to the model shall also be subject to internal audit and formal reconciliation processes shall be in place between the model and source data systems to verify on an ongoing basis that transaction terms and specifications are being reflected in EPE correctly or at least conservatively. |
| --- | --- |

36.

The model shall reflect transaction terms and specifications in a timely, complete, and conservative fashion. Such terms shall include at least contract notional amounts, maturity, reference assets, margining arrangements, netting arrangements. The terms and specifications shall be maintained in a database that is subject to formal and periodic audit. The process for recognising netting arrangements shall require signoff by legal staff to verify the legal enforceability of netting and be input into the database by an independent unit. The transmission of transaction terms and specifications data to the model shall also be subject to internal audit and formal reconciliation processes shall be in place between the model and source data systems to verify on an ongoing basis that transaction terms and specifications are being reflected in EPE correctly or at least conservatively.

| 37. | The model shall employ current market data to compute current exposures. When using historical data to estimate volatility and correlations, at least three years of historical data shall be used and shall be updated quarterly or more frequently if market conditions warrant. The data shall cover a full range of economic conditions, such as a full business cycle. A unit independent from the business unit shall validate the price supplied by the business unit. The data shall be acquired independently of the lines of business, fed into the model in a timely and complete fashion, and maintained in a database subject to formal and periodic audit. A credit institution shall also have a well-developed data integrity process to clean the data of erroneous and/or anomalous observations. To the extent that the model relies on proxy market data, including, for new products, where three years of historical data may not be available, internal policies shall identify suitable proxies and the credit institution shall demonstrate empirically that the proxy provides a conservative representation of the underlying risk under adverse market conditions. If the model includes the effect of collateral on changes in the market value of the netting set, the credit institution shall have adequate historical data to model the volatility of the collateral. |
| --- | --- |

37.

The model shall employ current market data to compute current exposures. When using historical data to estimate volatility and correlations, at least three years of historical data shall be used and shall be updated quarterly or more frequently if market conditions warrant. The data shall cover a full range of economic conditions, such as a full business cycle. A unit independent from the business unit shall validate the price supplied by the business unit. The data shall be acquired independently of the lines of business, fed into the model in a timely and complete fashion, and maintained in a database subject to formal and periodic audit. A credit institution shall also have a well-developed data integrity process to clean the data of erroneous and/or anomalous observations. To the extent that the model relies on proxy market data, including, for new products, where three years of historical data may not be available, internal policies shall identify suitable proxies and the credit institution shall demonstrate empirically that the proxy provides a conservative representation of the underlying risk under adverse market conditions. If the model includes the effect of collateral on changes in the market value of the netting set, the credit institution shall have adequate historical data to model the volatility of the collateral.

| 38. | The model shall be subject to a validation process. The process shall be clearly articulated in credit institutions' policies and procedures. The validation process shall specify the kind of testing needed to ensure model integrity and identify conditions under which assumptions are violated and may result in an understatement of EPE. The validation process shall include a review of the comprehensiveness of the model. |
| --- | --- |

38.

The model shall be subject to a validation process. The process shall be clearly articulated in credit institutions' policies and procedures. The validation process shall specify the kind of testing needed to ensure model integrity and identify conditions under which assumptions are violated and may result in an understatement of EPE. The validation process shall include a review of the comprehensiveness of the model.

| 39. | A credit institution shall monitor the appropriate risks and have processes in place to adjust its estimation of EPE when those risks become significant. This includes the following:






  a) | the credit institution shall identify and manage its exposures to specific wrong-way risk; |
| --- | --- | --- |

39.

A credit institution shall monitor the appropriate risks and have processes in place to adjust its estimation of EPE when those risks become significant. This includes the following:

a)

the credit institution shall identify and manage its exposures to specific wrong-way risk;

| b) | for exposures with a rising risk profile after one year, the credit institution shall compare on a regular basis the estimate of EPE over one year with EPE over the life of the exposure; and |
| --- | --- |

b)

for exposures with a rising risk profile after one year, the credit institution shall compare on a regular basis the estimate of EPE over one year with EPE over the life of the exposure; and

| c) | for exposures with a residual maturity below one year, the credit institution shall compare on a regular basis the replacement cost (current exposure) and the realised exposure profile, and/or store data that would allow such a comparison. |
| --- | --- |

c)

for exposures with a residual maturity below one year, the credit institution shall compare on a regular basis the replacement cost (current exposure) and the realised exposure profile, and/or store data that would allow such a comparison.

| 40. | A credit institution shall have internal procedures to verify that, prior to including a transaction in a netting set, the transaction is covered by a legally enforceable netting contract that meets the requirements set out in Part 7. |
| --- | --- |

40.

A credit institution shall have internal procedures to verify that, prior to including a transaction in a netting set, the transaction is covered by a legally enforceable netting contract that meets the requirements set out in Part 7.

| 41. | A credit institution that makes use of collateral to mitigate its CCR shall have internal procedures to verify that, prior to recognising the effect of collateral in its calculations, the collateral meets the legal certainty standards set out in Annex VIII.
  Validation requirements for EPE models |
| --- | --- |

41.

A credit institution that makes use of collateral to mitigate its CCR shall have internal procedures to verify that, prior to recognising the effect of collateral in its calculations, the collateral meets the legal certainty standards set out in Annex VIII.

Validation requirements for EPE models

| 42. | A credit institution's EPE model shall meet the following validation requirements:






  a) | the qualitative validation requirements set out in Annex V to Directive 2006/.../EC; |
| --- | --- | --- |

42.

A credit institution's EPE model shall meet the following validation requirements:

a)

the qualitative validation requirements set out in Annex V to Directive 2006/.../EC;

| b) | interest rates, foreign exchange rates, equity prices, commodities, and other market risk factors shall be forecast over long time horizons for measuring CCR exposure. The performance of the forecasting model for market risk factors shall be validated over a long time horizon; |
| --- | --- |

b)

interest rates, foreign exchange rates, equity prices, commodities, and other market risk factors shall be forecast over long time horizons for measuring CCR exposure. The performance of the forecasting model for market risk factors shall be validated over a long time horizon;

| c) | the pricing models used to calculate CCR exposure for a given scenario of future shocks to market risk factors shall be tested as Part of the model validation process. Pricing models for options shall account for the nonlinearity of option value with respect to market risk factors; |
| --- | --- |

c)

the pricing models used to calculate CCR exposure for a given scenario of future shocks to market risk factors shall be tested as Part of the model validation process. Pricing models for options shall account for the nonlinearity of option value with respect to market risk factors;

| d) | the EPE model shall capture transaction-specific information in order to aggregate exposures at the level of the netting set. A credit institution shall verify that transactions are assigned to the appropriate netting set within the model; |
| --- | --- |

d)

the EPE model shall capture transaction-specific information in order to aggregate exposures at the level of the netting set. A credit institution shall verify that transactions are assigned to the appropriate netting set within the model;

| e) | the EPE model shall also include transaction-specific information to capture the effects of margining. It shall take into account both the current amount of margin and margin that would be passed between counterparties in the future. Such a model shall account for the nature of margin agreements (unilateral or bilateral), the frequency of margin calls, the margin period of risk, the minimum threshold of unmargined exposure the credit institution is willing to accept, and the minimum transfer amount. Such a model shall either model the mark-to-market change in the value of collateral posted or apply the rules set out in Annex VIII; and |
| --- | --- |

e)

the EPE model shall also include transaction-specific information to capture the effects of margining. It shall take into account both the current amount of margin and margin that would be passed between counterparties in the future. Such a model shall account for the nature of margin agreements (unilateral or bilateral), the frequency of margin calls, the margin period of risk, the minimum threshold of unmargined exposure the credit institution is willing to accept, and the minimum transfer amount. Such a model shall either model the mark-to-market change in the value of collateral posted or apply the rules set out in Annex VIII; and

| f) | static, historical back-testing on representative counterparty portfolios shall be Part of the model validation process. At regular intervals, a credit institution shall conduct such back-testing on a number of representative counterparty portfolios (actual or hypothetical). These representative portfolios shall be chosen based on their sensitivity to the material risk factors and correlations to which the credit institution is exposed. |
| --- | --- |

f)

static, historical back-testing on representative counterparty portfolios shall be Part of the model validation process. At regular intervals, a credit institution shall conduct such back-testing on a number of representative counterparty portfolios (actual or hypothetical). These representative portfolios shall be chosen based on their sensitivity to the material risk factors and correlations to which the credit institution is exposed.

If back-testing indicates that the model is not sufficiently accurate, the competent authorities shall revoke the model approval or impose appropriate measures to ensure that the model is improved promptly. They may also require additional own funds to be held by credit institutions pursuant to Article 136.

Part 7: Contractual netting (contracts for novation and other netting agreements)

(a)   Types of netting that competent authorities may recognise

For the purpose of this Part, ‘counterparty’ means any entity (including natural persons) that has the power to conclude a contractual netting agreement and ‘contractual cross product netting agreement’ means a written bilateral agreement between a credit institution and a counterparty which creates a single legal obligation covering all included bilateral master agreements and transactions belonging to different product categories. Contractual cross product netting agreements do not cover netting other than on a bilateral basis.

For the purposes of cross product netting, the following are considered different product categories:

| i) | repurchase transactions, reverse repurchase transactions, securities and commodities lending and borrowing transactions, |
| --- | --- |

i)

repurchase transactions, reverse repurchase transactions, securities and commodities lending and borrowing transactions,

| ii) | margin lending transactions, and |
| --- | --- |

ii)

margin lending transactions, and

| iii) | the contracts listed in Annex IV. |
| --- | --- |

iii)

the contracts listed in Annex IV.

The competent authorities may recognise as risk-reducing the following types of contractual netting:

| i) | bilateral contracts for novation between a credit institution and its counterparty under which mutual claims and obligations are automatically amalgamated in such a way that this novation fixes one single net amount each time novation applies and thus creates a legally binding, single new contract extinguishing former contracts, |
| --- | --- |

i)

bilateral contracts for novation between a credit institution and its counterparty under which mutual claims and obligations are automatically amalgamated in such a way that this novation fixes one single net amount each time novation applies and thus creates a legally binding, single new contract extinguishing former contracts,

| ii) | other bilateral agreements between a credit institution and its counterparty, and |
| --- | --- |

ii)

other bilateral agreements between a credit institution and its counterparty, and

| iii) | contractual cross product netting agreements for credit institutions that have received approval by their competent authorities to use the method set out in Part 6, for transactions falling under the scope of that method. Netting across transactions entered by members of a group is not recognised for the purposes of calculating capital requirements. |
| --- | --- |

iii)

contractual cross product netting agreements for credit institutions that have received approval by their competent authorities to use the method set out in Part 6, for transactions falling under the scope of that method. Netting across transactions entered by members of a group is not recognised for the purposes of calculating capital requirements.

(b)   Conditions for recognition

The competent authorities may recognise contractual netting as risk-reducing only under the following conditions:

| i) | a credit institution must have a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the credit institution would have a claim to receive or an obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions, |
| --- | --- |

i)

a credit institution must have a contractual netting agreement with its counterparty which creates a single legal obligation, covering all included transactions, such that, in the event of a counterparty's failure to perform owing to default, bankruptcy, liquidation or any other similar circumstance, the credit institution would have a claim to receive or an obligation to pay only the net sum of the positive and negative mark-to-market values of included individual transactions,

| ii) | a credit institution must have made available to the competent authorities written and reasoned legal opinions to the effect that, in the event of a legal challenge, the relevant courts and administrative authorities would, in the cases described under (i), find that the credit institution's claims and obligations would be limited to the net sum, as described in (i), under:






  — | the law of the jurisdiction in which the counterparty is incorporated and, if a foreign branch of an undertaking is involved, also under the law of the jurisdiction in which the branch is located, |
| --- | --- | --- |

ii)

a credit institution must have made available to the competent authorities written and reasoned legal opinions to the effect that, in the event of a legal challenge, the relevant courts and administrative authorities would, in the cases described under (i), find that the credit institution's claims and obligations would be limited to the net sum, as described in (i), under:

—

the law of the jurisdiction in which the counterparty is incorporated and, if a foreign branch of an undertaking is involved, also under the law of the jurisdiction in which the branch is located,

| — | the law that governs the individual transactions included, and |
| --- | --- |

—

the law that governs the individual transactions included, and

| — | the law that governs any contract or agreement necessary to effect the contractual netting, |
| --- | --- |

—

the law that governs any contract or agreement necessary to effect the contractual netting,

| iii) | a credit institution must have procedures in place to ensure that the legal validity of its contractual netting is kept under review in the light of possible changes in the relevant laws, |
| --- | --- |

iii)

a credit institution must have procedures in place to ensure that the legal validity of its contractual netting is kept under review in the light of possible changes in the relevant laws,

| iv) | the credit institution maintains all required documentation in its files, |
| --- | --- |

iv)

the credit institution maintains all required documentation in its files,

| v) | the effects of netting shall be factored into the credit institution's measurement of each counterparty's aggregate credit risk exposure and the credit institution manages its CCR on such a basis, and |
| --- | --- |

v)

the effects of netting shall be factored into the credit institution's measurement of each counterparty's aggregate credit risk exposure and the credit institution manages its CCR on such a basis, and

| vi) | credit risk to each counterparty is aggregated to arrive at a single legal exposure across transactions. This aggregation shall be factored into credit limit purposes and internal capital purposes. |
| --- | --- |

vi)

credit risk to each counterparty is aggregated to arrive at a single legal exposure across transactions. This aggregation shall be factored into credit limit purposes and internal capital purposes.

The competent authorities must be satisfied, if necessary after consulting the other competent authorities concerned, that the contractual netting is legally valid under the law of each of the relevant jurisdictions. If any of the competent authorities are not satisfied in that respect, the contractual netting agreement will not be recognised as risk-reducing for either of the counterparties.

The competent authorities may accept reasoned legal opinions drawn up by types of contractual netting.

No contract containing a provision which permits a non-defaulting counterparty to make limited payments only, or no payments at all, to the estate of the defaulter, even if the defaulter is a net creditor (a ‘walkaway’ clause), may be recognised as risk-reducing.

In addition, for contractual cross-product netting agreements the following criteria shall be met:

| a) | the net sum referred to in subpoint (b)(i) of this Part shall be the net sum of the positive and negative close out values of any included individual bilateral master agreement and of the positive and negative mark-to-market value of the individual transactions (the ‘Cross-Product Net Amount’); |
| --- | --- |

a)

the net sum referred to in subpoint (b)(i) of this Part shall be the net sum of the positive and negative close out values of any included individual bilateral master agreement and of the positive and negative mark-to-market value of the individual transactions (the ‘Cross-Product Net Amount’);

| b) | the written and reasoned legal opinions referred to in subpoint (b)(ii) of this Part shall address the validity and enforceability of the entire contractual cross-product netting agreement under its terms and the impact of the netting arrangement on the material provisions of any included individual bilateral master agreement. A legal opinion shall be generally recognised as such by the legal community in the Member State in which the credit institution is authorised or a memorandum of law that addresses all relevant issues in a reasoned manner; |
| --- | --- |

b)

the written and reasoned legal opinions referred to in subpoint (b)(ii) of this Part shall address the validity and enforceability of the entire contractual cross-product netting agreement under its terms and the impact of the netting arrangement on the material provisions of any included individual bilateral master agreement. A legal opinion shall be generally recognised as such by the legal community in the Member State in which the credit institution is authorised or a memorandum of law that addresses all relevant issues in a reasoned manner;

| c) | the credit institution shall have procedures in place under subpoint (b)(iii) of this Part to verify that any transaction which is to be included in a netting set is covered by a legal opinion; and |
| --- | --- |

c)

the credit institution shall have procedures in place under subpoint (b)(iii) of this Part to verify that any transaction which is to be included in a netting set is covered by a legal opinion; and

| d) | taking into account the contractual cross product netting agreement, the credit institution shall continue to comply with the requirements for the recognition of bilateral netting and the requirements of Articles 90 to 93 for the recognition of credit risk mitigation, as applicable, with respect to each included individual bilateral master agreement and transaction. |
| --- | --- |

d)

taking into account the contractual cross product netting agreement, the credit institution shall continue to comply with the requirements for the recognition of bilateral netting and the requirements of Articles 90 to 93 for the recognition of credit risk mitigation, as applicable, with respect to each included individual bilateral master agreement and transaction.

(c)   Effects of recognition

Netting for the purposes of Parts 5 and 6 shall be recognised as set out therein.

(i)   Contracts for novation

The single net amounts fixed by contracts for novation, rather than the gross amounts involved, may be weighted. Thus, in the application of Part 3, in:

| — | step (a): the current replacement cost, and in |
| --- | --- |

—

step (a): the current replacement cost, and in

| — | step (b): the notional principal amounts or underlying values |
| --- | --- |

—

step (b): the notional principal amounts or underlying values

may be obtained taking account of the contract for novation. In the application of Part 4, in step (a) the notional principal amount may be calculated taking account of the contract for novation; the percentages of Table 3 must apply.

(ii)   Other netting agreements

In application of Part 3:

| — | in step (a) the current replacement cost for the contracts included in a netting agreement may be obtained by taking account of the actual hypothetical net replacement cost which results from the agreement; in the case where netting leads to a net obligation for the credit institution calculating the net replacement cost, the current replacement cost is calculated as ‘0’, and |
| --- | --- |

—

in step (a) the current replacement cost for the contracts included in a netting agreement may be obtained by taking account of the actual hypothetical net replacement cost which results from the agreement; in the case where netting leads to a net obligation for the credit institution calculating the net replacement cost, the current replacement cost is calculated as ‘0’, and

| — | in step (b) the figure for potential future credit exposure for all contracts included in a netting agreement may be reduced according to the following formula:
  PCEred = 0,4 * PCEgross + 0,6 * NGR * PCEgross









  where: |
| --- | --- |
| — | PCEred | = | the reduced figure for potential future credit exposure for all contracts with a given counterparty included in a legally valid bilateral netting agreement |
| — | PCEgross | = | the sum of the figures for potential future credit exposure for all contracts with a given counterparty which are included in a legally valid bilateral netting agreement and are calculated by multiplying their notional principal amounts by the percentages set out in Table 1 |
| — | NGR | = | ‘net-to-gross ratio’: at the discretion of the competent authorities either:






  (i) | separate calculation: the quotient of the net replacement cost for all contracts included in a legally valid bilateral netting agreement with a given counterparty (numerator) and the gross replacement cost for all contracts included in a legally valid bilateral netting agreement with that counterparty (denominator), or |

—

in step (b) the figure for potential future credit exposure for all contracts included in a netting agreement may be reduced according to the following formula:

PCEred = 0,4 * PCEgross + 0,6 * NGR * PCEgross

where:

—

PCEred

=

the reduced figure for potential future credit exposure for all contracts with a given counterparty included in a legally valid bilateral netting agreement

—

PCEgross

=

the sum of the figures for potential future credit exposure for all contracts with a given counterparty which are included in a legally valid bilateral netting agreement and are calculated by multiplying their notional principal amounts by the percentages set out in Table 1

—

NGR

=

‘net-to-gross ratio’: at the discretion of the competent authorities either:

(i)

separate calculation: the quotient of the net replacement cost for all contracts included in a legally valid bilateral netting agreement with a given counterparty (numerator) and the gross replacement cost for all contracts included in a legally valid bilateral netting agreement with that counterparty (denominator), or

| (ii) | aggregate calculation: the quotient of the sum of the net replacement cost calculated on a bilateral basis for all counterparties taking into account the contracts included in legally valid netting agreements (numerator) and the gross replacement cost for all contracts included in legally valid netting agreements (denominator). |
| --- | --- |

(ii)

aggregate calculation: the quotient of the sum of the net replacement cost calculated on a bilateral basis for all counterparties taking into account the contracts included in legally valid netting agreements (numerator) and the gross replacement cost for all contracts included in legally valid netting agreements (denominator).

If Member States permit credit institutions a choice of methods, the method chosen is to be used consistently.

For the calculation of the potential future credit exposure according to the above formula perfectly matching contracts included in the netting agreement may be taken into account as a single contract with a notional principal equivalent to the net receipts. Perfectly matching contracts are forward foreign-exchange contracts or similar contracts in which a notional principal is equivalent to cash flows if the cash flows fall due on the same value date and fully or partly in the same currency.

In the application of Part 4, in step (a)

| — | perfectly matching contracts included in the netting agreement may be taken into account as a single contract with a notional principal equivalent to the net receipts, the notional principal amounts are multiplied by the percentages given in Table 3, and |
| --- | --- |

—

perfectly matching contracts included in the netting agreement may be taken into account as a single contract with a notional principal equivalent to the net receipts, the notional principal amounts are multiplied by the percentages given in Table 3, and

| — | for all other contracts included in a netting agreement, the percentages applicable may be reduced as indicated in Table 6:
  Table 6







  Original maturity (5) | Interest-rate contracts | Foreign-exchange contracts |
| --- | --- | --- | --- |
| One year or less | 0,35 % | 1,50 % |
| More than one year but not more than two years | 0,75 % | 3,75 % |
| Additional allowance for each additional year | 0,75 % | 2,25 % |

—

for all other contracts included in a netting agreement, the percentages applicable may be reduced as indicated in Table 6:

Table 6

Original maturity (5)

Interest-rate contracts

Foreign-exchange contracts

One year or less

0,35 %

1,50 %

More than one year but not more than two years

0,75 %

3,75 %

Additional allowance for each additional year

0,75 %

2,25 %

---

(1)  Contracts which do not fall within one of the five categories indicated in this table shall be treated as contracts concerning commodities other than precious metals.

(2)  For contracts with multiple exchanges of principal, the percentages have to be multiplied by the number of remaining payments still to be made according to the contract.

(3)  For contracts that are structured to settle outstanding exposure following specified payment dates and where the terms are reset such that the market value of the contract is zero on these specified dates, the residual maturity would be equal to the time until the next reset date. In the case of interest-rate contracts that meet these criteria and have a remaining maturity of over one year, the percentage shall be no lower than 0,5 %.

(4)  In the case of interest-rate contracts, credit institutions may, subject to the consent of their competent authorities, choose either original or residual maturity.

(5)  In the case of interest-rate contracts, credit institutions may, subject to the consent of their competent authorities, choose either original or residual maturity.

ANNEX IV

TYPES OF DERIVATIVES

| 1. | Interest-rate contracts:






  (a) | single-currency interest rate swaps; |
| --- | --- | --- |

1.

Interest-rate contracts:

(a)

single-currency interest rate swaps;

| (b) | basis-swaps; |
| --- | --- |

(b)

basis-swaps;

| (c) | forward rate agreements; |
| --- | --- |

(c)

forward rate agreements;

| (d) | interest-rate futures; |
| --- | --- |

(d)

interest-rate futures;

| (e) | interest-rate options purchased; and |
| --- | --- |

(e)

interest-rate options purchased; and

| (f) | other contracts of similar nature. |
| --- | --- |

(f)

other contracts of similar nature.

| 2. | Foreign-exchange contracts and contracts concerning gold:






  (a) | cross-currency interest-rate swaps; |
| --- | --- | --- |

2.

Foreign-exchange contracts and contracts concerning gold:

(a)

cross-currency interest-rate swaps;

| (b) | forward foreign-exchange contracts; |
| --- | --- |

(b)

forward foreign-exchange contracts;

| (c) | currency futures; |
| --- | --- |

(c)

currency futures;

| (d) | currency options purchased; |
| --- | --- |

(d)

currency options purchased;

| (e) | other contracts of a similar nature; and |
| --- | --- |

(e)

other contracts of a similar nature; and

| (f) | contracts concerning gold of a nature similar to (a) to (e). |
| --- | --- |

(f)

contracts concerning gold of a nature similar to (a) to (e).

| 3. | Contracts of a nature similar to those in points 1(a) to (e) and 2(a) to (d) concerning other reference items or indices. This includes as a minimum all instruments specified in points 4 to 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC not otherwise included in points 1 or 2. |
| --- | --- |

3.

Contracts of a nature similar to those in points 1(a) to (e) and 2(a) to (d) concerning other reference items or indices. This includes as a minimum all instruments specified in points 4 to 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC not otherwise included in points 1 or 2.

ANNEX V

TECHNICAL CRITERIA CONCERNING THE ORGANISATION AND TREATMENT OF RISKS

1.   GOVERNANCE

| 1. | Arrangements shall be defined by the management body described in Article 11 concerning the segregation of duties in the organisation and the prevention of conflicts of interest. |
| --- | --- |

1.

Arrangements shall be defined by the management body described in Article 11 concerning the segregation of duties in the organisation and the prevention of conflicts of interest.

2.   TREATMENT OF RISKS

| 2. | The management body described in Article 11 shall approve and periodically review the strategies and policies for taking up, managing, monitoring and mitigating the risks the credit institution is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle. |
| --- | --- |

2.

The management body described in Article 11 shall approve and periodically review the strategies and policies for taking up, managing, monitoring and mitigating the risks the credit institution is or might be exposed to, including those posed by the macroeconomic environment in which it operates in relation to the status of the business cycle.

3.   CREDIT AND COUNTERPARTY RISK

| 3. | Credit-granting shall be based on sound and well-defined criteria. The process for approving, amending, renewing, and re-financing credits shall be clearly established. |
| --- | --- |

3.

Credit-granting shall be based on sound and well-defined criteria. The process for approving, amending, renewing, and re-financing credits shall be clearly established.

| 4. | The ongoing administration and monitoring of their various credit risk-bearing portfolios and exposures, including for identifying and managing problem credits and for making adequate value adjustments and provisions, shall be operated through effective systems. |
| --- | --- |

4.

The ongoing administration and monitoring of their various credit risk-bearing portfolios and exposures, including for identifying and managing problem credits and for making adequate value adjustments and provisions, shall be operated through effective systems.

| 5. | Diversification of credit portfolios shall be adequate given the credit institution's target markets and overall credit strategy. |
| --- | --- |

5.

Diversification of credit portfolios shall be adequate given the credit institution's target markets and overall credit strategy.

4.   RESIDUAL RISK

| 6. | The risk that recognised credit risk mitigation techniques used by the credit institution prove less effective than expected shall be addressed and controlled by means of written policies and procedures. |
| --- | --- |

6.

The risk that recognised credit risk mitigation techniques used by the credit institution prove less effective than expected shall be addressed and controlled by means of written policies and procedures.

5.   CONCENTRATION RISK

| 7. | The concentration risk arising from exposures to counterparties, groups of connected counterparties, and counterparties in the same economic sector, geographic region or from the same activity or commodity, the application of credit risk mitigation techniques, and including in particular risks associated with large indirect credit exposures (e.g. to a single collateral issuer), shall be addressed and controlled by means of written policies and procedures. |
| --- | --- |

7.

The concentration risk arising from exposures to counterparties, groups of connected counterparties, and counterparties in the same economic sector, geographic region or from the same activity or commodity, the application of credit risk mitigation techniques, and including in particular risks associated with large indirect credit exposures (e.g. to a single collateral issuer), shall be addressed and controlled by means of written policies and procedures.

6.   SECURITISATION RISK

| 8. | The risks arising from securitisation transactions in relation to which the credit institutions are originator or sponsor shall be evaluated and addressed through appropriate policies and procedures, to ensure in particular that the economic substance of the transaction is fully reflected in the risk assessment and management decisions. |
| --- | --- |

8.

The risks arising from securitisation transactions in relation to which the credit institutions are originator or sponsor shall be evaluated and addressed through appropriate policies and procedures, to ensure in particular that the economic substance of the transaction is fully reflected in the risk assessment and management decisions.

| 9. | Liquidity plans to address the implications of both scheduled and early amortization shall exist at credit institutions which are originators of revolving securitisation transactions involving early amortisation provisions. |
| --- | --- |

9.

Liquidity plans to address the implications of both scheduled and early amortization shall exist at credit institutions which are originators of revolving securitisation transactions involving early amortisation provisions.

7.   MARKET RISK

| 10. | Policies and processes for the measurement and management of all material sources and effects of market risks shall be implemented. |
| --- | --- |

10.

Policies and processes for the measurement and management of all material sources and effects of market risks shall be implemented.

8.   INTEREST RATE RISK ARISING FROM NON-TRADING ACTIVITIES

| 11. | Systems shall be implemented to evaluate and manage the risk arising from potential changes in interest rates as they affect a credit institution's non-trading activities. |
| --- | --- |

11.

Systems shall be implemented to evaluate and manage the risk arising from potential changes in interest rates as they affect a credit institution's non-trading activities.

9.   OPERATIONAL RISK

| 12. | Policies and processes to evaluate and manage the exposure to operational risk, including to low-frequency high-severity events, shall be implemented. Without prejudice to the definition laid down in Article 4(22), credit institutions shall articulate what constitutes operational risk for the purposes of those policies and procedures. |
| --- | --- |

12.

Policies and processes to evaluate and manage the exposure to operational risk, including to low-frequency high-severity events, shall be implemented. Without prejudice to the definition laid down in Article 4(22), credit institutions shall articulate what constitutes operational risk for the purposes of those policies and procedures.

| 13. | Contingency and business continuity plans shall be in place to ensure a credit institution's ability to operate on an ongoing basis and limit losses in the event of severe business disruption. |
| --- | --- |

13.

Contingency and business continuity plans shall be in place to ensure a credit institution's ability to operate on an ongoing basis and limit losses in the event of severe business disruption.

10.   LIQUIDITY RISK

| 14. | Policies and processes for the measurement and management of their net funding position and requirements on an ongoing and forward-looking basis shall exist. Alternative scenarios shall be considered and the assumptions underpinning decisions concerning the net funding position shall be reviewed regularly. |
| --- | --- |

14.

Policies and processes for the measurement and management of their net funding position and requirements on an ongoing and forward-looking basis shall exist. Alternative scenarios shall be considered and the assumptions underpinning decisions concerning the net funding position shall be reviewed regularly.

| 15. | Contingency plans to deal with liquidity crises shall be in place. |
| --- | --- |

15.

Contingency plans to deal with liquidity crises shall be in place.

ANNEX VI

STANDARDISED APPROACH

Part 1 — Risk weights

1.   EXPOSURES TO CENTRAL GOVERNMENTS OR CENTRAL BANKS

1.1.   Treatment

| 1. | Without prejudice to points 2 to 7, exposures to central governments and central banks shall be assigned a 100 % risk weight. |
| --- | --- |

1.

Without prejudice to points 2 to 7, exposures to central governments and central banks shall be assigned a 100 % risk weight.

| 2. | Subject to point 3, exposures to central governments and central banks for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 1 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale. |
| --- | --- |

2.

Subject to point 3, exposures to central governments and central banks for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 1 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.

Table 1

| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 0 % | 20 % | 50 % | 100 % | 100 % | 150 % |

Credit quality step

1

2

3

4

5

6

Risk weight

0 %

20 %

50 %

100 %

100 %

150 %

| 3. | Exposures to the European Central Bank shall be assigned a 0 % risk weight. |
| --- | --- |

3.

Exposures to the European Central Bank shall be assigned a 0 % risk weight.

1.2.   Exposures in the national currency of the borrower

| 4. | Exposures to Member States' central governments and central banks denominated and funded in the domestic currency of that central government and central bank shall be assigned a risk weight of 0 %. |
| --- | --- |

4.

Exposures to Member States' central governments and central banks denominated and funded in the domestic currency of that central government and central bank shall be assigned a risk weight of 0 %.

| 5. | When the competent authorities of a third country which apply supervisory and regulatory arrangements at least equivalent to those applied in the Community assign a risk weight which is lower than that indicated in point 1 to 2 to exposures to their central government and central bank denominated and funded in the domestic currency, Member States may allow their credit institutions to risk weight such exposures in the same manner. |
| --- | --- |

5.

When the competent authorities of a third country which apply supervisory and regulatory arrangements at least equivalent to those applied in the Community assign a risk weight which is lower than that indicated in point 1 to 2 to exposures to their central government and central bank denominated and funded in the domestic currency, Member States may allow their credit institutions to risk weight such exposures in the same manner.

1.3.   Use of credit assessments by Export Credit Agencies

| 6. | Export Credit Agency credit assessments shall be recognised by the competent authorities if either of the following conditions is met:






  a) | it is a consensus risk score from Export Credit Agencies participating in the OECD ‘Arrangement on Guidelines for Officially Supported Export Credits’; or |
| --- | --- | --- |

6.

Export Credit Agency credit assessments shall be recognised by the competent authorities if either of the following conditions is met:

a)

it is a consensus risk score from Export Credit Agencies participating in the OECD ‘Arrangement on Guidelines for Officially Supported Export Credits’; or

| b) | the Export Credit Agency publishes its credit assessments, and the Export Credit Agency subscribes to the OECD agreed methodology, and the credit assessment is associated with one of the eight minimum export insurance premiums (MEIP) that the OECD agreed methodology establishes. |
| --- | --- |

b)

the Export Credit Agency publishes its credit assessments, and the Export Credit Agency subscribes to the OECD agreed methodology, and the credit assessment is associated with one of the eight minimum export insurance premiums (MEIP) that the OECD agreed methodology establishes.

| 7. | Exposures for which a credit assessment by an Export Credit Agency is recognised for risk weighting purposes shall be assigned a risk weight according to Table 2. |
| --- | --- |

7.

Exposures for which a credit assessment by an Export Credit Agency is recognised for risk weighting purposes shall be assigned a risk weight according to Table 2.

Table 2

| MEIP | 0 | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 0 % | 0 % | 20 % | 50 % | 100 % | 100 % | 100 % | 150 % |

MEIP

0

1

2

3

4

5

6

7

Risk weight

0 %

0 %

20 %

50 %

100 %

100 %

100 %

150 %

2.   EXPOSURES TO REGIONAL GOVERNMENTS OR LOCAL AUTHORITIES

| 8. | Without prejudice to points 9 to 11, exposures to regional governments and local authorities shall be risk weighted as exposures to institutions. This treatment is independent of the exercise of discretion as specified in Article 80(3). The preferential treatment for short-term exposures specified in points 31, 32 and 37 shall not be applied. |
| --- | --- |

8.

Without prejudice to points 9 to 11, exposures to regional governments and local authorities shall be risk weighted as exposures to institutions. This treatment is independent of the exercise of discretion as specified in Article 80(3). The preferential treatment for short-term exposures specified in points 31, 32 and 37 shall not be applied.

| 9. | Exposures to regional governments and local authorities shall be treated as exposures to the central government in whose jurisdiction they are established where there is no difference in risk between such exposures because of the specific revenue-raising powers of the former, and the existence of specific institutional arrangements the effect of which is to reduce their risk of default.
  Competent authorities shall draw up and make public the list of the regional governments and local authorities to be risk-weighted like central governments. |
| --- | --- |

9.

Exposures to regional governments and local authorities shall be treated as exposures to the central government in whose jurisdiction they are established where there is no difference in risk between such exposures because of the specific revenue-raising powers of the former, and the existence of specific institutional arrangements the effect of which is to reduce their risk of default.

Competent authorities shall draw up and make public the list of the regional governments and local authorities to be risk-weighted like central governments.

| 10. | Exposures to churches and religious communities constituted in the form of a legal person under public law shall, in so far as they raise taxes in accordance with legislation conferring on them the right to do so, be treated as exposures to regional governments and local authorities, except that point 9 shall not apply. In this case for the purposes of Article 89(1)(a), permission to apply Title V, Chapter 2, Section 3, subsection 1 shall not be excluded. |
| --- | --- |

10.

Exposures to churches and religious communities constituted in the form of a legal person under public law shall, in so far as they raise taxes in accordance with legislation conferring on them the right to do so, be treated as exposures to regional governments and local authorities, except that point 9 shall not apply. In this case for the purposes of Article 89(1)(a), permission to apply Title V, Chapter 2, Section 3, subsection 1 shall not be excluded.

| 11. | When competent authorities of a third country jurisdiction which apply supervisory and regulatory arrangements at least equivalent to those applied in the Community treat exposures to regional governments and local authorities as exposures to their central government, Member States may allow their credit institutions to risk weight exposures to such regional governments and local authorities in the same manner. |
| --- | --- |

11.

When competent authorities of a third country jurisdiction which apply supervisory and regulatory arrangements at least equivalent to those applied in the Community treat exposures to regional governments and local authorities as exposures to their central government, Member States may allow their credit institutions to risk weight exposures to such regional governments and local authorities in the same manner.

3.   EXPOSURES TO ADMINISTRATIVE BODIES AND NON-COMMERCIAL UNDERTAKINGS

3.1.   Treatment

| 12. | Without prejudice to points 13 to 17, exposures to administrative bodies and non-commercial undertakings shall be assigned a 100 % risk weight. |
| --- | --- |

12.

Without prejudice to points 13 to 17, exposures to administrative bodies and non-commercial undertakings shall be assigned a 100 % risk weight.

3.2.   Public Sector Entities

| 13. | Without prejudice to points 14 to 17, exposures to public sector entities shall be assigned a 100 % risk weight. |
| --- | --- |

13.

Without prejudice to points 14 to 17, exposures to public sector entities shall be assigned a 100 % risk weight.

| 14. | Subject to the discretion of competent authorities, exposures to public sector entities may be treated as exposures to institutions. Exercise of this discretion by competent authorities is independent of the exercise of discretion as specified in Article 80(3). The preferential treatment for short-term exposures specified in points 31, 32 and 37 shall not be applied. |
| --- | --- |

14.

Subject to the discretion of competent authorities, exposures to public sector entities may be treated as exposures to institutions. Exercise of this discretion by competent authorities is independent of the exercise of discretion as specified in Article 80(3). The preferential treatment for short-term exposures specified in points 31, 32 and 37 shall not be applied.

| 15. | In exceptional circumstances, exposures to public-sector entities may be treated as exposures to the central government in whose jurisdiction they are established where in the opinion of the competent authorities there is no difference in risk between such exposures because of the existence of an appropriate guarantee by the central government. |
| --- | --- |

15.

In exceptional circumstances, exposures to public-sector entities may be treated as exposures to the central government in whose jurisdiction they are established where in the opinion of the competent authorities there is no difference in risk between such exposures because of the existence of an appropriate guarantee by the central government.

| 16. | When the discretion to treat exposures to public-sector entities as exposures to institutions or as exposures to the central government in whose jurisdiction they are established is exercised by the competent authorities of one Member State, the competent authorities of another Member State shall allow their credit institutions to risk-weight exposures to such public-sector entities in the same manner. |
| --- | --- |

16.

When the discretion to treat exposures to public-sector entities as exposures to institutions or as exposures to the central government in whose jurisdiction they are established is exercised by the competent authorities of one Member State, the competent authorities of another Member State shall allow their credit institutions to risk-weight exposures to such public-sector entities in the same manner.

| 17. | When competent authorities of a third country jurisdiction, which apply supervisory and regulatory arrangements at least equivalent to those applied in the Community, treat exposures to public sector entities as exposures to institutions, Member States may allow their credit institutions to risk weight exposures to such public sector entities in the same manner. |
| --- | --- |

17.

When competent authorities of a third country jurisdiction, which apply supervisory and regulatory arrangements at least equivalent to those applied in the Community, treat exposures to public sector entities as exposures to institutions, Member States may allow their credit institutions to risk weight exposures to such public sector entities in the same manner.

4.   EXPOSURES TO MULTILATERAL DEVELOPMENT BANKS

4.1.   Scope

| 18. | For the purposes of Articles 78 to 83, the Inter-American Investment Corporation, the Black Sea Trade and Development Bank and the Central American Bank for Economic Integration are considered to be Multilateral Development Banks (MDB). |
| --- | --- |

18.

For the purposes of Articles 78 to 83, the Inter-American Investment Corporation, the Black Sea Trade and Development Bank and the Central American Bank for Economic Integration are considered to be Multilateral Development Banks (MDB).

4.2.   Treatment

| 19. | Without prejudice to points 20 and 21, exposures to multilateral development banks shall be treated in the same manner as exposures to institutions in accordance with points 29 to 32. The preferential treatment for short-term exposures as specified in points 31, 32 and 37 shall not apply. |
| --- | --- |

19.

Without prejudice to points 20 and 21, exposures to multilateral development banks shall be treated in the same manner as exposures to institutions in accordance with points 29 to 32. The preferential treatment for short-term exposures as specified in points 31, 32 and 37 shall not apply.

| 20. | Exposures to the following multilateral development banks shall be assigned a 0 % risk weight:






  a) | the International Bank for Reconstruction and Development; |
| --- | --- | --- |

20.

Exposures to the following multilateral development banks shall be assigned a 0 % risk weight:

a)

the International Bank for Reconstruction and Development;

| b) | the International Finance Corporation; |
| --- | --- |

b)

the International Finance Corporation;

| c) | the Inter-American Development Bank; |
| --- | --- |

c)

the Inter-American Development Bank;

| d) | the Asian Development Bank; |
| --- | --- |

d)

the Asian Development Bank;

| e) | the African Development Bank; |
| --- | --- |

e)

the African Development Bank;

| f) | the Council of Europe Development Bank |
| --- | --- |

f)

the Council of Europe Development Bank

| g) | the Nordic Investment Bank; |
| --- | --- |

g)

the Nordic Investment Bank;

| h) | the Caribbean Development Bank; |
| --- | --- |

h)

the Caribbean Development Bank;

| i) | the European Bank for Reconstruction and Development; |
| --- | --- |

i)

the European Bank for Reconstruction and Development;

| j) | the European Investment Bank; |
| --- | --- |

j)

the European Investment Bank;

| k) | the European Investment Fund; and |
| --- | --- |

k)

the European Investment Fund; and

| l) | the Multilateral Investment Guarantee Agency. |
| --- | --- |

l)

the Multilateral Investment Guarantee Agency.

| 21. | A risk weight of 20 % shall be assigned to the portion of unpaid capital subscribed to the European Investment Fund. |
| --- | --- |

21.

A risk weight of 20 % shall be assigned to the portion of unpaid capital subscribed to the European Investment Fund.

5.   EXPOSURES TO INTERNATIONAL ORGANISATIONS

| 22. | Exposures to the following international organisations shall be assigned a 0 % risk weight:






  a) | the European Community; |
| --- | --- | --- |

22.

Exposures to the following international organisations shall be assigned a 0 % risk weight:

a)

the European Community;

| b) | the International Monetary Fund; |
| --- | --- |

b)

the International Monetary Fund;

| c) | the Bank for International Settlements. |
| --- | --- |

c)

the Bank for International Settlements.

6.   EXPOSURES TO INSTITUTIONS

6.1.   Treatment

| 23. | One of the two methods described in points 26 to 27 and 29 to 32 shall apply in determining the risk weights for exposures to institutions. |
| --- | --- |

23.

One of the two methods described in points 26 to 27 and 29 to 32 shall apply in determining the risk weights for exposures to institutions.

| 24. | Without prejudice to the other provisions of points 23 to 39, exposures to financial institutions authorised and supervised by the competent authorities responsible for the authorisation and supervision of credit institutions and subject to prudential requirements equivalent to those applied to credit institutions shall be risk-weighted as exposures to institutions. |
| --- | --- |

24.

Without prejudice to the other provisions of points 23 to 39, exposures to financial institutions authorised and supervised by the competent authorities responsible for the authorisation and supervision of credit institutions and subject to prudential requirements equivalent to those applied to credit institutions shall be risk-weighted as exposures to institutions.

6.2.   Risk-weight floor on exposures to unrated institutions

| 25. | Exposures to an unrated institution shall not be assigned a risk weight lower than that applied to exposures to its central government. |
| --- | --- |

25.

Exposures to an unrated institution shall not be assigned a risk weight lower than that applied to exposures to its central government.

6.3.   Central government risk weight based method

| 26. | Exposures to institutions shall be assigned a risk weight according to the credit quality step to which exposures to the central government of the jurisdiction in which the institution is incorporated are assigned in accordance with Table 3. |
| --- | --- |

26.

Exposures to institutions shall be assigned a risk weight according to the credit quality step to which exposures to the central government of the jurisdiction in which the institution is incorporated are assigned in accordance with Table 3.

Table 3

| Credit quality step to which central government is assigned | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight of exposure | 20 % | 50 % | 100 % | 100 % | 100 % | 150 % |

Credit quality step to which central government is assigned

1

2

3

4

5

6

Risk weight of exposure

20 %

50 %

100 %

100 %

100 %

150 %

| 27. | For exposures to institutions incorporated in countries where the central government is unrated, the risk weight shall be not more than 100 %. |
| --- | --- |

27.

For exposures to institutions incorporated in countries where the central government is unrated, the risk weight shall be not more than 100 %.

| 28. | For exposures to institutions with an original effective maturity of three months or less, the risk weight shall be 20 %. |
| --- | --- |

28.

For exposures to institutions with an original effective maturity of three months or less, the risk weight shall be 20 %.

6.4.   Credit assessment based method

| 29. | Exposures to institutions with an original effective maturity of more than three months for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 4 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale. |
| --- | --- |

29.

Exposures to institutions with an original effective maturity of more than three months for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 4 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.

Table 4

| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 20 % | 50 % | 50 % | 100 % | 100 % | 150 % |

Credit quality step

1

2

3

4

5

6

Risk weight

20 %

50 %

50 %

100 %

100 %

150 %

| 30. | Exposures to unrated institutions shall be assigned a risk weight of 50 %. |
| --- | --- |

30.

Exposures to unrated institutions shall be assigned a risk weight of 50 %.

| 31. | Exposures to an institution with an original effective maturity of three months or less for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 5 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale: |
| --- | --- |

31.

Exposures to an institution with an original effective maturity of three months or less for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 5 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale:

Table 5

| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 20 % | 20 % | 20 % | 50 % | 50 % | 150 % |

Credit quality step

1

2

3

4

5

6

Risk weight

20 %

20 %

20 %

50 %

50 %

150 %

| 32. | Exposures to unrated institutions having an original effective maturity of three months or less shall be assigned a 20 % risk weight. |
| --- | --- |

32.

Exposures to unrated institutions having an original effective maturity of three months or less shall be assigned a 20 % risk weight.

6.5.   Interaction with short-term credit assessments

| 33. | If the method specified in points 29 to 32 is applied to exposures to institutions, then the interaction with specific short-term assessments shall be as follows. |
| --- | --- |

33.

If the method specified in points 29 to 32 is applied to exposures to institutions, then the interaction with specific short-term assessments shall be as follows.

| 34. | If there is no short-term exposure assessment, the general preferential treatment for short-term exposures as specified in point 31 shall apply to all exposures to institutions of up to three months residual maturity. |
| --- | --- |

34.

If there is no short-term exposure assessment, the general preferential treatment for short-term exposures as specified in point 31 shall apply to all exposures to institutions of up to three months residual maturity.

| 35. | If there is a short-term assessment and such an assessment determines the application of a more favourable or identical risk weight than the use of the general preferential treatment for short-term exposures, as specified in point 31, then the short-term assessment shall be used for that specific exposure only. Other short-term exposures shall follow the general preferential treatment for short-term exposures, as specified in point 31. |
| --- | --- |

35.

If there is a short-term assessment and such an assessment determines the application of a more favourable or identical risk weight than the use of the general preferential treatment for short-term exposures, as specified in point 31, then the short-term assessment shall be used for that specific exposure only. Other short-term exposures shall follow the general preferential treatment for short-term exposures, as specified in point 31.

| 36. | If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in point 31, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment. |
| --- | --- |

36.

If there is a short-term assessment and such an assessment determines a less favourable risk weight than the use of the general preferential treatment for short-term exposures, as specified in point 31, then the general preferential treatment for short-term exposures shall not be used and all unrated short-term claims shall be assigned the same risk weight as that applied by the specific short-term assessment.

6.6.   Short-term exposures in the national currency of the borrower

| 37. | Exposures to institutions of a residual maturity of 3 months or less denominated and funded in the national currency may, subject to the discretion of the competent authority, be assigned, under both methods described in points 26 to 27 and 29 to 32, a risk weight that is one category less favourable than the preferential risk weight, as described in points 4 and 5, assigned to exposures to its central government. |
| --- | --- |

37.

Exposures to institutions of a residual maturity of 3 months or less denominated and funded in the national currency may, subject to the discretion of the competent authority, be assigned, under both methods described in points 26 to 27 and 29 to 32, a risk weight that is one category less favourable than the preferential risk weight, as described in points 4 and 5, assigned to exposures to its central government.

| 38. | No exposures of a residual maturity of 3 months or less denominated and funded in the national currency of the borrower shall be assigned a risk weight less than 20 %. |
| --- | --- |

38.

No exposures of a residual maturity of 3 months or less denominated and funded in the national currency of the borrower shall be assigned a risk weight less than 20 %.

6.7   Investments in regulatory capital instruments

| 39. | Investments in equity or regulatory capital instruments issued by institutions shall be risk weighted at 100 %, unless deducted from the own funds. |
| --- | --- |

39.

Investments in equity or regulatory capital instruments issued by institutions shall be risk weighted at 100 %, unless deducted from the own funds.

6.8   Minimum reserves required by the ECB

| 40. | Where an exposure to an institution is in the form of minimum reserves required by the ECB or by the central bank of a Member State to be held by the credit institution, Member States may permit the assignment of the risk weight that would be assigned to exposures to the central bank of the Member State in question provided:






  a) | the reserves are held in accordance with Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves (1) or a subsequent replacement regulation or in accordance with national requirements in all material respects equivalent to that Regulation; and |
| --- | --- | --- |

40.

Where an exposure to an institution is in the form of minimum reserves required by the ECB or by the central bank of a Member State to be held by the credit institution, Member States may permit the assignment of the risk weight that would be assigned to exposures to the central bank of the Member State in question provided:

a)

the reserves are held in accordance with Regulation (EC) No 1745/2003 of the European Central Bank of 12 September 2003 on the application of minimum reserves (1) or a subsequent replacement regulation or in accordance with national requirements in all material respects equivalent to that Regulation; and

| b) | in the event of the bankruptcy or insolvency of the institution where the reserves are held, the reserves are fully repaid to the credit institution in a timely manner and are not made available to meet other liabilities of the institution. |
| --- | --- |

b)

in the event of the bankruptcy or insolvency of the institution where the reserves are held, the reserves are fully repaid to the credit institution in a timely manner and are not made available to meet other liabilities of the institution.

7.   EXPOSURES TO CORPORATES

7.1.   Treatment

| 41. | Exposures for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 6 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale. |
| --- | --- |

41.

Exposures for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 6 in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.

Table 6

| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 20 % | 50 % | 100 % | 100 % | 150 % | 150 % |

Credit quality step

1

2

3

4

5

6

Risk weight

20 %

50 %

100 %

100 %

150 %

150 %

| 42. | Exposures for which such a credit assessment is not available shall be assigned a 100 % risk weight or the risk weight of its central government, whichever is the higher. |
| --- | --- |

42.

Exposures for which such a credit assessment is not available shall be assigned a 100 % risk weight or the risk weight of its central government, whichever is the higher.

8.   RETAIL EXPOSURES

| 43. | Exposures that comply with the criteria listed in Article 79(2) shall be assigned a risk weight of 75 %. |
| --- | --- |

43.

Exposures that comply with the criteria listed in Article 79(2) shall be assigned a risk weight of 75 %.

9.   EXPOSURES SECURED BY REAL ESTATE PROPERTY

| 44. | Without prejudice to points 45 to 60, exposures fully secured by real estate property shall be assigned a risk weight of 100 %. |
| --- | --- |

44.

Without prejudice to points 45 to 60, exposures fully secured by real estate property shall be assigned a risk weight of 100 %.

9.1.   Exposures secured by mortgages on residential property

| 45. | Exposures or any part of an exposure fully and completely secured, to the satisfaction of the competent authorities, by mortgages on residential property which is or shall be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, shall be assigned a risk weight of 35 %. |
| --- | --- |

45.

Exposures or any part of an exposure fully and completely secured, to the satisfaction of the competent authorities, by mortgages on residential property which is or shall be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, shall be assigned a risk weight of 35 %.

| 46. | Exposures fully and completely secured, to the satisfaction of the competent authorities, by shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of residential property which is or shall be occupied or let by the owner shall be assigned a risk weight of 35 %. |
| --- | --- |

46.

Exposures fully and completely secured, to the satisfaction of the competent authorities, by shares in Finnish residential housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of residential property which is or shall be occupied or let by the owner shall be assigned a risk weight of 35 %.

| 47. | Exposures to a tenant under a property leasing transaction concerning residential property under which the credit institution is the lessor and the tenant has an option to purchase, shall be assigned a risk weight of 35 % provided that the competent authorities are satisfied that the exposure of the credit institution is fully and completely secured by its ownership of the property. |
| --- | --- |

47.

Exposures to a tenant under a property leasing transaction concerning residential property under which the credit institution is the lessor and the tenant has an option to purchase, shall be assigned a risk weight of 35 % provided that the competent authorities are satisfied that the exposure of the credit institution is fully and completely secured by its ownership of the property.

| 48. | In the exercise of their judgement for the purposes of points 45 to 47, competent authorities shall be satisfied only if the following conditions are met:






  a) | the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower; |
| --- | --- | --- |

48.

In the exercise of their judgement for the purposes of points 45 to 47, competent authorities shall be satisfied only if the following conditions are met:

a)

the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower;

| b) | the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral; |
| --- | --- |

b)

the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral;

| c) | the minimum requirements set out in Annex VIII, Part 2, point 8 and the valuation rules set out in Annex VIII, Part 3, points 62 to 65 are met; and |
| --- | --- |

c)

the minimum requirements set out in Annex VIII, Part 2, point 8 and the valuation rules set out in Annex VIII, Part 3, points 62 to 65 are met; and

| d) | the value of the property exceeds the exposures by a substantial margin. |
| --- | --- |

d)

the value of the property exceeds the exposures by a substantial margin.

| 49. | Competent authorities may dispense with the condition contained in point 48(b) for exposures fully and completely secured by mortgages on residential property which is situated within their territory, if they have evidence that a well-developed and long-established residential real estate market is present in their territory with loss rates which are sufficiently low to justify such treatment. |
| --- | --- |

49.

Competent authorities may dispense with the condition contained in point 48(b) for exposures fully and completely secured by mortgages on residential property which is situated within their territory, if they have evidence that a well-developed and long-established residential real estate market is present in their territory with loss rates which are sufficiently low to justify such treatment.

| 50. | When the discretion contained in point 49 is exercised by the competent authorities of a Member State, the competent authorities of another Member State may allow their credit institutions to assign a risk weight of 35 % to such exposures fully and completely secured by mortgages on residential property. |
| --- | --- |

50.

When the discretion contained in point 49 is exercised by the competent authorities of a Member State, the competent authorities of another Member State may allow their credit institutions to assign a risk weight of 35 % to such exposures fully and completely secured by mortgages on residential property.

9.2.   Exposures secured by mortgages on commercial real estate

| 51. | Subject to the discretion of the competent authorities, exposures or any part of an exposure fully and completely secured, to the satisfaction of the competent authorities, by mortgages on offices or other commercial premises situated within their territory may be assigned a risk weight of 50 %. |
| --- | --- |

51.

Subject to the discretion of the competent authorities, exposures or any part of an exposure fully and completely secured, to the satisfaction of the competent authorities, by mortgages on offices or other commercial premises situated within their territory may be assigned a risk weight of 50 %.

| 52. | Subject to the discretion of the competent authorities, exposures fully and completely secured, to the satisfaction of the competent authorities, by shares in Finnish housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of offices or other commercial premises may be assigned a risk weight of 50 %. |
| --- | --- |

52.

Subject to the discretion of the competent authorities, exposures fully and completely secured, to the satisfaction of the competent authorities, by shares in Finnish housing companies, operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation, in respect of offices or other commercial premises may be assigned a risk weight of 50 %.

| 53. | Subject to the discretion of the competent authorities, exposures related to property leasing transactions concerning offices or other commercial premises situated in their territories under which the credit institution is the lessor and the tenant has an option to purchase may be assigned a risk weight of 50 % provided that the exposure of the credit institution is fully and completely secured to the satisfaction of the competent authorities by its ownership of the property. |
| --- | --- |

53.

Subject to the discretion of the competent authorities, exposures related to property leasing transactions concerning offices or other commercial premises situated in their territories under which the credit institution is the lessor and the tenant has an option to purchase may be assigned a risk weight of 50 % provided that the exposure of the credit institution is fully and completely secured to the satisfaction of the competent authorities by its ownership of the property.

| 54. | The application of points 51 to 53 is subject to the following conditions:






  a) | the value of the property must not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower; |
| --- | --- | --- |

54.

The application of points 51 to 53 is subject to the following conditions:

a)

the value of the property must not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower;

| b) | the risk of the borrower must not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility must not materially depend on any cash flow generated by the underlying property serving as collateral; and |
| --- | --- |

b)

the risk of the borrower must not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility must not materially depend on any cash flow generated by the underlying property serving as collateral; and

| c) | the minimum requirements set out in Annex VIII, Part 2, point 8, and the valuation rules set out in Annex VIII, Part 3, points 62 to 65 are met. |
| --- | --- |

c)

the minimum requirements set out in Annex VIII, Part 2, point 8, and the valuation rules set out in Annex VIII, Part 3, points 62 to 65 are met.

| 55. | The 50 % risk weight shall be assigned to the Part of the loan that does not exceed a limit calculated according to either of the following conditions:






  a) | 50 % of the market value of the property in question; |
| --- | --- | --- |

55.

The 50 % risk weight shall be assigned to the Part of the loan that does not exceed a limit calculated according to either of the following conditions:

a)

50 % of the market value of the property in question;

| b) | 50 % of the market value of the property or 60 % of the mortgage lending value, whichever is lower, in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions. |
| --- | --- |

b)

50 % of the market value of the property or 60 % of the mortgage lending value, whichever is lower, in those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions.

| 56. | A 100 % risk weigh shall be assigned to the Part of the loan that exceeds the limits set out in point 55. |
| --- | --- |

56.

A 100 % risk weigh shall be assigned to the Part of the loan that exceeds the limits set out in point 55.

| 57. | When the discretion contained in points 51 to 53 is exercised by the competent authorities of one Member State, the competent authorities of another Member State may allow their credit institutions to risk weight at 50 % such exposures fully and completely secured by mortgages on commercial property. |
| --- | --- |

57.

When the discretion contained in points 51 to 53 is exercised by the competent authorities of one Member State, the competent authorities of another Member State may allow their credit institutions to risk weight at 50 % such exposures fully and completely secured by mortgages on commercial property.

| 58. | Competent authorities may dispense with the condition contained in point 54(b) for exposures fully and completely secured by mortgages on commercial property which is situated within their territory, if they have evidence that a well-developed and long-established commercial real estate market is present in their territory with loss-rates which do not exceed the following limits:






  a) | losses stemming from lending collateralised by commercial real estate property up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage lending value (MLV)) do not exceed 0,3 % of the outstanding loans collateralised by commercial real estate property in any given year; and |
| --- | --- | --- |

58.

Competent authorities may dispense with the condition contained in point 54(b) for exposures fully and completely secured by mortgages on commercial property which is situated within their territory, if they have evidence that a well-developed and long-established commercial real estate market is present in their territory with loss-rates which do not exceed the following limits:

a)

losses stemming from lending collateralised by commercial real estate property up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage lending value (MLV)) do not exceed 0,3 % of the outstanding loans collateralised by commercial real estate property in any given year; and

| b) | overall losses stemming from lending collateralised by commercial real estate property must not exceed 0,5 % of the outstanding loans collateralised by commercial real estate property in any given year. |
| --- | --- |

b)

overall losses stemming from lending collateralised by commercial real estate property must not exceed 0,5 % of the outstanding loans collateralised by commercial real estate property in any given year.

| 59. | If either of the limits referred to in point 58 is not satisfied in a given year, the eligibility to use point 58 shall cease and the condition contained in point 54(b) shall apply until the conditions in point 58 are satisfied in a subsequent year. |
| --- | --- |

59.

If either of the limits referred to in point 58 is not satisfied in a given year, the eligibility to use point 58 shall cease and the condition contained in point 54(b) shall apply until the conditions in point 58 are satisfied in a subsequent year.

| 60. | When the discretion contained in point 58 is exercised by the competent authorities of a Member State, the competent authorities of another Member State may allow their credit institutions to assign a risk weight of 50 % to such exposures fully and completely secured by mortgages on commercial property. |
| --- | --- |

60.

When the discretion contained in point 58 is exercised by the competent authorities of a Member State, the competent authorities of another Member State may allow their credit institutions to assign a risk weight of 50 % to such exposures fully and completely secured by mortgages on commercial property.

10.   PAST DUE ITEMS

| 61. | Without prejudice to the provisions contained in points 62 to 65, the unsecured part of any item that is past due for more than 90 days and which is above a threshold defined by the competent authorities and which reflects a reasonable level of risk shall be assigned a risk weight of:






  a) | 150 %, if value adjustments are less than 20 % of the unsecured part of the exposure gross of value adjustments; and |
| --- | --- | --- |

61.

Without prejudice to the provisions contained in points 62 to 65, the unsecured part of any item that is past due for more than 90 days and which is above a threshold defined by the competent authorities and which reflects a reasonable level of risk shall be assigned a risk weight of:

a)

150 %, if value adjustments are less than 20 % of the unsecured part of the exposure gross of value adjustments; and

| b) | 100 %, if value adjustments are no less than 20 % of the unsecured part of the exposure gross of value adjustments. |
| --- | --- |

b)

100 %, if value adjustments are no less than 20 % of the unsecured part of the exposure gross of value adjustments.

| 62. | For the purpose of defining the secured part of the past due item, eligible collateral and guarantees shall be those eligible for credit risk mitigation purposes. |
| --- | --- |

62.

For the purpose of defining the secured part of the past due item, eligible collateral and guarantees shall be those eligible for credit risk mitigation purposes.

| 63. | Nonetheless, where a past due item is fully secured by forms of collateral other then those eligible for credit risk mitigation purposes, a 100 % risk weight may be assigned subject to the discretion of competent authorities based upon strict operational criteria to ensure the good quality of the collateral when value adjustments reach 15 % of the exposure gross of value adjustments. |
| --- | --- |

63.

Nonetheless, where a past due item is fully secured by forms of collateral other then those eligible for credit risk mitigation purposes, a 100 % risk weight may be assigned subject to the discretion of competent authorities based upon strict operational criteria to ensure the good quality of the collateral when value adjustments reach 15 % of the exposure gross of value adjustments.

| 64. | Exposures indicated in points 45 to 50 shall be assigned a risk weight of 100 % net of value adjustments if they are past due for more than 90 days. If value adjustments are no less than 20 % of the exposure gross of value adjustments, the risk weight to be assigned to the remainder of the exposure may be reduced to 50 % at the discretion of competent authorities. |
| --- | --- |

64.

Exposures indicated in points 45 to 50 shall be assigned a risk weight of 100 % net of value adjustments if they are past due for more than 90 days. If value adjustments are no less than 20 % of the exposure gross of value adjustments, the risk weight to be assigned to the remainder of the exposure may be reduced to 50 % at the discretion of competent authorities.

| 65. | Exposures indicated in points 51 to 60 shall be assigned a risk weight of 100 % if they are past due for more than 90 days. |
| --- | --- |

65.

Exposures indicated in points 51 to 60 shall be assigned a risk weight of 100 % if they are past due for more than 90 days.

11.   ITEMS BELONGING TO REGULATORY HIGH-RISK CATEGORIES

| 66. | Subject to the discretion of competent authorities, exposures associated with particularly high risks such as investments in venture capital firms and private equity investments shall be assigned a risk weight of 150 %. |
| --- | --- |

66.

Subject to the discretion of competent authorities, exposures associated with particularly high risks such as investments in venture capital firms and private equity investments shall be assigned a risk weight of 150 %.

| 67. | Competent authorities may permit non past due items to be assigned a 150 % risk weight according to the provisions of this Part and for which value adjustments have been established to be assigned a risk weight of:






  a) | 100 %, if value adjustments are no less than 20 % of the exposure value gross of value adjustments; and |
| --- | --- | --- |

67.

Competent authorities may permit non past due items to be assigned a 150 % risk weight according to the provisions of this Part and for which value adjustments have been established to be assigned a risk weight of:

a)

100 %, if value adjustments are no less than 20 % of the exposure value gross of value adjustments; and

| b) | 50 %, if value adjustments are no less than 50 % of the exposure value gross of value adjustments. |
| --- | --- |

b)

50 %, if value adjustments are no less than 50 % of the exposure value gross of value adjustments.

12.   EXPOSURES IN THE FORM OF COVERED BONDS

| 68. | ‘Covered bonds’, shall mean bonds as defined in Article 22(4) of Directive 85/611/EEC and collateralised by any of the following eligible assets:






  a) | exposures to or guaranteed by central governments, central banks, public sector entities, regional governments and local authorities in the EU; |
| --- | --- | --- |

68.

‘Covered bonds’, shall mean bonds as defined in Article 22(4) of Directive 85/611/EEC and collateralised by any of the following eligible assets:

a)

exposures to or guaranteed by central governments, central banks, public sector entities, regional governments and local authorities in the EU;

| b) | exposures to or guaranteed by non-EU central governments, non-EU central banks, multilateral development banks, international organisations that qualify for the credit quality step 1 as set out in this Annex, and exposures to or guaranteed by non-EU public sector entities, non-EU regional governments and non-EU local authorities that are risk weighted as exposures to institutions or central governments and central banks according to points 8, 9, 14 or 15 respectively and that qualify for the credit quality step 1 as set out in this Annex, and exposures in the sense of this point that qualify as a minimum for the credit quality step 2 as set out in this Annex, provided that they do not exceed 20 % of the nominal amount of outstanding covered bonds of issuing institutions; |
| --- | --- |

b)

exposures to or guaranteed by non-EU central governments, non-EU central banks, multilateral development banks, international organisations that qualify for the credit quality step 1 as set out in this Annex, and exposures to or guaranteed by non-EU public sector entities, non-EU regional governments and non-EU local authorities that are risk weighted as exposures to institutions or central governments and central banks according to points 8, 9, 14 or 15 respectively and that qualify for the credit quality step 1 as set out in this Annex, and exposures in the sense of this point that qualify as a minimum for the credit quality step 2 as set out in this Annex, provided that they do not exceed 20 % of the nominal amount of outstanding covered bonds of issuing institutions;

| c) | exposures to institutions that qualify for the credit quality step 1 as set out in this Annex. The total exposure of this kind shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing credit institution. Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by real estate to the holders of covered bonds shall not be comprised by the 15 % limit. Exposures to institutions in the EU with a maturity not exceeding 100 days shall not be comprised by the step 1 requirement but those institutions must as a minimum qualify for credit quality step 2 as set out in this Annex; |
| --- | --- |

c)

exposures to institutions that qualify for the credit quality step 1 as set out in this Annex. The total exposure of this kind shall not exceed 15 % of the nominal amount of outstanding covered bonds of the issuing credit institution. Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by real estate to the holders of covered bonds shall not be comprised by the 15 % limit. Exposures to institutions in the EU with a maturity not exceeding 100 days shall not be comprised by the step 1 requirement but those institutions must as a minimum qualify for credit quality step 2 as set out in this Annex;

| d) | loans secured by residential real estate or shares in Finnish residential housing companies as referred to in point 46 up to the lesser of the principal amount of the liens that are combined with any prior liens and 80 % of the value of the pledged properties or by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of a Member State securitising residential real estate exposures provided that at least 90 % of the assets of such Fonds Communs de Créances or of equivalent securitisation entities governed by the laws of a Member State are composed of mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 80 % of the value of the pledged properties and the units qualify for the credit quality step 1 as set out in this Annex where such units do not exceed 20 % of the nominal amount of the outstanding issue.
  Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the 90 % limit; |
| --- | --- |

d)

loans secured by residential real estate or shares in Finnish residential housing companies as referred to in point 46 up to the lesser of the principal amount of the liens that are combined with any prior liens and 80 % of the value of the pledged properties or by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of a Member State securitising residential real estate exposures provided that at least 90 % of the assets of such Fonds Communs de Créances or of equivalent securitisation entities governed by the laws of a Member State are composed of mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 80 % of the value of the pledged properties and the units qualify for the credit quality step 1 as set out in this Annex where such units do not exceed 20 % of the nominal amount of the outstanding issue.

Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the 90 % limit;

| e) | loans secured by commercial real estate or shares in Finnish housing companies as referred to in point 52 up to the lesser of the principal amount of the liens that are combined with any prior liens and 60 % of the value of the pledged properties or by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of a Member State securitising commercial real estate exposures provided that, at least, 90 % of the assets of such Fonds Communs de Créances or of equivalent securitisation entities governed by the laws of a Member State are composed of mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 60 % of the value of the pledged properties and the units qualify for the credit quality step 1 as set out in this Annex where such units do not exceed 20 % of the nominal amount of the outstanding issue. The competent authorities may recognise loans secured by commercial real estate as eligible where the Loan to Value ratio of 60 % is exceeded up to a maximum level of 70 % if the value of the total assets pledged as collateral for the covered bonds exceed the nominal amount outstanding on the covered bond by at least 10 %, and the bondholders' claim meets the legal certainty requirements set out in Annex VIII. The bondholders' claim must take priority over all other claims on the collateral.
  Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the 90 % limit; or |
| --- | --- |

e)

loans secured by commercial real estate or shares in Finnish housing companies as referred to in point 52 up to the lesser of the principal amount of the liens that are combined with any prior liens and 60 % of the value of the pledged properties or by senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities governed by the laws of a Member State securitising commercial real estate exposures provided that, at least, 90 % of the assets of such Fonds Communs de Créances or of equivalent securitisation entities governed by the laws of a Member State are composed of mortgages that are combined with any prior liens up to the lesser of the principal amounts due under the units, the principal amounts of the liens, and 60 % of the value of the pledged properties and the units qualify for the credit quality step 1 as set out in this Annex where such units do not exceed 20 % of the nominal amount of the outstanding issue. The competent authorities may recognise loans secured by commercial real estate as eligible where the Loan to Value ratio of 60 % is exceeded up to a maximum level of 70 % if the value of the total assets pledged as collateral for the covered bonds exceed the nominal amount outstanding on the covered bond by at least 10 %, and the bondholders' claim meets the legal certainty requirements set out in Annex VIII. The bondholders' claim must take priority over all other claims on the collateral.

Exposures caused by transmission and management of payments of the obligors of, or liquidation proceeds in respect of, loans secured by pledged properties of the senior units or debt securities shall not be comprised in calculating the 90 % limit; or

| f) | loans secured by ships where only liens that are combined with any prior liens within 60 % of the value of the pledged ship. |
| --- | --- |

f)

loans secured by ships where only liens that are combined with any prior liens within 60 % of the value of the pledged ship.

For these purposes ‘collateralised’ includes situations where the assets as described in subpoints (a) to (f) are exclusively dedicated in law to the protection of the bond-holders against losses.

Until 31 December 2010 the 20 % limit for senior units issued by French Fonds Communs de Créances or by equivalent securitisation entities as specified in subpoints (d) and (e) does not apply, provided that those senior units have a credit assessment by a nominated ECAI which is the most favourable category of credit assessment made by the ECAI in respect of covered bonds. Before the end of this period this derogation shall be reviewed and consequent to such review the Commission may as appropriate extend this period in accordance with the procedure referred to in Article 151(2) with or without a further review clause.

Until 31 December 2010 the figure of 60 % indicated in subpoint (f) can be replaced with a figure of 70 %. Before the end of this period this derogation shall be reviewed and consequent to such review the Commission may as appropriate extend this period in accordance with the procedure referred to in Article 151(2) with or without a further review clause.

| 69. | Credit institutions shall for real estate collateralising covered bonds meet the minimum requirements set out in Annex VIII Part 2, point 8 and the valuation rules set out in Annex VIII, Part 3, points 62 to 65. |
| --- | --- |

69.

Credit institutions shall for real estate collateralising covered bonds meet the minimum requirements set out in Annex VIII Part 2, point 8 and the valuation rules set out in Annex VIII, Part 3, points 62 to 65.

| 70. | Notwithstanding points 68 and 69, covered bonds meeting the definition of Article 22(4) of Directive 85/611/EEC and issued before 31 December 2007 are also eligible for the preferential treatment until their maturity. |
| --- | --- |

70.

Notwithstanding points 68 and 69, covered bonds meeting the definition of Article 22(4) of Directive 85/611/EEC and issued before 31 December 2007 are also eligible for the preferential treatment until their maturity.

| 71. | Covered bonds shall be assigned a risk weight on the basis of the risk weight assigned to senior unsecured exposures to the credit institution which issues them. The following correspondence between risk weights shall apply:






  a) | if the exposures to the institution are assigned a risk weight of 20 %, the covered bond shall be assigned a risk weight of 10 %; |
| --- | --- | --- |

71.

Covered bonds shall be assigned a risk weight on the basis of the risk weight assigned to senior unsecured exposures to the credit institution which issues them. The following correspondence between risk weights shall apply:

a)

if the exposures to the institution are assigned a risk weight of 20 %, the covered bond shall be assigned a risk weight of 10 %;

| b) | if the exposures to the institution are assigned a risk weight of 50 %, the covered bond shall be assigned a risk weight of 20 %; |
| --- | --- |

b)

if the exposures to the institution are assigned a risk weight of 50 %, the covered bond shall be assigned a risk weight of 20 %;

| c) | if the exposures to the institution are assigned a risk weight of 100 %, the covered bond shall be assigned a risk weight of 50 %; and |
| --- | --- |

c)

if the exposures to the institution are assigned a risk weight of 100 %, the covered bond shall be assigned a risk weight of 50 %; and

| d) | if the exposures to the institution are assigned a risk weight of 150 %, the covered bond shall be assigned a risk weight of 100 %. |
| --- | --- |

d)

if the exposures to the institution are assigned a risk weight of 150 %, the covered bond shall be assigned a risk weight of 100 %.

13.   ITEMS REPRESENTING SECURITISATION POSITIONS

| 72. | Risk weight exposure amounts for securitisation positions shall be determined in accordance with Articles 94 to 101. |
| --- | --- |

72.

Risk weight exposure amounts for securitisation positions shall be determined in accordance with Articles 94 to 101.

14.   SHORT-TERM EXPOSURES TO INSTITUTIONS AND CORPORATES

| 73. | Short-term exposures to an institution or corporate for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 7 as follows, in accordance with the mapping by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale: |
| --- | --- |

73.

Short-term exposures to an institution or corporate for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 7 as follows, in accordance with the mapping by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale:

Table 7

| Credit Quality Step | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 20 % | 50 % | 100 % | 150 % | 150 % | 150 % |

Credit Quality Step

1

2

3

4

5

6

Risk weight

20 %

50 %

100 %

150 %

150 %

150 %

15.   EXPOSURES IN THE FORM OF COLLECTIVE INVESTMENT UNDERTAKINGS (CIUS)

| 74. | Without prejudice to points 75 to 81, exposures in collective investment undertakings (CIUs) shall be assigned a risk weight of 100 %. |
| --- | --- |

74.

Without prejudice to points 75 to 81, exposures in collective investment undertakings (CIUs) shall be assigned a risk weight of 100 %.

| 75. | Exposures in the form of CIUs for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 8,in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale. |
| --- | --- |

75.

Exposures in the form of CIUs for which a credit assessment by a nominated ECAI is available shall be assigned a risk weight according to Table 8,in accordance with the assignment by the competent authorities of the credit assessments of eligible ECAIs to six steps in a credit quality assessment scale.

Table 8

| Credit quality step | 1 | 2 | 3 | 4 | 5 | 6 |
| --- | --- | --- | --- | --- | --- | --- |
| Risk weight | 20 % | 50 % | 100 % | 100 % | 150 % | 150 % |

Credit quality step

1

2

3

4

5

6

Risk weight

20 %

50 %

100 %

100 %

150 %

150 %

| 76. | Where competent authorities consider that a position in a CIU is associated with particularly high risks they shall require that that position is assigned a risk weight of 150 %. |
| --- | --- |

76.

Where competent authorities consider that a position in a CIU is associated with particularly high risks they shall require that that position is assigned a risk weight of 150 %.

| 77. | Credit institutions may determine the risk weight for a CIU as set out in points 79 to 81, if the following eligibility criteria are met:






  a) | the CIU is managed by a company which is subject to supervision in a Member State or, subject to approval of the credit institution's competent authority, if:






  i) | the CIU is managed by a company which is subject to supervision that is considered equivalent to that laid down in Community law; and |
| --- | --- | --- | --- |

77.

Credit institutions may determine the risk weight for a CIU as set out in points 79 to 81, if the following eligibility criteria are met:

a)

the CIU is managed by a company which is subject to supervision in a Member State or, subject to approval of the credit institution's competent authority, if:

i)

the CIU is managed by a company which is subject to supervision that is considered equivalent to that laid down in Community law; and

| ii) | cooperation between competent authorities is sufficiently ensured; |
| --- | --- |

ii)

cooperation between competent authorities is sufficiently ensured;

| b) | the CIU's prospectus or equivalent document includes:






  i) | the categories of assets in which the CIU is authorised to invest; and |
| --- | --- | --- |

b)

the CIU's prospectus or equivalent document includes:

i)

the categories of assets in which the CIU is authorised to invest; and

| ii) | if investment limits apply, the relative limits and the methodologies to calculate them; and |
| --- | --- |

ii)

if investment limits apply, the relative limits and the methodologies to calculate them; and

| c) | the business of the CIU is reported on at least an annual basis to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period. |
| --- | --- |

c)

the business of the CIU is reported on at least an annual basis to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period.

| 78. | If a competent authority approves a third country CIU as eligible, as set out in point 77(a), then a competent authority in another Member State may make use of this recognition without conducting its own assessment. |
| --- | --- |

78.

If a competent authority approves a third country CIU as eligible, as set out in point 77(a), then a competent authority in another Member State may make use of this recognition without conducting its own assessment.

| 79. | Where the credit institution is aware of the underlying exposures of a CIU, it may look through to those underlying exposures in order to calculate an average risk weight for the CIU in accordance with the methods set out in Article 78 to 83. |
| --- | --- |

79.

Where the credit institution is aware of the underlying exposures of a CIU, it may look through to those underlying exposures in order to calculate an average risk weight for the CIU in accordance with the methods set out in Article 78 to 83.

| 80. | Where the credit institution is not aware of the underlying exposures of a CIU, it may calculate an average risk weight for the CIU in accordance with the methods set out in Articles 78 to 83 subject to the following rules: it will be assumed that the CIU first invests, to the maximum extent allowed under its mandate, in the exposure classes attracting the highest capital requirement, and then continues making investments in descending order until the maximum total investment limit is reached. |
| --- | --- |

80.

Where the credit institution is not aware of the underlying exposures of a CIU, it may calculate an average risk weight for the CIU in accordance with the methods set out in Articles 78 to 83 subject to the following rules: it will be assumed that the CIU first invests, to the maximum extent allowed under its mandate, in the exposure classes attracting the highest capital requirement, and then continues making investments in descending order until the maximum total investment limit is reached.

| 81. | Credit institutions may rely on a third party to calculate and report, in accordance with the methods set out in points 79 and 80, a risk weight for the CIU provided that the correctness of the calculation and report shall be adequately ensured. |
| --- | --- |

81.

Credit institutions may rely on a third party to calculate and report, in accordance with the methods set out in points 79 and 80, a risk weight for the CIU provided that the correctness of the calculation and report shall be adequately ensured.

16.   OTHER ITEMS

16.1.   Treatment

| 82. | Tangible assets within the meaning of Article 4(10) of Directive 86/635/EEC shall be assigned a risk weight of 100 %. |
| --- | --- |

82.

Tangible assets within the meaning of Article 4(10) of Directive 86/635/EEC shall be assigned a risk weight of 100 %.

| 83. | Prepayments and accrued income for which an institution is unable to determine the counterparty in accordance with Directive 86/635/EEC, shall be assigned a risk weight of 100 %. |
| --- | --- |

83.

Prepayments and accrued income for which an institution is unable to determine the counterparty in accordance with Directive 86/635/EEC, shall be assigned a risk weight of 100 %.

| 84. | Cash items in the process of collection shall be assigned a 20 % risk weight. Cash in hand and equivalent cash items shall be assigned a 0 % risk weight. |
| --- | --- |

84.

Cash items in the process of collection shall be assigned a 20 % risk weight. Cash in hand and equivalent cash items shall be assigned a 0 % risk weight.

| 85. | Member States may allow a risk weight of 10 % for exposures to institutions specialising in the inter-bank and public-debt markets in their home Member States and subject to close supervision by the competent authorities where those asset items are fully and completely secured, to the satisfaction of the competent authorities of the home Member States, by a items assigned a 0 % or a 20 % risk weight and recognised by the latter as constituting adequate collateral. |
| --- | --- |

85.

Member States may allow a risk weight of 10 % for exposures to institutions specialising in the inter-bank and public-debt markets in their home Member States and subject to close supervision by the competent authorities where those asset items are fully and completely secured, to the satisfaction of the competent authorities of the home Member States, by a items assigned a 0 % or a 20 % risk weight and recognised by the latter as constituting adequate collateral.

| 86. | Holdings of equity and other participations, except where deducted from own funds, shall be assigned a risk weight of at least 100 %. |
| --- | --- |

86.

Holdings of equity and other participations, except where deducted from own funds, shall be assigned a risk weight of at least 100 %.

| 87. | Gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities shall be assigned a 0 % risk weight. |
| --- | --- |

87.

Gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities shall be assigned a 0 % risk weight.

| 88. | In the case of asset sale and repurchase agreements and outright forward purchases, the risk weight shall be that assigned to the assets in question and not to the counterparties to the transactions. |
| --- | --- |

88.

In the case of asset sale and repurchase agreements and outright forward purchases, the risk weight shall be that assigned to the assets in question and not to the counterparties to the transactions.

| 89. | Where a credit institution provides credit protection for a number of exposures under terms that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, and where the product has an external credit assessment from an eligible ECAI, the risk weights prescribed in Articles 94 to 101 shall be assigned. If the product is not rated by an eligible ECAI, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures, up to a maximum of 1 250 % and multiplied by the nominal amount of the protection provided by the credit derivative to obtain the risk weighted asset amount. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation. |
| --- | --- |

89.

Where a credit institution provides credit protection for a number of exposures under terms that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, and where the product has an external credit assessment from an eligible ECAI, the risk weights prescribed in Articles 94 to 101 shall be assigned. If the product is not rated by an eligible ECAI, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures, up to a maximum of 1 250 % and multiplied by the nominal amount of the protection provided by the credit derivative to obtain the risk weighted asset amount. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation.

Part 2 — Recognition of ECAIs and mapping of their credit assessments

1.   METHODOLOGY

1.1.   Objectivity

| 1. | Competent authorities shall verify that the methodology for assigning credit assessments is rigorous, systematic, continuous and subject to validation based on historical experience. |
| --- | --- |

1.

Competent authorities shall verify that the methodology for assigning credit assessments is rigorous, systematic, continuous and subject to validation based on historical experience.

1.2.   Independence

| 2. | Competent authorities shall verify that the methodology is free from external political influences or constraints, and from economic pressures that may influence the credit assessment. |
| --- | --- |

2.

Competent authorities shall verify that the methodology is free from external political influences or constraints, and from economic pressures that may influence the credit assessment.

| 3. | Independence of the ECAI's methodology shall be assessed by competent authorities according to factors such as the following:






  a) | ownership and organisation structure of the ECAI; |
| --- | --- | --- |

3.

Independence of the ECAI's methodology shall be assessed by competent authorities according to factors such as the following:

a)

ownership and organisation structure of the ECAI;

| b) | financial resources of the ECAI; |
| --- | --- |

b)

financial resources of the ECAI;

| c) | staffing and expertise of the ECAI; and |
| --- | --- |

c)

staffing and expertise of the ECAI; and

| d) | corporate governance of the ECAI. |
| --- | --- |

d)

corporate governance of the ECAI.

1.3.   Ongoing review

| 4. | Competent authorities shall verify that ECAI's credit assessments are subject to ongoing review and shall be responsive to changes in the financial conditions. Such review shall take place after all significant events and at least annually. |
| --- | --- |

4.

Competent authorities shall verify that ECAI's credit assessments are subject to ongoing review and shall be responsive to changes in the financial conditions. Such review shall take place after all significant events and at least annually.

| 5. | Before any recognition, competent authorities shall verify that the assessment methodology for each market segment is established according to standards such as the following:






  a) | the back-testing must be established for at least one year; |
| --- | --- | --- |

5.

Before any recognition, competent authorities shall verify that the assessment methodology for each market segment is established according to standards such as the following:

a)

the back-testing must be established for at least one year;

| b) | the regularity of the review process by the ECAI must be monitored by the competent authorities; and |
| --- | --- |

b)

the regularity of the review process by the ECAI must be monitored by the competent authorities; and

| c) | the competent authorities must be able to receive from the ECAI the extent of its contacts with the senior management of the entities which it rates. |
| --- | --- |

c)

the competent authorities must be able to receive from the ECAI the extent of its contacts with the senior management of the entities which it rates.

| 6. | Competent authorities shall take the necessary measures to be promptly informed by ECAIs of any material changes in the methodology they use for assigning credit assessments. |
| --- | --- |

6.

Competent authorities shall take the necessary measures to be promptly informed by ECAIs of any material changes in the methodology they use for assigning credit assessments.

1.4.   Transparency and disclosure

| 7. | Competent authorities shall take the necessary measures to assure that the principles of the methodology employed by the ECAI for the formulation of its credit assessments are publicly available as to allow all potential users to decide whether they are derived in a reasonable way. |
| --- | --- |

7.

Competent authorities shall take the necessary measures to assure that the principles of the methodology employed by the ECAI for the formulation of its credit assessments are publicly available as to allow all potential users to decide whether they are derived in a reasonable way.

2.   INDIVIDUAL CREDIT ASSESSMENTS

2.1.   Credibility and market acceptance

| 8. | Competent authorities shall verify that ECAIs' individual credit assessments are recognised in the market as credible and reliable by the users of such credit assessments. |
| --- | --- |

8.

Competent authorities shall verify that ECAIs' individual credit assessments are recognised in the market as credible and reliable by the users of such credit assessments.

| 9. | Credibility shall be assessed by competent authorities according to factors such as the following:






  a) | market share of the ECAI; |
| --- | --- | --- |

9.

Credibility shall be assessed by competent authorities according to factors such as the following:

a)

market share of the ECAI;

| b) | revenues generated by the ECAI, and more in general financial resources of the ECAI; |
| --- | --- |

b)

revenues generated by the ECAI, and more in general financial resources of the ECAI;

| c) | whether there is any pricing on the basis of the rating; and |
| --- | --- |

c)

whether there is any pricing on the basis of the rating; and

| d) | at least two credit institutions use the ECAI's individual credit assessment for bond issuing and/or assessing credit risks. |
| --- | --- |

d)

at least two credit institutions use the ECAI's individual credit assessment for bond issuing and/or assessing credit risks.

2.2.   Transparency and Disclosure

| 10. | Competent authorities shall verify that individual credit assessments are accessible at equivalent terms at least to all credit institutions having a legitimate interest in these individual credit assessments. |
| --- | --- |

10.

Competent authorities shall verify that individual credit assessments are accessible at equivalent terms at least to all credit institutions having a legitimate interest in these individual credit assessments.

| 11. | In particular, competent authorities shall verify that individual credit assessments are available to non-domestic parties on equivalent terms as to domestic credit institutions having a legitimate interest in these individual credit assessments. |
| --- | --- |

11.

In particular, competent authorities shall verify that individual credit assessments are available to non-domestic parties on equivalent terms as to domestic credit institutions having a legitimate interest in these individual credit assessments.

3.   ‘MAPPING’

| 12. | In order to differentiate between the relative degrees of risk expressed by each credit assessment, competent authorities shall consider quantitative factors such as the long-term default rate associated with all items assigned the same credit assessment. For recently established ECAIs and for those that have compiled only a short record of default data, competent authorities shall ask the ECAI what it believes to be the long-term default rate associated with all items assigned the same credit assessment. |
| --- | --- |

12.

In order to differentiate between the relative degrees of risk expressed by each credit assessment, competent authorities shall consider quantitative factors such as the long-term default rate associated with all items assigned the same credit assessment. For recently established ECAIs and for those that have compiled only a short record of default data, competent authorities shall ask the ECAI what it believes to be the long-term default rate associated with all items assigned the same credit assessment.

| 13. | In order to differentiate between the relative degrees of risk expressed by each credit assessment, competent authorities shall consider qualitative factors such as the pool of issuers that the ECAI covers, the range of credit assessments that the ECAI assigns, each credit assessment meaning and the ECAI's definition of default. |
| --- | --- |

13.

In order to differentiate between the relative degrees of risk expressed by each credit assessment, competent authorities shall consider qualitative factors such as the pool of issuers that the ECAI covers, the range of credit assessments that the ECAI assigns, each credit assessment meaning and the ECAI's definition of default.

| 14. | Competent authorities shall compare default rates experienced for each credit assessment of a particular ECAI and compare them with a benchmark built on the basis of default rates experienced by other ECAIs on a population of issuers that the competent authorities believes to present an equivalent level of credit risk. |
| --- | --- |

14.

Competent authorities shall compare default rates experienced for each credit assessment of a particular ECAI and compare them with a benchmark built on the basis of default rates experienced by other ECAIs on a population of issuers that the competent authorities believes to present an equivalent level of credit risk.

| 15. | When competent authorities believe that the default rates experienced for the credit assessment of a particular ECAI are materially and systematically higher then the benchmark, competent authorities shall assign a higher credit quality step in the credit quality assessment scale to the ECAI credit assessment. |
| --- | --- |

15.

When competent authorities believe that the default rates experienced for the credit assessment of a particular ECAI are materially and systematically higher then the benchmark, competent authorities shall assign a higher credit quality step in the credit quality assessment scale to the ECAI credit assessment.

| 16. | When competent authorities have increased the associated risk weight for a specific credit assessment of a particular ECAI, if the ECAI demonstrates that the default rates experienced for its credit assessment are no longer materially and systematically higher than the benchmark, competent authorities may decide to restore the original credit quality step in the credit quality assessment scale for the ECAI credit assessment. |
| --- | --- |

16.

When competent authorities have increased the associated risk weight for a specific credit assessment of a particular ECAI, if the ECAI demonstrates that the default rates experienced for its credit assessment are no longer materially and systematically higher than the benchmark, competent authorities may decide to restore the original credit quality step in the credit quality assessment scale for the ECAI credit assessment.

Part 3 — Use of ECAIs' credit assessments for the determination of risk weights

1.   TREATMENT

| 1. | A credit institution may nominate one or more eligible ECAIs to be used for the determination of risk weights to be assigned to asset and off-balance sheet items. |
| --- | --- |

1.

A credit institution may nominate one or more eligible ECAIs to be used for the determination of risk weights to be assigned to asset and off-balance sheet items.

| 2. | A credit institution which decides to use the credit assessments produced by an eligible ECAI for a certain class of items must use those credit assessments consistently for all exposures belonging to that class. |
| --- | --- |

2.

A credit institution which decides to use the credit assessments produced by an eligible ECAI for a certain class of items must use those credit assessments consistently for all exposures belonging to that class.

| 3. | A credit institution which decides to use the credit assessments produced by an eligible ECAI must use them in a continuous and consistent way over time. |
| --- | --- |

3.

A credit institution which decides to use the credit assessments produced by an eligible ECAI must use them in a continuous and consistent way over time.

| 4. | A credit institution can only use ECAIs credit assessments that take into account all amounts both in principal and in interest owed to it. |
| --- | --- |

4.

A credit institution can only use ECAIs credit assessments that take into account all amounts both in principal and in interest owed to it.

| 5. | If only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the risk weight for that item. |
| --- | --- |

5.

If only one credit assessment is available from a nominated ECAI for a rated item, that credit assessment shall be used to determine the risk weight for that item.

| 6. | If two credit assessments are available from nominated ECAIs and the two correspond to different risk weights for a rated item, the higher risk weight shall be assigned. |
| --- | --- |

6.

If two credit assessments are available from nominated ECAIs and the two correspond to different risk weights for a rated item, the higher risk weight shall be assigned.

| 7. | If more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest risk weights shall be referred to. If the two lowest risk weights are different, the higher risk weight shall be assigned. If the two lowest risk weights are the same, that risk weight shall be assigned. |
| --- | --- |

7.

If more than two credit assessments are available from nominated ECAIs for a rated item, the two assessments generating the two lowest risk weights shall be referred to. If the two lowest risk weights are different, the higher risk weight shall be assigned. If the two lowest risk weights are the same, that risk weight shall be assigned.

2.   ISSUER AND ISSUE CREDIT ASSESSMENT

| 8. | Where a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure belongs, this credit assessment shall be used to determine the risk weight to be assigned to that item. |
| --- | --- |

8.

Where a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure belongs, this credit assessment shall be used to determine the risk weight to be assigned to that item.

| 9. | Where no directly applicable credit assessment exists for a certain item, but a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure does not belong or a general credit assessment exists for the issuer, then that credit assessment shall be used if it produces a higher risk weight than would other wise be the case or if it produces a lower risk weight and the exposure in question ranks pari passu or senior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant. |
| --- | --- |

9.

Where no directly applicable credit assessment exists for a certain item, but a credit assessment exists for a specific issuing program or facility to which the item constituting the exposure does not belong or a general credit assessment exists for the issuer, then that credit assessment shall be used if it produces a higher risk weight than would other wise be the case or if it produces a lower risk weight and the exposure in question ranks pari passu or senior in all respects to the specific issuing program or facility or to senior unsecured exposures of that issuer, as relevant.

| 10. | Points 8 and 9 are not to prevent the application of points 68 to 71 of Part 1. |
| --- | --- |

10.

Points 8 and 9 are not to prevent the application of points 68 to 71 of Part 1.

| 11. | Credit assessments for issuers within a corporate group cannot be used as credit assessment of another issuer within the same corporate group. |
| --- | --- |

11.

Credit assessments for issuers within a corporate group cannot be used as credit assessment of another issuer within the same corporate group.

3.   LONG-TERM AND SHORT-TERM CREDIT ASSESSMENTS

| 12. | Short-term credit assessments may only be used for short-term asset and off-balance sheet items constituting exposures to institutions and corporates. |
| --- | --- |

12.

Short-term credit assessments may only be used for short-term asset and off-balance sheet items constituting exposures to institutions and corporates.

| 13. | Any short-term credit assessment shall only apply to the item the short-term credit assessment refers to, and it shall not be used to derive risk weights for any other item. |
| --- | --- |

13.

Any short-term credit assessment shall only apply to the item the short-term credit assessment refers to, and it shall not be used to derive risk weights for any other item.

| 14. | Notwithstanding point 13, if a short-term rated facility is assigned a 150 % risk weight, then all unrated unsecured exposures on that obligor whether short-term or long-term shall also be assigned a 150 % risk weight. |
| --- | --- |

14.

Notwithstanding point 13, if a short-term rated facility is assigned a 150 % risk weight, then all unrated unsecured exposures on that obligor whether short-term or long-term shall also be assigned a 150 % risk weight.

| 15. | Notwithstanding point 13, if a short-term rated facility is assigned a 50 % risk-weight, no unrated short-term exposure shall be assigned a risk weight lower than 100 %. |
| --- | --- |

15.

Notwithstanding point 13, if a short-term rated facility is assigned a 50 % risk-weight, no unrated short-term exposure shall be assigned a risk weight lower than 100 %.

4.   DOMESTIC AND FOREIGN CURRENCY ITEMS

| 16. | A credit assessment that refers to an item denominated in the obligor's domestic currency cannot be used to derive a risk weight for another exposure on that same obligor that is denominated in a foreign currency. |
| --- | --- |

16.

A credit assessment that refers to an item denominated in the obligor's domestic currency cannot be used to derive a risk weight for another exposure on that same obligor that is denominated in a foreign currency.

| 17. | Notwithstanding point 16, when an exposure arises through a credit institution's participation in a loan that has been extended by a Multilateral Development Bank whose preferred creditor status is recognised in the market, competent authorities may allow the credit assessment on the obligors' domestic currency item to be used for risk weighting purposes. |
| --- | --- |

17.

Notwithstanding point 16, when an exposure arises through a credit institution's participation in a loan that has been extended by a Multilateral Development Bank whose preferred creditor status is recognised in the market, competent authorities may allow the credit assessment on the obligors' domestic currency item to be used for risk weighting purposes.

---

(1)  OJ L 250, 2.10.2003, p. 10.

ANNEX VII

INTERNAL RATINGS BASED APPROACH

Part 1 — Risk weighted exposure amounts and expected loss amounts

1.   CALCULATION OF RISK WEIGHTED EXPOSURE AMOUNTS FOR CREDIT RISK

| 1. | Unless noted otherwise, the input parameters PD, LGD, and maturity value (M) shall be determined as set out in Part 2 and the exposure value shall be determined as set out in Part 3. |
| --- | --- |

1.

Unless noted otherwise, the input parameters PD, LGD, and maturity value (M) shall be determined as set out in Part 2 and the exposure value shall be determined as set out in Part 3.

| 2. | The risk weighted exposure amount for each exposure shall be calculated in accordance with the following formulae. |
| --- | --- |

2.

The risk weighted exposure amount for each exposure shall be calculated in accordance with the following formulae.

1.1.   Risk weighted exposure amounts for exposures to corporates, institutions and central governments and central banks.

| 3. | Subject to points 5 to 9, the risk weighted exposure amounts for exposures to corporates, institutions and central governments and central banks shall be calculated according to the following formulae:
  Correlation (R) = 0,12 × (1 - EXP (- 50 * PD ))/(1 - EXP (- 50)) + 0,24 * [1 - (1 - EXP (- 50 * PD ))/(1 - EXP (- 50))]
  Maturity factor (b) = (0,11852 - 0,05478 * ln(PD))2

  Risk weight (RW) = (LGD * N[(1 - R)0,5 * G(PD) + (R/(1 - ))0,5 * G(0,999)] - PD * LGD * (1 - 1,5 * b)-1 * (1 + (M - 2,5) * b) * 12,5 * 1,06
  N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that = z).
  For PD = 0, RW shall be 0.
  For PD = 1:






  — | for defaulted exposures where credit institutions apply the LGD values set out in Part 2, point 8, RW shall be 0; and |
| --- | --- | --- |

3.

Subject to points 5 to 9, the risk weighted exposure amounts for exposures to corporates, institutions and central governments and central banks shall be calculated according to the following formulae:

Correlation (R) = 0,12 × (1 - EXP (- 50 * PD ))/(1 - EXP (- 50)) + 0,24 * [1 - (1 - EXP (- 50 * PD ))/(1 - EXP (- 50))]

Maturity factor (b) = (0,11852 - 0,05478 * ln(PD))2

Risk weight (RW) = (LGD * N[(1 - R)0,5 * G(PD) + (R/(1 - ))0,5 * G(0,999)] - PD * LGD * (1 - 1,5 * b)-1 * (1 + (M - 2,5) * b) * 12,5 * 1,06

N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that = z).

For PD = 0, RW shall be 0.

For PD = 1:

—

for defaulted exposures where credit institutions apply the LGD values set out in Part 2, point 8, RW shall be 0; and

| — | for defaulted exposures where credit institutions use own estimates of LGDs, RW shall be Max{0, 12,5 *(LGD-ELBE)}; |
| --- | --- |

—

for defaulted exposures where credit institutions use own estimates of LGDs, RW shall be Max{0, 12,5 *(LGD-ELBE)};

where ELBE shall be the credit institution's best estimate of expected loss for the defaulted exposure according to point 80 of Part 4.

Risk-weighted exposure amount = RW * exposure value.

| 4. | The risk weighted exposure amount for each exposure which meets the requirements set out in Annex VIII, Part 1, point 29 and Annex VIII, Part 2, point 22 may be adjusted according to the following formula:
  Risk-weighted exposure amount = RW * exposure value * (0,15 + 160 * PDpp)]
  where:
  PDpp = PD of the protection provider.
  RW shall be calculated using the relevant risk weight formula set out in point 3 for the exposure, the PD of the obligor and the LGD of a comparable direct exposure to the protection provider. The maturity factor (b) shall be calculated using the lower of the PD of the protection provider and the PD of the obligor. |
| --- | --- |

4.

The risk weighted exposure amount for each exposure which meets the requirements set out in Annex VIII, Part 1, point 29 and Annex VIII, Part 2, point 22 may be adjusted according to the following formula:

Risk-weighted exposure amount = RW * exposure value * (0,15 + 160 * PDpp)]

where:

PDpp = PD of the protection provider.

RW shall be calculated using the relevant risk weight formula set out in point 3 for the exposure, the PD of the obligor and the LGD of a comparable direct exposure to the protection provider. The maturity factor (b) shall be calculated using the lower of the PD of the protection provider and the PD of the obligor.

| 5. | For exposures to companies where the total annual sales for the consolidated group of which the firm is a Part is less than 50 million Euro, credit institutions may use the following correlation formula for the calculation of risk weights for corporate exposures. In this formula S is expressed as total annual sales in millions of Euros with 5 million Euro ≤ S ≤ 50 million Euro. Reported sales of less than 5 million Euro shall be treated as if they were equivalent to 5 million Euro. For purchased receivables the total annual sales shall be the weighted average by individual exposures of the pool.
  Correlation (R) = 0,12 × (1 - EXP (- 50 * PD ))/(1 - EXP (- 50)) + 0,24 * [1 - (1 - EXP (- 50 * PD ))/(1 - EXP (- 50))]- 0,04 * (1 - ( S - 5)/45)
  Credit institutions shall substitute total assets of the consolidated group for total annual sales when total annual sales are not a meaningful indicator of firm size and total assets are a more meaningful indicator than total annual sales. |
| --- | --- |

5.

For exposures to companies where the total annual sales for the consolidated group of which the firm is a Part is less than 50 million Euro, credit institutions may use the following correlation formula for the calculation of risk weights for corporate exposures. In this formula S is expressed as total annual sales in millions of Euros with 5 million Euro ≤ S ≤ 50 million Euro. Reported sales of less than 5 million Euro shall be treated as if they were equivalent to 5 million Euro. For purchased receivables the total annual sales shall be the weighted average by individual exposures of the pool.

Correlation (R) = 0,12 × (1 - EXP (- 50 * PD ))/(1 - EXP (- 50)) + 0,24 * [1 - (1 - EXP (- 50 * PD ))/(1 - EXP (- 50))]- 0,04 * (1 - ( S - 5)/45)

Credit institutions shall substitute total assets of the consolidated group for total annual sales when total annual sales are not a meaningful indicator of firm size and total assets are a more meaningful indicator than total annual sales.

| 6. | For specialised lending exposures in respect of which a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4 it shall assign risk weights to these exposures according to Table 1, as follows:
  Table 1










  Remaining Maturity | Category 1 | Category 2 | Category 3 | Category 4 | Category 5 |
| --- | --- | --- | --- | --- | --- | --- |
| Less than 2,5 years | 50 % | 70 % | 115 % | 250 % | 0 % |
| Equal or more than 2,5 years | 70 % | 90 % | 115 % | 250 % | 0 % |

6.

For specialised lending exposures in respect of which a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4 it shall assign risk weights to these exposures according to Table 1, as follows:

Table 1

Remaining Maturity

Category 1

Category 2

Category 3

Category 4

Category 5

Less than 2,5 years

50 %

70 %

115 %

250 %

0 %

Equal or more than 2,5 years

70 %

90 %

115 %

250 %

0 %

The competent authorities may authorise a credit institution generally to assign preferential risk weights of 50 % to exposures in category 1, and a 70 % risk weight to exposures in category 2, provided the credit institution's underwriting characteristics and other risk characteristics are substantially strong for the relevant category.

In assigning risk weights to specialised lending exposures credit institutions shall take into account the following factors: financial strength, political and legal environment, transaction and/or asset characteristics, strength of the sponsor and developer, including any public private partnership income stream, and security package.

| 7. | For their purchased corporate receivables credit institutions shall comply with the minimum requirements set out in points 105 to 109 of Part 4. For purchased corporate receivables that comply in addition with the conditions set out in point 14, and where it would be unduly burdensome for a credit institution to use the risk quantification standards for corporate exposures as set out in Part 4 for these receivables, the risk quantification standards for retail exposures as set out in Part 4 may be used. |
| --- | --- |

7.

For their purchased corporate receivables credit institutions shall comply with the minimum requirements set out in points 105 to 109 of Part 4. For purchased corporate receivables that comply in addition with the conditions set out in point 14, and where it would be unduly burdensome for a credit institution to use the risk quantification standards for corporate exposures as set out in Part 4 for these receivables, the risk quantification standards for retail exposures as set out in Part 4 may be used.

| 8. | For purchased corporate receivables, refundable purchase discounts, collateral or partial guarantees that provide first-loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under the IRB securitisation framework. |
| --- | --- |

8.

For purchased corporate receivables, refundable purchase discounts, collateral or partial guarantees that provide first-loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under the IRB securitisation framework.

| 9. | Where an institution provides credit protection for a number of exposures under terms that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, if the product has an external credit assessment from an eligible ECAI the risk weights set out in Articles 94 to 101 will be applied. If the product is not rated by an eligible ECAI, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures where the sum of the expected loss amount multiplied by 12,5 and the risk weighted exposure amount shall not exceed the nominal amount of the protection provided by the credit derivative multiplied by 12,5. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation. |
| --- | --- |

9.

Where an institution provides credit protection for a number of exposures under terms that the nth default among the exposures shall trigger payment and that this credit event shall terminate the contract, if the product has an external credit assessment from an eligible ECAI the risk weights set out in Articles 94 to 101 will be applied. If the product is not rated by an eligible ECAI, the risk weights of the exposures included in the basket will be aggregated, excluding n-1 exposures where the sum of the expected loss amount multiplied by 12,5 and the risk weighted exposure amount shall not exceed the nominal amount of the protection provided by the credit derivative multiplied by 12,5. The n-1 exposures to be excluded from the aggregation shall be determined on the basis that they shall include those exposures each of which produces a lower risk-weighted exposure amount than the risk-weighted exposure amount of any of the exposures included in the aggregation.

1.2.   Risk weighted exposure amounts for retail exposures

| 10. | Subject to points 12 and 13, the risk weighted exposure amounts for retail exposures shall be calculated according to the following formulae:
  Correlation (R) = 0,03 × (1 - EXP (- 35 * PD ))/(1 - EXP (- 35)) + 0,16 * [1 - (1 - EXP (- 35 * PD ))/(1 - EXP (- 35))]
  Risk weight (RW):
  (LGD * N[(1 - R) 0,5 * G(PD) + (R/(1 - R)) 0,5 * G(0,999)] - PD * LGD) * 12,5 * 1,06
  N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that = z).
  For PD = 1 (defaulted exposure), RW shall be Max {0, 12,5 * (LGD-ELBE)},
  where ELBE shall be the credit institution's best estimate of expected loss for the defaulted exposure according to point 80 of Part 4.
  Risk-weighted exposure amount = RW * exposure value. |
| --- | --- |

10.

Subject to points 12 and 13, the risk weighted exposure amounts for retail exposures shall be calculated according to the following formulae:

Correlation (R) = 0,03 × (1 - EXP (- 35 * PD ))/(1 - EXP (- 35)) + 0,16 * [1 - (1 - EXP (- 35 * PD ))/(1 - EXP (- 35))]

Risk weight (RW):

(LGD * N[(1 - R) 0,5 * G(PD) + (R/(1 - R)) 0,5 * G(0,999)] - PD * LGD) * 12,5 * 1,06

N(x) denotes the cumulative distribution function for a standard normal random variable (i.e. the probability that a normal random variable with mean zero and variance of one is less than or equal to x). denotes the inverse cumulative distribution function for a standard normal random variable (i.e. the value x such that = z).

For PD = 1 (defaulted exposure), RW shall be Max {0, 12,5 * (LGD-ELBE)},

where ELBE shall be the credit institution's best estimate of expected loss for the defaulted exposure according to point 80 of Part 4.

Risk-weighted exposure amount = RW * exposure value.

| 11. | The risk weighted exposure amount for each exposure to small and medium sized entities as defined in Article 86(4) which meets the requirements set out in Annex VIII, Part 1, point 29 and Annex VIII, Part 2, point 22 may be calculated according to point 4. |
| --- | --- |

11.

The risk weighted exposure amount for each exposure to small and medium sized entities as defined in Article 86(4) which meets the requirements set out in Annex VIII, Part 1, point 29 and Annex VIII, Part 2, point 22 may be calculated according to point 4.

| 12. | For retail exposures secured by real estate collateral a correlation (R) of 0,15 shall replace the figure produced by the correlation formula in point 10. |
| --- | --- |

12.

For retail exposures secured by real estate collateral a correlation (R) of 0,15 shall replace the figure produced by the correlation formula in point 10.

| 13. | For qualifying revolving retail exposures as defined in points (a) to (e), a correlation (R) of 0,04 shall replace the figure produced by the correlation formula in point 10.
  Exposures shall qualify as qualifying revolving retail exposures if they meet the following conditions:






  (a) | The exposures are to individuals; |
| --- | --- | --- |

13.

For qualifying revolving retail exposures as defined in points (a) to (e), a correlation (R) of 0,04 shall replace the figure produced by the correlation formula in point 10.

Exposures shall qualify as qualifying revolving retail exposures if they meet the following conditions:

(a)

The exposures are to individuals;

| (b) | The exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the credit institution. (In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the credit institution.) Undrawn commitments may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation; |
| --- | --- |

(b)

The exposures are revolving, unsecured, and to the extent they are not drawn immediately and unconditionally, cancellable by the credit institution. (In this context revolving exposures are defined as those where customers' outstanding balances are permitted to fluctuate based on their decisions to borrow and repay, up to a limit established by the credit institution.) Undrawn commitments may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation;

| (c) | The maximum exposure to a single individual in the sub-portfolio is 100 000 Euro or less; |
| --- | --- |

(c)

The maximum exposure to a single individual in the sub-portfolio is 100 000 Euro or less;

| (d) | The credit institution can demonstrate that the use of the correlation of this point is limited to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands. Competent authorities shall review the relative volatility of loss rates across the qualifying revolving retail sub-portfolios, as well the aggregate qualifying revolving retail portfolio, and intend to share information on the typical characteristics of qualifying revolving retail loss rates across jurisdictions; and |
| --- | --- |

(d)

The credit institution can demonstrate that the use of the correlation of this point is limited to portfolios that have exhibited low volatility of loss rates, relative to their average level of loss rates, especially within the low PD bands. Competent authorities shall review the relative volatility of loss rates across the qualifying revolving retail sub-portfolios, as well the aggregate qualifying revolving retail portfolio, and intend to share information on the typical characteristics of qualifying revolving retail loss rates across jurisdictions; and

| (e) | The competent authority concurs that treatment as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of the sub-portfolio. |
| --- | --- |

(e)

The competent authority concurs that treatment as a qualifying revolving retail exposure is consistent with the underlying risk characteristics of the sub-portfolio.

By way of derogation from point (b), competent authorities may waive the requirement that the exposure be unsecured in respect of collateralised credit facilities linked to a wage account. In this case amounts recovered from the collateral shall not be taken into account in the LGD estimate.

| 14. | To be eligible for the retail treatment, purchased receivables shall comply with the minimum requirements set out in Part 4, points 105 to 109 and the following conditions:






  (a) | The credit institution has purchased the receivables from unrelated, third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the credit institution itself; |
| --- | --- | --- |

14.

To be eligible for the retail treatment, purchased receivables shall comply with the minimum requirements set out in Part 4, points 105 to 109 and the following conditions:

(a)

The credit institution has purchased the receivables from unrelated, third party sellers, and its exposure to the obligor of the receivable does not include any exposures that are directly or indirectly originated by the credit institution itself;

| (b) | The purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible; |
| --- | --- |

(b)

The purchased receivables shall be generated on an arm's-length basis between the seller and the obligor. As such, inter-company accounts receivables and receivables subject to contra-accounts between firms that buy and sell to each other are ineligible;

| (c) | The purchasing credit institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and |
| --- | --- |

(c)

The purchasing credit institution has a claim on all proceeds from the purchased receivables or a pro-rata interest in the proceeds; and

| (d) | The portfolio of purchased receivables is sufficiently diversified. |
| --- | --- |

(d)

The portfolio of purchased receivables is sufficiently diversified.

| 15. | For purchased receivables, refundable purchase discounts, collateral or partial guarantees that provide first-loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under the IRB securitisation framework. |
| --- | --- |

15.

For purchased receivables, refundable purchase discounts, collateral or partial guarantees that provide first-loss protection for default losses, dilution losses, or both, may be treated as first-loss positions under the IRB securitisation framework.

| 16. | For hybrid pools of purchased retail receivables where purchasing credit institutions cannot separate exposures secured by real estate collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply. |
| --- | --- |

16.

For hybrid pools of purchased retail receivables where purchasing credit institutions cannot separate exposures secured by real estate collateral and qualifying revolving retail exposures from other retail exposures, the retail risk weight function producing the highest capital requirements for those exposures shall apply.

1.3.   Risk weighted exposure amounts for equity exposures

| 17. | A credit institution may employ different approaches to different portfolios where the credit institution itself uses different approaches internally. Where a credit institution uses different approaches, the credit institution shall demonstrate to the competent authorities that the choice is made consistently and is not determined by regulatory arbitrage considerations. |
| --- | --- |

17.

A credit institution may employ different approaches to different portfolios where the credit institution itself uses different approaches internally. Where a credit institution uses different approaches, the credit institution shall demonstrate to the competent authorities that the choice is made consistently and is not determined by regulatory arbitrage considerations.

| 18. | Notwithstanding point 17, competent authorities may allow the attribution of risk weighted exposure amounts for equity exposures to ancillary services undertakings according to the treatment of other non credit-obligation assets. |
| --- | --- |

18.

Notwithstanding point 17, competent authorities may allow the attribution of risk weighted exposure amounts for equity exposures to ancillary services undertakings according to the treatment of other non credit-obligation assets.

1.3.1.   Simple risk weight approach

| 19. | The risk weighted exposure amount shall be calculated according to the following formula:
  Risk weight (RW) = 190 % for private equity exposures in sufficiently diversified portfolios.
  Risk weight (RW) = 290 % for exchange traded equity exposures.
  Risk weight (RW) = 370 % for all other equity exposures.
  Risk-weighted exposure amount = RW * exposure value. |
| --- | --- |

19.

The risk weighted exposure amount shall be calculated according to the following formula:

Risk weight (RW) = 190 % for private equity exposures in sufficiently diversified portfolios.

Risk weight (RW) = 290 % for exchange traded equity exposures.

Risk weight (RW) = 370 % for all other equity exposures.

Risk-weighted exposure amount = RW * exposure value.

| 20. | Short cash positions and derivative instruments held in the non-trading book are permitted to offset long positions in the same individual stocks provided that these instruments have been explicitly designated as hedges of specific equity exposures and that they provide a hedge for at least another year. Other short positions are to be treated as if they are long positions with the relevant risk weight assigned to the absolute value of each position. In the context of maturity mismatched positions, the method is that for corporate exposures as set out in point 16 of Annex VII, Part 2. |
| --- | --- |

20.

Short cash positions and derivative instruments held in the non-trading book are permitted to offset long positions in the same individual stocks provided that these instruments have been explicitly designated as hedges of specific equity exposures and that they provide a hedge for at least another year. Other short positions are to be treated as if they are long positions with the relevant risk weight assigned to the absolute value of each position. In the context of maturity mismatched positions, the method is that for corporate exposures as set out in point 16 of Annex VII, Part 2.

| 21. | Credit institutions may recognise unfunded credit protection obtained on an equity exposure in accordance with the methods set out in Articles 90 to 93. |
| --- | --- |

21.

Credit institutions may recognise unfunded credit protection obtained on an equity exposure in accordance with the methods set out in Articles 90 to 93.

1.3.2.   PD/LGD approach

| 22. | The risk weighted exposure amounts shall be calculated according to the formulas in point 3. If credit institutions do not have sufficient information to use the definition of default set out in points 44 to 48 of Part 4, a scaling factor of 1,5 shall be assigned to the risk weights. |
| --- | --- |

22.

The risk weighted exposure amounts shall be calculated according to the formulas in point 3. If credit institutions do not have sufficient information to use the definition of default set out in points 44 to 48 of Part 4, a scaling factor of 1,5 shall be assigned to the risk weights.

| 23. | At the individual exposure level the sum of the expected loss amount multiplied by 12,5 and the risk weighted exposure amount shall not exceed the exposure value multiplied by 12,5. |
| --- | --- |

23.

At the individual exposure level the sum of the expected loss amount multiplied by 12,5 and the risk weighted exposure amount shall not exceed the exposure value multiplied by 12,5.

| 24. | Credit institutions may recognise unfunded credit protection obtained on an equity exposure in accordance with the methods set out in Articles 90 to 93. This shall be subject to an LGD of 90 % on the exposure to the provider of the hedge. For private equity exposures in sufficiently diversified portfolios an LGD of 65 % may be used. For these purposes M shall be 5 years. |
| --- | --- |

24.

Credit institutions may recognise unfunded credit protection obtained on an equity exposure in accordance with the methods set out in Articles 90 to 93. This shall be subject to an LGD of 90 % on the exposure to the provider of the hedge. For private equity exposures in sufficiently diversified portfolios an LGD of 65 % may be used. For these purposes M shall be 5 years.

1.3.3.   Internal models approach

| 25. | The risk weighted exposure amount shall be the potential loss on the credit institution's equity exposures as derived using internal value-at-risk models subject to the 99th percentile, one-tailed confidence interval of the difference between quarterly returns and an appropriate risk-free rate computed over a long-term sample period, multiplied by 12,5. The risk weighted exposure amounts at the individual exposure level shall not be less than the sum of minimum risk weighted exposure amounts required under the PD/LGD Approach and the corresponding expected loss amounts multiplied by 12,5 and calculated on the basis of the PD values set out in Part 2, point 24(a) and the corresponding LGD values set out in Part 2, points 25 and 26. |
| --- | --- |

25.

The risk weighted exposure amount shall be the potential loss on the credit institution's equity exposures as derived using internal value-at-risk models subject to the 99th percentile, one-tailed confidence interval of the difference between quarterly returns and an appropriate risk-free rate computed over a long-term sample period, multiplied by 12,5. The risk weighted exposure amounts at the individual exposure level shall not be less than the sum of minimum risk weighted exposure amounts required under the PD/LGD Approach and the corresponding expected loss amounts multiplied by 12,5 and calculated on the basis of the PD values set out in Part 2, point 24(a) and the corresponding LGD values set out in Part 2, points 25 and 26.

| 26. | Credit institutions may recognise unfunded credit protection obtained on an equity position. |
| --- | --- |

26.

Credit institutions may recognise unfunded credit protection obtained on an equity position.

1.4.   Risk weighted exposure amounts for other non credit-obligation assets

| 27. | The risk weighted exposure amounts shall be calculated according to the formula:
  Risk-weighted exposure amount = 100 % * exposure value,
  except for when the exposure is a residual value in which case it should be provisioned for each year and will be calculated as follows:
  1/t * 100 % * exposure value,
  where t is the number of years of the lease contract term. |
| --- | --- |

27.

The risk weighted exposure amounts shall be calculated according to the formula:

Risk-weighted exposure amount = 100 % * exposure value,

except for when the exposure is a residual value in which case it should be provisioned for each year and will be calculated as follows:

1/t * 100 % * exposure value,

where t is the number of years of the lease contract term.

2.   CALCULATION OF RISK WEIGHTED EXPOSURE AMOUNTS FOR DILUTION RISK OF PURCHASED RECEIVABLES

| 28. | Risk weights for dilution risk of purchased corporate and retail receivables:
  The risk weights shall be calculated according to the formula in point 3. The input parameters PD and LGD shall be determined as set out in Part 2, the exposure value shall be determined as set out in Part 3 and M shall be 1 year. If credit institutions can demonstrate to the competent authorities that dilution risk is immaterial, it need not be recognised. |
| --- | --- |

28.

Risk weights for dilution risk of purchased corporate and retail receivables:

The risk weights shall be calculated according to the formula in point 3. The input parameters PD and LGD shall be determined as set out in Part 2, the exposure value shall be determined as set out in Part 3 and M shall be 1 year. If credit institutions can demonstrate to the competent authorities that dilution risk is immaterial, it need not be recognised.

3.   CALCULATION OF EXPECTED LOSS AMOUNTS

| 29. | Unless noted otherwise, the input parameters PD and LGD shall be determined as set out in Part 2 and the exposure value shall be determined as set out in Part 3. |
| --- | --- |

29.

Unless noted otherwise, the input parameters PD and LGD shall be determined as set out in Part 2 and the exposure value shall be determined as set out in Part 3.

| 30. | The expected loss amounts for exposures to corporates, institutions, central governments and central banks and retail exposures shall be calculated according to the following formulae:
  Expected loss (EL) = PD × LGD.
  Expected loss amount = EL × exposure value.
  For defaulted exposures (PD =1) where credit institutions use own estimates of LGDs, EL shall be ELBE, the credit institution's best estimate of expected loss for the defaulted exposure according to Part 4, point 80.
  For exposures subject to the treatment set out in Part 1, point 4, EL shall be 0. |
| --- | --- |

30.

The expected loss amounts for exposures to corporates, institutions, central governments and central banks and retail exposures shall be calculated according to the following formulae:

Expected loss (EL) = PD × LGD.

Expected loss amount = EL × exposure value.

For defaulted exposures (PD =1) where credit institutions use own estimates of LGDs, EL shall be ELBE, the credit institution's best estimate of expected loss for the defaulted exposure according to Part 4, point 80.

For exposures subject to the treatment set out in Part 1, point 4, EL shall be 0.

| 31. | The EL values for specialised lending exposures where credit institutions use the methods set out in point 6 for assigning risk weights shall be assigned according to Table 2.
  Table 2










  Remaining Maturity | Category 1 | Category 2 | Category 3 | Category 4 | Category 5 |
| --- | --- | --- | --- | --- | --- | --- |
| Less than 2,5 years | 0 % | 0,4 % | 2,8 % | 8 % | 50 % |
| Equal to or more than 2,5 years | 0,4 % | 0,8 % | 2,8 % | 8 % | 50 % |

31.

The EL values for specialised lending exposures where credit institutions use the methods set out in point 6 for assigning risk weights shall be assigned according to Table 2.

Table 2

Remaining Maturity

Category 1

Category 2

Category 3

Category 4

Category 5

Less than 2,5 years

0 %

0,4 %

2,8 %

8 %

50 %

Equal to or more than 2,5 years

0,4 %

0,8 %

2,8 %

8 %

50 %

Where competent authorities have authorised a credit institution generally to assign preferential risk weights of 50 % to exposures in category 1, and 70 % to exposures in category 2, the EL value for exposures in category 1 shall be 0 %, and for exposures in category 2 shall be 0,4 %.

| 32. | The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 19 to 21, shall be calculated according to the following formula:
  Expected loss amount = EL × exposure value
  The EL values shall be the following:
  Expected loss (EL) = 0,8 % for private equity exposures in sufficiently diversified portfolios
  Expected loss (EL) = 0,8 % for exchange traded equity exposures
  Expected loss (EL) = 2,4 % for all other equity exposures. |
| --- | --- |

32.

The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 19 to 21, shall be calculated according to the following formula:

Expected loss amount = EL × exposure value

The EL values shall be the following:

Expected loss (EL) = 0,8 % for private equity exposures in sufficiently diversified portfolios

Expected loss (EL) = 0,8 % for exchange traded equity exposures

Expected loss (EL) = 2,4 % for all other equity exposures.

| 33. | The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 22 to 24 shall be calculated according to the following formulae:
  Expected loss (EL) = PD × LGD and
  Expected loss amount = EL × exposure value |
| --- | --- |

33.

The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 22 to 24 shall be calculated according to the following formulae:

Expected loss (EL) = PD × LGD and

Expected loss amount = EL × exposure value

| 34. | The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 25 to 26 shall be 0 %. |
| --- | --- |

34.

The expected loss amounts for equity exposures where the risk weighted exposure amounts are calculated according to the methods set out in points 25 to 26 shall be 0 %.

| 35. | The expected loss amounts for dilution risk of purchased receivables shall be calculated according to the following formula:
  Expected loss (EL) = PD × LGD and
  Expected loss amount = EL × exposure value |
| --- | --- |

35.

The expected loss amounts for dilution risk of purchased receivables shall be calculated according to the following formula:

Expected loss (EL) = PD × LGD and

Expected loss amount = EL × exposure value

4.   TREATMENT OF EXPECTED LOSS AMOUNTS

| 36. | The expected loss amounts calculated in accordance with points 30, 31 and 35 shall be subtracted from the sum of value adjustments and provisions related to these exposures. Discounts on balance sheet exposures purchased when in default according to Part 3, point 1 shall be treated in the same manner as value adjustments. Expected loss amounts for securitised exposures and value adjustments and provisions related to these exposures shall not be included in this calculation. |
| --- | --- |

36.

The expected loss amounts calculated in accordance with points 30, 31 and 35 shall be subtracted from the sum of value adjustments and provisions related to these exposures. Discounts on balance sheet exposures purchased when in default according to Part 3, point 1 shall be treated in the same manner as value adjustments. Expected loss amounts for securitised exposures and value adjustments and provisions related to these exposures shall not be included in this calculation.

Part 2 — PD, LGD and Maturity

| 1. | The input parameters PD, LGD and maturity value (M) into the calculation of risk weighted exposure amounts and expected loss amounts specified in Part 1 shall be those estimated by the credit institution in accordance with Part 4, subject to the following provisions. |
| --- | --- |

1.

The input parameters PD, LGD and maturity value (M) into the calculation of risk weighted exposure amounts and expected loss amounts specified in Part 1 shall be those estimated by the credit institution in accordance with Part 4, subject to the following provisions.

1.   EXPOSURES TO CORPORATES, INSTITUTIONS AND CENTRAL GOVERNMENTS AND CENTRAL BANKS

1.1.   PD

| 2. | The PD of an exposure to a corporate or an institution shall be at least 0,03 %. |
| --- | --- |

2.

The PD of an exposure to a corporate or an institution shall be at least 0,03 %.

| 3. | For purchased corporate receivables in respect of which a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4, the PDs for these exposures shall be determined according to the following methods: for senior claims on purchased corporate receivables PD shall be the credit institutions estimate of EL divided by LGD for these receivables. For subordinated claims on purchased corporate receivables PD shall be the credit institution's estimate of EL. If a credit institution is permitted to use own LGD estimates for corporate exposures and it can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a reliable manner, the PD estimate may be used |
| --- | --- |

3.

For purchased corporate receivables in respect of which a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4, the PDs for these exposures shall be determined according to the following methods: for senior claims on purchased corporate receivables PD shall be the credit institutions estimate of EL divided by LGD for these receivables. For subordinated claims on purchased corporate receivables PD shall be the credit institution's estimate of EL. If a credit institution is permitted to use own LGD estimates for corporate exposures and it can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a reliable manner, the PD estimate may be used

| 4. | The PD of obligors in default shall be 100 %. |
| --- | --- |

4.

The PD of obligors in default shall be 100 %.

| 5. | Credit institutions may recognise unfunded credit protection in the PD in accordance with the provisions of Articles 90 to 93. For dilution risk, however, competent authorities may recognise as eligible unfunded credit protection providers other than those indicated in Annex VIII, Part 1. |
| --- | --- |

5.

Credit institutions may recognise unfunded credit protection in the PD in accordance with the provisions of Articles 90 to 93. For dilution risk, however, competent authorities may recognise as eligible unfunded credit protection providers other than those indicated in Annex VIII, Part 1.

| 6. | Credit institutions using own LGD estimates may recognise unfunded credit protection by adjusting PDs subject to point 10. |
| --- | --- |

6.

Credit institutions using own LGD estimates may recognise unfunded credit protection by adjusting PDs subject to point 10.

| 7. | For dilution risk of purchased corporate receivables, PD shall be set equal to EL estimate for dilution risk. If a credit institution is permitted to use own LGD estimates for corporate exposures and it can decompose its EL estimates for dilution risk of purchased corporate receivables into PDs and LGDs in a reliable manner, the PD estimate may be used. Credit institutions may recognise unfunded credit protection in the PD in accordance with the provisions of Articles 90 to 93. Competent authorities may recognise as eligible unfunded credit protection providers other than those indicated in Annex VIII, Part 1. If a credit institution is permitted to use own LGD estimates for dilution risk of purchased corporate receivables, it may recognise unfunded credit protection by adjusting PDs subject of point 10. |
| --- | --- |

7.

For dilution risk of purchased corporate receivables, PD shall be set equal to EL estimate for dilution risk. If a credit institution is permitted to use own LGD estimates for corporate exposures and it can decompose its EL estimates for dilution risk of purchased corporate receivables into PDs and LGDs in a reliable manner, the PD estimate may be used. Credit institutions may recognise unfunded credit protection in the PD in accordance with the provisions of Articles 90 to 93. Competent authorities may recognise as eligible unfunded credit protection providers other than those indicated in Annex VIII, Part 1. If a credit institution is permitted to use own LGD estimates for dilution risk of purchased corporate receivables, it may recognise unfunded credit protection by adjusting PDs subject of point 10.

1.2.   LGD

| 8. | Credit institutions shall use the following LGD values:






  (a) | Senior exposures without eligible collateral: 45 %; |
| --- | --- | --- |

8.

Credit institutions shall use the following LGD values:

(a)

Senior exposures without eligible collateral: 45 %;

| (b) | Subordinated exposures without eligible collateral: 75 %; |
| --- | --- |

(b)

Subordinated exposures without eligible collateral: 75 %;

| (c) | Credit institutions may recognise funded and unfunded credit protection in the LGD in accordance with Articles 90 to 93; |
| --- | --- |

(c)

Credit institutions may recognise funded and unfunded credit protection in the LGD in accordance with Articles 90 to 93;

| (d) | Covered bonds as defined in Annex VI, Part 1, points 68 to 70 may be assigned an LGD value of 12,5 %; |
| --- | --- |

(d)

Covered bonds as defined in Annex VI, Part 1, points 68 to 70 may be assigned an LGD value of 12,5 %;

| (e) | For senior purchased corporate receivables exposures where a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4: 45 %; |
| --- | --- |

(e)

For senior purchased corporate receivables exposures where a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4: 45 %;

| (f) | For subordinated purchased corporate receivables exposures where a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4: 100 %; and |
| --- | --- |

(f)

For subordinated purchased corporate receivables exposures where a credit institution cannot demonstrate that its PD estimates meet the minimum requirements set out in Part 4: 100 %; and

| (g) | For dilution risk of purchased corporate receivables: 75 %.
  Until 31 December 2010, covered bonds as defined in Annex VI, Part 1, points 68 to 70 may be assigned an LGD value of 11,25 % if:






  — | assets as set out in Annex VI, Part 1, point 68(a) to (c) collateralising the bonds all qualify for credit quality step 1 as set out in that Annex; |
| --- | --- | --- |

(g)

For dilution risk of purchased corporate receivables: 75 %.

Until 31 December 2010, covered bonds as defined in Annex VI, Part 1, points 68 to 70 may be assigned an LGD value of 11,25 % if:

—

assets as set out in Annex VI, Part 1, point 68(a) to (c) collateralising the bonds all qualify for credit quality step 1 as set out in that Annex;

| — | where assets set out in Annex VI, Part 1, point 68(d) and (e) are used as collateral, the respective upper limits laid down in each of those points is 10 % of the nominal amount of the outstanding issue; |
| --- | --- |

—

where assets set out in Annex VI, Part 1, point 68(d) and (e) are used as collateral, the respective upper limits laid down in each of those points is 10 % of the nominal amount of the outstanding issue;

| — | assets as set out in Annex VI, Part 1, point 68(f) are not used as collateral; or |
| --- | --- |

—

assets as set out in Annex VI, Part 1, point 68(f) are not used as collateral; or

| — | the covered bonds are the subject of a credit assessment by a nominated ECAI, and the ECAI places them in the most favourable category of credit assessment that the ECAI could make in respect of covered bonds. |
| --- | --- |

—

the covered bonds are the subject of a credit assessment by a nominated ECAI, and the ECAI places them in the most favourable category of credit assessment that the ECAI could make in respect of covered bonds.

By 31 December 2010, this derogation shall be reviewed and consequent to such review the Commission may make proposals in accordance with the procedure referred to in Article 151(2).

| 9. | Notwithstanding point 8, for dilution and default risk if a credit institution is permitted to use own LGD estimates for corporate exposures and it can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a reliable manner, the LGD estimate for purchased corporate receivables may be used. |
| --- | --- |

9.

Notwithstanding point 8, for dilution and default risk if a credit institution is permitted to use own LGD estimates for corporate exposures and it can decompose its EL estimates for purchased corporate receivables into PDs and LGDs in a reliable manner, the LGD estimate for purchased corporate receivables may be used.

| 10. | Notwithstanding point 8, if a credit institution is permitted to use own LGD estimates for exposures to corporates, institutions, central governments and central banks, unfunded credit protection may be recognised by adjusting PD and/or LGD subject to minimum requirements as specified in Part 4 and approval of competent authorities. A credit institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor. |
| --- | --- |

10.

Notwithstanding point 8, if a credit institution is permitted to use own LGD estimates for exposures to corporates, institutions, central governments and central banks, unfunded credit protection may be recognised by adjusting PD and/or LGD subject to minimum requirements as specified in Part 4 and approval of competent authorities. A credit institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor.

| 11. | Notwithstanding points 8 and 10, for the purposes of Part 1, point 4, the LGD of a comparable direct exposure to the protection provider shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively. |
| --- | --- |

11.

Notwithstanding points 8 and 10, for the purposes of Part 1, point 4, the LGD of a comparable direct exposure to the protection provider shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively.

1.3.   Maturity

| 12. | Subject to point 13, credit institutions shall assign to exposures arising from repurchase transactions or securities or commodities lending or borrowing transactions a maturity value (M) of 0,5 years and to all other exposures an M of 2,5 years. Competent authorities may require all credit institutions in their jurisdiction to use M for each exposure as set out under point 13. |
| --- | --- |

12.

Subject to point 13, credit institutions shall assign to exposures arising from repurchase transactions or securities or commodities lending or borrowing transactions a maturity value (M) of 0,5 years and to all other exposures an M of 2,5 years. Competent authorities may require all credit institutions in their jurisdiction to use M for each exposure as set out under point 13.

| 13. | Credit institutions permitted to use own LGDs and/or own conversion factors for exposures to corporates, institutions or central governments and central banks shall calculate M for each of these exposures as set out in (a) to (e) and subject to points 14 to 16. In all cases, M shall be no greater than 5 years:






  (a) | For an instrument subject to a cash flow schedule, M shall be calculated according to the following formula:

  where CFt denotes the cash flows (principal, interest payments and fees) contractually payable by the obligor in period t; |
| --- | --- | --- |

13.

Credit institutions permitted to use own LGDs and/or own conversion factors for exposures to corporates, institutions or central governments and central banks shall calculate M for each of these exposures as set out in (a) to (e) and subject to points 14 to 16. In all cases, M shall be no greater than 5 years:

(a)

For an instrument subject to a cash flow schedule, M shall be calculated according to the following formula:

where CFt denotes the cash flows (principal, interest payments and fees) contractually payable by the obligor in period t;

| (b) | For derivatives subject to a master netting agreement, M shall be the weighted average remaining maturity of the exposure, where M shall be at least 1 year. The notional amount of each exposure shall be used for weighting the maturity; |
| --- | --- |

(b)

For derivatives subject to a master netting agreement, M shall be the weighted average remaining maturity of the exposure, where M shall be at least 1 year. The notional amount of each exposure shall be used for weighting the maturity;

| (c) | For exposures arising from fully or nearly-fully collateralised derivative instruments (listed in Annex IV) transactions and fully or nearly-fully collateralised margin lending transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least 10 days. The notional amount of each transaction shall be used for weighting the maturity; |
| --- | --- |

(c)

For exposures arising from fully or nearly-fully collateralised derivative instruments (listed in Annex IV) transactions and fully or nearly-fully collateralised margin lending transactions which are subject to a master netting agreement, M shall be the weighted average remaining maturity of the transactions where M shall be at least 10 days. The notional amount of each transaction shall be used for weighting the maturity;

| (d) | If a credit institution is permitted to use own PD estimates for purchased corporate receivables, for drawn amounts M shall equal the purchased receivables exposure weighted average maturity, where M shall be at least 90 days. This same value of M shall also be used for undrawn amounts under a committed purchase facility provided the facility contains effective covenants, early amortisation triggers, or other features that protect the purchasing credit institution against a significant deterioration in the quality of the future receivables it is required to purchase over the facility's term. Absent such effective protections, M for undrawn amounts shall be calculated as the sum of the longest-dated potential receivable under the purchase agreement and the remaining maturity of the purchase facility, where M shall be at least 90 days; |
| --- | --- |

(d)

If a credit institution is permitted to use own PD estimates for purchased corporate receivables, for drawn amounts M shall equal the purchased receivables exposure weighted average maturity, where M shall be at least 90 days. This same value of M shall also be used for undrawn amounts under a committed purchase facility provided the facility contains effective covenants, early amortisation triggers, or other features that protect the purchasing credit institution against a significant deterioration in the quality of the future receivables it is required to purchase over the facility's term. Absent such effective protections, M for undrawn amounts shall be calculated as the sum of the longest-dated potential receivable under the purchase agreement and the remaining maturity of the purchase facility, where M shall be at least 90 days;

| (e) | For any other instrument than those mentioned in this point or when a credit institution is not in a position to calculate M as set out in (a), M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least 1 year ; |
| --- | --- |

(e)

For any other instrument than those mentioned in this point or when a credit institution is not in a position to calculate M as set out in (a), M shall be the maximum remaining time (in years) that the obligor is permitted to take to fully discharge its contractual obligations, where M shall be at least 1 year ;

| f) | for credit institutions using the Internal Model Method set out in Annex III, Part 6 to calculate the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year according to the following formula:

  where:
  df = the risk-free discount factor for future time period tk and the remaining symbols are defined in Annex III, Part 6.
  Notwithstanding the first paragraph of point 13(f), a credit institution that uses an internal model to calculate a one-sided credit valuation adjustment (CVA) may use, subject to the approval of the competent authorities, the effective credit duration estimated by the internal model as M.
  Subject to paragraph 14, for netting sets in which all contracts have an original maturity of less than one year the formula in point (a) shall apply; and |
| --- | --- |

f)

for credit institutions using the Internal Model Method set out in Annex III, Part 6 to calculate the exposure values, M shall be calculated for exposures to which they apply this method and for which the maturity of the longest-dated contract contained in the netting set is greater than one year according to the following formula:

where:

df = the risk-free discount factor for future time period tk and the remaining symbols are defined in Annex III, Part 6.

Notwithstanding the first paragraph of point 13(f), a credit institution that uses an internal model to calculate a one-sided credit valuation adjustment (CVA) may use, subject to the approval of the competent authorities, the effective credit duration estimated by the internal model as M.

Subject to paragraph 14, for netting sets in which all contracts have an original maturity of less than one year the formula in point (a) shall apply; and

| g) | for the purposes of Part 1, point 4, M shall be the effective maturity of the credit protection but at least 1 year. |
| --- | --- |

g)

for the purposes of Part 1, point 4, M shall be the effective maturity of the credit protection but at least 1 year.

| 14. | Notwithstanding point 13(a), (b), (d) and (e), M shall be at least one-day for:






  — | fully or nearly-fully collateralised derivative instruments listed in Annex IV; |
| --- | --- | --- |

14.

Notwithstanding point 13(a), (b), (d) and (e), M shall be at least one-day for:

—

fully or nearly-fully collateralised derivative instruments listed in Annex IV;

| — | fully or nearly-fully collateralised margin lending transactions; and |
| --- | --- |

—

fully or nearly-fully collateralised margin lending transactions; and

| — | repurchase transactions, securities or commodities lending or borrowing transactions |
| --- | --- |

—

repurchase transactions, securities or commodities lending or borrowing transactions

provided the documentation requires daily re-margining and daily revaluation and includes provisions that allow for the prompt liquidation or setoff of collateral in the event of default or failure to re-margin.

In addition, for other short-term exposures specified by the competent authorities which are not Part of the credit institution's ongoing financing of the obligor, M shall be at least one-day. A careful review of the particular circumstances shall be made in each case.

| 15. | The competent authorities may allow for exposures to corporates situated in the Community and having consolidated sales and consolidated assets of less than 500 million Euro the use of M as set out in point 12. Competent authorities may replace 500 million Euro total assets with 1 000 million Euro total assets for corporates which primarily invest in real estate. |
| --- | --- |

15.

The competent authorities may allow for exposures to corporates situated in the Community and having consolidated sales and consolidated assets of less than 500 million Euro the use of M as set out in point 12. Competent authorities may replace 500 million Euro total assets with 1 000 million Euro total assets for corporates which primarily invest in real estate.

| 16. | Maturity mismatches shall be treated as specified in Articles 90 to 93. |
| --- | --- |

16.

Maturity mismatches shall be treated as specified in Articles 90 to 93.

2.   RETAIL EXPOSURES

2.1.   PD

| 17. | The PD of an exposure shall be at least 0,03 %. |
| --- | --- |

17.

The PD of an exposure shall be at least 0,03 %.

| 18. | The PD of obligors or, where an obligation approach is used, of exposures in default shall be 100 %. |
| --- | --- |

18.

The PD of obligors or, where an obligation approach is used, of exposures in default shall be 100 %.

| 19. | For dilution risk of purchased receivables PD shall be set equal to EL estimates for dilution risk. If a credit institution can decompose its EL estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the PD estimate may be used. |
| --- | --- |

19.

For dilution risk of purchased receivables PD shall be set equal to EL estimates for dilution risk. If a credit institution can decompose its EL estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the PD estimate may be used.

| 20. | Unfunded credit protection may be recognised as eligible by adjusting PDs subject to point 22. For dilution risk, where credit institutions do not use own estimates of LGDs, this shall be subject to compliance with Articles 90 to 93; for this purpose competent authorities may recognise as eligible unfunded protection providers other than those indicated in Annex VIII, Part 1. |
| --- | --- |

20.

Unfunded credit protection may be recognised as eligible by adjusting PDs subject to point 22. For dilution risk, where credit institutions do not use own estimates of LGDs, this shall be subject to compliance with Articles 90 to 93; for this purpose competent authorities may recognise as eligible unfunded protection providers other than those indicated in Annex VIII, Part 1.

2.2.   LGD

| 21. | Credit institutions shall provide own estimates of LGDs subject to minimum requirements as specified in Part 4 and approval of competent authorities. For dilution risk of purchased receivables, an LGD value of 75 % shall be used. If a credit institution can decompose its EL estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the LGD estimate may be used. |
| --- | --- |

21.

Credit institutions shall provide own estimates of LGDs subject to minimum requirements as specified in Part 4 and approval of competent authorities. For dilution risk of purchased receivables, an LGD value of 75 % shall be used. If a credit institution can decompose its EL estimates for dilution risk of purchased receivables into PDs and LGDs in a reliable manner, the LGD estimate may be used.

| 22. | Unfunded credit protection may be recognised as eligible by adjusting PD or LGD estimates subject to minimum requirements as specified in Part 4, points 99 to 104 and approval of competent authorities either in support of an individual exposure or a pool of exposures. A credit institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor. |
| --- | --- |

22.

Unfunded credit protection may be recognised as eligible by adjusting PD or LGD estimates subject to minimum requirements as specified in Part 4, points 99 to 104 and approval of competent authorities either in support of an individual exposure or a pool of exposures. A credit institution shall not assign guaranteed exposures an adjusted PD or LGD such that the adjusted risk weight would be lower than that of a comparable, direct exposure to the guarantor.

| 23. | Notwithstanding point 22, for the purposes of Part 1, point 11 the LGD of a comparable direct exposure to the protection provider shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether, in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively. |
| --- | --- |

23.

Notwithstanding point 22, for the purposes of Part 1, point 11 the LGD of a comparable direct exposure to the protection provider shall either be the LGD associated with an unhedged facility to the guarantor or the unhedged facility of the obligor, depending upon whether, in the event both the guarantor and obligor default during the life of the hedged transaction, available evidence and the structure of the guarantee indicate that the amount recovered would depend on the financial condition of the guarantor or obligor, respectively.

3.   EQUITY EXPOSURES SUBJECT TO PD/LGD METHOD

3.1.   PD

| 24. | PDs shall be determined according to the methods for corporate exposures.
  The following minimum PDs shall apply:






  a) | 0,09 % for exchange traded equity exposures where the investment is part of a long-term customer relationship; |
| --- | --- | --- |

24.

PDs shall be determined according to the methods for corporate exposures.

The following minimum PDs shall apply:

a)

0,09 % for exchange traded equity exposures where the investment is part of a long-term customer relationship;

| b) | 0,09 % for non-exchange traded equity exposures where the returns on the investment are based on regular and periodic cash flows not derived from capital gains; |
| --- | --- |

b)

0,09 % for non-exchange traded equity exposures where the returns on the investment are based on regular and periodic cash flows not derived from capital gains;

| c) | 0,40 % for exchange traded equity exposures including other short positions as set out in part 1, point 20; and |
| --- | --- |

c)

0,40 % for exchange traded equity exposures including other short positions as set out in part 1, point 20; and

| d) | 1,25 % for all other equity exposures including other short positions as set out in Part 1, point 20. |
| --- | --- |

d)

1,25 % for all other equity exposures including other short positions as set out in Part 1, point 20.

3.2.   LGD

| 25. | Private equity exposures in sufficiently diversified portfolios may be assigned an LGD of 65 %. |
| --- | --- |

25.

Private equity exposures in sufficiently diversified portfolios may be assigned an LGD of 65 %.

| 26. | All other exposures shall be assigned an LGD of 90 %. |
| --- | --- |

26.

All other exposures shall be assigned an LGD of 90 %.

3.3.   Maturity

| 27. | M assigned to all exposures shall be 5 years. |
| --- | --- |

27.

M assigned to all exposures shall be 5 years.

Part 3 — Exposure value

1.   EXPOSURES TO CORPORATES, INSTITUTIONS, CENTRAL GOVERNMENTS AND CENTRAL BANKS AND RETAIL EXPOSURES.

| 1. | Unless noted otherwise, the exposure value of on-balance sheet exposures shall be measured gross of value adjustments. This rule also applies to assets purchased at a price different than the amount owed. For purchased assets, the difference between the amount owed and the net value recorded on the balance-sheet of credit institutions is denoted discount if the amount owed is larger, and premium if it is smaller. |
| --- | --- |

1.

Unless noted otherwise, the exposure value of on-balance sheet exposures shall be measured gross of value adjustments. This rule also applies to assets purchased at a price different than the amount owed. For purchased assets, the difference between the amount owed and the net value recorded on the balance-sheet of credit institutions is denoted discount if the amount owed is larger, and premium if it is smaller.

| 2. | Where credit institutions use Master netting agreements in relation to repurchase transactions or securities or commodities lending or borrowing transactions, the exposure value shall be calculated in accordance with Articles 90 to 93. |
| --- | --- |

2.

Where credit institutions use Master netting agreements in relation to repurchase transactions or securities or commodities lending or borrowing transactions, the exposure value shall be calculated in accordance with Articles 90 to 93.

| 3. | For on-balance sheet netting of loans and deposits, credit institutions shall apply for the calculation of the exposure value the methods set out in Articles 90 to 93. |
| --- | --- |

3.

For on-balance sheet netting of loans and deposits, credit institutions shall apply for the calculation of the exposure value the methods set out in Articles 90 to 93.

| 4. | The exposure value for leases shall be the discounted minimum lease payments.
  ‘Minimum lease payments’ are the payments over the lease term that the lessee is or can be required to make and any bargain option (i.e. option the exercise of which is reasonably certain). Any guaranteed residual value fulfilling the set of conditions in Annex VIII, Part 1, points 26 to 28 regarding the eligibility of protection providers as well as the minimum requirements for recognising other types of guarantees provided in Annex VIII, Part 2, points 14 to 19 should also be included in the minimum lease payments. |
| --- | --- |

4.

The exposure value for leases shall be the discounted minimum lease payments.

‘Minimum lease payments’ are the payments over the lease term that the lessee is or can be required to make and any bargain option (i.e. option the exercise of which is reasonably certain). Any guaranteed residual value fulfilling the set of conditions in Annex VIII, Part 1, points 26 to 28 regarding the eligibility of protection providers as well as the minimum requirements for recognising other types of guarantees provided in Annex VIII, Part 2, points 14 to 19 should also be included in the minimum lease payments.

| 5. | In the case of any item listed in Annex IV, the exposure value shall be determined by the methods set out in Annex III. |
| --- | --- |

5.

In the case of any item listed in Annex IV, the exposure value shall be determined by the methods set out in Annex III.

| 6. | The exposure value for the calculation of risk weighted exposure amounts of purchased receivables shall be the outstanding amount minus the capital requirements for dilution risk prior to credit risk mitigation. |
| --- | --- |

6.

The exposure value for the calculation of risk weighted exposure amounts of purchased receivables shall be the outstanding amount minus the capital requirements for dilution risk prior to credit risk mitigation.

| 7. | Where an exposure takes the form of securities or commodities sold, posted or lent under repurchase transactions or securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions, the exposure value shall be the value of the securities or commodities determined in accordance with Article 74. Where the Financial Collateral Comprehensive Method as set out under Annex VIII, Part 3 is used, the exposure value shall be increased by the volatility adjustment appropriate to such securities or commodities, as set out therein. The exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions may be determined either in accordance with Annex III or Annex VIII, Part 3, points 12 to 21. |
| --- | --- |

7.

Where an exposure takes the form of securities or commodities sold, posted or lent under repurchase transactions or securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions, the exposure value shall be the value of the securities or commodities determined in accordance with Article 74. Where the Financial Collateral Comprehensive Method as set out under Annex VIII, Part 3 is used, the exposure value shall be increased by the volatility adjustment appropriate to such securities or commodities, as set out therein. The exposure value of repurchase transactions, securities or commodities lending or borrowing transactions, long settlement transactions and margin lending transactions may be determined either in accordance with Annex III or Annex VIII, Part 3, points 12 to 21.

| 8. | Notwithstanding point 7, the exposure value of credit risk exposures outstanding, as determined by the competent authorities, with a central counterparty shall be determined in accordance with Annex III, Part 2, point 6, provided that the central counterparty's counterparty credit risk exposures with all participants in its arrangements are fully collateralised on a daily basis. |
| --- | --- |

8.

Notwithstanding point 7, the exposure value of credit risk exposures outstanding, as determined by the competent authorities, with a central counterparty shall be determined in accordance with Annex III, Part 2, point 6, provided that the central counterparty's counterparty credit risk exposures with all participants in its arrangements are fully collateralised on a daily basis.

| 9. | The exposure value for the following items shall be calculated as the committed but undrawn amount multiplied by a conversion factor.
  Credit institutions shall use the following conversion factors:






  a) | for credit lines which are uncommitted, that are unconditionally cancellable at any time by the credit institution without prior notice, or that effectively provide for automatic cancellation due to deterioration in a borrower's credit worthiness, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, credit institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor. Undrawn retail credit lines may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation; |
| --- | --- | --- |

9.

The exposure value for the following items shall be calculated as the committed but undrawn amount multiplied by a conversion factor.

Credit institutions shall use the following conversion factors:

a)

for credit lines which are uncommitted, that are unconditionally cancellable at any time by the credit institution without prior notice, or that effectively provide for automatic cancellation due to deterioration in a borrower's credit worthiness, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, credit institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor. Undrawn retail credit lines may be considered as unconditionally cancellable if the terms permit the credit institution to cancel them to the full extent allowable under consumer protection and related legislation;

| b) | for short-term letters of credit arising from the movement of goods, a conversion factor of 20 % shall apply for both the issuing and confirming institutions; |
| --- | --- |

b)

for short-term letters of credit arising from the movement of goods, a conversion factor of 20 % shall apply for both the issuing and confirming institutions;

| c) | for undrawn purchase commitments for revolving purchased receivables that are unconditionally cancellable or that effectively provide for automatic cancellation at any time by the institution without prior notice, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, credit institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor; |
| --- | --- |

c)

for undrawn purchase commitments for revolving purchased receivables that are unconditionally cancellable or that effectively provide for automatic cancellation at any time by the institution without prior notice, a conversion factor of 0 % shall apply. To apply a conversion factor of 0 %, credit institutions shall actively monitor the financial condition of the obligor, and their internal control systems shall enable them to immediately detect a deterioration in the credit quality of the obligor;

| d) | for other credit lines, note issuance facilities (NIFs), and revolving underwriting facilities (RUFs), a conversion factor of 75 % shall apply; and |
| --- | --- |

d)

for other credit lines, note issuance facilities (NIFs), and revolving underwriting facilities (RUFs), a conversion factor of 75 % shall apply; and

| e) | credit institutions which meet the minimum requirements for the use of own estimates of conversion factors as specified in Part 4 may use their own estimates of conversion factors across different product types as mentioned in points (a) to (d), subject to approval of the competent authorities. |
| --- | --- |

e)

credit institutions which meet the minimum requirements for the use of own estimates of conversion factors as specified in Part 4 may use their own estimates of conversion factors across different product types as mentioned in points (a) to (d), subject to approval of the competent authorities.

| 10. | Where a commitment refers to the extension of another commitment, the lower of the two conversion factors associated with the individual commitment shall be used. |
| --- | --- |

10.

Where a commitment refers to the extension of another commitment, the lower of the two conversion factors associated with the individual commitment shall be used.

| 11. | For all off-balance sheet items other than those mentioned in points 1 to 9, the exposure value shall be the following percentage of its value:






  — | 100 % if it is a full risk item, |
| --- | --- | --- |

11.

For all off-balance sheet items other than those mentioned in points 1 to 9, the exposure value shall be the following percentage of its value:

—

100 % if it is a full risk item,

| — | 50 % if it is a medium-risk item, |
| --- | --- |

—

50 % if it is a medium-risk item,

| — | 20 % if it is a medium/low-risk item, and |
| --- | --- |

—

20 % if it is a medium/low-risk item, and

| — | 0 % if it is a low-risk item. |
| --- | --- |

—

0 % if it is a low-risk item.

For the purposes of this point the off-balance sheet items shall be assigned to risk categories as indicated in Annex II.

2.   EQUITY EXPOSURES

| 12. | The exposure value shall be the value presented in the financial statements. Admissible equity exposure measures are the following:






  (a) | For investments held at fair value with changes in value flowing directly through income and into own funds, the exposure value is the fair value presented in the balance sheet; |
| --- | --- | --- |

12.

The exposure value shall be the value presented in the financial statements. Admissible equity exposure measures are the following:

(a)

For investments held at fair value with changes in value flowing directly through income and into own funds, the exposure value is the fair value presented in the balance sheet;

| (b) | For investments held at fair value with changes in value not flowing through income but into a tax-adjusted separate component of equity, the exposure value is the fair value presented in the balance sheet; and |
| --- | --- |

(b)

For investments held at fair value with changes in value not flowing through income but into a tax-adjusted separate component of equity, the exposure value is the fair value presented in the balance sheet; and

| (c) | For investments held at cost or at the lower of cost or market, the exposure value is the cost or market value presented in the balance sheet. |
| --- | --- |

(c)

For investments held at cost or at the lower of cost or market, the exposure value is the cost or market value presented in the balance sheet.

3.   OTHER NON CREDIT-OBLIGATION ASSETS

| 13. | The exposure value of other non credit-obligation assets shall be the value presented in the financial statements. |
| --- | --- |

13.

The exposure value of other non credit-obligation assets shall be the value presented in the financial statements.

Part 4 — Minimum Requirements for IRB Approach

1.   RATING SYSTEMS

| 1. | A ‘rating system’ shall comprise all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to grades or pools (rating), and the quantification of default and loss estimates for a certain type of exposure. |
| --- | --- |

1.

A ‘rating system’ shall comprise all of the methods, processes, controls, data collection and IT systems that support the assessment of credit risk, the assignment of exposures to grades or pools (rating), and the quantification of default and loss estimates for a certain type of exposure.

| 2. | If a credit institution uses multiple rating systems, the rationale for assigning an obligor or a transaction to a rating system shall be documented and applied in a manner that appropriately reflects the level of risk. |
| --- | --- |

2.

If a credit institution uses multiple rating systems, the rationale for assigning an obligor or a transaction to a rating system shall be documented and applied in a manner that appropriately reflects the level of risk.

| 3. | Assignment criteria and processes shall be periodically reviewed to determine whether they remain appropriate for the current portfolio and external conditions. |
| --- | --- |

3.

Assignment criteria and processes shall be periodically reviewed to determine whether they remain appropriate for the current portfolio and external conditions.

1.1.   Structure of rating systems

| 4. | Where a credit institution uses direct estimates of risk parameters these may be seen as the outputs of grades on a continuous rating scale. |
| --- | --- |

4.

Where a credit institution uses direct estimates of risk parameters these may be seen as the outputs of grades on a continuous rating scale.

1.1.1.   Exposures to corporates, institutions and central governments and central banks

| 5. | A rating system shall take into account obligor and transaction risk characteristics. |
| --- | --- |

5.

A rating system shall take into account obligor and transaction risk characteristics.

| 6. | A rating system shall have an obligor rating scale which reflects exclusively quantification of the risk of obligor default. The obligor rating scale shall have a minimum of 7 grades for non-defaulted obligors and one for defaulted obligors. |
| --- | --- |

6.

A rating system shall have an obligor rating scale which reflects exclusively quantification of the risk of obligor default. The obligor rating scale shall have a minimum of 7 grades for non-defaulted obligors and one for defaulted obligors.

| 7. | An ‘obligor grade’ shall mean a risk category within a rating system's obligor rating scale, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of PD are derived. A credit institution shall document the relationship between obligor grades in terms of the level of default risk each grade implies and the criteria used to distinguish that level of default risk. |
| --- | --- |

7.

An ‘obligor grade’ shall mean a risk category within a rating system's obligor rating scale, to which obligors are assigned on the basis of a specified and distinct set of rating criteria, from which estimates of PD are derived. A credit institution shall document the relationship between obligor grades in terms of the level of default risk each grade implies and the criteria used to distinguish that level of default risk.

| 8. | Credit institutions with portfolios concentrated in a particular market segment and range of default risk shall have enough obligor grades within that range to avoid undue concentrations of obligors in a particular grade. Significant concentrations within a single grade shall be supported by convincing empirical evidence that the obligor grade covers a reasonably narrow PD band and that the default risk posed by all obligors in the grade falls within that band. |
| --- | --- |

8.

Credit institutions with portfolios concentrated in a particular market segment and range of default risk shall have enough obligor grades within that range to avoid undue concentrations of obligors in a particular grade. Significant concentrations within a single grade shall be supported by convincing empirical evidence that the obligor grade covers a reasonably narrow PD band and that the default risk posed by all obligors in the grade falls within that band.

| 9. | To qualify for recognition by the competent authorities of the use for capital requirement calculation of own estimates of LGDs, a rating system shall incorporate a distinct facility rating scale which exclusively reflects LGDrelated transaction characteristics. |
| --- | --- |

9.

To qualify for recognition by the competent authorities of the use for capital requirement calculation of own estimates of LGDs, a rating system shall incorporate a distinct facility rating scale which exclusively reflects LGDrelated transaction characteristics.

| 10. | A ‘facility grade’ shall mean a risk category within a rating system's facility scale, to which exposures are assigned on the basis of a specified and distinct set of rating criteria from which own estimates of LGDs are derived. The grade definition shall include both a description of how exposures are assigned to the grade and of the criteria used to distinguish the level of risk across grades. |
| --- | --- |

10.

A ‘facility grade’ shall mean a risk category within a rating system's facility scale, to which exposures are assigned on the basis of a specified and distinct set of rating criteria from which own estimates of LGDs are derived. The grade definition shall include both a description of how exposures are assigned to the grade and of the criteria used to distinguish the level of risk across grades.

| 11. | Significant concentrations within a single facility grade shall be supported by convincing empirical evidence that the facility grade covers a reasonably narrow LGD band, respectively, and that the risk posed by all exposures in the grade falls within that band. |
| --- | --- |

11.

Significant concentrations within a single facility grade shall be supported by convincing empirical evidence that the facility grade covers a reasonably narrow LGD band, respectively, and that the risk posed by all exposures in the grade falls within that band.

| 12. | Credit institutions using the methods set out in Part 1, point 6 for assigning risk weights for specialised lending exposures are exempt from the requirement to have an obligor rating scale which reflects exclusively quantification of the risk of obligor default for these exposures. Notwithstanding point 6, these institutions shall have for these exposures at least 4 grades for non-defaulted obligors and at least one grade for defaulted obligors. |
| --- | --- |

12.

Credit institutions using the methods set out in Part 1, point 6 for assigning risk weights for specialised lending exposures are exempt from the requirement to have an obligor rating scale which reflects exclusively quantification of the risk of obligor default for these exposures. Notwithstanding point 6, these institutions shall have for these exposures at least 4 grades for non-defaulted obligors and at least one grade for defaulted obligors.

1.1.2.   Retail exposures

| 13. | Rating systems shall reflect both obligor and transaction risk, and shall capture all relevant obligor and transaction characteristics. |
| --- | --- |

13.

Rating systems shall reflect both obligor and transaction risk, and shall capture all relevant obligor and transaction characteristics.

| 14. | The level of risk differentiation shall ensure that the number of exposures in a given grade or pool is sufficient to allow for meaningful quantification and validation of the loss characteristics at the grade or pool level. The distribution of exposures and obligors across grades or pools shall be such as to avoid excessive concentrations. |
| --- | --- |

14.

The level of risk differentiation shall ensure that the number of exposures in a given grade or pool is sufficient to allow for meaningful quantification and validation of the loss characteristics at the grade or pool level. The distribution of exposures and obligors across grades or pools shall be such as to avoid excessive concentrations.

| 15. | Credit institutions shall demonstrate that the process of assigning exposures to grades or pools provides for a meaningful differentiation of risk, provides for a grouping of sufficiently homogenous exposures, and allows for accurate and consistent estimation of loss characteristics at grade or pool level. For purchased receivables the grouping shall reflect the seller's underwriting practices and the heterogeneity of its customers. |
| --- | --- |

15.

Credit institutions shall demonstrate that the process of assigning exposures to grades or pools provides for a meaningful differentiation of risk, provides for a grouping of sufficiently homogenous exposures, and allows for accurate and consistent estimation of loss characteristics at grade or pool level. For purchased receivables the grouping shall reflect the seller's underwriting practices and the heterogeneity of its customers.

| 16. | Credit institutions shall consider the following risk drivers when assigning exposures to grades or pools.






  (a) | Obligor risk characteristics; |
| --- | --- | --- |

16.

Credit institutions shall consider the following risk drivers when assigning exposures to grades or pools.

(a)

Obligor risk characteristics;

| (b) | Transaction risk characteristics, including product or collateral types or both. Credit institutions shall explicitly address cases where several exposures benefit from the same collateral; and |
| --- | --- |

(b)

Transaction risk characteristics, including product or collateral types or both. Credit institutions shall explicitly address cases where several exposures benefit from the same collateral; and

| (c) | Delinquency, unless the credit institution demonstrates to its competent authority that delinquency is not a material risk drivers for the exposure; |
| --- | --- |

(c)

Delinquency, unless the credit institution demonstrates to its competent authority that delinquency is not a material risk drivers for the exposure;

1.2.   Assignment to grades or pools.

| 17. | A credit institution shall have specific definitions, processes and criteria for assigning exposures to grades or pools within a rating system.






  (a) | The grade or pool definitions and criteria shall be sufficiently detailed to allow those charged with assigning ratings to consistently assign obligors or facilities posing similar risk to the same grade or pool. This consistency shall exist across lines of business, departments and geographic locations; |
| --- | --- | --- |

17.

A credit institution shall have specific definitions, processes and criteria for assigning exposures to grades or pools within a rating system.

(a)

The grade or pool definitions and criteria shall be sufficiently detailed to allow those charged with assigning ratings to consistently assign obligors or facilities posing similar risk to the same grade or pool. This consistency shall exist across lines of business, departments and geographic locations;

| (b) | The documentation of the rating process shall allow third parties to understand the assignments of exposures to grades or pools, to replicate grade and pool assignments and to evaluate the appropriateness of the assignments to a grade or a pool; and |
| --- | --- |

(b)

The documentation of the rating process shall allow third parties to understand the assignments of exposures to grades or pools, to replicate grade and pool assignments and to evaluate the appropriateness of the assignments to a grade or a pool; and

| (c) | The criteria shall also be consistent with the credit institution's internal lending standards and its policies for handling troubled obligors and facilities. |
| --- | --- |

(c)

The criteria shall also be consistent with the credit institution's internal lending standards and its policies for handling troubled obligors and facilities.

| 18. | A credit institution shall take all relevant information into account in assigning obligors and facilities to grades or pools. Information shall be current and shall enable the credit institution to forecast the future performance of the exposure. The less information a credit institution has, the more conservative shall be its assignments of exposures to obligor and facility grades or pools. If a credit institution uses an external rating as a primary factor determining an internal rating assignment, the credit institution shall ensure that it considers other relevant information. |
| --- | --- |

18.

A credit institution shall take all relevant information into account in assigning obligors and facilities to grades or pools. Information shall be current and shall enable the credit institution to forecast the future performance of the exposure. The less information a credit institution has, the more conservative shall be its assignments of exposures to obligor and facility grades or pools. If a credit institution uses an external rating as a primary factor determining an internal rating assignment, the credit institution shall ensure that it considers other relevant information.

1.3.   Assignment of exposures

1.3.1.   Exposures to corporates, institutions and central governments and central banks

| 19. | Each obligor shall be assigned to an obligor grade as Part of the credit approval process. |
| --- | --- |

19.

Each obligor shall be assigned to an obligor grade as Part of the credit approval process.

| 20. | For those credit institutions permitted to use own estimates of LGDs and/or conversion factors, each exposure shall also be assigned to a facility grade as Part of the credit approval process. |
| --- | --- |

20.

For those credit institutions permitted to use own estimates of LGDs and/or conversion factors, each exposure shall also be assigned to a facility grade as Part of the credit approval process.

| 21. | Credit institutions using the methods set out in Part 1, point 6 for assigning risk weights for specialised lending exposures shall assign each of these exposures to a grade in accordance with point 12. |
| --- | --- |

21.

Credit institutions using the methods set out in Part 1, point 6 for assigning risk weights for specialised lending exposures shall assign each of these exposures to a grade in accordance with point 12.

| 22. | Each separate legal entity to which the credit institution is exposed shall be separately rated. A credit institution shall demonstrate to its competent authority that it has acceptable policies regarding the treatment of individual obligor clients and groups of connected clients. |
| --- | --- |

22.

Each separate legal entity to which the credit institution is exposed shall be separately rated. A credit institution shall demonstrate to its competent authority that it has acceptable policies regarding the treatment of individual obligor clients and groups of connected clients.

| 23. | Separate exposures to the same obligor shall be assigned to the same obligor grade, irrespective of any differences in the nature of each specific transaction. Exceptions, where separate exposures are allowed to result in multiple grades for the same obligor are:






  a) | country transfer risk, this being dependent on whether the exposures are denominated in local or foreign currency; |
| --- | --- | --- |

23.

Separate exposures to the same obligor shall be assigned to the same obligor grade, irrespective of any differences in the nature of each specific transaction. Exceptions, where separate exposures are allowed to result in multiple grades for the same obligor are:

a)

country transfer risk, this being dependent on whether the exposures are denominated in local or foreign currency;

| b) | where the treatment of associated guarantees to an exposure may be reflected in an adjusted assignment to an obligor grade; and |
| --- | --- |

b)

where the treatment of associated guarantees to an exposure may be reflected in an adjusted assignment to an obligor grade; and

| c) | where consumer protection, bank secrecy or other legislation prohibit the exchange of client data. |
| --- | --- |

c)

where consumer protection, bank secrecy or other legislation prohibit the exchange of client data.

1.3.2.   Retail exposures

| 24. | Each exposure shall be assigned to a grade or a pool as part of the credit approval process. |
| --- | --- |

24.

Each exposure shall be assigned to a grade or a pool as part of the credit approval process.

1.3.3.   Overrides

| 25. | For grade and pool assignments credit institutions shall document the situations in which human judgement may override the inputs or outputs of the assignment process and the personnel responsible for approving these overrides. Credit institutions shall document these overrides and the personnel responsible. Credit institutions shall analyse the performance of the exposures whose assignments have been overridden. This analysis shall include assessment of the performance of exposures whose rating has been overridden by a particular person, accounting for all the responsible personnel. |
| --- | --- |

25.

For grade and pool assignments credit institutions shall document the situations in which human judgement may override the inputs or outputs of the assignment process and the personnel responsible for approving these overrides. Credit institutions shall document these overrides and the personnel responsible. Credit institutions shall analyse the performance of the exposures whose assignments have been overridden. This analysis shall include assessment of the performance of exposures whose rating has been overridden by a particular person, accounting for all the responsible personnel.

1.4.   Integrity of assignment process

1.4.1.   Exposures to corporates, institutions and central governments and central banks

| 26. | Assignments and periodic reviews of assignments shall be completed or approved by an independent party that does not directly benefit from decisions to extend the credit. |
| --- | --- |

26.

Assignments and periodic reviews of assignments shall be completed or approved by an independent party that does not directly benefit from decisions to extend the credit.

| 27. | Credit institutions shall update assignments at least annually. High risk obligors and problem exposures shall be subject to more frequent review. Credit institutions shall undertake a new assignment if material information on the obligor or exposure becomes available. |
| --- | --- |

27.

Credit institutions shall update assignments at least annually. High risk obligors and problem exposures shall be subject to more frequent review. Credit institutions shall undertake a new assignment if material information on the obligor or exposure becomes available.

| 28. | A credit institution shall have an effective process to obtain and update relevant information on obligor characteristics that affect PDs, and on transaction characteristics that affect LGDs and/or conversion factors. |
| --- | --- |

28.

A credit institution shall have an effective process to obtain and update relevant information on obligor characteristics that affect PDs, and on transaction characteristics that affect LGDs and/or conversion factors.

1.4.2.   Retail exposures

| 29. | A credit institution shall at least annually update obligor and facility assignments or review the loss characteristics and delinquency status of each identified risk pool, whichever applicable. A credit institution shall also at least annually review in a representative sample the status of individual exposures within each pool as a means of ensuring that exposures continue to be assigned to the correct pool. |
| --- | --- |

29.

A credit institution shall at least annually update obligor and facility assignments or review the loss characteristics and delinquency status of each identified risk pool, whichever applicable. A credit institution shall also at least annually review in a representative sample the status of individual exposures within each pool as a means of ensuring that exposures continue to be assigned to the correct pool.

1.5.   Use of models

| 30. | If a credit institution uses statistical models and other mechanical methods to assign exposures to obligors or facilities grades or pools, then:






  a) | the credit institution shall demonstrate to its competent authority that the model has good predictive power and that capital requirements are not distorted as a result of its use. The input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases; |
| --- | --- | --- |

30.

If a credit institution uses statistical models and other mechanical methods to assign exposures to obligors or facilities grades or pools, then:

a)

the credit institution shall demonstrate to its competent authority that the model has good predictive power and that capital requirements are not distorted as a result of its use. The input variables shall form a reasonable and effective basis for the resulting predictions. The model shall not have material biases;

| b) | the credit institution shall have in place a process for vetting data inputs into the model, which includes an assessment of the accuracy, completeness and appropriateness of the data; |
| --- | --- |

b)

the credit institution shall have in place a process for vetting data inputs into the model, which includes an assessment of the accuracy, completeness and appropriateness of the data;

| c) | the credit institution shall demonstrate that the data used to build the model is representative of the population of the credit institution's actual obligors or exposures; |
| --- | --- |

c)

the credit institution shall demonstrate that the data used to build the model is representative of the population of the credit institution's actual obligors or exposures;

| d) | the credit institution shall have a regular cycle of model validation that includes monitoring of model performance and stability; review of model specification; and testing of model outputs against outcomes; and |
| --- | --- |

d)

the credit institution shall have a regular cycle of model validation that includes monitoring of model performance and stability; review of model specification; and testing of model outputs against outcomes; and

| e) | the credit institution shall complement the statistical model by human judgement and human oversight to review model-based assignments and to ensure that the models are used appropriately. Review procedures shall aim at finding and limiting errors associated with model weaknesses. Human judgements shall take into account all relevant information not considered by the model. The credit institution shall document how human judgement and model results are to be combined. |
| --- | --- |

e)

the credit institution shall complement the statistical model by human judgement and human oversight to review model-based assignments and to ensure that the models are used appropriately. Review procedures shall aim at finding and limiting errors associated with model weaknesses. Human judgements shall take into account all relevant information not considered by the model. The credit institution shall document how human judgement and model results are to be combined.

1.6.   Documentation of rating systems

| 31. | The credit institutions shall document the design and operational details of its rating systems. The documentation shall evidence compliance with the minimum requirements in this part, and address topics including portfolio differentiation, rating criteria, responsibilities of parties that rate obligors and exposures, frequency of assignment reviews, and management oversight of the rating process. |
| --- | --- |

31.

The credit institutions shall document the design and operational details of its rating systems. The documentation shall evidence compliance with the minimum requirements in this part, and address topics including portfolio differentiation, rating criteria, responsibilities of parties that rate obligors and exposures, frequency of assignment reviews, and management oversight of the rating process.

| 32. | The credit institution shall document the rationale for and analysis supporting its choice of rating criteria. A credit institution shall document all major changes in the risk rating process, and such documentation shall support identification of changes made to the risk rating process subsequent to the last review by the competent authorities. The organisation of rating assignment including the rating assignment process and the internal control structure shall also be documented. |
| --- | --- |

32.

The credit institution shall document the rationale for and analysis supporting its choice of rating criteria. A credit institution shall document all major changes in the risk rating process, and such documentation shall support identification of changes made to the risk rating process subsequent to the last review by the competent authorities. The organisation of rating assignment including the rating assignment process and the internal control structure shall also be documented.

| 33. | The credit institutions shall document the specific definitions of default and loss used internally and demonstrate consistency with the definitions set out in this Directive. |
| --- | --- |

33.

The credit institutions shall document the specific definitions of default and loss used internally and demonstrate consistency with the definitions set out in this Directive.

| 34. | If the credit institution employs statistical models in the rating process, the credit institution shall document their methodologies. This material shall:






  a) | provide a detailed outline of the theory, assumptions and/or mathematical and empirical basis of the assignment of estimates to grades, individual obligors, exposures, or pools, and the data source(s) used to estimate the model; |
| --- | --- | --- |

34.

If the credit institution employs statistical models in the rating process, the credit institution shall document their methodologies. This material shall:

a)

provide a detailed outline of the theory, assumptions and/or mathematical and empirical basis of the assignment of estimates to grades, individual obligors, exposures, or pools, and the data source(s) used to estimate the model;

| b) | establish a rigorous statistical process (including out-of-time and out-of-sample performance tests) for validating the model; and |
| --- | --- |

b)

establish a rigorous statistical process (including out-of-time and out-of-sample performance tests) for validating the model; and

| c) | indicate any circumstances under which the model does not work effectively. |
| --- | --- |

c)

indicate any circumstances under which the model does not work effectively.

| 35. | Use of a model obtained from a third-party vendor that claims proprietary technology is not a justification for exemption from documentation or any other of the requirements for rating systems. The burden is on the credit institution to satisfy competent authorities. |
| --- | --- |

35.

Use of a model obtained from a third-party vendor that claims proprietary technology is not a justification for exemption from documentation or any other of the requirements for rating systems. The burden is on the credit institution to satisfy competent authorities.

1.7.   Data maintenance

| 36. | Credit institutions shall collect and store data on aspects of their internal ratings as required under Articles 145 to 149. |
| --- | --- |

36.

Credit institutions shall collect and store data on aspects of their internal ratings as required under Articles 145 to 149.

1.7.1.   Exposures to corporates, institutions and central governments and central banks

| 37. | Credit institutions shall collect and store:






  a) | complete rating histories on obligors and recognised guarantors; |
| --- | --- | --- |

37.

Credit institutions shall collect and store:

a)

complete rating histories on obligors and recognised guarantors;

| b) | the dates the ratings were assigned; |
| --- | --- |

b)

the dates the ratings were assigned;

| c) | the key data and methodology used to derive the rating; |
| --- | --- |

c)

the key data and methodology used to derive the rating;

| d) | the person responsible for the rating assignment; |
| --- | --- |

d)

the person responsible for the rating assignment;

| e) | the identity of obligors and exposures that defaulted; |
| --- | --- |

e)

the identity of obligors and exposures that defaulted;

| f) | the date and circumstances of such defaults; and |
| --- | --- |

f)

the date and circumstances of such defaults; and

| g) | data on the PDs and realised default rates associated with rating grades and ratings migration; |
| --- | --- |

g)

data on the PDs and realised default rates associated with rating grades and ratings migration;

Credit institutions not using own estimates of LGDs and/or conversion factors shall collect and store data on comparisons of realised LGDs to the values as set out in Part 2, point 8 and realised conversion factors to the values as set out in Part 3, point 9.

| 38. | Credit institutions using own estimates of LGDs and/or conversion factors shall collect and store:






  a) | complete histories of data on the facility ratings and LGD and conversion factor estimates associated with each rating scale; |
| --- | --- | --- |

38.

Credit institutions using own estimates of LGDs and/or conversion factors shall collect and store:

a)

complete histories of data on the facility ratings and LGD and conversion factor estimates associated with each rating scale;

| b) | the dates the ratings were assigned and the estimates were done; |
| --- | --- |

b)

the dates the ratings were assigned and the estimates were done;

| c) | the key data and methodology used to derive the facility ratings and LGD and conversion factor estimates; |
| --- | --- |

c)

the key data and methodology used to derive the facility ratings and LGD and conversion factor estimates;

| d) | the person who assigned the facility rating and the person who provided LGD and conversion factor estimates; |
| --- | --- |

d)

the person who assigned the facility rating and the person who provided LGD and conversion factor estimates;

| e) | data on the estimated and realised LGDs and conversion factors associated with each defaulted exposure; |
| --- | --- |

e)

data on the estimated and realised LGDs and conversion factors associated with each defaulted exposure;

| f) | data on the LGD of the exposure before and after evaluation of the effects of a guarantee/ or credit derivative, for those credit institutions that reflect the credit risk mitigating effects of guarantees or credit derivatives through LGD; and |
| --- | --- |

f)

data on the LGD of the exposure before and after evaluation of the effects of a guarantee/ or credit derivative, for those credit institutions that reflect the credit risk mitigating effects of guarantees or credit derivatives through LGD; and

| g) | data on the components of loss for each defaulted exposure. |
| --- | --- |

g)

data on the components of loss for each defaulted exposure.

1.7.2.   Retail exposures

| 39. | Credit institutions shall collect and store:






  a) | data used in the process of allocating exposures to grades or pools; |
| --- | --- | --- |

39.

Credit institutions shall collect and store:

a)

data used in the process of allocating exposures to grades or pools;

| b) | data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures; |
| --- | --- |

b)

data on the estimated PDs, LGDs and conversion factors associated with grades or pools of exposures;

| c) | the identity of obligors and exposures that defaulted; |
| --- | --- |

c)

the identity of obligors and exposures that defaulted;

| d) | for defaulted exposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD and conversion factor; and |
| --- | --- |

d)

for defaulted exposures, data on the grades or pools to which the exposure was assigned over the year prior to default and the realised outcomes on LGD and conversion factor; and

| e) | data on loss rates for qualifying revolving retail exposures. |
| --- | --- |

e)

data on loss rates for qualifying revolving retail exposures.

1.8.   Stress tests used in assessment of capital adequacy

| 40. | A credit institution shall have in place sound stress testing processes for use in the assessment of its capital adequacy. Stress testing shall involve identifying possible events or future changes in economic conditions that could have unfavourable effects on a credit institution's credit exposures and assessment of the credit institution's ability to withstand such changes. |
| --- | --- |

40.

A credit institution shall have in place sound stress testing processes for use in the assessment of its capital adequacy. Stress testing shall involve identifying possible events or future changes in economic conditions that could have unfavourable effects on a credit institution's credit exposures and assessment of the credit institution's ability to withstand such changes.

| 41. | A credit institution shall regularly perform a credit risk stress test to assess the effect of certain specific conditions on its total capital requirements for credit risk. The test shall be one chosen by the credit institution, subject to supervisory review. The test to be employed shall be meaningful and reasonably conservative, considering at least the effect of mild recession scenarios. A credit institution shall assess migration in its ratings under the stress test scenarios. Stressed portfolios shall contain the vast majority of a credit institution's total exposure. |
| --- | --- |

41.

A credit institution shall regularly perform a credit risk stress test to assess the effect of certain specific conditions on its total capital requirements for credit risk. The test shall be one chosen by the credit institution, subject to supervisory review. The test to be employed shall be meaningful and reasonably conservative, considering at least the effect of mild recession scenarios. A credit institution shall assess migration in its ratings under the stress test scenarios. Stressed portfolios shall contain the vast majority of a credit institution's total exposure.

| 42. | Credit institutions using the treatment set out in Part 1, point 4 shall consider as Part of their stress testing framework the impact of a deterioration in the credit quality of protection providers, in particular the impact of protection providers falling outside the eligibility criteria. |
| --- | --- |

42.

Credit institutions using the treatment set out in Part 1, point 4 shall consider as Part of their stress testing framework the impact of a deterioration in the credit quality of protection providers, in particular the impact of protection providers falling outside the eligibility criteria.

2.   RISK QUANTIFICATION

| 43. | In determining the risk parameters to be associated with rating grades or pools, credit institutions shall apply the following requirements. |
| --- | --- |

43.

In determining the risk parameters to be associated with rating grades or pools, credit institutions shall apply the following requirements.

2.1.   Definition of default

| 44. | A ‘default’ shall be considered to have occurred with regard to a particular obligor when either or both of the two following events has taken place:






  a) | the credit institution considers that the obligor is unlikely to pay its credit obligations to the credit institution, the parent undertaking or any of its subsidiaries in full, without recourse by the credit institution to actions such as realising security (if held); |
| --- | --- | --- |

44.

A ‘default’ shall be considered to have occurred with regard to a particular obligor when either or both of the two following events has taken place:

a)

the credit institution considers that the obligor is unlikely to pay its credit obligations to the credit institution, the parent undertaking or any of its subsidiaries in full, without recourse by the credit institution to actions such as realising security (if held);

| b) | the obligor is past due more than 90 days on any material credit obligation to the credit institution, the parent undertaking or any of its subsidiaries. |
| --- | --- |

b)

the obligor is past due more than 90 days on any material credit obligation to the credit institution, the parent undertaking or any of its subsidiaries.

For overdrafts, days past due commence once an obligor has breached an advised limit, has been advised a limit smaller than current outstandings, or has drawn credit without authorisation and the underlying amount is material.

An ‘advised limit’ shall mean a limit which has been brought to the knowledge of the obligor.

Days past due for credit cards commence on the minimum payment due date.

In the case of retail exposures and exposures to public sector entities (PSE) the competent authorities shall set a number of days past due as specified in point 48.

In the case of corporate exposures the competent authorities may set a number of days past due as specified in Article 154(7).

In the case of retail exposures credit institutions may apply the definition of default at a facility level.

In all cases, the exposure past due shall be above a threshold defined by the competent authorities and which reflects a reasonable level of risk.

| 45. | Elements to be taken as indications of unlikeliness to pay shall include:






  (a) | The credit institution puts the credit obligation on non-accrued status, |
| --- | --- | --- |

45.

Elements to be taken as indications of unlikeliness to pay shall include:

(a)

The credit institution puts the credit obligation on non-accrued status,

| (b) | The credit institution makes a value adjustment resulting from a significant perceived decline in credit quality subsequent to the credit institution taking on the exposure, |
| --- | --- |

(b)

The credit institution makes a value adjustment resulting from a significant perceived decline in credit quality subsequent to the credit institution taking on the exposure,

| (c) | The credit institution sells the credit obligation at a material credit-related economic loss, |
| --- | --- |

(c)

The credit institution sells the credit obligation at a material credit-related economic loss,

| (d) | The credit institution consents to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or (where relevant) fees. This includes, in the case of equity exposures assessed under a PD/LGD Approach, distressed restructuring of the equity itself, |
| --- | --- |

(d)

The credit institution consents to a distressed restructuring of the credit obligation where this is likely to result in a diminished financial obligation caused by the material forgiveness, or postponement, of principal, interest or (where relevant) fees. This includes, in the case of equity exposures assessed under a PD/LGD Approach, distressed restructuring of the equity itself,

| (e) | The credit institution has filed for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the credit institution, the parent undertaking or any of its subsidiaries, and |
| --- | --- |

(e)

The credit institution has filed for the obligor's bankruptcy or a similar order in respect of an obligor's credit obligation to the credit institution, the parent undertaking or any of its subsidiaries, and

| (f) | The obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the credit institution, the parent undertaking or any of its subsidiaries. |
| --- | --- |

(f)

The obligor has sought or has been placed in bankruptcy or similar protection where this would avoid or delay repayment of a credit obligation to the credit institution, the parent undertaking or any of its subsidiaries.

| 46. | Credit institutions that use external data that is not itself consistent with the definition of default, shall demonstrate to their competent authorities that appropriate adjustments have been made to achieve broad equivalence with the definition of default. |
| --- | --- |

46.

Credit institutions that use external data that is not itself consistent with the definition of default, shall demonstrate to their competent authorities that appropriate adjustments have been made to achieve broad equivalence with the definition of default.

| 47. | If the credit institution considers that a previously defaulted exposure is such that no trigger of default continues to apply, the credit institution shall rate the obligor or facility as they would for a non-defaulted exposure. Should the definition of default subsequently be triggered, another default would be deemed to have occurred. |
| --- | --- |

47.

If the credit institution considers that a previously defaulted exposure is such that no trigger of default continues to apply, the credit institution shall rate the obligor or facility as they would for a non-defaulted exposure. Should the definition of default subsequently be triggered, another default would be deemed to have occurred.

| 48. | For retail and PSE exposures, the competent authorities of each Member State shall set the exact number of days past due that all credit institutions in its jurisdiction shall abide by under the definition of default set out in point 44, for exposures to such counterparts situated within this Member State. The specific number shall fall within 90-180 days and may differ across product lines. For exposures to such counterparts situated in the territories of other Member States, the competent authorities shall set a number of days past due which is not higher than the number set by the competent authority of the respective Member State. |
| --- | --- |

48.

For retail and PSE exposures, the competent authorities of each Member State shall set the exact number of days past due that all credit institutions in its jurisdiction shall abide by under the definition of default set out in point 44, for exposures to such counterparts situated within this Member State. The specific number shall fall within 90-180 days and may differ across product lines. For exposures to such counterparts situated in the territories of other Member States, the competent authorities shall set a number of days past due which is not higher than the number set by the competent authority of the respective Member State.

2.2.   Overall requirements for estimation

| 49. | A credit institution's own estimates of the risk parameters PD, LGD, conversion factor and EL shall incorporate all relevant data, information and methods. The estimates shall be derived using both historical experience and empirical evidence, and not based purely on judgemental considerations. The estimates shall be plausible and intuitive and shall be based on the material drivers of the respective risk parameters. The less data a credit institution has, the more conservative it shall be in its estimation. |
| --- | --- |

49.

A credit institution's own estimates of the risk parameters PD, LGD, conversion factor and EL shall incorporate all relevant data, information and methods. The estimates shall be derived using both historical experience and empirical evidence, and not based purely on judgemental considerations. The estimates shall be plausible and intuitive and shall be based on the material drivers of the respective risk parameters. The less data a credit institution has, the more conservative it shall be in its estimation.

| 50. | The credit institution shall be able to provide a breakdown of its loss experience in terms of default frequency, LGD, conversion factor, or loss where EL estimates are used, by the factors it sees as the drivers of the respective risk parameters. The credit institution shall demonstrate that its estimates are representative of long run experience. |
| --- | --- |

50.

The credit institution shall be able to provide a breakdown of its loss experience in terms of default frequency, LGD, conversion factor, or loss where EL estimates are used, by the factors it sees as the drivers of the respective risk parameters. The credit institution shall demonstrate that its estimates are representative of long run experience.

| 51. | Any changes in lending practice or the process for pursuing recoveries over the observation periods referred to in points 66, 71, 82, 86, 93 and 95 shall be taken into account. A credit institution's estimates shall reflect the implications of technical advances and new data and other information, as it becomes available. Credit institutions shall review their estimates when new information comes to light but at least on an annual basis. |
| --- | --- |

51.

Any changes in lending practice or the process for pursuing recoveries over the observation periods referred to in points 66, 71, 82, 86, 93 and 95 shall be taken into account. A credit institution's estimates shall reflect the implications of technical advances and new data and other information, as it becomes available. Credit institutions shall review their estimates when new information comes to light but at least on an annual basis.

| 52. | The population of exposures represented in the data used for estimation, the lending standards used when the data was generated and other relevant characteristics shall be comparable with those of the credit institution's exposures and standards. The credit institution shall also demonstrate that the economic or market conditions that underlie the data are relevant to current and foreseeable conditions. The number of exposures in the sample and the data period used for quantification shall be sufficient to provide the credit institution with confidence in the accuracy and robustness of its estimates. |
| --- | --- |

52.

The population of exposures represented in the data used for estimation, the lending standards used when the data was generated and other relevant characteristics shall be comparable with those of the credit institution's exposures and standards. The credit institution shall also demonstrate that the economic or market conditions that underlie the data are relevant to current and foreseeable conditions. The number of exposures in the sample and the data period used for quantification shall be sufficient to provide the credit institution with confidence in the accuracy and robustness of its estimates.

| 53. | For purchased receivables the estimates shall reflect all relevant information available to the purchasing credit institution regarding the quality of the underlying receivables, including data for similar pools provided by the seller, by the purchasing credit institution, or by external sources. The purchasing credit institution shall evaluate any data relied upon which is provided by the seller. |
| --- | --- |

53.

For purchased receivables the estimates shall reflect all relevant information available to the purchasing credit institution regarding the quality of the underlying receivables, including data for similar pools provided by the seller, by the purchasing credit institution, or by external sources. The purchasing credit institution shall evaluate any data relied upon which is provided by the seller.

| 54. | A credit institution shall add to its estimates a margin of conservatism that is related to the expected range of estimation errors. Where methods and data are less satisfactory and the expected range of errors is larger, the margin of conservatism shall be larger. |
| --- | --- |

54.

A credit institution shall add to its estimates a margin of conservatism that is related to the expected range of estimation errors. Where methods and data are less satisfactory and the expected range of errors is larger, the margin of conservatism shall be larger.

| 55. | If credit institutions use different estimates for the calculation of risk weights and for internal purposes, it shall be documented and their reasonableness shall be demonstrated to the competent authority. |
| --- | --- |

55.

If credit institutions use different estimates for the calculation of risk weights and for internal purposes, it shall be documented and their reasonableness shall be demonstrated to the competent authority.

| 56. | If credit institutions can demonstrate to their competent authorities that for data that have been collected prior to the date of implementation of this Directive appropriate adjustments have been made to achieve broad equivalence with the definitions of default or loss, competent authorities may allow the credit institutions some flexibility in the application of the required standards for data. |
| --- | --- |

56.

If credit institutions can demonstrate to their competent authorities that for data that have been collected prior to the date of implementation of this Directive appropriate adjustments have been made to achieve broad equivalence with the definitions of default or loss, competent authorities may allow the credit institutions some flexibility in the application of the required standards for data.

| 57. | If a credit institution uses data that is pooled across credit institutions it shall demonstrate that:






  a) | the rating systems and criteria of other credit institutions in the pool are similar with its own; |
| --- | --- | --- |

57.

If a credit institution uses data that is pooled across credit institutions it shall demonstrate that:

a)

the rating systems and criteria of other credit institutions in the pool are similar with its own;

| b) | the pool is representative of the portfolio for which the pooled data is used; and |
| --- | --- |

b)

the pool is representative of the portfolio for which the pooled data is used; and

| c) | the pooled data is used consistently over time by the credit institution for its estimates. |
| --- | --- |

c)

the pooled data is used consistently over time by the credit institution for its estimates.

| 58. | If a credit institution uses data that is pooled across credit institutions, it shall remain responsible for the integrity of its rating systems. The credit institution shall demonstrate to the competent authority that it has sufficient in-house understanding of its rating systems, including effective ability to monitor and audit the rating process. |
| --- | --- |

58.

If a credit institution uses data that is pooled across credit institutions, it shall remain responsible for the integrity of its rating systems. The credit institution shall demonstrate to the competent authority that it has sufficient in-house understanding of its rating systems, including effective ability to monitor and audit the rating process.

2.2.1.   Requirements specific to PD estimation

Exposures to corporates, institutions and central governments and central banks

| 59. | Credit institutions shall estimate PDs by obligor grade from long run averages of one-year default rates. |
| --- | --- |

59.

Credit institutions shall estimate PDs by obligor grade from long run averages of one-year default rates.

| 60. | For purchased corporate receivables credit institutions may estimate ELs by obligor grade from long run averages of one-year realised default rates. |
| --- | --- |

60.

For purchased corporate receivables credit institutions may estimate ELs by obligor grade from long run averages of one-year realised default rates.

| 61. | If a credit institution derives long run average estimates of PDs and LGDs for purchased corporate receivables from an estimate of EL, and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in point 73. |
| --- | --- |

61.

If a credit institution derives long run average estimates of PDs and LGDs for purchased corporate receivables from an estimate of EL, and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in point 73.

| 62. | Credit institutions shall use PD estimation techniques only with supporting analysis. Credit institutions shall recognise the importance of judgmental considerations in combining results of techniques and in making adjustments for limitations of techniques and information. |
| --- | --- |

62.

Credit institutions shall use PD estimation techniques only with supporting analysis. Credit institutions shall recognise the importance of judgmental considerations in combining results of techniques and in making adjustments for limitations of techniques and information.

| 63. | To the extent that a credit institution uses data on internal default experience for the estimation of PDs, it shall demonstrate in its analysis that the estimates are reflective of underwriting standards and of any differences in the rating system that generated the data and the current rating system. Where underwriting standards or rating systems have changed, the credit institution shall add a greater margin of conservatism in its estimate of PD. |
| --- | --- |

63.

To the extent that a credit institution uses data on internal default experience for the estimation of PDs, it shall demonstrate in its analysis that the estimates are reflective of underwriting standards and of any differences in the rating system that generated the data and the current rating system. Where underwriting standards or rating systems have changed, the credit institution shall add a greater margin of conservatism in its estimate of PD.

| 64. | To the extent that a credit institution associates or maps its internal grades to the scale used by an ECAI or similar organisations and then attributes the default rate observed for the external organisation's grades to the credit institution's grades, mappings shall be based on a comparison of internal rating criteria to the criteria used by the external organisation and on a comparison of the internal and external ratings of any common obligors. Biases or inconsistencies in the mapping approach or underlying data shall be avoided. The external organisation's criteria underlying the data used for quantification shall be oriented to default risk only and not reflect transaction characteristics. The credit institution's analysis shall include a comparison of the default definitions used, subject to the requirements in points 44 to 48. The credit institution shall document the basis for the mapping. |
| --- | --- |

64.

To the extent that a credit institution associates or maps its internal grades to the scale used by an ECAI or similar organisations and then attributes the default rate observed for the external organisation's grades to the credit institution's grades, mappings shall be based on a comparison of internal rating criteria to the criteria used by the external organisation and on a comparison of the internal and external ratings of any common obligors. Biases or inconsistencies in the mapping approach or underlying data shall be avoided. The external organisation's criteria underlying the data used for quantification shall be oriented to default risk only and not reflect transaction characteristics. The credit institution's analysis shall include a comparison of the default definitions used, subject to the requirements in points 44 to 48. The credit institution shall document the basis for the mapping.

| 65. | To the extent that a credit institution uses statistical default prediction models it is allowed to estimate PDs as the simple average of default-probability estimates for individual obligors in a given grade. The credit institution's use of default probability models for this purpose shall meet the standards specified in point 30. |
| --- | --- |

65.

To the extent that a credit institution uses statistical default prediction models it is allowed to estimate PDs as the simple average of default-probability estimates for individual obligors in a given grade. The credit institution's use of default probability models for this purpose shall meet the standards specified in point 30.

| 66. | Irrespective of whether a credit institution is using external, internal, or pooled data sources, or a combination of the three, for its PD estimation, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation period spans a longer period for any source, and this data is relevant, this longer period shall be used. This point also applies to the PD/LGD Approach to equity. Member States may allow credit institutions which are not permitted to use own estimates of LGDs or conversion factors to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years. |
| --- | --- |

66.

Irrespective of whether a credit institution is using external, internal, or pooled data sources, or a combination of the three, for its PD estimation, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation period spans a longer period for any source, and this data is relevant, this longer period shall be used. This point also applies to the PD/LGD Approach to equity. Member States may allow credit institutions which are not permitted to use own estimates of LGDs or conversion factors to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.

Retail exposures

| 67. | Credit institutions shall estimate PDs by obligor grade or pool from long run averages of one-year default rates. |
| --- | --- |

67.

Credit institutions shall estimate PDs by obligor grade or pool from long run averages of one-year default rates.

| 68. | Notwithstanding point 67, PD estimates may also be derived from realised losses and appropriate estimates of LGDs. |
| --- | --- |

68.

Notwithstanding point 67, PD estimates may also be derived from realised losses and appropriate estimates of LGDs.

| 69. | Credit institutions shall regard internal data for assigning exposures to grades or pools as the primary source of information for estimating loss characteristics. Credit institutions are permitted to use external data (including pooled data) or statistical models for quantification provided a strong link can be demonstrated between:






  a) | the credit institution's process of assigning exposures to grades or pools and the process used by the external data source; and |
| --- | --- | --- |

69.

Credit institutions shall regard internal data for assigning exposures to grades or pools as the primary source of information for estimating loss characteristics. Credit institutions are permitted to use external data (including pooled data) or statistical models for quantification provided a strong link can be demonstrated between:

a)

the credit institution's process of assigning exposures to grades or pools and the process used by the external data source; and

| b) | the credit institution's internal risk profile and the composition of the external data. |
| --- | --- |

b)

the credit institution's internal risk profile and the composition of the external data.

For purchased retail receivables, credit institutions may use external and internal reference data. Credit institutions shall use all relevant data sources as points of comparison.

| 70. | If a credit institution derives long run average estimates of PD and LGD for retail from an estimate of total losses and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in point 73. |
| --- | --- |

70.

If a credit institution derives long run average estimates of PD and LGD for retail from an estimate of total losses and an appropriate estimate of PD or LGD, the process for estimating total losses shall meet the overall standards for estimation of PD and LGD set out in this part, and the outcome shall be consistent with the concept of LGD as set out in point 73.

| 71. | Irrespective of whether a credit institution is using external, internal or pooled data sources or a combination of the three, for their estimation of loss characteristics, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation spans a longer period for any source, and these data are relevant, this longer period shall be used. A credit institution need not give equal importance to historic data if it can convince its competent authority that more recent data is a better predictor of loss rates. Member States may allow credit institutions to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years. |
| --- | --- |

71.

Irrespective of whether a credit institution is using external, internal or pooled data sources or a combination of the three, for their estimation of loss characteristics, the length of the underlying historical observation period used shall be at least five years for at least one source. If the available observation spans a longer period for any source, and these data are relevant, this longer period shall be used. A credit institution need not give equal importance to historic data if it can convince its competent authority that more recent data is a better predictor of loss rates. Member States may allow credit institutions to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.

| 72. | Credit institutions shall identify and analyse expected changes of risk parameters over the life of credit exposures (seasoning effects). |
| --- | --- |

72.

Credit institutions shall identify and analyse expected changes of risk parameters over the life of credit exposures (seasoning effects).

2.2.2.   Requirements specific to own-LGD estimates

| 73. | Credit institutions shall estimate LGDs by facility grade or pool on the basis of the average realised LGDs by facility grade or pool using all observed defaults within the data sources (default weighted average). |
| --- | --- |

73.

Credit institutions shall estimate LGDs by facility grade or pool on the basis of the average realised LGDs by facility grade or pool using all observed defaults within the data sources (default weighted average).

| 74. | Credit institutions shall use LGD estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised LGDs at a constant level by grade or pool over time, credit institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn. |
| --- | --- |

74.

Credit institutions shall use LGD estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised LGDs at a constant level by grade or pool over time, credit institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn.

| 75. | A credit institution shall consider the extent of any dependence between the risk of the obligor with that of the collateral or collateral provider. Cases where there is a significant degree of dependence shall be addressed in a conservative manner. |
| --- | --- |

75.

A credit institution shall consider the extent of any dependence between the risk of the obligor with that of the collateral or collateral provider. Cases where there is a significant degree of dependence shall be addressed in a conservative manner.

| 76. | Currency mismatches between the underlying obligation and the collateral shall be treated conservatively in the credit institution's assessment of LGD. |
| --- | --- |

76.

Currency mismatches between the underlying obligation and the collateral shall be treated conservatively in the credit institution's assessment of LGD.

| 77. | To the extent that LGD estimates take into account the existence of collateral, these estimates shall not solely be based on the collateral's estimated market value. LGD estimates shall take into account the effect of the potential inability of credit institutions to expeditiously gain control of their collateral and liquidate it. |
| --- | --- |

77.

To the extent that LGD estimates take into account the existence of collateral, these estimates shall not solely be based on the collateral's estimated market value. LGD estimates shall take into account the effect of the potential inability of credit institutions to expeditiously gain control of their collateral and liquidate it.

| 78. | To the extent that LGD estimates take into account the existence of collateral, credit institutions must establish internal requirements for collateral management, legal certainty and risk management that are generally consistent with those set out in Annex VIII, Part 2. |
| --- | --- |

78.

To the extent that LGD estimates take into account the existence of collateral, credit institutions must establish internal requirements for collateral management, legal certainty and risk management that are generally consistent with those set out in Annex VIII, Part 2.

| 79. | To the extent that a credit institution recognises collateral for determining the exposure value for counterparty credit risk according to Annex III, Part 5 or 6, any amount expected to be recovered from the collateral shall not be taken into account in the LGD estimates. |
| --- | --- |

79.

To the extent that a credit institution recognises collateral for determining the exposure value for counterparty credit risk according to Annex III, Part 5 or 6, any amount expected to be recovered from the collateral shall not be taken into account in the LGD estimates.

| 80. | For the specific case of exposures already in default, the credit institution shall use the sum of its best estimate of expected loss for each exposure given current economic circumstances and exposure status and the possibility of additional unexpected losses during the recovery period. |
| --- | --- |

80.

For the specific case of exposures already in default, the credit institution shall use the sum of its best estimate of expected loss for each exposure given current economic circumstances and exposure status and the possibility of additional unexpected losses during the recovery period.

| 81. | To the extent that unpaid late fees have been capitalised in the credit institution's income statement, they shall be added to the credit institution's measure of exposure and loss. |
| --- | --- |

81.

To the extent that unpaid late fees have been capitalised in the credit institution's income statement, they shall be added to the credit institution's measure of exposure and loss.

Exposures to corporates, institutions and central governments and central banks

| 82. | Estimates of LGD shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If the available observation period spans a longer period for any source, and the data is relevant, this longer period shall be used. |
| --- | --- |

82.

Estimates of LGD shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If the available observation period spans a longer period for any source, and the data is relevant, this longer period shall be used.

Retail exposures

| 83. | Notwithstanding point 73, LGD estimates may be derived from realised losses and appropriate estimates of PDs. |
| --- | --- |

83.

Notwithstanding point 73, LGD estimates may be derived from realised losses and appropriate estimates of PDs.

| 84. | Notwithstanding point 89, credit institutions may reflect future drawings either in their conversion factors or in their LGD estimates. |
| --- | --- |

84.

Notwithstanding point 89, credit institutions may reflect future drawings either in their conversion factors or in their LGD estimates.

| 85. | For purchased retail receivables credit institutions may use external and internal reference data to estimate LGDs. |
| --- | --- |

85.

For purchased retail receivables credit institutions may use external and internal reference data to estimate LGDs.

| 86. | Estimates of LGD shall be based on data over a minimum of five years. Notwithstanding point 73, a credit institution needs not give equal importance to historic data if it can demonstrate to its competent authority that more recent data is a better predictor of loss rates. Member States may allow credit institutions to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years. |
| --- | --- |

86.

Estimates of LGD shall be based on data over a minimum of five years. Notwithstanding point 73, a credit institution needs not give equal importance to historic data if it can demonstrate to its competent authority that more recent data is a better predictor of loss rates. Member States may allow credit institutions to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.

2.2.3.   Requirements specific to own-conversion factor estimates

| 87. | Credit institutions shall estimate conversion factors by facility grade or pool on the basis of the average realised conversion factors by facility grade or pool using all observed defaults within the data sources (default weighted average). |
| --- | --- |

87.

Credit institutions shall estimate conversion factors by facility grade or pool on the basis of the average realised conversion factors by facility grade or pool using all observed defaults within the data sources (default weighted average).

| 88. | Credit institutions shall use conversion factor estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised conversion factors at a constant level by grade or pool over time, credit institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn. |
| --- | --- |

88.

Credit institutions shall use conversion factor estimates that are appropriate for an economic downturn if those are more conservative than the long-run average. To the extent a rating system is expected to deliver realised conversion factors at a constant level by grade or pool over time, credit institutions shall make adjustments to their estimates of risk parameters by grade or pool to limit the capital impact of an economic downturn.

| 89. | Credit institutions' estimates of conversion factors shall reflect the possibility of additional drawings by the obligor up to and after the time a default event is triggered.
  The conversion factor estimate shall incorporate a larger margin of conservatism where a stronger positive correlation can reasonably be expected between the default frequency and the magnitude of conversion factor. |
| --- | --- |

89.

Credit institutions' estimates of conversion factors shall reflect the possibility of additional drawings by the obligor up to and after the time a default event is triggered.

The conversion factor estimate shall incorporate a larger margin of conservatism where a stronger positive correlation can reasonably be expected between the default frequency and the magnitude of conversion factor.

| 90. | In arriving at estimates of conversion factors credit institutions shall consider their specific policies and strategies adopted in respect of account monitoring and payment processing. Credit institutions shall also consider their ability and willingness to prevent further drawings in circumstances short of payment default, such as covenant violations or other technical default events. |
| --- | --- |

90.

In arriving at estimates of conversion factors credit institutions shall consider their specific policies and strategies adopted in respect of account monitoring and payment processing. Credit institutions shall also consider their ability and willingness to prevent further drawings in circumstances short of payment default, such as covenant violations or other technical default events.

| 91. | Credit institutions shall have adequate systems and procedures in place to monitor facility amounts, current outstandings against committed lines and changes in outstandings per obligor and per grade. The credit institution shall be able to monitor outstanding balances on a daily basis. |
| --- | --- |

91.

Credit institutions shall have adequate systems and procedures in place to monitor facility amounts, current outstandings against committed lines and changes in outstandings per obligor and per grade. The credit institution shall be able to monitor outstanding balances on a daily basis.

| 92. | If credit institutions use different estimates of conversion factors for the calculation of risk weighted exposure amounts and internal purposes it shall be documented and their reasonableness shall be demonstrated to the competent authority. |
| --- | --- |

92.

If credit institutions use different estimates of conversion factors for the calculation of risk weighted exposure amounts and internal purposes it shall be documented and their reasonableness shall be demonstrated to the competent authority.

Exposures to corporates, institutions and central governments and central banks

| 93. | Estimates of conversion factors shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If the available observation period spans a longer period for any source, and the data is relevant, this longer period shall be used. |
| --- | --- |

93.

Estimates of conversion factors shall be based on data over a minimum of five years, increasing by one year each year after implementation until a minimum of seven years is reached, for at least one data source. If the available observation period spans a longer period for any source, and the data is relevant, this longer period shall be used.

Retail exposures

| 94. | Notwithstanding point 89, credit institutions may reflect future drawings either in their conversion factors or in their LGD estimates. |
| --- | --- |

94.

Notwithstanding point 89, credit institutions may reflect future drawings either in their conversion factors or in their LGD estimates.

| 95. | Estimates of conversion factors shall be based on data over a minimum of five years. Notwithstanding point 87, a credit institution need not give equal importance to historic data if it can demonstrate to its competent authority that more recent data is a better predictor of draw downs. Member States may allow credit institutions to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years. |
| --- | --- |

95.

Estimates of conversion factors shall be based on data over a minimum of five years. Notwithstanding point 87, a credit institution need not give equal importance to historic data if it can demonstrate to its competent authority that more recent data is a better predictor of draw downs. Member States may allow credit institutions to have, when they implement the IRB Approach, relevant data covering a period of two years. The period to be covered shall increase by one year each year until relevant data cover a period of five years.

2.2.4.   Minimum requirements for assessing the effect of guarantees and credit derivatives

Exposures to corporates, institutions and central governments and central banks where own estimates of LGD are used and retail exposures

| 96. | The requirements in points 97 to 104 shall not apply for guarantees provided by institutions and central governments and central banks if the credit institution has received approval to apply the rules of Articles 78 to 83 for exposures to such entities. In this case the requirements of Articles 90 to 93 shall apply. |
| --- | --- |

96.

The requirements in points 97 to 104 shall not apply for guarantees provided by institutions and central governments and central banks if the credit institution has received approval to apply the rules of Articles 78 to 83 for exposures to such entities. In this case the requirements of Articles 90 to 93 shall apply.

| 97. | For retail guarantees, these requirements also apply to the assignment of exposures to grades or pools, and the estimation of PD. |
| --- | --- |

97.

For retail guarantees, these requirements also apply to the assignment of exposures to grades or pools, and the estimation of PD.

Eligible guarantors and guarantees

| 98. | Credit institutions shall have clearly specified criteria for the types of guarantors they recognise for the calculation of risk weighted exposure amounts. |
| --- | --- |

98.

Credit institutions shall have clearly specified criteria for the types of guarantors they recognise for the calculation of risk weighted exposure amounts.

| 99. | For recognised guarantors the same rules as for obligors as set out in points 17 to 29 shall apply. |
| --- | --- |

99.

For recognised guarantors the same rules as for obligors as set out in points 17 to 29 shall apply.

| 100. | The guarantee shall be evidenced in writing, non-cancellable on the part of the guarantor, in force until the obligation is satisfied in full (to the extent of the amount and tenor of the guarantee) and legally enforceable against the guarantor in a jurisdiction where the guarantor has assets to attach and enforce a judgement. Guarantees prescribing conditions under which the guarantor may not be obliged to perform (conditional guarantees) may be recognised subject to approval of competent authorities. The credit institution shall demonstrate that the assignment criteria adequately address any potential reduction in the risk mitigation effect. |
| --- | --- |

100.

The guarantee shall be evidenced in writing, non-cancellable on the part of the guarantor, in force until the obligation is satisfied in full (to the extent of the amount and tenor of the guarantee) and legally enforceable against the guarantor in a jurisdiction where the guarantor has assets to attach and enforce a judgement. Guarantees prescribing conditions under which the guarantor may not be obliged to perform (conditional guarantees) may be recognised subject to approval of competent authorities. The credit institution shall demonstrate that the assignment criteria adequately address any potential reduction in the risk mitigation effect.

Adjustment criteria

| 101. | A credit institution shall have clearly specified criteria for adjusting grades, pools or LGD estimates, and, in the case of retail and eligible purchased receivables, the process of allocating exposures to grades or pools, to reflect the impact of guarantees for the calculation of risk weighted exposure amounts. These criteria shall comply with the minimum requirements set out in points 17 to 29. |
| --- | --- |

101.

A credit institution shall have clearly specified criteria for adjusting grades, pools or LGD estimates, and, in the case of retail and eligible purchased receivables, the process of allocating exposures to grades or pools, to reflect the impact of guarantees for the calculation of risk weighted exposure amounts. These criteria shall comply with the minimum requirements set out in points 17 to 29.

| 102. | The criteria shall be plausible and intuitive. They shall address the guarantor's ability and willingness to perform under the guarantee, the likely timing of any payments from the guarantor, the degree to which the guarantor's ability to perform under the guarantee is correlated with the obligor's ability to repay, and the extent to which residual risk to the obligor remains. |
| --- | --- |

102.

The criteria shall be plausible and intuitive. They shall address the guarantor's ability and willingness to perform under the guarantee, the likely timing of any payments from the guarantor, the degree to which the guarantor's ability to perform under the guarantee is correlated with the obligor's ability to repay, and the extent to which residual risk to the obligor remains.

Credit derivatives

| 103. | The minimum requirements for guarantees in this part shall apply also for single-name credit derivatives. In relation to a mismatch between the underlying obligation and the reference obligation of the credit derivative or the obligation used for determining whether a credit event has occurred, the requirements set out under Annex VIII Part 2, point 21 shall apply. For retail exposures and eligible purchased receivables, this point applies to the process of allocating exposures to grades or pools. |
| --- | --- |

103.

The minimum requirements for guarantees in this part shall apply also for single-name credit derivatives. In relation to a mismatch between the underlying obligation and the reference obligation of the credit derivative or the obligation used for determining whether a credit event has occurred, the requirements set out under Annex VIII Part 2, point 21 shall apply. For retail exposures and eligible purchased receivables, this point applies to the process of allocating exposures to grades or pools.

| 104. | The criteria shall address the payout structure of the credit derivative and conservatively assess the impact this has on the level and timing of recoveries. The credit institution shall consider the extent to which other forms of residual risk remain. |
| --- | --- |

104.

The criteria shall address the payout structure of the credit derivative and conservatively assess the impact this has on the level and timing of recoveries. The credit institution shall consider the extent to which other forms of residual risk remain.

2.2.5.   Minimum requirements for purchased receivables

Legal certainty

| 105. | The structure of the facility shall ensure that under all foreseeable circumstances the credit institution has effective ownership and control of all cash remittances from the receivables. When the obligor makes payments directly to a seller or servicer, the credit institution shall verify regularly that payments are forwarded completely and within the contractually agreed terms. ‘Servicer’ shall mean an entity that manages a pool of purchased receivables or the underlying credit exposures on a day-to-day basis. Credit institutions shall have procedures to ensure that ownership over the receivables and cash receipts is protected against bankruptcy stays or legal challenges that could materially delay the lender's ability to liquidate or assign the receivables or retain control over cash receipts. |
| --- | --- |

105.

The structure of the facility shall ensure that under all foreseeable circumstances the credit institution has effective ownership and control of all cash remittances from the receivables. When the obligor makes payments directly to a seller or servicer, the credit institution shall verify regularly that payments are forwarded completely and within the contractually agreed terms. ‘Servicer’ shall mean an entity that manages a pool of purchased receivables or the underlying credit exposures on a day-to-day basis. Credit institutions shall have procedures to ensure that ownership over the receivables and cash receipts is protected against bankruptcy stays or legal challenges that could materially delay the lender's ability to liquidate or assign the receivables or retain control over cash receipts.

Effectiveness of monitoring systems

| 106. | The credit institution shall monitor both the quality of the purchased receivables and the financial condition of the seller and servicer. In particular:






  a) | the credit institution shall assess the correlation among the quality of the purchased receivables and the financial condition of both the seller and servicer, and have in place internal policies and procedures that provide adequate safeguards to protect against any contingencies, including the assignment of an internal risk rating for each seller and servicer; |
| --- | --- | --- |

106.

The credit institution shall monitor both the quality of the purchased receivables and the financial condition of the seller and servicer. In particular:

a)

the credit institution shall assess the correlation among the quality of the purchased receivables and the financial condition of both the seller and servicer, and have in place internal policies and procedures that provide adequate safeguards to protect against any contingencies, including the assignment of an internal risk rating for each seller and servicer;

| b) | the credit institution shall have clear and effective policies and procedures for determining seller and servicer eligibility. The credit institution or its agent shall conduct periodic reviews of sellers and servicers in order to verify the accuracy of reports from the seller or servicer, detect fraud or operational weaknesses, and verify the quality of the seller's credit policies and servicer's collection policies and procedures. The findings of these reviews shall be documented; |
| --- | --- |

b)

the credit institution shall have clear and effective policies and procedures for determining seller and servicer eligibility. The credit institution or its agent shall conduct periodic reviews of sellers and servicers in order to verify the accuracy of reports from the seller or servicer, detect fraud or operational weaknesses, and verify the quality of the seller's credit policies and servicer's collection policies and procedures. The findings of these reviews shall be documented;

| c) | the credit institution shall assess the characteristics of the purchased receivables pools, including over-advances; history of the seller's arrears, bad debts, and bad debt allowances; payment terms, and potential contra accounts; |
| --- | --- |

c)

the credit institution shall assess the characteristics of the purchased receivables pools, including over-advances; history of the seller's arrears, bad debts, and bad debt allowances; payment terms, and potential contra accounts;

| d) | the credit institution shall have effective policies and procedures for monitoring on an aggregate basis single-obligor concentrations both within and across purchased receivables pools; and |
| --- | --- |

d)

the credit institution shall have effective policies and procedures for monitoring on an aggregate basis single-obligor concentrations both within and across purchased receivables pools; and

| e) | the credit institution shall ensure that it receives from the servicer timely and sufficiently detailed reports of receivables ageings and dilutions to ensure compliance with the credit institution's eligibility criteria and advancing policies governing purchased receivables, and provide an effective means with which to monitor and confirm the seller's terms of sale and dilution. |
| --- | --- |

e)

the credit institution shall ensure that it receives from the servicer timely and sufficiently detailed reports of receivables ageings and dilutions to ensure compliance with the credit institution's eligibility criteria and advancing policies governing purchased receivables, and provide an effective means with which to monitor and confirm the seller's terms of sale and dilution.

Effectiveness of work-out systems

| 107. | The credit institution shall have systems and procedures for detecting deteriorations in the seller's financial condition and purchased receivables quality at an early stage, and for addressing emerging problems pro-actively. In particular, the credit institution shall have clear and effective policies, procedures, and information systems to monitor covenant violations, and clear and effective policies and procedures for initiating legal actions and dealing with problem purchased receivables. |
| --- | --- |

107.

The credit institution shall have systems and procedures for detecting deteriorations in the seller's financial condition and purchased receivables quality at an early stage, and for addressing emerging problems pro-actively. In particular, the credit institution shall have clear and effective policies, procedures, and information systems to monitor covenant violations, and clear and effective policies and procedures for initiating legal actions and dealing with problem purchased receivables.

Effectiveness of systems for controlling collateral, credit availability, and cash

| 108. | The credit institution shall have clear and effective policies and procedures governing the control of purchased receivables, credit, and cash. In particular, written internal policies shall specify all material elements of the receivables purchase programme, including the advancing rates, eligible collateral, necessary documentation, concentration limits, and the way cash receipts are to be handled. These elements shall take appropriate account of all relevant and material factors, including the seller and servicer's financial condition, risk concentrations, and trends in the quality of the purchased receivables and the seller's customer base, and internal systems shall ensure that funds are advanced only against specified supporting collateral and documentation. |
| --- | --- |

108.

The credit institution shall have clear and effective policies and procedures governing the control of purchased receivables, credit, and cash. In particular, written internal policies shall specify all material elements of the receivables purchase programme, including the advancing rates, eligible collateral, necessary documentation, concentration limits, and the way cash receipts are to be handled. These elements shall take appropriate account of all relevant and material factors, including the seller and servicer's financial condition, risk concentrations, and trends in the quality of the purchased receivables and the seller's customer base, and internal systems shall ensure that funds are advanced only against specified supporting collateral and documentation.

Compliance with the credit institution's internal policies and procedures

| 109. | The credit institution shall have an effective internal process for assessing compliance with all internal policies and procedures. The process shall include regular audits of all critical phases of the credit institution's receivables purchase programme, verification of the separation of duties between firstly the assessment of the seller and servicer and the assessment of the obligor and secondly between the assessment of the seller and servicer and the field audit of the seller and servicer, and evaluations of back office operations, with particular focus on qualifications, experience, staffing levels, and supporting automation systems. |
| --- | --- |

109.

The credit institution shall have an effective internal process for assessing compliance with all internal policies and procedures. The process shall include regular audits of all critical phases of the credit institution's receivables purchase programme, verification of the separation of duties between firstly the assessment of the seller and servicer and the assessment of the obligor and secondly between the assessment of the seller and servicer and the field audit of the seller and servicer, and evaluations of back office operations, with particular focus on qualifications, experience, staffing levels, and supporting automation systems.

3.   VALIDATION OF INTERNAL ESTIMATES

| 110. | Credit institutions shall have robust systems in place to validate the accuracy and consistency of rating systems, processes, and the estimation of all relevant risk parameters. A credit institution shall demonstrate to its competent authority that the internal validation process enables it to assess the performance of internal rating and risk estimation systems consistently and meaningfully. |
| --- | --- |

110.

Credit institutions shall have robust systems in place to validate the accuracy and consistency of rating systems, processes, and the estimation of all relevant risk parameters. A credit institution shall demonstrate to its competent authority that the internal validation process enables it to assess the performance of internal rating and risk estimation systems consistently and meaningfully.

| 111. | Credit institutions shall regularly compare realised default rates with estimated PDs for each grade and, where realised default rates are outside the expected range for that grade, credit institutions shall specifically analyse the reasons for the deviation. Credit institutions using own estimates of LGDs and/or conversion factors shall also perform analogous analysis for these estimates. Such comparisons shall make use of historical data that cover as long a period as possible. The credit institution shall document the methods and data used in such comparisons. This analysis and documentation shall be updated at least annually. |
| --- | --- |

111.

Credit institutions shall regularly compare realised default rates with estimated PDs for each grade and, where realised default rates are outside the expected range for that grade, credit institutions shall specifically analyse the reasons for the deviation. Credit institutions using own estimates of LGDs and/or conversion factors shall also perform analogous analysis for these estimates. Such comparisons shall make use of historical data that cover as long a period as possible. The credit institution shall document the methods and data used in such comparisons. This analysis and documentation shall be updated at least annually.

| 112. | Credit institutions shall also use other quantitative validation tools and comparisons with relevant external data sources. The analysis shall be based on data that are appropriate to the portfolio, are updated regularly, and cover a relevant observation period. Credit institutions' internal assessments of the performance of their rating systems shall be based on as long a period as possible. |
| --- | --- |

112.

Credit institutions shall also use other quantitative validation tools and comparisons with relevant external data sources. The analysis shall be based on data that are appropriate to the portfolio, are updated regularly, and cover a relevant observation period. Credit institutions' internal assessments of the performance of their rating systems shall be based on as long a period as possible.

| 113. | The methods and data used for quantitative validation shall be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) shall be documented. |
| --- | --- |

113.

The methods and data used for quantitative validation shall be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) shall be documented.

| 114. | Credit institutions shall have sound internal standards for situations where deviations in realised PDs, LGDs, conversion factors and total losses, where EL is used, from expectations, become significant enough to call the validity of the estimates into question. These standards shall take account of business cycles and similar systematic variability in default experience. Where realised values continue to be higher than expected values, credit institutions shall revise estimates upward to reflect their default and loss experience. |
| --- | --- |

114.

Credit institutions shall have sound internal standards for situations where deviations in realised PDs, LGDs, conversion factors and total losses, where EL is used, from expectations, become significant enough to call the validity of the estimates into question. These standards shall take account of business cycles and similar systematic variability in default experience. Where realised values continue to be higher than expected values, credit institutions shall revise estimates upward to reflect their default and loss experience.

4.   CALCULATION OF RISK WEIGHTED EXPOSURE AMOUNTS FOR EQUITY EXPOSURES UNDER THE INTERNAL MODELS APPROACH

4.1.   Capital requirement and risk quantification

| 115. | For the purpose of calculating capital requirements credit institutions shall meet the following standards:






  a) | the estimate of potential loss shall be robust to adverse market movements relevant to the long-term risk profile of the credit institution's specific holdings. The data used to represent return distributions shall reflect the longest sample period for which data is available and meaningful in representing the risk profile of the credit institution's specific equity exposures. The data used shall be sufficient to provide conservative, statistically reliable and robust loss estimates that are not based purely on subjective or judgmental considerations. Credit institutions shall demonstrate to competent authorities that the shock employed provides a conservative estimate of potential losses over a relevant long-term market or business cycle. The credit institution shall combine empirical analysis of available data with adjustments based on a variety of factors in order to attain model outputs that achieve appropriate realism and conservatism. In constructing Value at Risk (VaR) models estimating potential quarterly losses, credit institutions may use quarterly data or convert shorter horizon period data to a quarterly equivalent using an analytically appropriate method supported by empirical evidence and through a well-developed and documented thought process and analysis. Such an approach shall be applied conservatively and consistently over time. Where only limited relevant data is available the credit institution shall add appropriate margins of conservatism; |
| --- | --- | --- |

115.

For the purpose of calculating capital requirements credit institutions shall meet the following standards:

a)

the estimate of potential loss shall be robust to adverse market movements relevant to the long-term risk profile of the credit institution's specific holdings. The data used to represent return distributions shall reflect the longest sample period for which data is available and meaningful in representing the risk profile of the credit institution's specific equity exposures. The data used shall be sufficient to provide conservative, statistically reliable and robust loss estimates that are not based purely on subjective or judgmental considerations. Credit institutions shall demonstrate to competent authorities that the shock employed provides a conservative estimate of potential losses over a relevant long-term market or business cycle. The credit institution shall combine empirical analysis of available data with adjustments based on a variety of factors in order to attain model outputs that achieve appropriate realism and conservatism. In constructing Value at Risk (VaR) models estimating potential quarterly losses, credit institutions may use quarterly data or convert shorter horizon period data to a quarterly equivalent using an analytically appropriate method supported by empirical evidence and through a well-developed and documented thought process and analysis. Such an approach shall be applied conservatively and consistently over time. Where only limited relevant data is available the credit institution shall add appropriate margins of conservatism;

| b) | the models used shall be able to capture adequately all of the material risks embodied in equity returns including both the general market risk and specific risk exposure of the credit institution's equity portfolio. The internal models shall adequately explain historical price variation, capture both the magnitude and changes in the composition of potential concentrations, and be robust to adverse market environments. The population of risk exposures represented in the data used for estimation shall be closely matched to or at least comparable with those of the credit institution's equity exposures; |
| --- | --- |

b)

the models used shall be able to capture adequately all of the material risks embodied in equity returns including both the general market risk and specific risk exposure of the credit institution's equity portfolio. The internal models shall adequately explain historical price variation, capture both the magnitude and changes in the composition of potential concentrations, and be robust to adverse market environments. The population of risk exposures represented in the data used for estimation shall be closely matched to or at least comparable with those of the credit institution's equity exposures;

| c) | the internal model shall be appropriate for the risk profile and complexity of a credit institution's equity portfolio. Where a credit institution has material holdings with values that are highly non-linear in nature the internal models shall be designed to capture appropriately the risks associated with such instruments; |
| --- | --- |

c)

the internal model shall be appropriate for the risk profile and complexity of a credit institution's equity portfolio. Where a credit institution has material holdings with values that are highly non-linear in nature the internal models shall be designed to capture appropriately the risks associated with such instruments;

| d) | mapping of individual positions to proxies, market indices, and risk factors shall be plausible, intuitive, and conceptually sound; |
| --- | --- |

d)

mapping of individual positions to proxies, market indices, and risk factors shall be plausible, intuitive, and conceptually sound;

| e) | credit institutions shall demonstrate through empirical analyses the appropriateness of risk factors, including their ability to cover both general and specific risk; |
| --- | --- |

e)

credit institutions shall demonstrate through empirical analyses the appropriateness of risk factors, including their ability to cover both general and specific risk;

| f) | the estimates of the return volatility of equity exposures shall incorporate relevant and available data, information, and methods. Independently reviewed internal data or data from external sources (including pooled data) shall be used; and |
| --- | --- |

f)

the estimates of the return volatility of equity exposures shall incorporate relevant and available data, information, and methods. Independently reviewed internal data or data from external sources (including pooled data) shall be used; and

| g) | a rigorous and comprehensive stress-testing programme shall be in place; |
| --- | --- |

g)

a rigorous and comprehensive stress-testing programme shall be in place;

4.2.   Risk management process and controls

| 116. | With regard to the development and use of internal models for capital requirement purposes, credit institutions shall establish policies, procedures, and controls to ensure the integrity of the model and modelling process. These policies, procedures, and controls shall include the following:






  a) | full integration of the internal model into the overall management information systems of the credit institution and in the management of the non-trading book equity portfolio. Internal models shall be fully integrated into the credit institution's risk management infrastructure if they are particularly used inmeasuring and assessing equity portfolio performance (including the risk-adjusted performance), allocating economic capital to equity exposures and evaluating overall capital adequacy and the investment management process; |
| --- | --- | --- |

116.

With regard to the development and use of internal models for capital requirement purposes, credit institutions shall establish policies, procedures, and controls to ensure the integrity of the model and modelling process. These policies, procedures, and controls shall include the following:

a)

full integration of the internal model into the overall management information systems of the credit institution and in the management of the non-trading book equity portfolio. Internal models shall be fully integrated into the credit institution's risk management infrastructure if they are particularly used inmeasuring and assessing equity portfolio performance (including the risk-adjusted performance), allocating economic capital to equity exposures and evaluating overall capital adequacy and the investment management process;

| b) | established management systems, procedures, and control functions for ensuring the periodic and independent review of all elements of the internal modelling process, including approval of model revisions, vetting of model inputs, and review of model results, such as direct verification of risk computations. These reviews shall assess the accuracy, completeness, and appropriateness of model inputs and results and focus on both finding and limiting potential errors associated with known weaknesses and identifying unknown model weaknesses. Such reviews may be conducted by an internal independent unit, or by an independent external third party; |
| --- | --- |

b)

established management systems, procedures, and control functions for ensuring the periodic and independent review of all elements of the internal modelling process, including approval of model revisions, vetting of model inputs, and review of model results, such as direct verification of risk computations. These reviews shall assess the accuracy, completeness, and appropriateness of model inputs and results and focus on both finding and limiting potential errors associated with known weaknesses and identifying unknown model weaknesses. Such reviews may be conducted by an internal independent unit, or by an independent external third party;

| c) | adequate systems and procedures for monitoring investment limits and the risk exposures of equity exposures; |
| --- | --- |

c)

adequate systems and procedures for monitoring investment limits and the risk exposures of equity exposures;

| d) | the units responsible for the design and application of the model shall be functionally independent from the units responsible for managing individual investments; and |
| --- | --- |

d)

the units responsible for the design and application of the model shall be functionally independent from the units responsible for managing individual investments; and

| e) | parties responsible for any aspect of the modelling process shall be adequately qualified. Management shall allocate sufficient skilled and competent resources to the modelling function. |
| --- | --- |

e)

parties responsible for any aspect of the modelling process shall be adequately qualified. Management shall allocate sufficient skilled and competent resources to the modelling function.

4.3.   Validation and documentation

| 117. | Credit institutions shall have a robust system in place to validate the accuracy and consistency of their internal models and modelling processes. All material elements of the internal models and the modelling process and validation shall be documented. |
| --- | --- |

117.

Credit institutions shall have a robust system in place to validate the accuracy and consistency of their internal models and modelling processes. All material elements of the internal models and the modelling process and validation shall be documented.

| 118. | Credit institutions shall use the internal validation process to assess the performance of its internal models and processes in a consistent and meaningful way. |
| --- | --- |

118.

Credit institutions shall use the internal validation process to assess the performance of its internal models and processes in a consistent and meaningful way.

| 119. | The methods and data used for quantitative validation shall be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) shall be documented. |
| --- | --- |

119.

The methods and data used for quantitative validation shall be consistent through time. Changes in estimation and validation methods and data (both data sources and periods covered) shall be documented.

| 120. | Credit institutions shall regularly compare actual equity returns (computed using realised and unrealised gains and losses) with modelled estimates. Such comparisons shall make use of historical data that cover as long a period as possible. The credit institution shall document the methods and data used in such comparisons. This analysis and documentation shall be updated at least annually. |
| --- | --- |

120.

Credit institutions shall regularly compare actual equity returns (computed using realised and unrealised gains and losses) with modelled estimates. Such comparisons shall make use of historical data that cover as long a period as possible. The credit institution shall document the methods and data used in such comparisons. This analysis and documentation shall be updated at least annually.

| 121. | Credit institutions shall make use of other quantitative validation tools and comparisons with external data sources. The analysis shall be based on data that are appropriate to the portfolio, are updated regularly, and cover a relevant observation period. Credit institutions' internal assessments of the performance of their models shall be based on as long a period as possible. |
| --- | --- |

121.

Credit institutions shall make use of other quantitative validation tools and comparisons with external data sources. The analysis shall be based on data that are appropriate to the portfolio, are updated regularly, and cover a relevant observation period. Credit institutions' internal assessments of the performance of their models shall be based on as long a period as possible.

| 122. | Credit institutions shall have sound internal standards for situations where comparison of actual equity returns with the models estimates calls the validity of the estimates or of the models as such into question. These standards shall take account of business cycles and similar systematic variability in equity returns. All adjustments made to internal models in response to model reviews shall be documented and consistent with the credit institution's model review standards. |
| --- | --- |

122.

Credit institutions shall have sound internal standards for situations where comparison of actual equity returns with the models estimates calls the validity of the estimates or of the models as such into question. These standards shall take account of business cycles and similar systematic variability in equity returns. All adjustments made to internal models in response to model reviews shall be documented and consistent with the credit institution's model review standards.

| 123. | The internal model and the modelling process shall be documented, including the responsibilities of parties involved in the modelling, and the model approval and model review processes. |
| --- | --- |

123.

The internal model and the modelling process shall be documented, including the responsibilities of parties involved in the modelling, and the model approval and model review processes.

5.   CORPORATE GOVERNANCE AND OVERSIGHT

5.1.   Corporate Governance

| 124. | All material aspects of the rating and estimation processes shall be approved by the credit institution's management body described in Article 11 or a designated committee thereof and senior management. These parties shall possess a general understanding of the credit institution's rating systems and detailed comprehension of its associated management reports. |
| --- | --- |

124.

All material aspects of the rating and estimation processes shall be approved by the credit institution's management body described in Article 11 or a designated committee thereof and senior management. These parties shall possess a general understanding of the credit institution's rating systems and detailed comprehension of its associated management reports.

| 125. | Senior management shall provide notice to the management body described in Article 11 or a designated committee thereof of material changes or exceptions from established policies that will materially impact the operations of the credit institution's rating systems. |
| --- | --- |

125.

Senior management shall provide notice to the management body described in Article 11 or a designated committee thereof of material changes or exceptions from established policies that will materially impact the operations of the credit institution's rating systems.

| 126. | Senior management shall have a good understanding of the rating systems designs and operations. Senior management shall ensure, on an ongoing basis that the rating systems are operating properly. Senior management shall be regularly informed by the credit risk control units about the performance of the rating process, areas needing improvement, and the status of efforts to improve previously identified deficiencies. |
| --- | --- |

126.

Senior management shall have a good understanding of the rating systems designs and operations. Senior management shall ensure, on an ongoing basis that the rating systems are operating properly. Senior management shall be regularly informed by the credit risk control units about the performance of the rating process, areas needing improvement, and the status of efforts to improve previously identified deficiencies.

| 127. | Internal ratings-based analysis of the credit institution's credit risk profile shall be an essential part of the management reporting to these parties. Reporting shall include at least risk profile by grade, migration across grades, estimation of the relevant parameters per grade, and comparison of realised default rates, and to the extent that own estimates are used of realised LGDs and realised conversion factors against expectations and stress-test results. Reporting frequencies shall depend on the significance and type of information and the level of the recipient. |
| --- | --- |

127.

Internal ratings-based analysis of the credit institution's credit risk profile shall be an essential part of the management reporting to these parties. Reporting shall include at least risk profile by grade, migration across grades, estimation of the relevant parameters per grade, and comparison of realised default rates, and to the extent that own estimates are used of realised LGDs and realised conversion factors against expectations and stress-test results. Reporting frequencies shall depend on the significance and type of information and the level of the recipient.

5.2.   Credit risk control

| 128. | The credit risk control unit shall be independent from the personnel and management functions responsible for originating or renewing exposures and report directly to senior management. The unit shall be responsible for the design or selection, implementation, oversight and performance of the rating systems. It shall regularly produce and analyse reports on the output of the rating systems. |
| --- | --- |

128.

The credit risk control unit shall be independent from the personnel and management functions responsible for originating or renewing exposures and report directly to senior management. The unit shall be responsible for the design or selection, implementation, oversight and performance of the rating systems. It shall regularly produce and analyse reports on the output of the rating systems.

| 129. | The areas of responsibility for the credit risk control unit(s) shall include:






  a) | testing and monitoring grades and pools; |
| --- | --- | --- |

129.

The areas of responsibility for the credit risk control unit(s) shall include:

a)

testing and monitoring grades and pools;

| b) | production and analysis of summary reports from the credit institution's rating systems; |
| --- | --- |

b)

production and analysis of summary reports from the credit institution's rating systems;

| c) | implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas; |
| --- | --- |

c)

implementing procedures to verify that grade and pool definitions are consistently applied across departments and geographic areas;

| d) | reviewing and documenting any changes to the rating process, including the reasons for the changes; |
| --- | --- |

d)

reviewing and documenting any changes to the rating process, including the reasons for the changes;

| e) | reviewing the rating criteria to evaluate if they remain predictive of risk. Changes to the rating process, criteria or individual rating parameters shall be documented and retained; |
| --- | --- |

e)

reviewing the rating criteria to evaluate if they remain predictive of risk. Changes to the rating process, criteria or individual rating parameters shall be documented and retained;

| f) | active participation in the design or selection, implementation and validation of models used in the rating process; |
| --- | --- |

f)

active participation in the design or selection, implementation and validation of models used in the rating process;

| g) | oversight and supervision of models used in the rating process; and |
| --- | --- |

g)

oversight and supervision of models used in the rating process; and

| h) | ongoing review and alterations to models used in the rating process. |
| --- | --- |

h)

ongoing review and alterations to models used in the rating process.

| 130. | Notwithstanding point 129, credit institutions using pooled data according to points 57 and 58 may outsource the following tasks:






  a) | production of information relevant to testing and monitoring grades and pools; |
| --- | --- | --- |

130.

Notwithstanding point 129, credit institutions using pooled data according to points 57 and 58 may outsource the following tasks:

a)

production of information relevant to testing and monitoring grades and pools;

| b) | production of summary reports from the credit institution's rating systems; |
| --- | --- |

b)

production of summary reports from the credit institution's rating systems;

| c) | production of information relevant to review of the rating criteria to evaluate if they remain predictive of risk; |
| --- | --- |

c)

production of information relevant to review of the rating criteria to evaluate if they remain predictive of risk;

| d) | documentation of changes to the rating process, criteria or individual rating parameters; and |
| --- | --- |

d)

documentation of changes to the rating process, criteria or individual rating parameters; and

| e) | production of information relevant to ongoing review and alterations to models used in the rating process. |
| --- | --- |

e)

production of information relevant to ongoing review and alterations to models used in the rating process.

Credit institutions making use of this point shall ensure that the competent authorities have access to all relevant information from the third party that is necessary for examining compliance with the minimum requirements and that the competent authorities may perform on-site examinations to the same extent as within the credit institution.

5.3.   Internal Audit

| 131. | Internal audit or another comparable independent auditing unit shall review at least annually the credit institution's rating systems and its operations, including the operations of the credit function and the estimation of PDs, LGDs, ELs and conversion factors. Areas of review shall include adherence to all applicable minimum requirements. |
| --- | --- |

131.

Internal audit or another comparable independent auditing unit shall review at least annually the credit institution's rating systems and its operations, including the operations of the credit function and the estimation of PDs, LGDs, ELs and conversion factors. Areas of review shall include adherence to all applicable minimum requirements.

ANNEX VIII

CREDIT RISK MITIGATION

Part 1 — Eligibility

| 1. | This part sets out eligible forms of credit risk mitigation for the purposes of Article 92. |
| --- | --- |

1.

This part sets out eligible forms of credit risk mitigation for the purposes of Article 92.

| 2. | For the purposes of this Annex: | ‘Secured lending transaction’ shall mean any transaction giving rise to an exposure secured by collateral which does not include a provision conferring upon the credit institution the right to receive margin frequently. |
| --- | --- | --- |

2.

For the purposes of this Annex:

‘Secured lending transaction’ shall mean any transaction giving rise to an exposure secured by collateral which does not include a provision conferring upon the credit institution the right to receive margin frequently.

| | ‘Capital market-driven transaction’ shall mean any transaction giving rise to an exposure secured by collateral which includes a provision conferring upon the credit institution the right to receive margin frequently. |
| --- | --- |

‘Capital market-driven transaction’ shall mean any transaction giving rise to an exposure secured by collateral which includes a provision conferring upon the credit institution the right to receive margin frequently.

1.   FUNDED CREDIT PROTECTION

1.1.   On-balance sheet netting

| 3. | The on-balance sheet netting of mutual claims between the credit institution and its counterparty may be recognised as eligible. |
| --- | --- |

3.

The on-balance sheet netting of mutual claims between the credit institution and its counterparty may be recognised as eligible.

| 4. | Without prejudice to point 5, eligibility is limited to reciprocal cash balances between the credit institution and the counterparty. Only loans and deposits of the lending credit institution may be subject to a modification of risk-weighted exposure amounts and, as relevant, expected loss amounts as a result of an on-balance sheet netting agreement. |
| --- | --- |

4.

Without prejudice to point 5, eligibility is limited to reciprocal cash balances between the credit institution and the counterparty. Only loans and deposits of the lending credit institution may be subject to a modification of risk-weighted exposure amounts and, as relevant, expected loss amounts as a result of an on-balance sheet netting agreement.

1.2.   Master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions

| 5. | For credit institutions adopting the Financial Collateral Comprehensive Method under Part 3, the effects of bilateral netting contracts covering repurchase transactions, securities or commodities lending or borrowing transactions, and/or other capital market-driven transactions with a counterparty may be recognised. Without prejudice to Annex II to Directive 2006/.../EC to be recognised the collateral taken and securities or commodities borrowed within such agreements must comply with the eligibility requirements for collateral set out at points 7 to 11. |
| --- | --- |

5.

For credit institutions adopting the Financial Collateral Comprehensive Method under Part 3, the effects of bilateral netting contracts covering repurchase transactions, securities or commodities lending or borrowing transactions, and/or other capital market-driven transactions with a counterparty may be recognised. Without prejudice to Annex II to Directive 2006/.../EC to be recognised the collateral taken and securities or commodities borrowed within such agreements must comply with the eligibility requirements for collateral set out at points 7 to 11.

1.3.   Collateral

| 6. | Where the credit risk mitigation technique used relies on the right of the credit institution to liquidate or retain assets, eligibility depends upon whether risk-weighted exposure amounts, and, as relevant, expected loss amounts, are calculated under Articles 78 to 83 or Articles 84 to 89. Eligibility further depends upon whether the Financial Collateral Simple Method is used or the Financial Collateral Comprehensive Method under Part 3. In relation to repurchase transactions and securities or commodities lending or borrowing transactions, eligibility also depends upon whether the transaction is booked in the non-trading book or the trading book. |
| --- | --- |

6.

Where the credit risk mitigation technique used relies on the right of the credit institution to liquidate or retain assets, eligibility depends upon whether risk-weighted exposure amounts, and, as relevant, expected loss amounts, are calculated under Articles 78 to 83 or Articles 84 to 89. Eligibility further depends upon whether the Financial Collateral Simple Method is used or the Financial Collateral Comprehensive Method under Part 3. In relation to repurchase transactions and securities or commodities lending or borrowing transactions, eligibility also depends upon whether the transaction is booked in the non-trading book or the trading book.

1.3.1.   Eligibility under all approaches and methods

| 7. | The following financial items may be recognised as eligible collateral under all approaches and methods:






  a) | cash on deposit with, or cash assimilated instruments held by, the lending credit institution; |
| --- | --- | --- |

7.

The following financial items may be recognised as eligible collateral under all approaches and methods:

a)

cash on deposit with, or cash assimilated instruments held by, the lending credit institution;

| b) | debt securities issued by central governments or central banks, which securities have a credit assessment by an ECAI or export credit agency recognised as eligible for the purposes of Articles 78 to 83 which has been determined by the competent authority to be associated with credit quality step 4 or above under the rules for the risk weighting of exposures to central governments and central banks under Articles 78 to 83; |
| --- | --- |

b)

debt securities issued by central governments or central banks, which securities have a credit assessment by an ECAI or export credit agency recognised as eligible for the purposes of Articles 78 to 83 which has been determined by the competent authority to be associated with credit quality step 4 or above under the rules for the risk weighting of exposures to central governments and central banks under Articles 78 to 83;

| c) | debt securities issued by institutions, which securities have a credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to credit institutions under Articles 78 to 83; |
| --- | --- |

c)

debt securities issued by institutions, which securities have a credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to credit institutions under Articles 78 to 83;

| d) | debt securities issued by other entities, which securities have a credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; |
| --- | --- |

d)

debt securities issued by other entities, which securities have a credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83;

| e) | debt securities with a short-term credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of short term exposures under Articles 78 to 83; |
| --- | --- |

e)

debt securities with a short-term credit assessment by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of short term exposures under Articles 78 to 83;

| f) | equities or convertible bonds that are included in a main index; and |
| --- | --- |

f)

equities or convertible bonds that are included in a main index; and

| g) | gold. |
| --- | --- |

g)

gold.

For the purposes of point (b), ‘debt securities issued by central governments or central banks’ shall include:

| i) | debt securities issued by regional governments or local authorities, exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83; |
| --- | --- |

i)

debt securities issued by regional governments or local authorities, exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83;

| ii) | debt securities issued by public sector entities which are treated as exposures to central governments in accordance with point 15 of Part 1 of Annex VI; |
| --- | --- |

ii)

debt securities issued by public sector entities which are treated as exposures to central governments in accordance with point 15 of Part 1 of Annex VI;

| iii) | debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under Articles 78 to 83; and |
| --- | --- |

iii)

debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under Articles 78 to 83; and

| iv) | debt securities issued by international organisations which are assigned a 0 % risk weight under Articles 78 to 83. |
| --- | --- |

iv)

debt securities issued by international organisations which are assigned a 0 % risk weight under Articles 78 to 83.

For the purposes of point (c), ‘debt securities issued by institutions’ include:

| i) | debt securities issued by regional governments or local authorities other than those exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83; |
| --- | --- |

i)

debt securities issued by regional governments or local authorities other than those exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83;

| ii) | debt securities issued by public sector entities, exposures to which are treated as exposures to credit institutions under Articles 78 to 83; and |
| --- | --- |

ii)

debt securities issued by public sector entities, exposures to which are treated as exposures to credit institutions under Articles 78 to 83; and

| iii) | debt securities issued by multilateral development banks other than those to which a 0 % risk weight is assigned under Articles 78 to 83. |
| --- | --- |

iii)

debt securities issued by multilateral development banks other than those to which a 0 % risk weight is assigned under Articles 78 to 83.

| 8. | Debt securities issued by institutions which securities do not have a credit assessment by an eligible ECAI may be recognised as eligible collateral if they fulfil the following criteria:






  a) | they are listed on a recognised exchange; |
| --- | --- | --- |

8.

Debt securities issued by institutions which securities do not have a credit assessment by an eligible ECAI may be recognised as eligible collateral if they fulfil the following criteria:

a)

they are listed on a recognised exchange;

| b) | they qualify as senior debt; |
| --- | --- |

b)

they qualify as senior debt;

| c) | all other rated issues by the issuing institution of the same seniority have a credit assessment by an eligible ECAI which has been determined by the competent authorities to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to institutions or short term exposures under Articles 78 to 83; |
| --- | --- |

c)

all other rated issues by the issuing institution of the same seniority have a credit assessment by an eligible ECAI which has been determined by the competent authorities to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to institutions or short term exposures under Articles 78 to 83;

| d) | the lending credit institution has no information to suggest that the issue would justify a credit assessment below that indicated in (c); and |
| --- | --- |

d)

the lending credit institution has no information to suggest that the issue would justify a credit assessment below that indicated in (c); and

| e) | the credit institution can demonstrate to the competent authorities that the market liquidity of the instrument is sufficient for these purposes. |
| --- | --- |

e)

the credit institution can demonstrate to the competent authorities that the market liquidity of the instrument is sufficient for these purposes.

| 9. | Units in collective investment undertakings may be recognised as eligible collateral if the following conditions are satisfied:






  a) | they have a daily public price quote; and |
| --- | --- | --- |

9.

Units in collective investment undertakings may be recognised as eligible collateral if the following conditions are satisfied:

a)

they have a daily public price quote; and

| b) | the collective investment undertaking is limited to investing in instruments that are eligible for recognition under points 7 and 8. |
| --- | --- |

b)

the collective investment undertaking is limited to investing in instruments that are eligible for recognition under points 7 and 8.

The use (or potential use) by a collective investment undertaking of derivative instruments to hedge permitted investments shall not prevent units in that undertaking from being eligible.

| 10. | In relation to points (b) to (e) of point 7, where a security has two credit assessments by eligible ECAIs, the less favourable assessment shall be deemed to apply. In cases where a security has more than two credit assessments by eligible ECAIs, the two most favourable assessments shall be deemed to apply. If the two most favourable credit assessments are different, the less favourable of the two shall be deemed to apply. |
| --- | --- |

10.

In relation to points (b) to (e) of point 7, where a security has two credit assessments by eligible ECAIs, the less favourable assessment shall be deemed to apply. In cases where a security has more than two credit assessments by eligible ECAIs, the two most favourable assessments shall be deemed to apply. If the two most favourable credit assessments are different, the less favourable of the two shall be deemed to apply.

1.3.2.   Additional eligibility under the Financial Collateral Comprehensive Method

| 11. | In addition to the collateral set out in points 7 to 10, where a credit institution uses the Financial Collateral Comprehensive Method under Part 3, the following financial items may be recognised as eligible collateral:






  a) | equities or convertible bonds not included in a main index but traded on a recognised exchange; and |
| --- | --- | --- |

11.

In addition to the collateral set out in points 7 to 10, where a credit institution uses the Financial Collateral Comprehensive Method under Part 3, the following financial items may be recognised as eligible collateral:

a)

equities or convertible bonds not included in a main index but traded on a recognised exchange; and

| b) | units in collective investment undertakings if the following conditions are met:






  i) | they have a daily public price quote; and |
| --- | --- | --- |

b)

units in collective investment undertakings if the following conditions are met:

i)

they have a daily public price quote; and

| ii) | the collective investment undertaking is limited to investing in instruments that are eligible for recognition under point 7 and 8 and the items mentioned in point (a) of this point. |
| --- | --- |

ii)

the collective investment undertaking is limited to investing in instruments that are eligible for recognition under point 7 and 8 and the items mentioned in point (a) of this point.

The use (or potential use) by a collective investment undertaking of derivative instruments to hedge permitted investments shall not prevent units in that undertaking from being eligible.

1.3.3.   Additional eligibility for calculations under Articles 84 to 89

| 12. | In addition to the collateral set out above the provisions of points 13 to 22 apply where a credit institution calculates risk-weighted exposure amounts and expected loss amounts under the approach set out in Articles 84 to 89: |
| --- | --- |

12.

In addition to the collateral set out above the provisions of points 13 to 22 apply where a credit institution calculates risk-weighted exposure amounts and expected loss amounts under the approach set out in Articles 84 to 89:

(a)   Real estate collateral

| 13. | Residential real estate property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial real estate property, that is, offices and other commercial premises, may be recognised as eligible collateral where the following conditions are met:






  a) | the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower; and |
| --- | --- | --- |

13.

Residential real estate property which is or will be occupied or let by the owner, or the beneficial owner in the case of personal investment companies, and commercial real estate property, that is, offices and other commercial premises, may be recognised as eligible collateral where the following conditions are met:

a)

the value of the property does not materially depend upon the credit quality of the obligor. This requirement does not preclude situations where purely macro-economic factors affect both the value of the property and the performance of the borrower; and

| b) | the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral. |
| --- | --- |

b)

the risk of the borrower does not materially depend upon the performance of the underlying property or project, but rather on the underlying capacity of the borrower to repay the debt from other sources. As such, repayment of the facility does not materially depend on any cash flow generated by the underlying property serving as collateral.

| 14. | Credit institutions may also recognise as eligible collateral shares in Finnish residential housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation in respect of residential property which is or will be occupied or let by the owner, as residential real estate collateral, provided that these conditions are met. |
| --- | --- |

14.

Credit institutions may also recognise as eligible collateral shares in Finnish residential housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation in respect of residential property which is or will be occupied or let by the owner, as residential real estate collateral, provided that these conditions are met.

| 15. | The competent authorities may also authorise their credit institutions to recognise as eligible collateral shares in Finnish housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation as commercial real estate collateral, provided that these conditions are met. |
| --- | --- |

15.

The competent authorities may also authorise their credit institutions to recognise as eligible collateral shares in Finnish housing companies operating in accordance with the Finnish Housing Company Act of 1991 or subsequent equivalent legislation as commercial real estate collateral, provided that these conditions are met.

| 16. | The competent authorities may waive the requirement for their credit institutions to comply with condition (b) in point 13 for exposures secured by residential real estate property situated within the territory of that Member State, if the competent authorities have evidence that the relevant market is well-developed and long-established with loss-rates which are sufficiently low to justify such action. This shall not prevent the competent authorities of a Member State, which do not use this waiver from recognising as eligible residential real estate property recognised as eligible in another Member State by virtue of the waiver. Member States shall disclose publicly the use they make of this waiver. |
| --- | --- |

16.

The competent authorities may waive the requirement for their credit institutions to comply with condition (b) in point 13 for exposures secured by residential real estate property situated within the territory of that Member State, if the competent authorities have evidence that the relevant market is well-developed and long-established with loss-rates which are sufficiently low to justify such action. This shall not prevent the competent authorities of a Member State, which do not use this waiver from recognising as eligible residential real estate property recognised as eligible in another Member State by virtue of the waiver. Member States shall disclose publicly the use they make of this waiver.

| 17. | The competent authorities of the Member States may waive the requirement for their credit institutions to comply with the condition in point 13(b) for commercial real estate property situated within the territory of that Member State, if the competent authorities have evidence that the relevant market is well-developed and long-established and that loss-rates stemming from lending secured by commercial real estate property satisfy the following conditions:






  a) | losses stemming from loans collateralised by commercial real estate property up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by commercial real estate property in any given year; and |
| --- | --- | --- |

17.

The competent authorities of the Member States may waive the requirement for their credit institutions to comply with the condition in point 13(b) for commercial real estate property situated within the territory of that Member State, if the competent authorities have evidence that the relevant market is well-developed and long-established and that loss-rates stemming from lending secured by commercial real estate property satisfy the following conditions:

a)

losses stemming from loans collateralised by commercial real estate property up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by commercial real estate property in any given year; and

| b) | overall losses stemming from loans collateralised by commercial real estate property do not exceed 0,5 % of the outstanding loans collateralised by commercial real estate property in any given year. |
| --- | --- |

b)

overall losses stemming from loans collateralised by commercial real estate property do not exceed 0,5 % of the outstanding loans collateralised by commercial real estate property in any given year.

| 18. | If either of these conditions is not satisfied in a given year, the eligibility to use this treatment will cease until the conditions are satisfied in a subsequent year. |
| --- | --- |

18.

If either of these conditions is not satisfied in a given year, the eligibility to use this treatment will cease until the conditions are satisfied in a subsequent year.

| 19. | The competent authorities of a Member State may recognise as eligible collateral commercial real estate property recognised as eligible collateral in another Member State by virtue of the waiver provided for in point 17. |
| --- | --- |

19.

The competent authorities of a Member State may recognise as eligible collateral commercial real estate property recognised as eligible collateral in another Member State by virtue of the waiver provided for in point 17.

(b)   Receivables

| 20. | The competent authorities may recognise as eligible collateral amounts receivable linked to a commercial transaction or transactions with an original maturity of less than or equal to one year. Eligible receivables do not include those associated with securitisations, sub-participations or credit derivatives or amounts owed by affiliated parties. |
| --- | --- |

20.

The competent authorities may recognise as eligible collateral amounts receivable linked to a commercial transaction or transactions with an original maturity of less than or equal to one year. Eligible receivables do not include those associated with securitisations, sub-participations or credit derivatives or amounts owed by affiliated parties.

(c)   Other physical collateral

| 21. | The competent authorities may recognise as eligible collateral physical items of a type other than those types indicated in points 13 to 19 if satisfied as to the following:






  a) | the existence of liquid markets for disposal of the collateral in an expeditious and economically efficient manner; and |
| --- | --- | --- |

21.

The competent authorities may recognise as eligible collateral physical items of a type other than those types indicated in points 13 to 19 if satisfied as to the following:

a)

the existence of liquid markets for disposal of the collateral in an expeditious and economically efficient manner; and

| b) | the existence of well-established publicly available market prices for the collateral. The credit institution must be able to demonstrate that there is no evidence that the net prices it receives when collateral is realised deviates significantly from these market prices. |
| --- | --- |

b)

the existence of well-established publicly available market prices for the collateral. The credit institution must be able to demonstrate that there is no evidence that the net prices it receives when collateral is realised deviates significantly from these market prices.

(d)   Leasing

| 22. | Subject to the provisions of Part 3, point 72, where the requirements set out in Part 2, point 11 are met, exposures arising from transactions whereby a credit institution leases property to a third party will be treated the same as loans collateralised by the type of property leased. |
| --- | --- |

22.

Subject to the provisions of Part 3, point 72, where the requirements set out in Part 2, point 11 are met, exposures arising from transactions whereby a credit institution leases property to a third party will be treated the same as loans collateralised by the type of property leased.

1.4.   Other funded credit protection

1.4.1.   Cash on deposit with, or cash assimilated instruments held by, a third party institution.

| 23. | Cash on deposit with, or cash assimilated instruments held by, a third party institution in a non-custodial arrangement and pledged to the lending credit institution may be recognised as eligible credit protection. |
| --- | --- |

23.

Cash on deposit with, or cash assimilated instruments held by, a third party institution in a non-custodial arrangement and pledged to the lending credit institution may be recognised as eligible credit protection.

1.4.2.   Life insurance policies pledged to the lending credit institution

| 24. | Life insurance policies pledged to the lending credit institution may be recognised as eligible credit protection. |
| --- | --- |

24.

Life insurance policies pledged to the lending credit institution may be recognised as eligible credit protection.

1.4.3.   Institution instruments repurchased on request

| 25. | Instruments issued by third party institutions which will be repurchased by that institution on request may be recognised as eligible credit protection. |
| --- | --- |

25.

Instruments issued by third party institutions which will be repurchased by that institution on request may be recognised as eligible credit protection.

2.   UNFUNDED CREDIT PROTECTION

2.1.   Eligibility of protection providers under all approaches

| 26. | The following parties may be recognised as eligible providers of unfunded credit protection:






  a) | central governments and central banks; |
| --- | --- | --- |

26.

The following parties may be recognised as eligible providers of unfunded credit protection:

a)

central governments and central banks;

| b) | regional governments or local authorities; |
| --- | --- |

b)

regional governments or local authorities;

| c) | multilateral development banks; |
| --- | --- |

c)

multilateral development banks;

| d) | international organisations exposures to which a 0 % risk weight under Articles 78 to 83 is assigned; |
| --- | --- |

d)

international organisations exposures to which a 0 % risk weight under Articles 78 to 83 is assigned;

| e) | public sector entities, claims on which are treated by the competent authorities as claims on institutions or central governments under Articles 78 to 83; |
| --- | --- |

e)

public sector entities, claims on which are treated by the competent authorities as claims on institutions or central governments under Articles 78 to 83;

| f) | institutions; and |
| --- | --- |

f)

institutions; and

| g) | other corporate entities, including parent, subsidiary and affiliate corporate entities of the credit institution, that:






  i) | have a credit assessment by a recognised ECAI which has been determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; and |
| --- | --- | --- |

g)

other corporate entities, including parent, subsidiary and affiliate corporate entities of the credit institution, that:

i)

have a credit assessment by a recognised ECAI which has been determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; and

| ii) | in the case of credit institutions calculating risk-weighted exposure amounts and expected loss amounts under Articles 84 to 89, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporate under Articles 78 to 83. |
| --- | --- |

ii)

in the case of credit institutions calculating risk-weighted exposure amounts and expected loss amounts under Articles 84 to 89, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporate under Articles 78 to 83.

| 27. | Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, to be eligible a guarantor must be internally rated by the credit institution in accordance with the provisions of Annex VII, Part 4. |
| --- | --- |

27.

Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, to be eligible a guarantor must be internally rated by the credit institution in accordance with the provisions of Annex VII, Part 4.

| 28. | By way of derogation from point 26, the Member States may also recognise as eligible providers of unfunded credit protection, other financial institutions authorised and supervised by the competent authorities responsible for the authorisation and supervision of credit institutions and subject to prudential requirements equivalent to those applied to credit institutions. |
| --- | --- |

28.

By way of derogation from point 26, the Member States may also recognise as eligible providers of unfunded credit protection, other financial institutions authorised and supervised by the competent authorities responsible for the authorisation and supervision of credit institutions and subject to prudential requirements equivalent to those applied to credit institutions.

2.2.   Eligibility of protection providers under the IRB Approach which qualify for the treatment set out in Annex VII, Part 1, point 4.

| 29. | Institutions, insurance and reinsurance undertakings and export credit agencies which fulfil the following conditions may be recognised as eligible providers of unfunded credit protection which qualify for the treatment set out in Annex VII, Part 1, point 4:






  — | the protection provider has sufficient expertise in providing unfunded credit protection; |
| --- | --- | --- |

29.

Institutions, insurance and reinsurance undertakings and export credit agencies which fulfil the following conditions may be recognised as eligible providers of unfunded credit protection which qualify for the treatment set out in Annex VII, Part 1, point 4:

—

the protection provider has sufficient expertise in providing unfunded credit protection;

| — | the protection provider is regulated in a manner equivalent to the rules laid down in this Directive, or had, at the time the credit protection was provided, a credit assessment by a recognised ECAI which had been determined by the competent authorities to be associated with credit quality step 3, or above, under the rules for the risk weighting of exposures to corporate under Articles 78 to 83; |
| --- | --- |

—

the protection provider is regulated in a manner equivalent to the rules laid down in this Directive, or had, at the time the credit protection was provided, a credit assessment by a recognised ECAI which had been determined by the competent authorities to be associated with credit quality step 3, or above, under the rules for the risk weighting of exposures to corporate under Articles 78 to 83;

| — | the protection provider had, at the time the credit protection was provided, or for any period of time thereafter, an internal rating with a PD equivalent to or lower than that associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; and |
| --- | --- |

—

the protection provider had, at the time the credit protection was provided, or for any period of time thereafter, an internal rating with a PD equivalent to or lower than that associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83; and

| — | the provider has an internal rating with a PD equivalent to or lower than that associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83. |
| --- | --- |

—

the provider has an internal rating with a PD equivalent to or lower than that associated with credit quality step 3 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83.

For the purpose of this point, credit protection provided by export credit agencies shall not benefit from any explicit central government counter-guarantee.

3.   TYPES OF CREDIT DERIVATIVES

| 30. | The following types of credit derivatives, and instruments that may be composed of such credit derivatives or that are economically effectively similar, may be recognised as eligible:






  a) | credit default swaps; |
| --- | --- | --- |

30.

The following types of credit derivatives, and instruments that may be composed of such credit derivatives or that are economically effectively similar, may be recognised as eligible:

a)

credit default swaps;

| b) | total return swaps; and |
| --- | --- |

b)

total return swaps; and

| c) | credit linked notes to the extent of their cash funding. |
| --- | --- |

c)

credit linked notes to the extent of their cash funding.

| 31. | Where a credit institution buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record offsetting deterioration in the value of the asset that is protected (either through reductions in fair value or by an addition to reserves), the credit protection shall not be recognised as eligible. |
| --- | --- |

31.

Where a credit institution buys credit protection through a total return swap and records the net payments received on the swap as net income, but does not record offsetting deterioration in the value of the asset that is protected (either through reductions in fair value or by an addition to reserves), the credit protection shall not be recognised as eligible.

3.1.   Internal hedges

| 32. | When a credit institution conducts an internal hedge using a credit derivative — i.e. hedges the credit risk of an exposure in the non-trading book with a credit derivative booked in the trading book — in order for the protection to be recognised as eligible for the purposes of this Annex the credit risk transferred to the trading book shall be transferred out to a third party or parties. In such circumstances, subject to the compliance of such transfer with the requirements for the recognition of credit risk mitigation set out in this Annex, the rules set out in Parts 3 to 6 for the calculation of risk-weighted exposure amounts and expected loss amounts where unfunded credit protection is acquired shall be applied. |
| --- | --- |

32.

When a credit institution conducts an internal hedge using a credit derivative — i.e. hedges the credit risk of an exposure in the non-trading book with a credit derivative booked in the trading book — in order for the protection to be recognised as eligible for the purposes of this Annex the credit risk transferred to the trading book shall be transferred out to a third party or parties. In such circumstances, subject to the compliance of such transfer with the requirements for the recognition of credit risk mitigation set out in this Annex, the rules set out in Parts 3 to 6 for the calculation of risk-weighted exposure amounts and expected loss amounts where unfunded credit protection is acquired shall be applied.

Part 2 — Minimum Requirements

| 1. | The credit institution must satisfy the competent authorities that it has adequate risk management processes to control those risks to which the credit institution may be exposed as a result of carrying out credit risk mitigation practices. |
| --- | --- |

1.

The credit institution must satisfy the competent authorities that it has adequate risk management processes to control those risks to which the credit institution may be exposed as a result of carrying out credit risk mitigation practices.

| 2. | Notwithstanding the presence of credit risk mitigation taken into account for the purposes of calculating risk-weighted exposure amounts and as relevant expected loss amounts, credit institutions shall continue to undertake full credit risk assessment of the underlying exposure and be in a position to demonstrate the fulfilment of this requirement to the competent authorities. In the case of repurchase transactions and/or securities or commodities lending or borrowing transactions the underlying exposure shall, for the purposes of this point only, be deemed to be the net amount of the exposure. |
| --- | --- |

2.

Notwithstanding the presence of credit risk mitigation taken into account for the purposes of calculating risk-weighted exposure amounts and as relevant expected loss amounts, credit institutions shall continue to undertake full credit risk assessment of the underlying exposure and be in a position to demonstrate the fulfilment of this requirement to the competent authorities. In the case of repurchase transactions and/or securities or commodities lending or borrowing transactions the underlying exposure shall, for the purposes of this point only, be deemed to be the net amount of the exposure.

1.   FUNDED CREDIT PROTECTION

1.1.   On-balance sheet netting agreements (other than master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital market-driven transactions).

| 3. | For on-balance sheet netting agreements — other than master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital market-driven transactions — to be recognised for the purposes of Articles 90 to 93, the following conditions shall be satisfied:






  a) | they must be legally effective and enforceable in all relevant jurisdictions, including in the event of the insolvency or bankruptcy of a counterparty; |
| --- | --- | --- |

3.

For on-balance sheet netting agreements — other than master netting agreements covering repurchase transactions, securities or commodities lending or borrowing transactions and/or other capital market-driven transactions — to be recognised for the purposes of Articles 90 to 93, the following conditions shall be satisfied:

a)

they must be legally effective and enforceable in all relevant jurisdictions, including in the event of the insolvency or bankruptcy of a counterparty;

| b) | the credit institution must be able to determine at any time those assets and liabilities that are subject to the on-balance sheet netting agreement; |
| --- | --- |

b)

the credit institution must be able to determine at any time those assets and liabilities that are subject to the on-balance sheet netting agreement;

| c) | the credit institution must monitor and control the risks associated with the termination of the credit protection; and |
| --- | --- |

c)

the credit institution must monitor and control the risks associated with the termination of the credit protection; and

| d) | the credit institution must monitor and control the relevant exposures on a net basis. |
| --- | --- |

d)

the credit institution must monitor and control the relevant exposures on a net basis.

1.2.   Master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market driven transactions

| 4. | For master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market driven transactions to be recognised for the purposes of Articles 90 to 93, they shall:






  a) | be legally effective and enforceable in all relevant jurisdictions, including in the event of the bankruptcy or insolvency of the counterparty; |
| --- | --- | --- |

4.

For master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market driven transactions to be recognised for the purposes of Articles 90 to 93, they shall:

a)

be legally effective and enforceable in all relevant jurisdictions, including in the event of the bankruptcy or insolvency of the counterparty;

| b) | give the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement upon the event of default, including in the event of the bankruptcy or insolvency of the counterparty; and |
| --- | --- |

b)

give the non-defaulting party the right to terminate and close-out in a timely manner all transactions under the agreement upon the event of default, including in the event of the bankruptcy or insolvency of the counterparty; and

| c) | provide for the netting of gains and losses on transactions closed out under a master agreement so that a single net amount is owed by one party to the other. |
| --- | --- |

c)

provide for the netting of gains and losses on transactions closed out under a master agreement so that a single net amount is owed by one party to the other.

| 5. | In addition, the minimum requirements for the recognition of financial collateral under the Financial Collateral Comprehensive Method set out in point 6 shall be fulfilled. |
| --- | --- |

5.

In addition, the minimum requirements for the recognition of financial collateral under the Financial Collateral Comprehensive Method set out in point 6 shall be fulfilled.

1.3.   Financial collateral

1.3.1.   Minimum requirements for the recognition of financial collateral under all Approaches and Methods

| 6. | For the recognition of financial collateral and gold, the following conditions shall be met.






  (a) | Low correlation
  The credit quality of the obligor and the value of the collateral must not have a material positive correlation.
  Securities issued by the obligor, or any related group entity, are not eligible. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Annex VI, Part 1, points 68 to 70 may be recognised as eligible when they are posted as collateral for repurchase transactions, provided that the first paragraph of this point is complied with. |
| --- | --- | --- |

6.

For the recognition of financial collateral and gold, the following conditions shall be met.

(a)

Low correlation

The credit quality of the obligor and the value of the collateral must not have a material positive correlation.

Securities issued by the obligor, or any related group entity, are not eligible. This notwithstanding, the obligor's own issues of covered bonds falling within the terms of Annex VI, Part 1, points 68 to 70 may be recognised as eligible when they are posted as collateral for repurchase transactions, provided that the first paragraph of this point is complied with.

| (b) | Legal certainty
  Credit institutions shall fulfil any contractual and statutory requirements in respect of, and take all steps necessary to ensure, the enforceability of the collateral arrangements under the law applicable to their interest in the collateral.
  Credit institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions. They shall re-conduct such review as necessary to ensure continuing enforceability. |
| --- | --- |

(b)

Legal certainty

Credit institutions shall fulfil any contractual and statutory requirements in respect of, and take all steps necessary to ensure, the enforceability of the collateral arrangements under the law applicable to their interest in the collateral.

Credit institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions. They shall re-conduct such review as necessary to ensure continuing enforceability.

| (c) | Operational requirements
  The collateral arrangements shall be properly documented, with a clear and robust procedure for the timely liquidation of collateral.
  Credit institutions shall employ robust procedures and processes to control risks arising from the use of collateral — including risks of failed or reduced credit protection, valuation risks, risks associated with the termination of the credit protection, concentration risk arising from the use of collateral and the interaction with the credit institution's overall risk profile.
  The credit institution shall have documented policies and practices concerning the types and amounts of collateral accepted.
  Credit institutions shall calculate the market value of the collateral, and revalue it accordingly, with a minimum frequency of once every six months and whenever the credit institution has reason to believe that there has occurred a significant decrease in its market value.
  Where the collateral is held by a third party, credit institutions must take reasonable steps to ensure that the third party segregates the collateral from its own assets. |
| --- | --- |

(c)

Operational requirements

The collateral arrangements shall be properly documented, with a clear and robust procedure for the timely liquidation of collateral.

Credit institutions shall employ robust procedures and processes to control risks arising from the use of collateral — including risks of failed or reduced credit protection, valuation risks, risks associated with the termination of the credit protection, concentration risk arising from the use of collateral and the interaction with the credit institution's overall risk profile.

The credit institution shall have documented policies and practices concerning the types and amounts of collateral accepted.

Credit institutions shall calculate the market value of the collateral, and revalue it accordingly, with a minimum frequency of once every six months and whenever the credit institution has reason to believe that there has occurred a significant decrease in its market value.

Where the collateral is held by a third party, credit institutions must take reasonable steps to ensure that the third party segregates the collateral from its own assets.

1.3.2.   Additional minimum requirements for the recognition of financial collateral under the Financial Collateral Simple Method

| 7. | In addition to the requirements set out in point 6, for the recognition of financial collateral under the Financial Collateral Simple Method the residual maturity of the protection must be at least as long as the residual maturity of the exposure. |
| --- | --- |

7.

In addition to the requirements set out in point 6, for the recognition of financial collateral under the Financial Collateral Simple Method the residual maturity of the protection must be at least as long as the residual maturity of the exposure.

1.4.   Minimum requirements for the recognition of real estate collateral

| 8. | For the recognition of real estate collateral the following conditions shall be met.






  (a) | Legal certainty
  The mortgage or charge shall be enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement, and the mortgage or charge shall be properly filed on a timely basis. The arrangements shall reflect a perfected lien (i.e. all legal requirements for establishing the pledge shall been fulfilled). The protection agreement and the legal process underpinning it shall enable the credit institution to realise the value of the protection within a reasonable timeframe. |
| --- | --- | --- |

8.

For the recognition of real estate collateral the following conditions shall be met.

(a)

Legal certainty

The mortgage or charge shall be enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement, and the mortgage or charge shall be properly filed on a timely basis. The arrangements shall reflect a perfected lien (i.e. all legal requirements for establishing the pledge shall been fulfilled). The protection agreement and the legal process underpinning it shall enable the credit institution to realise the value of the protection within a reasonable timeframe.

| (b) | Monitoring of property values
  The value of the property shall be monitored on a frequent basis and at a minimum once every year for commercial real estate and once every three years for residential real estate. More frequent monitoring shall be carried out where the market is subject to significant changes in conditions. Statistical methods may be used to monitor the value of the property and to identify property that needs revaluation. The property valuation shall be reviewed by an independent valuer when information indicates that the value of the property may have declined materially relative to general market prices. For loans exceeding 3 million Euro or 5 % of the own funds of the credit institution, the property valuation shall be reviewed by an independent valuer at least every three years.
  ‘Independent valuer’ shall mean a person who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process. |
| --- | --- |

(b)

Monitoring of property values

The value of the property shall be monitored on a frequent basis and at a minimum once every year for commercial real estate and once every three years for residential real estate. More frequent monitoring shall be carried out where the market is subject to significant changes in conditions. Statistical methods may be used to monitor the value of the property and to identify property that needs revaluation. The property valuation shall be reviewed by an independent valuer when information indicates that the value of the property may have declined materially relative to general market prices. For loans exceeding 3 million Euro or 5 % of the own funds of the credit institution, the property valuation shall be reviewed by an independent valuer at least every three years.

‘Independent valuer’ shall mean a person who possesses the necessary qualifications, ability and experience to execute a valuation and who is independent from the credit decision process.

| (c) | Documentation
  The types of residential and commercial real estate accepted by the credit institution and its lending policies in this regard shall be clearly documented. |
| --- | --- |

(c)

Documentation

The types of residential and commercial real estate accepted by the credit institution and its lending policies in this regard shall be clearly documented.

| (d) | Insurance
  The credit institution shall have procedures to monitor that the property taken as protection is adequately insured against damage. |
| --- | --- |

(d)

Insurance

The credit institution shall have procedures to monitor that the property taken as protection is adequately insured against damage.

1.5.   Minimum requirements for the recognition of receivables as collateral

| 9. | For the recognition of receivables as collateral the following conditions shall be met:






  (a) | Legal certainty






  (i) | The legal mechanism by which the collateral is provided shall be robust and effective and ensure that the lender has clear rights over the proceeds; |
| --- | --- | --- | --- |

9.

For the recognition of receivables as collateral the following conditions shall be met:

(a)

Legal certainty

(i)

The legal mechanism by which the collateral is provided shall be robust and effective and ensure that the lender has clear rights over the proceeds;

| (ii) | Credit institutions must take all steps necessary to fulfil local requirements in respect of the enforceability of security interest. There shall be a framework which allows the lender to have a first priority claim over the collateral subject to national discretion to allow such claims to be subject to the claims of preferential creditors provided for in legislative or implementing provisions; |
| --- | --- |

(ii)

Credit institutions must take all steps necessary to fulfil local requirements in respect of the enforceability of security interest. There shall be a framework which allows the lender to have a first priority claim over the collateral subject to national discretion to allow such claims to be subject to the claims of preferential creditors provided for in legislative or implementing provisions;

| (iii) | Credit institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions; and |
| --- | --- |

(iii)

Credit institutions shall have conducted sufficient legal review confirming the enforceability of the collateral arrangements in all relevant jurisdictions; and

| (iv) | The collateral arrangements must be properly documented, with a clear and robust procedure for the timely collection of collateral. Credit institution's procedures shall ensure that any legal conditions required for declaring the default of the borrower and timely collection of collateral are observed. In the event of the borrower's financial distress or default, the credit institution shall have legal authority to sell or assign the receivables to other parties without consent of the receivables obligors. |
| --- | --- |

(iv)

The collateral arrangements must be properly documented, with a clear and robust procedure for the timely collection of collateral. Credit institution's procedures shall ensure that any legal conditions required for declaring the default of the borrower and timely collection of collateral are observed. In the event of the borrower's financial distress or default, the credit institution shall have legal authority to sell or assign the receivables to other parties without consent of the receivables obligors.

| (b) | Risk management






  (i) | The credit institution must have a sound process for determining the credit risk associated with the receivables. Such a process shall include, among other things, analyses of the borrower's business and industry and the types of customers with whom the borrower does business. Where the credit institution relies on the borrower to ascertain the credit risk of the customers, the credit institution must review the borrower's credit practices to ascertain their soundness and credibility; |
| --- | --- | --- |

(b)

Risk management

(i)

The credit institution must have a sound process for determining the credit risk associated with the receivables. Such a process shall include, among other things, analyses of the borrower's business and industry and the types of customers with whom the borrower does business. Where the credit institution relies on the borrower to ascertain the credit risk of the customers, the credit institution must review the borrower's credit practices to ascertain their soundness and credibility;

| (ii) | The margin between the amount of the exposure and the value of the receivables must reflect all appropriate factors, including the cost of collection, concentration within the receivables pool pledged by an individual borrower, and potential concentration risk within the credit institution's total exposures beyond that controlled by the credit institution's general methodology. The credit institution must maintain a continuous monitoring process appropriate to the receivables. Additionally, compliance with loan covenants, environmental restrictions, and other legal requirements shall be reviewed on a regular basis; |
| --- | --- |

(ii)

The margin between the amount of the exposure and the value of the receivables must reflect all appropriate factors, including the cost of collection, concentration within the receivables pool pledged by an individual borrower, and potential concentration risk within the credit institution's total exposures beyond that controlled by the credit institution's general methodology. The credit institution must maintain a continuous monitoring process appropriate to the receivables. Additionally, compliance with loan covenants, environmental restrictions, and other legal requirements shall be reviewed on a regular basis;

| (iii) | The receivables pledged by a borrower shall be diversified and not be unduly correlated with the borrower. Where there is material positive correlation, the attendant risks shall be taken into account in the setting of margins for the collateral pool as a whole; |
| --- | --- |

(iii)

The receivables pledged by a borrower shall be diversified and not be unduly correlated with the borrower. Where there is material positive correlation, the attendant risks shall be taken into account in the setting of margins for the collateral pool as a whole;

| (iv) | Receivables from affiliates of the borrower (including subsidiaries and employees) shall not be recognised as risk mitigants; and |
| --- | --- |

(iv)

Receivables from affiliates of the borrower (including subsidiaries and employees) shall not be recognised as risk mitigants; and

| (v) | The credit institution shall have a documented process for collecting receivable payments in distressed situations. The requisite facilities for collection shall be in place, even when the credit institution normally looks to the borrower for collections. |
| --- | --- |

(v)

The credit institution shall have a documented process for collecting receivable payments in distressed situations. The requisite facilities for collection shall be in place, even when the credit institution normally looks to the borrower for collections.

1.6.   Minimum requirements for the recognition of other physical collateral

| 10. | For the recognition of other physical collateral the following conditions shall be met:






  a) | the collateral arrangement shall be legally effective and enforceable in all relevant jurisdictions and shall enable the credit institution to realise the value of the property within a reasonable timeframe; |
| --- | --- | --- |

10.

For the recognition of other physical collateral the following conditions shall be met:

a)

the collateral arrangement shall be legally effective and enforceable in all relevant jurisdictions and shall enable the credit institution to realise the value of the property within a reasonable timeframe;

| b) | with the sole exception of permissible prior claims referred to in point 9(a)(ii), only first liens on, or charges over, collateral are permissible. As such, the credit institution shall have priority over all other lenders to the realised proceeds of the collateral; |
| --- | --- |

b)

with the sole exception of permissible prior claims referred to in point 9(a)(ii), only first liens on, or charges over, collateral are permissible. As such, the credit institution shall have priority over all other lenders to the realised proceeds of the collateral;

| c) | the value of the property shall be monitored on a frequent basis and at a minimum once every year. More frequent monitoring shall be required where the market is subject to significant changes in conditions; |
| --- | --- |

c)

the value of the property shall be monitored on a frequent basis and at a minimum once every year. More frequent monitoring shall be required where the market is subject to significant changes in conditions;

| d) | the loan agreement shall include detailed descriptions of the collateral plus detailed specifications of the manner and frequency of revaluation; |
| --- | --- |

d)

the loan agreement shall include detailed descriptions of the collateral plus detailed specifications of the manner and frequency of revaluation;

| e) | the types of physical collateral accepted by the credit institution and policies and practices in respect of the appropriate amount of each type of collateral relative to the exposure amount shall be clearly documented in internal credit policies and procedures available for examination; |
| --- | --- |

e)

the types of physical collateral accepted by the credit institution and policies and practices in respect of the appropriate amount of each type of collateral relative to the exposure amount shall be clearly documented in internal credit policies and procedures available for examination;

| f) | the credit institution's credit policies with regard to the transaction structure shall address appropriate collateral requirements relative to the exposure amount, the ability to liquidate the collateral readily, the ability to establish objectively a price or market value, the frequency with which the value can readily be obtained (including a professional appraisal or valuation), and the volatility or a proxy of the volatility of the value of the collateral; |
| --- | --- |

f)

the credit institution's credit policies with regard to the transaction structure shall address appropriate collateral requirements relative to the exposure amount, the ability to liquidate the collateral readily, the ability to establish objectively a price or market value, the frequency with which the value can readily be obtained (including a professional appraisal or valuation), and the volatility or a proxy of the volatility of the value of the collateral;

| g) | both initial valuation and revaluation shall take fully into account any deterioration or obsolescence of the collateral. Particular attention must be paid in valuation and revaluation to the effects of the passage of time on fashion- or date-sensitive collateral; |
| --- | --- |

g)

both initial valuation and revaluation shall take fully into account any deterioration or obsolescence of the collateral. Particular attention must be paid in valuation and revaluation to the effects of the passage of time on fashion- or date-sensitive collateral;

| h) | the credit institution must have the right to physically inspect the property. It shall have policies and procedures addressing its exercise of the right to physical inspection; and |
| --- | --- |

h)

the credit institution must have the right to physically inspect the property. It shall have policies and procedures addressing its exercise of the right to physical inspection; and

| i) | the credit institution must have procedures to monitor that the property taken as protection is adequately insured against damage. |
| --- | --- |

i)

the credit institution must have procedures to monitor that the property taken as protection is adequately insured against damage.

1.7.   Minimum requirements for treating lease exposures as collateralised

| 11. | For the exposures arising from leasing transactions to be treated as collateralised by the type of property leased, the following conditions shall be met:






  a) | the conditions set out in points 8 or 10 as appropriate for the recognition as collateral of the type of property leased shall be met; |
| --- | --- | --- |

11.

For the exposures arising from leasing transactions to be treated as collateralised by the type of property leased, the following conditions shall be met:

a)

the conditions set out in points 8 or 10 as appropriate for the recognition as collateral of the type of property leased shall be met;

| b) | there shall be robust risk management on the part of the lessor with respect to the use to which the leased asset is put, its age and the planned duration of its use, including appropriate monitoring of the value of the security; |
| --- | --- |

b)

there shall be robust risk management on the part of the lessor with respect to the use to which the leased asset is put, its age and the planned duration of its use, including appropriate monitoring of the value of the security;

| c) | there shall be in place a robust legal framework establishing the lessor's legal ownership of the asset and its ability to exercise its rights as owner in a timely fashion; and |
| --- | --- |

c)

there shall be in place a robust legal framework establishing the lessor's legal ownership of the asset and its ability to exercise its rights as owner in a timely fashion; and

| d) | where this has not already been ascertained in calculating the LGD level, the difference between the value of the unamortised amount and the market value of the security must not be so large as to overstate the credit risk mitigation attributed to the leased assets. |
| --- | --- |

d)

where this has not already been ascertained in calculating the LGD level, the difference between the value of the unamortised amount and the market value of the security must not be so large as to overstate the credit risk mitigation attributed to the leased assets.

1.8.   Minimum requirements for the recognition of other funded credit protection

1.8.1.   Cash on deposit with, or cash assimilated instruments held by, a third party institution

| 12. | To be eligible for the treatment set out at Part 3, point 79, the protection referred to in Part 1, point 23 must satisfy the following conditions:






  a) | the borrower's claim against the third party institution is openly pledged or assigned to the lending credit institution and such pledge or assignment is legally effective and enforceable in all relevant jurisdictions; |
| --- | --- | --- |

12.

To be eligible for the treatment set out at Part 3, point 79, the protection referred to in Part 1, point 23 must satisfy the following conditions:

a)

the borrower's claim against the third party institution is openly pledged or assigned to the lending credit institution and such pledge or assignment is legally effective and enforceable in all relevant jurisdictions;

| b) | the third party institution is notified of the pledge or assignment; |
| --- | --- |

b)

the third party institution is notified of the pledge or assignment;

| c) | as a result of the notification, the third party institution is able to make payments solely to the lending credit institution or to other parties with the lending credit institution's consent; and |
| --- | --- |

c)

as a result of the notification, the third party institution is able to make payments solely to the lending credit institution or to other parties with the lending credit institution's consent; and

| d) | the pledge or assignment is unconditional and irrevocable. |
| --- | --- |

d)

the pledge or assignment is unconditional and irrevocable.

1.8.2.   Life insurance policies pledged to the lending credit institution.

| 13. | For life insurance policies pledged to the lending credit institution to be recognised the following conditions shall be met:






  a) | the company providing the life insurance may be recognised as an eligible unfunded credit protection provider under Part 1, point 26; |
| --- | --- | --- |

13.

For life insurance policies pledged to the lending credit institution to be recognised the following conditions shall be met:

a)

the company providing the life insurance may be recognised as an eligible unfunded credit protection provider under Part 1, point 26;

| b) | the life insurance policy is openly pledged or assigned to the lending credit institution; |
| --- | --- |

b)

the life insurance policy is openly pledged or assigned to the lending credit institution;

| c) | the company providing the life insurance is notified of the pledge or assignment and as a result may not pay amounts payable under the contract without the consent of the lending credit institution; |
| --- | --- |

c)

the company providing the life insurance is notified of the pledge or assignment and as a result may not pay amounts payable under the contract without the consent of the lending credit institution;

| d) | the declared surrender value of the policy is non-reducible; |
| --- | --- |

d)

the declared surrender value of the policy is non-reducible;

| e) | the lending credit institution must have the right to cancel the policy and receive the surrender value in a timely way in the event of the default of the borrower; |
| --- | --- |

e)

the lending credit institution must have the right to cancel the policy and receive the surrender value in a timely way in the event of the default of the borrower;

| f) | the lending credit institution is informed of any non-payments under the policy by the policy-holder; |
| --- | --- |

f)

the lending credit institution is informed of any non-payments under the policy by the policy-holder;

| g) | the credit protection must be provided for the maturity of the loan. Where this is not possible because the insurance relationship ends before the loan relationship expires, the credit institution must ensure that the amount deriving from the insurance contract serves the credit institution as security until the end of the duration of the credit agreement; and |
| --- | --- |

g)

the credit protection must be provided for the maturity of the loan. Where this is not possible because the insurance relationship ends before the loan relationship expires, the credit institution must ensure that the amount deriving from the insurance contract serves the credit institution as security until the end of the duration of the credit agreement; and

| h) | the pledge or assignment must be legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement. |
| --- | --- |

h)

the pledge or assignment must be legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.

2.   UNFUNDED CREDIT PROTECTION AND CREDIT LINKED NOTES

2.1.   Requirements common to guarantees and credit derivatives

| 14. | Subject to point 16, for the credit protection deriving from a guarantee or credit derivative to be recognised the following conditions shall be met:






  a) | the credit protection shall be direct; |
| --- | --- | --- |

14.

Subject to point 16, for the credit protection deriving from a guarantee or credit derivative to be recognised the following conditions shall be met:

a)

the credit protection shall be direct;

| b) | the extent of the credit protection shall be clearly defined and incontrovertible; |
| --- | --- |

b)

the extent of the credit protection shall be clearly defined and incontrovertible;

| c) | the credit protection contract shall not contain any clause, the fulfilment of which is outside the direct control of the lender, that:






  i) | would allow the protection provider unilaterally to cancel the protection; |
| --- | --- | --- |

c)

the credit protection contract shall not contain any clause, the fulfilment of which is outside the direct control of the lender, that:

i)

would allow the protection provider unilaterally to cancel the protection;

| ii) | would increase the effective cost of protection as a result of deteriorating credit quality of the protected exposure; |
| --- | --- |

ii)

would increase the effective cost of protection as a result of deteriorating credit quality of the protected exposure;

| iii) | could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due; or |
| --- | --- |

iii)

could prevent the protection provider from being obliged to pay out in a timely manner in the event that the original obligor fails to make any payments due; or

| iv) | could allow the maturity of the credit protection to be reduced by the protection provider; and |
| --- | --- |

iv)

could allow the maturity of the credit protection to be reduced by the protection provider; and

| d) | it must be legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement. |
| --- | --- |

d)

it must be legally effective and enforceable in all jurisdictions which are relevant at the time of the conclusion of the credit agreement.

2.1.1.   Operational requirements

| 15. | The credit institution shall satisfy the competent authority that it has systems in place to manage potential concentration of risk arising from the credit institution's use of guarantees and credit derivatives. The credit institution must be able to demonstrate how its strategy in respect of its use of credit derivatives and guarantees interacts with its management of its overall risk profile. |
| --- | --- |

15.

The credit institution shall satisfy the competent authority that it has systems in place to manage potential concentration of risk arising from the credit institution's use of guarantees and credit derivatives. The credit institution must be able to demonstrate how its strategy in respect of its use of credit derivatives and guarantees interacts with its management of its overall risk profile.

2.2.   Sovereign and other public sector counter-guarantees

| 16. | Where an exposure is protected by a guarantee which is counter-guaranteed by a central government or central bank, a regional government or local authority, a public sector entity, claims on which are treated as claims on the central government in whose jurisdiction they are established under Articles 78 to 83, a multi-lateral development bank to which a 0 % risk weight is assigned under or by virtue of Articles 78 to 83, or a public sector entity, claims on which are treated as claims on credit institutions under Articles 78 to 83, the exposure may be treated as protected by a guarantee provided by the entity in question, provided the following conditions are satisfied:






  a) | the counter-guarantee covers all credit risk elements of the claim; |
| --- | --- | --- |

16.

Where an exposure is protected by a guarantee which is counter-guaranteed by a central government or central bank, a regional government or local authority, a public sector entity, claims on which are treated as claims on the central government in whose jurisdiction they are established under Articles 78 to 83, a multi-lateral development bank to which a 0 % risk weight is assigned under or by virtue of Articles 78 to 83, or a public sector entity, claims on which are treated as claims on credit institutions under Articles 78 to 83, the exposure may be treated as protected by a guarantee provided by the entity in question, provided the following conditions are satisfied:

a)

the counter-guarantee covers all credit risk elements of the claim;

| b) | both the original guarantee and the counter-guarantee meet the requirements for guarantees set out in points 14, 15 and 18, except that the counter-guarantee need not be direct; and |
| --- | --- |

b)

both the original guarantee and the counter-guarantee meet the requirements for guarantees set out in points 14, 15 and 18, except that the counter-guarantee need not be direct; and

| c) | the competent authority is satisfied that the cover is robust and that nothing in the historical evidence suggests that the coverage of the counter-guarantee is less than effectively equivalent to that of a direct guarantee by the entity in question. |
| --- | --- |

c)

the competent authority is satisfied that the cover is robust and that nothing in the historical evidence suggests that the coverage of the counter-guarantee is less than effectively equivalent to that of a direct guarantee by the entity in question.

| 17. | The treatment set out in point 16 also applies to an exposure which is not counter-guaranteed by an entity listed in that point if that exposure's counter-guarantee is in turn directly guaranteed by one of the listed entities and the conditions listed in that point are satisfied. |
| --- | --- |

17.

The treatment set out in point 16 also applies to an exposure which is not counter-guaranteed by an entity listed in that point if that exposure's counter-guarantee is in turn directly guaranteed by one of the listed entities and the conditions listed in that point are satisfied.

2.3.   Additional requirements for guarantees

| 18. | For a guarantee to be recognised the following conditions shall also be met:






  a) | on the qualifying default of and/or non-payment by the counterparty, the lending credit institution shall have the right to pursue, in a timely manner, the guarantor for any monies due under the claim in respect of which the protection is provided. Payment by the guarantor shall not be subject to the lending credit institution first having to pursue the obligor. In the case of unfunded credit protection covering residential mortgage loans, the requirements in point 14(c)(iii) and in the first subparagraph of this point have only to be satisfied within 24 months; |
| --- | --- | --- |

18.

For a guarantee to be recognised the following conditions shall also be met:

a)

on the qualifying default of and/or non-payment by the counterparty, the lending credit institution shall have the right to pursue, in a timely manner, the guarantor for any monies due under the claim in respect of which the protection is provided. Payment by the guarantor shall not be subject to the lending credit institution first having to pursue the obligor. In the case of unfunded credit protection covering residential mortgage loans, the requirements in point 14(c)(iii) and in the first subparagraph of this point have only to be satisfied within 24 months;

| b) | the guarantee shall be an explicitly documented obligation assumed by the guarantor; and |
| --- | --- |

b)

the guarantee shall be an explicitly documented obligation assumed by the guarantor; and

| c) | subject to the following sentence, the guarantee shall cover all types of payments the obligor is expected to make in respect of the claim. Where certain types of payment are excluded from the guarantee, the recognised value of the guarantee shall be adjusted to reflect the limited coverage. |
| --- | --- |

c)

subject to the following sentence, the guarantee shall cover all types of payments the obligor is expected to make in respect of the claim. Where certain types of payment are excluded from the guarantee, the recognised value of the guarantee shall be adjusted to reflect the limited coverage.

| 19. | In the case of guarantees provided in the context of mutual guarantee schemes recognised for these purposes by the competent authorities or provided by or counter-guaranteed by entities referred to in point 16, the requirements in point 18(a) shall be considered to be satisfied where either of the following conditions are met:






  a) | the lending credit institution has the right to obtain in a timely manner a provisional payment by the guarantor calculated to represent a robust estimate of the amount of the economic loss, including losses resulting from the non-payment of interest and other types of payment which the borrower is obliged to make, likely to be incurred by the lending credit institution proportional to the coverage of the guarantee; or |
| --- | --- | --- |

19.

In the case of guarantees provided in the context of mutual guarantee schemes recognised for these purposes by the competent authorities or provided by or counter-guaranteed by entities referred to in point 16, the requirements in point 18(a) shall be considered to be satisfied where either of the following conditions are met:

a)

the lending credit institution has the right to obtain in a timely manner a provisional payment by the guarantor calculated to represent a robust estimate of the amount of the economic loss, including losses resulting from the non-payment of interest and other types of payment which the borrower is obliged to make, likely to be incurred by the lending credit institution proportional to the coverage of the guarantee; or

| b) | the lending credit institution can demonstrate that the loss-protecting effects of the guarantee, including losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment. |
| --- | --- |

b)

the lending credit institution can demonstrate that the loss-protecting effects of the guarantee, including losses resulting from the non-payment of interest and other types of payments which the borrower is obliged to make, justify such treatment.

2.4.   Additional requirements for credit derivatives

| 20. | For a credit derivative to be recognised the following conditions shall also be met:






  a) | subject to point (b), the credit events specified under the credit derivative shall at a minimum include:






  i) | the failure to pay the amounts due under the terms of the underlying obligation that are in effect at the time of such failure (with a grace period that is closely in line with or shorter than the grace period in the underlying obligation); |
| --- | --- | --- | --- |

20.

For a credit derivative to be recognised the following conditions shall also be met:

a)

subject to point (b), the credit events specified under the credit derivative shall at a minimum include:

i)

the failure to pay the amounts due under the terms of the underlying obligation that are in effect at the time of such failure (with a grace period that is closely in line with or shorter than the grace period in the underlying obligation);

| ii) | the bankruptcy, insolvency or inability of the obligor to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due, and analogous events; and |
| --- | --- |

ii)

the bankruptcy, insolvency or inability of the obligor to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due, and analogous events; and

| iii) | the restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that results in a credit loss event (i.e. value adjustment or other similar debit to the profit and loss account); |
| --- | --- |

iii)

the restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that results in a credit loss event (i.e. value adjustment or other similar debit to the profit and loss account);

| b) | where the credit events specified under the credit derivative do not include restructuring of the underlying obligation as described in point (a)(iii), the credit protection may nonetheless be recognised subject to a reduction in the recognised value as specified in point 83 of Part 3; |
| --- | --- |

b)

where the credit events specified under the credit derivative do not include restructuring of the underlying obligation as described in point (a)(iii), the credit protection may nonetheless be recognised subject to a reduction in the recognised value as specified in point 83 of Part 3;

| c) | in the case of credit derivatives allowing for cash settlement, a robust valuation process shall be in place in order to estimate loss reliably. There shall be a clearly specified period for obtaining post-credit-event valuations of the underlying obligation; |
| --- | --- |

c)

in the case of credit derivatives allowing for cash settlement, a robust valuation process shall be in place in order to estimate loss reliably. There shall be a clearly specified period for obtaining post-credit-event valuations of the underlying obligation;

| d) | if the protection purchaser's right and ability to transfer the underlying obligation to the protection provider is required for settlement, the terms of the underlying obligation shall provide that any required consent to such transfer may not be unreasonably withheld; and |
| --- | --- |

d)

if the protection purchaser's right and ability to transfer the underlying obligation to the protection provider is required for settlement, the terms of the underlying obligation shall provide that any required consent to such transfer may not be unreasonably withheld; and

| e) | the identity of the parties responsible for determining whether a credit event has occurred shall be clearly defined. This determination shall not be the sole responsibility of the protection provider. The protection buyer shall have the right/ability to inform the protection provider of the occurrence of a credit event. |
| --- | --- |

e)

the identity of the parties responsible for determining whether a credit event has occurred shall be clearly defined. This determination shall not be the sole responsibility of the protection provider. The protection buyer shall have the right/ability to inform the protection provider of the occurrence of a credit event.

| 21. | A mismatch between the underlying obligation and the reference obligation under the credit derivative (i.e. the obligation used for the purposes of determining cash settlement value or the deliverable obligation) or between the underlying obligation and the obligation used for purposes of determining whether a credit event has occurred is permissible only if the following conditions are met:






  a) | the reference obligation or the obligation used for purposes of determining whether a credit event has occurred, as the case may be, ranks pari passu with or is junior to the underlying obligation; and |
| --- | --- | --- |

21.

A mismatch between the underlying obligation and the reference obligation under the credit derivative (i.e. the obligation used for the purposes of determining cash settlement value or the deliverable obligation) or between the underlying obligation and the obligation used for purposes of determining whether a credit event has occurred is permissible only if the following conditions are met:

a)

the reference obligation or the obligation used for purposes of determining whether a credit event has occurred, as the case may be, ranks pari passu with or is junior to the underlying obligation; and

| b) | the underlying obligation and the reference obligation or the obligation used for purposes of determining whether a credit event has occurred, as the case may be, share the same obligor (i.e., the same legal entity) and there are in place legally enforceable cross-default or cross-acceleration clauses. |
| --- | --- |

b)

the underlying obligation and the reference obligation or the obligation used for purposes of determining whether a credit event has occurred, as the case may be, share the same obligor (i.e., the same legal entity) and there are in place legally enforceable cross-default or cross-acceleration clauses.

2.5.   Requirements to qualify for the treatment set out in Annex VII, Part 1, point 4

| 22. | To be eligible for the treatment set out in Annex VII, Part 1, point 4, credit protection deriving from a guarantee or credit derivative shall meet the following conditions:






  a) | the underlying obligation shall be to:






  — | a corporate exposure as defined in Article 86, excluding insurance and reinsurance undertakings; |
| --- | --- | --- | --- |

22.

To be eligible for the treatment set out in Annex VII, Part 1, point 4, credit protection deriving from a guarantee or credit derivative shall meet the following conditions:

a)

the underlying obligation shall be to:

—

a corporate exposure as defined in Article 86, excluding insurance and reinsurance undertakings;

| — | an exposure to a regional government, local authority or Public Sector Entity which is not treated as an exposure to a central government or a central bank according to Article 86; or |
| --- | --- |

—

an exposure to a regional government, local authority or Public Sector Entity which is not treated as an exposure to a central government or a central bank according to Article 86; or

| — | an exposure to a small or medium sized entity, classified as a retail exposure according to Article 86(4); |
| --- | --- |

—

an exposure to a small or medium sized entity, classified as a retail exposure according to Article 86(4);

| b) | the underlying obligors shall not be members of the same group as the protection provider; |
| --- | --- |

b)

the underlying obligors shall not be members of the same group as the protection provider;

| c) | the exposure shall be hedged by one of the following instruments:






  — | single-name unfunded credit derivatives or single-name guarantees, |
| --- | --- | --- |

c)

the exposure shall be hedged by one of the following instruments:

—

single-name unfunded credit derivatives or single-name guarantees,

| — | first-to-default basket products — the treatment shall be applied to the asset within the basket with the lowest risk-weighted exposure amount, or |
| --- | --- |

—

first-to-default basket products — the treatment shall be applied to the asset within the basket with the lowest risk-weighted exposure amount, or

| — | nth-to-default basket products — the protection obtained is only eligible for consideration under this framework if eligible (n – 1)th default protection has also be obtained or where (n – 1) of the assets within the basket has/have already defaulted. Where this is the case the treatment shall be applied to the asset within the basket with the lowest risk-weighted exposure amount; |
| --- | --- |

—

nth-to-default basket products — the protection obtained is only eligible for consideration under this framework if eligible (n – 1)th default protection has also be obtained or where (n – 1) of the assets within the basket has/have already defaulted. Where this is the case the treatment shall be applied to the asset within the basket with the lowest risk-weighted exposure amount;

| d) | the credit protection meets the requirements set out in points 14, 15, 18, 20 and 21; |
| --- | --- |

d)

the credit protection meets the requirements set out in points 14, 15, 18, 20 and 21;

| e) | the risk weight that is associated with the exposure prior to the application of the treatment in Annex VII, Part 1, point 4, does not already factor in any aspect of the credit protection; |
| --- | --- |

e)

the risk weight that is associated with the exposure prior to the application of the treatment in Annex VII, Part 1, point 4, does not already factor in any aspect of the credit protection;

| f) | a credit institution shall have the right and expectation to receive payment from the protection provider without having to take legal action in order to pursue the counterparty for payment. To the extent possible, a credit institution shall take steps to satisfy itself that the protection provider is willing to pay promptly should a credit event occur; |
| --- | --- |

f)

a credit institution shall have the right and expectation to receive payment from the protection provider without having to take legal action in order to pursue the counterparty for payment. To the extent possible, a credit institution shall take steps to satisfy itself that the protection provider is willing to pay promptly should a credit event occur;

| g) | the purchased credit protection shall absorb all credit losses incurred on the hedged portion of an exposure that arise due to the occurrence of credit events outlined in the contract; |
| --- | --- |

g)

the purchased credit protection shall absorb all credit losses incurred on the hedged portion of an exposure that arise due to the occurrence of credit events outlined in the contract;

| h) | if the payout structure provides for physical settlement, then there shall be legal certainty with respect to the deliverability of a loan, bond, or contingent liability. If a credit institution intends to deliver an obligation other than the underlying exposure, it shall ensure that the deliverable obligation is sufficiently liquid so that the credit institution would have the ability to purchase it for delivery in accordance with the contract; |
| --- | --- |

h)

if the payout structure provides for physical settlement, then there shall be legal certainty with respect to the deliverability of a loan, bond, or contingent liability. If a credit institution intends to deliver an obligation other than the underlying exposure, it shall ensure that the deliverable obligation is sufficiently liquid so that the credit institution would have the ability to purchase it for delivery in accordance with the contract;

| i) | the terms and conditions of credit protection arrangements shall be legally confirmed in writing by both the protection provider and the credit institution; |
| --- | --- |

i)

the terms and conditions of credit protection arrangements shall be legally confirmed in writing by both the protection provider and the credit institution;

| j) | credit institutions shall have a process in place to detect excessive correlation between the creditworthiness of a protection provider and the obligor of the underlying exposure due to their performance being dependent on common factors beyond the systematic risk factor; and |
| --- | --- |

j)

credit institutions shall have a process in place to detect excessive correlation between the creditworthiness of a protection provider and the obligor of the underlying exposure due to their performance being dependent on common factors beyond the systematic risk factor; and

| k) | in the case of protection against dilution risk, the seller of purchased receivables shall not be a member of the same group as the protection provider. |
| --- | --- |

k)

in the case of protection against dilution risk, the seller of purchased receivables shall not be a member of the same group as the protection provider.

Part 3 — Calculating the effects of credit risk mitigation

| 1. | Subject to Parts 4 to 6, where the provisions in Parts 1 and 2 are satisfied, the calculation of risk-weighted exposure amounts under Articles 78 to 83 and the calculation of risk-weighted exposure amounts and expected loss amounts under Articles 84 to 89 may be modified in accordance with the provisions of this Part. |
| --- | --- |

1.

Subject to Parts 4 to 6, where the provisions in Parts 1 and 2 are satisfied, the calculation of risk-weighted exposure amounts under Articles 78 to 83 and the calculation of risk-weighted exposure amounts and expected loss amounts under Articles 84 to 89 may be modified in accordance with the provisions of this Part.

| 2. | Cash, securities or commodities purchased, borrowed or received under a repurchase transaction or securities or commodities lending or borrowing transaction shall be treated as collateral. |
| --- | --- |

2.

Cash, securities or commodities purchased, borrowed or received under a repurchase transaction or securities or commodities lending or borrowing transaction shall be treated as collateral.

1.   FUNDED CREDIT PROTECTION

1.1.   Credit linked notes

| 3. | Investments in credit linked notes issued by the lending credit institution may be treated as cash collateral. |
| --- | --- |

3.

Investments in credit linked notes issued by the lending credit institution may be treated as cash collateral.

1.2.   On-balance sheet netting

| 4. | Loans and deposits with the lending credit institution subject to on-balance sheet netting are to be treated as cash collateral. |
| --- | --- |

4.

Loans and deposits with the lending credit institution subject to on-balance sheet netting are to be treated as cash collateral.

1.3.   Master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions

1.3.1.   Calculation of the fully-adjusted exposure value

(a)   Using the ‘Supervisory’ volatility adjustments or the ‘Own Estimates’ volatility adjustments approaches

| 5. | Subject to points 12 to 21, in calculating the ‘fully adjusted exposure value’ (E*) for the exposures subject to an eligible master netting agreement covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions, the volatility adjustments to be applied shall be calculated either using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach as set out in points 30 to 61 for the Financial Collateral Comprehensive Method. For the use of the Own estimates approach, the same conditions and requirements shall apply as apply under the Financial Collateral Comprehensive Method |
| --- | --- |

5.

Subject to points 12 to 21, in calculating the ‘fully adjusted exposure value’ (E*) for the exposures subject to an eligible master netting agreement covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions, the volatility adjustments to be applied shall be calculated either using the Supervisory Volatility Adjustments Approach or the Own Estimates Volatility Adjustments Approach as set out in points 30 to 61 for the Financial Collateral Comprehensive Method. For the use of the Own estimates approach, the same conditions and requirements shall apply as apply under the Financial Collateral Comprehensive Method

| 6. | The net position in each ‘type of security’ or commodity shall be calculated by subtracting from the total value of the securities or commodities of that type lent, sold or provided under the master netting agreement, the total value of securities or commodities of that type borrowed, purchased or received under the agreement. |
| --- | --- |

6.

The net position in each ‘type of security’ or commodity shall be calculated by subtracting from the total value of the securities or commodities of that type lent, sold or provided under the master netting agreement, the total value of securities or commodities of that type borrowed, purchased or received under the agreement.

| 7. | For the purposes of point 6, ‘type of security’ means securities which are issued by the same entity, have the same issue date, the same maturity and are subject to the same terms and conditions and are subject to the same liquidation periods as indicated in points 34 to 59. |
| --- | --- |

7.

For the purposes of point 6, ‘type of security’ means securities which are issued by the same entity, have the same issue date, the same maturity and are subject to the same terms and conditions and are subject to the same liquidation periods as indicated in points 34 to 59.

| 8. | The net position in each currency, other than the settlement currency of the master netting agreement, shall be calculated by subtracting from the total value of securities denominated in that currency lent, sold or provided under the master netting agreement added to the amount of cash in that currency lent or transferred under the agreement, the total value of securities denominated in that currency borrowed, purchased or received under the agreement added to the amount of cash in that currency borrowed or received under the agreement. |
| --- | --- |

8.

The net position in each currency, other than the settlement currency of the master netting agreement, shall be calculated by subtracting from the total value of securities denominated in that currency lent, sold or provided under the master netting agreement added to the amount of cash in that currency lent or transferred under the agreement, the total value of securities denominated in that currency borrowed, purchased or received under the agreement added to the amount of cash in that currency borrowed or received under the agreement.

| 9. | The volatility adjustment appropriate to a given type of security or cash position shall be applied to the absolute value of the positive or negative net position in the securities of that type. |
| --- | --- |

9.

The volatility adjustment appropriate to a given type of security or cash position shall be applied to the absolute value of the positive or negative net position in the securities of that type.

| 10. | The foreign exchange risk (fx) volatility adjustment shall be applied to the net positive or negative position in each currency other than the settlement currency of the master netting agreement. |
| --- | --- |

10.

The foreign exchange risk (fx) volatility adjustment shall be applied to the net positive or negative position in each currency other than the settlement currency of the master netting agreement.

| 11. | E* shall be calculated according to the following formula:
  E* = max {0, [(Σ(E) - Σ(C)) + Σ(|net position in each security| × Hsec) + (Σ|Efx| × Hfx)]}
  Where risk-weighted exposure amounts are calculated under Articles 78 to 83, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.
  Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.
  C is the value of the securities or commodities borrowed, purchased or received or the cash borrowed or received in respect of each such exposure.
  Σ(E) is the sum of all Es under the agreement.
  Σ(C) is the sum of all Cs under the agreement.
  Efx is the net position (positive or negative) in a given currency other than the settlement currency of the agreement as calculated under point 8.
  Hsec is the volatility adjustment appropriate to a particular type of security.
  Hfx is the foreign exchange volatility adjustment.
  E* is the fully adjusted exposure value. |
| --- | --- |

11.

E* shall be calculated according to the following formula:

E* = max {0, [(Σ(E) - Σ(C)) + Σ(|net position in each security| × Hsec) + (Σ|Efx| × Hfx)]}

Where risk-weighted exposure amounts are calculated under Articles 78 to 83, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.

Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.

C is the value of the securities or commodities borrowed, purchased or received or the cash borrowed or received in respect of each such exposure.

Σ(E) is the sum of all Es under the agreement.

Σ(C) is the sum of all Cs under the agreement.

Efx is the net position (positive or negative) in a given currency other than the settlement currency of the agreement as calculated under point 8.

Hsec is the volatility adjustment appropriate to a particular type of security.

Hfx is the foreign exchange volatility adjustment.

E* is the fully adjusted exposure value.

(b)   Using the Internal Models approach

| 12. | As an alternative to using the Supervisory volatility adjustments approach or the Own Estimates volatility adjustments approach in calculating the fully adjusted exposure value (E*) resulting from the application of an eligible master netting agreement covering repurchase transactions, securities or commodities lending or borrowing transactions, and/or other capital market driven transactions other than derivative transactions, credit institutions may be permitted to use an internal models approach which takes into account correlation effects between security positions subject to the master netting agreement as well as the liquidity of the instruments concerned. Internal models used in this approach shall provide estimates of the potential change in value of the unsecured exposure amount (ΣE - ΣC). Subject to the approval of the competent authorities, credit institutions may also use their internal models for margin lending transactions, if the transactions are covered under a bilateral master netting agreement that meets the requirements set out in Annex III, Part 7. |
| --- | --- |

12.

As an alternative to using the Supervisory volatility adjustments approach or the Own Estimates volatility adjustments approach in calculating the fully adjusted exposure value (E*) resulting from the application of an eligible master netting agreement covering repurchase transactions, securities or commodities lending or borrowing transactions, and/or other capital market driven transactions other than derivative transactions, credit institutions may be permitted to use an internal models approach which takes into account correlation effects between security positions subject to the master netting agreement as well as the liquidity of the instruments concerned. Internal models used in this approach shall provide estimates of the potential change in value of the unsecured exposure amount (ΣE - ΣC). Subject to the approval of the competent authorities, credit institutions may also use their internal models for margin lending transactions, if the transactions are covered under a bilateral master netting agreement that meets the requirements set out in Annex III, Part 7.

| 13. | A credit institution may choose to use an internal models approach independently of the choice it has made between Articles 78 to 83 and Articles 84 to 89 for the calculation of risk-weighted exposure amounts. However, if a credit institution seeks to use an internal models approach, it must do so for all counterparties and securities, excluding immaterial portfolios where it may use the Supervisory volatility adjustments approach or the Own estimates volatility adjustments approach as set out in points 5 to 11. |
| --- | --- |

13.

A credit institution may choose to use an internal models approach independently of the choice it has made between Articles 78 to 83 and Articles 84 to 89 for the calculation of risk-weighted exposure amounts. However, if a credit institution seeks to use an internal models approach, it must do so for all counterparties and securities, excluding immaterial portfolios where it may use the Supervisory volatility adjustments approach or the Own estimates volatility adjustments approach as set out in points 5 to 11.

| 14. | The internal models approach is available to credit institutions that have received recognition for an internal risk-management model under Annex V to Directive 2006/.../EC. |
| --- | --- |

14.

The internal models approach is available to credit institutions that have received recognition for an internal risk-management model under Annex V to Directive 2006/.../EC.

| 15. | Credit institutions which have not received supervisory recognition for use of such a model under Directive 2006/.../EC, may apply to the competent authorities for recognition of an internal risk-measurement model for the purposes of points 12 to 21. |
| --- | --- |

15.

Credit institutions which have not received supervisory recognition for use of such a model under Directive 2006/.../EC, may apply to the competent authorities for recognition of an internal risk-measurement model for the purposes of points 12 to 21.

| 16. | Recognition shall only be given if the competent authority is satisfied that the credit institution's risk-management system for managing the risks arising on the transactions covered by the master netting agreement is conceptually sound and implemented with integrity and that, in particular, the following qualitative standards are met:






  a) | the internal risk-measurement model used for calculation of potential price volatility for the transactions is closely integrated into the daily risk-management process of the credit institution and serves as the basis for reporting risk exposures to senior management of the credit institution; |
| --- | --- | --- |

16.

Recognition shall only be given if the competent authority is satisfied that the credit institution's risk-management system for managing the risks arising on the transactions covered by the master netting agreement is conceptually sound and implemented with integrity and that, in particular, the following qualitative standards are met:

a)

the internal risk-measurement model used for calculation of potential price volatility for the transactions is closely integrated into the daily risk-management process of the credit institution and serves as the basis for reporting risk exposures to senior management of the credit institution;

| b) | the credit institution has a risk control unit that is independent from business trading units and reports directly to senior management. The unit must be responsible for designing and implementing the credit institution's risk-management system. It shall produce and analyse daily reports on the output of the risk-measurement model and on the appropriate measures to be taken in terms of position limits; |
| --- | --- |

b)

the credit institution has a risk control unit that is independent from business trading units and reports directly to senior management. The unit must be responsible for designing and implementing the credit institution's risk-management system. It shall produce and analyse daily reports on the output of the risk-measurement model and on the appropriate measures to be taken in terms of position limits;

| c) | the daily reports produced by the risk-control unit are reviewed by a level of management with sufficient authority to enforce reductions of positions taken and of overall risk exposure; |
| --- | --- |

c)

the daily reports produced by the risk-control unit are reviewed by a level of management with sufficient authority to enforce reductions of positions taken and of overall risk exposure;

| d) | the credit institution has sufficient staff skilled in the use of sophisticated models in the risk control unit; |
| --- | --- |

d)

the credit institution has sufficient staff skilled in the use of sophisticated models in the risk control unit;

| e) | the credit institution has established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of the risk-measurement system; |
| --- | --- |

e)

the credit institution has established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of the risk-measurement system;

| f) | the credit institution's models have a proven track record of reasonable accuracy in measuring risks demonstrated through the back-testing of its output using at least one year of data; |
| --- | --- |

f)

the credit institution's models have a proven track record of reasonable accuracy in measuring risks demonstrated through the back-testing of its output using at least one year of data;

| g) | the credit institution frequently conducts a rigorous programme of stress testing and the results of these tests are reviewed by senior management and reflected in the policies and limits it sets; |
| --- | --- |

g)

the credit institution frequently conducts a rigorous programme of stress testing and the results of these tests are reviewed by senior management and reflected in the policies and limits it sets;

| h) | the credit institution must conduct, as Part of its regular internal auditing process, an independent review of its risk-measurement system. This review must include both the activities of the business trading units and of the independent risk-control unit; |
| --- | --- |

h)

the credit institution must conduct, as Part of its regular internal auditing process, an independent review of its risk-measurement system. This review must include both the activities of the business trading units and of the independent risk-control unit;

| i) | at least once a year, the credit institution must conduct a review of its risk-management system; and |
| --- | --- |

i)

at least once a year, the credit institution must conduct a review of its risk-management system; and

| j) | the internal model shall meet the requirements set out in Annex III, Part 6, points 40 to 42. |
| --- | --- |

j)

the internal model shall meet the requirements set out in Annex III, Part 6, points 40 to 42.

| 17. | The calculation of the potential change in value shall be subject to the following minimum standards:






  a) | at least daily calculation of the potential change in value; |
| --- | --- | --- |

17.

The calculation of the potential change in value shall be subject to the following minimum standards:

a)

at least daily calculation of the potential change in value;

| b) | a 99th percentile, one-tailed confidence interval; |
| --- | --- |

b)

a 99th percentile, one-tailed confidence interval;

| c) | a 5-day equivalent liquidation period, except in the case of transactions other than securities repurchase transactions or securities lending or borrowing transactions where a 10-day equivalent liquidation period shall be used; |
| --- | --- |

c)

a 5-day equivalent liquidation period, except in the case of transactions other than securities repurchase transactions or securities lending or borrowing transactions where a 10-day equivalent liquidation period shall be used;

| d) | an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility; and |
| --- | --- |

d)

an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility; and

| e) | three-monthly data set updates. |
| --- | --- |

e)

three-monthly data set updates.

| 18. | The competent authorities shall require that the internal risk-measurement model captures a sufficient number of risk factors in order to capture all material price risks. |
| --- | --- |

18.

The competent authorities shall require that the internal risk-measurement model captures a sufficient number of risk factors in order to capture all material price risks.

| 19. | The competent authorities may allow credit institutions to use empirical correlations within risk categories and across risk categories if they are satisfied that the credit institution's system for measuring correlations is sound and implemented with integrity. |
| --- | --- |

19.

The competent authorities may allow credit institutions to use empirical correlations within risk categories and across risk categories if they are satisfied that the credit institution's system for measuring correlations is sound and implemented with integrity.

| 20. | The fully adjusted exposure value (E*) for credit institutions using the Internal models approach shall be calculated according to the following formula:
  E* = max {0, [(ΣE - ΣC) + (output of the internal model)]}
  Where risk-weighted exposure amounts are calculated under Articles 78 to 83, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.
  Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.
  C is the value of the securities borrowed, purchased or received or the cash borrowed or received in respect of each such exposure.
  Σ(E) is the sum of all Es under the agreement.
  Σ(C) is the sum of all Cs under the agreement. |
| --- | --- |

20.

The fully adjusted exposure value (E*) for credit institutions using the Internal models approach shall be calculated according to the following formula:

E* = max {0, [(ΣE - ΣC) + (output of the internal model)]}

Where risk-weighted exposure amounts are calculated under Articles 78 to 83, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.

Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, E is the exposure value for each separate exposure under the agreement that would apply in the absence of the credit protection.

C is the value of the securities borrowed, purchased or received or the cash borrowed or received in respect of each such exposure.

Σ(E) is the sum of all Es under the agreement.

Σ(C) is the sum of all Cs under the agreement.

| 21. | In calculating risk-weighted exposure amounts using internal models, credit institutions shall use the previous business day's model output. |
| --- | --- |

21.

In calculating risk-weighted exposure amounts using internal models, credit institutions shall use the previous business day's model output.

1.3.2.   Calculating risk-weighted exposure amounts and expected loss amounts for repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions covered by master netting agreements

Standardised Approach

| 22. | E* as calculated under points 5 to 21 shall be taken as the exposure value of the exposure to the counterparty arising from the transactions subject to the master netting agreement for the purposes of Article 80. |
| --- | --- |

22.

E* as calculated under points 5 to 21 shall be taken as the exposure value of the exposure to the counterparty arising from the transactions subject to the master netting agreement for the purposes of Article 80.

IRB Approach

| 23. | E* as calculated under points 5 to 21 shall be taken as the exposure value of the exposure to the counterparty arising from the transactions subject to the master netting agreement for the purposes of Annex VII. |
| --- | --- |

23.

E* as calculated under points 5 to 21 shall be taken as the exposure value of the exposure to the counterparty arising from the transactions subject to the master netting agreement for the purposes of Annex VII.

1.4.   Financial collateral

1.4.1.   Financial Collateral Simple Method

| 24. | The Financial Collateral Simple Method shall be available only where risk-weighted exposure amounts are calculated under Articles 78 to 83. A credit institution shall not use both the Financial Collateral Simple Method and the Financial Collateral Comprehensive Method. |
| --- | --- |

24.

The Financial Collateral Simple Method shall be available only where risk-weighted exposure amounts are calculated under Articles 78 to 83. A credit institution shall not use both the Financial Collateral Simple Method and the Financial Collateral Comprehensive Method.

Valuation

| 25. | Under this method, recognised financial collateral is assigned a value equal to its market value as determined in accordance with Part 2, point 6. |
| --- | --- |

25.

Under this method, recognised financial collateral is assigned a value equal to its market value as determined in accordance with Part 2, point 6.

Calculating risk-weighted exposure amounts

| 26. | The risk weight that would be assigned under Articles 78 to 83 if the lender had a direct exposure to the collateral instrument shall be assigned to those portions of claims collateralised by the market value of recognised collateral. The risk weight of the collateralised portion shall be a minimum of 20 % except as specified in points 27 to 29. The remainder of the exposure shall receive the risk weight that would be assigned to an unsecured exposure to the counterparty under Articles 78 to 83. |
| --- | --- |

26.

The risk weight that would be assigned under Articles 78 to 83 if the lender had a direct exposure to the collateral instrument shall be assigned to those portions of claims collateralised by the market value of recognised collateral. The risk weight of the collateralised portion shall be a minimum of 20 % except as specified in points 27 to 29. The remainder of the exposure shall receive the risk weight that would be assigned to an unsecured exposure to the counterparty under Articles 78 to 83.

Repurchase transactions and securities lending or borrowing transactions

| 27. | A risk weight of 0 % shall be assigned to the collateralised portion of the exposure arising from transactions which fulfil the criteria enumerated in points 58 and 59. If the counterparty to the transaction is not a core market participant a risk weight of 10 % shall be assigned. |
| --- | --- |

27.

A risk weight of 0 % shall be assigned to the collateralised portion of the exposure arising from transactions which fulfil the criteria enumerated in points 58 and 59. If the counterparty to the transaction is not a core market participant a risk weight of 10 % shall be assigned.

OTC derivative transactions subject to daily mark-to-market

| 28. | A risk weight of 0 % shall, to the extent of the collateralisation, be assigned to the exposure values determined under Annex III for the derivative instruments listed in Annex IV and subject to daily marking-to-market, collateralised by cash or cash-assimilated instruments where there is no currency mismatch. A risk weight of 10 % shall be assigned to the extent of the collateralisation to the exposure values of such transactions collateralised by debt securities issued by central governments or central banks which are assigned a 0 % risk weight under Articles 78 to 83.
  For the purposes of this point debt securities issued by central governments or central banks shall include:






  a) | debt securities issued by regional governments or local authorities exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83; |
| --- | --- | --- |

28.

A risk weight of 0 % shall, to the extent of the collateralisation, be assigned to the exposure values determined under Annex III for the derivative instruments listed in Annex IV and subject to daily marking-to-market, collateralised by cash or cash-assimilated instruments where there is no currency mismatch. A risk weight of 10 % shall be assigned to the extent of the collateralisation to the exposure values of such transactions collateralised by debt securities issued by central governments or central banks which are assigned a 0 % risk weight under Articles 78 to 83.

For the purposes of this point debt securities issued by central governments or central banks shall include:

a)

debt securities issued by regional governments or local authorities exposures to which are treated as exposures to the central government in whose jurisdiction they are established under Articles 78 to 83;

| b) | debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under or by virtue of Articles 78 to 83; and |
| --- | --- |

b)

debt securities issued by multilateral development banks to which a 0 % risk weight is assigned under or by virtue of Articles 78 to 83; and

| c) | debt securities issued by international organisations which are assigned a 0 % risk weight under Articles 78 to 83. |
| --- | --- |

c)

debt securities issued by international organisations which are assigned a 0 % risk weight under Articles 78 to 83.

Other transactions

| 29. | A 0 % risk weight may be assigned where the exposure and the collateral are denominated in the same currency, and either:






  a) | the collateral is cash on deposit or a cash assimilated instrument; or |
| --- | --- | --- |

29.

A 0 % risk weight may be assigned where the exposure and the collateral are denominated in the same currency, and either:

a)

the collateral is cash on deposit or a cash assimilated instrument; or

| b) | the collateral is in the form of debt securities issued by central governments or central banks eligible for a 0 % risk weight under Articles 78 to 83, and its market value has been discounted by 20 %. |
| --- | --- |

b)

the collateral is in the form of debt securities issued by central governments or central banks eligible for a 0 % risk weight under Articles 78 to 83, and its market value has been discounted by 20 %.

For the purposes of this point ‘debt securities issued by central governments or central banks’ shall to include those indicated under point 28.

1.4.2.   Financial Collateral Comprehensive Method

| 30. | In valuing financial collateral for the purposes of the Financial Collateral Comprehensive Method, ‘volatility adjustments’ shall be applied to the market value of collateral, as set out in points 34 to 59 below, in order to take account of price volatility. |
| --- | --- |

30.

In valuing financial collateral for the purposes of the Financial Collateral Comprehensive Method, ‘volatility adjustments’ shall be applied to the market value of collateral, as set out in points 34 to 59 below, in order to take account of price volatility.

| 31. | Subject to the treatment for currency mismatches in the case of OTC derivatives transactions set out in point 32, where collateral is denominated in a currency that differs from that in which the underlying exposure is denominated, an adjustment reflecting currency volatility shall be added to the volatility adjustment appropriate to the collateral as set out in points 34 to 59. |
| --- | --- |

31.

Subject to the treatment for currency mismatches in the case of OTC derivatives transactions set out in point 32, where collateral is denominated in a currency that differs from that in which the underlying exposure is denominated, an adjustment reflecting currency volatility shall be added to the volatility adjustment appropriate to the collateral as set out in points 34 to 59.

| 32. | In the case of OTC derivatives transactions covered by netting agreements recognised by the competent authorities under Annex III, a volatility adjustment reflecting currency volatility shall be applied when there is a mismatch between the collateral currency and the settlement currency. Even in the case where multiple currencies are involved in the transactions covered by the netting agreement, only a single volatility adjustment shall be applied. |
| --- | --- |

32.

In the case of OTC derivatives transactions covered by netting agreements recognised by the competent authorities under Annex III, a volatility adjustment reflecting currency volatility shall be applied when there is a mismatch between the collateral currency and the settlement currency. Even in the case where multiple currencies are involved in the transactions covered by the netting agreement, only a single volatility adjustment shall be applied.

(a)   Calculating adjusted values

| 33. | The volatility-adjusted value of the collateral to be taken into account is calculated as follows in the case of all transactions except those transactions subject to recognised master netting agreements to which the provisions set out in points 5 to 23 are applied:
  CVA = C × (1- HC - HFX)
  The volatility-adjusted value of the exposure to be taken into account is calculated as follows:
  EVA = E × (1+HE), and, in the case of OTC derivative transactions, EVA = E.
  The fully adjusted value of the exposure, taking into account both volatility and the risk-mitigating effects of collateral is calculated as follows:
  E* = max {0, [EVA - CVAM]}
  Where:
  E is the exposure value as would be determined under Articles 78 to 83 or Articles 84 to 89 as appropriate if the exposure was not collateralised. For this purpose, for credit institutions calculating risk-weighted exposure amounts under Articles 78 to 83, the exposure value of off-balance sheet items listed in Annex II shall be 100 % of its value rather than the percentages indicated in Article 78(1), and for credit institutions calculating risk-weighted exposure amounts under Articles 84 to 89, the exposure value of the items listed in Annex VII, Part 3, points 9 to 11 shall be calculated using a conversion factor of 100 % rather than the conversion factors or percentages indicated in those points.
  EVA is the volatility-adjusted exposure amount.
  CVA is the volatility-adjusted value of the collateral.
  CVAM is CVA further adjusted for any maturity mismatch in accordance with the provisions of Part 4.
  HE is the volatility adjustment appropriate to the exposure (E), as calculated under points 34 to 59.
  HC is the volatility adjustment appropriate to the collateral, as calculated under points 34 to 59.
  HFX is the volatility adjustment appropriate to currency mismatch, as calculated under points 34 to 59.
  E* is the fully adjusted exposure value taking into account volatility and the risk-mitigating effects of the collateral. |
| --- | --- |

33.

The volatility-adjusted value of the collateral to be taken into account is calculated as follows in the case of all transactions except those transactions subject to recognised master netting agreements to which the provisions set out in points 5 to 23 are applied:

CVA = C × (1- HC - HFX)

The volatility-adjusted value of the exposure to be taken into account is calculated as follows:

EVA = E × (1+HE), and, in the case of OTC derivative transactions, EVA = E.

The fully adjusted value of the exposure, taking into account both volatility and the risk-mitigating effects of collateral is calculated as follows:

E* = max {0, [EVA - CVAM]}

Where:

E is the exposure value as would be determined under Articles 78 to 83 or Articles 84 to 89 as appropriate if the exposure was not collateralised. For this purpose, for credit institutions calculating risk-weighted exposure amounts under Articles 78 to 83, the exposure value of off-balance sheet items listed in Annex II shall be 100 % of its value rather than the percentages indicated in Article 78(1), and for credit institutions calculating risk-weighted exposure amounts under Articles 84 to 89, the exposure value of the items listed in Annex VII, Part 3, points 9 to 11 shall be calculated using a conversion factor of 100 % rather than the conversion factors or percentages indicated in those points.

EVA is the volatility-adjusted exposure amount.

CVA is the volatility-adjusted value of the collateral.

CVAM is CVA further adjusted for any maturity mismatch in accordance with the provisions of Part 4.

HE is the volatility adjustment appropriate to the exposure (E), as calculated under points 34 to 59.

HC is the volatility adjustment appropriate to the collateral, as calculated under points 34 to 59.

HFX is the volatility adjustment appropriate to currency mismatch, as calculated under points 34 to 59.

E* is the fully adjusted exposure value taking into account volatility and the risk-mitigating effects of the collateral.

(b)   Calculation of volatility adjustments to be applied

| 34. | Volatility adjustments may be calculated in two ways: the Supervisory volatility adjustments approach and the Own estimates of volatility adjustments approach (the ‘Own estimates’ approach). |
| --- | --- |

34.

Volatility adjustments may be calculated in two ways: the Supervisory volatility adjustments approach and the Own estimates of volatility adjustments approach (the ‘Own estimates’ approach).

| 35. | A credit institution may choose to use the Supervisory volatility adjustments approach or the Own estimates approach independently of the choice it has made between the Articles 78 to 83 and Articles 84 to 89 for the calculation of risk-weighted exposure amounts. However, if credit institutions seek to use the Own estimates approach, they must do so for the full range of instrument types, excluding immaterial portfolios where they may use the Supervisory volatility adjustments approach.
  Where the collateral consists of a number of recognised items, the volatility adjustment shall be , where ai is the proportion of an item to the collateral as a whole and Hi is the volatility adjustment applicable to that item. |
| --- | --- |

35.

A credit institution may choose to use the Supervisory volatility adjustments approach or the Own estimates approach independently of the choice it has made between the Articles 78 to 83 and Articles 84 to 89 for the calculation of risk-weighted exposure amounts. However, if credit institutions seek to use the Own estimates approach, they must do so for the full range of instrument types, excluding immaterial portfolios where they may use the Supervisory volatility adjustments approach.

Where the collateral consists of a number of recognised items, the volatility adjustment shall be Formula, where ai is the proportion of an item to the collateral as a whole and Hi is the volatility adjustment applicable to that item.

(i)   Supervisory volatility adjustments

| 36. | The volatility adjustments to be applied under the Supervisory volatility adjustments approach (assuming daily revaluation) shall be those set out in Tables 1 to 4. |
| --- | --- |

36.

The volatility adjustments to be applied under the Supervisory volatility adjustments approach (assuming daily revaluation) shall be those set out in Tables 1 to 4.

VOLATILITY ADJUSTMENTS

Table 1

| Credit quality step with which the credit assessment of the debt security is associated | Residual Maturity | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(b) | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(c) and (d) |
| --- | --- | --- | --- |
| | | 20-day liquidation period (%) | 10-day liquidation period (%) | 5-day liquidation period (%) | 20-day liquidation period (%) | 10-day liquidation period (%) | 5-day liquidation period (%) |
| 1 | ≤ 1 year | 0,707 | 0,5 | 0,354 | 1,414 | 1 | 0,707 |
| | >1 ≤ 5 years | 2,828 | 2 | 1,414 | 5,657 | 4 | 2,828 |
| | > 5 years | 5,657 | 4 | 2,828 | 11,314 | 8 | 5,657 |
| 2-3 | ≤ 1 year | 1,414 | 1 | 0,707 | 2,828 | 2 | 1,414 |
| | >1 ≤ 5 years | 4,243 | 3 | 2,121 | 8,485 | 6 | 4,243 |
| | > 5 years | 8,485 | 6 | 4,243 | 16,971 | 12 | 8,485 |
| 4 | ≤ 1 year | 21,213 | 15 | 10,607 | N/A | N/A | N/A |
| | >1 ≤ 5 years | 21,213 | 15 | 10,607 | N/A | N/A | N/A |
| | > 5 years | 21,213 | 15 | 10,607 | N/A | N/A | N/A |

Credit quality step with which the credit assessment of the debt security is associated

Residual Maturity

Volatility adjustments for debt securities issued by entities described in Part 1, point 7(b)

Volatility adjustments for debt securities issued by entities described in Part 1, point 7(c) and (d)

20-day liquidation period (%)

10-day liquidation period (%)

5-day liquidation period (%)

20-day liquidation period (%)

10-day liquidation period (%)

5-day liquidation period (%)

1

≤ 1 year

0,707

0,5

0,354

1,414

1

0,707

>1 ≤ 5 years

2,828

2

1,414

5,657

4

2,828

> 5 years

5,657

4

2,828

11,314

8

5,657

2-3

≤ 1 year

1,414

1

0,707

2,828

2

1,414

>1 ≤ 5 years

4,243

3

2,121

8,485

6

4,243

> 5 years

8,485

6

4,243

16,971

12

8,485

4

≤ 1 year

21,213

15

10,607

N/A

N/A

N/A

>1 ≤ 5 years

21,213

15

10,607

N/A

N/A

N/A

> 5 years

21,213

15

10,607

N/A

N/A

N/A

Table 2

| Credit quality step with which the credit assessment of a short term debt security is associated | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(b) with short-term credit assessments | Volatility adjustments for debt securities issued by entities described in Part 1, point 7(c) and (d) with short-term credit assessments |
| --- | --- | --- |
| | 20-day liquidation period (%) | 10-day liquidation period (%) | 5-day liquidation period (%) | 20-day liquidation period (%) | 10-day liquidation period (%) | 5-day liquidation period (%) |
| 1 | 0,707 | 0,5 | 0,354 | 1,414 | 1 | 0,707 |
| 2-3 | 1,414 | 1 | 0,707 | 2,828 | 2 | 1,414 |

Credit quality step with which the credit assessment of a short term debt security is associated

Volatility adjustments for debt securities issued by entities described in Part 1, point 7(b) with short-term credit assessments

Volatility adjustments for debt securities issued by entities described in Part 1, point 7(c) and (d) with short-term credit assessments

20-day liquidation period (%)

10-day liquidation period (%)

5-day liquidation period (%)

20-day liquidation period (%)

10-day liquidation period (%)

5-day liquidation period (%)

1

0,707

0,5

0,354

1,414

1

0,707

2-3

1,414

1

0,707

2,828

2

1,414

Table 3

| Other collateral or exposure types |
| --- |
| | 20-day liquidation period (%) | 10-day liquidation period (%) | 5-day liquidation period (%) |
| Main Index Equities, Main Index Convertible Bonds | 21,213 | 15 | 10,607 |
| Other Equities or Convertible Bonds listed on a recognised exchange | 35,355 | 25 | 17,678 |
| Cash | 0 | 0 | 0 |
| Gold | 21,213 | 15 | 10,607 |

Other collateral or exposure types

20-day liquidation period (%)

10-day liquidation period (%)

5-day liquidation period (%)

Main Index Equities, Main Index Convertible Bonds

21,213

15

10,607

Other Equities or Convertible Bonds listed on a recognised exchange

35,355

25

17,678

Cash

0

0

0

Gold

21,213

15

10,607

Table 4

| Volatility adjustment for currency mismatch |
| --- |
| 20-day liquidation period (%) | 10-day liquidation period (%) | 5-day liquidation period (%) |
| 11,314 | 8 | 5,657 |

Volatility adjustment for currency mismatch

20-day liquidation period (%)

10-day liquidation period (%)

5-day liquidation period (%)

11,314

8

5,657

| 37. | For secured lending transactions the liquidation period shall be 20 business days. For repurchase transactions (except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities) and securities lending or borrowing transactions the liquidation period shall be 5 business days. For other capital market driven transactions, the liquidation period shall be 10 business days. |
| --- | --- |

37.

For secured lending transactions the liquidation period shall be 20 business days. For repurchase transactions (except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities) and securities lending or borrowing transactions the liquidation period shall be 5 business days. For other capital market driven transactions, the liquidation period shall be 10 business days.

| 38. | In Tables 1 to 4 and in points 39 to 41, the credit quality step with which a credit assessment of the debt security is associated is the credit quality step with which the credit assessment is determined by the competent authorities to be associated under Articles 78 to 83. For the purpose of this point, Part 1, point 10 also applies. |
| --- | --- |

38.

In Tables 1 to 4 and in points 39 to 41, the credit quality step with which a credit assessment of the debt security is associated is the credit quality step with which the credit assessment is determined by the competent authorities to be associated under Articles 78 to 83. For the purpose of this point, Part 1, point 10 also applies.

| 39. | For non-eligible securities or for commodities lent or sold under repurchase transactions or securities or commodities lending or borrowing transactions, the volatility adjustment is the same as for non-main index equities listed on a recognised exchange. |
| --- | --- |

39.

For non-eligible securities or for commodities lent or sold under repurchase transactions or securities or commodities lending or borrowing transactions, the volatility adjustment is the same as for non-main index equities listed on a recognised exchange.

| 40. | For eligible units in collective investment undertakings the volatility adjustment is the weighted average volatility adjustments that would apply, having regard to the liquidation period of the transaction as specified in point 37, to the assets in which the fund has invested. If the assets in which the fund has invested are not known to the credit institution, the volatility adjustment is the highest volatility adjustment that would apply to any of the assets in which the fund has the right to invest. |
| --- | --- |

40.

For eligible units in collective investment undertakings the volatility adjustment is the weighted average volatility adjustments that would apply, having regard to the liquidation period of the transaction as specified in point 37, to the assets in which the fund has invested. If the assets in which the fund has invested are not known to the credit institution, the volatility adjustment is the highest volatility adjustment that would apply to any of the assets in which the fund has the right to invest.

| 41. | For unrated debt securities issued by institutions and satisfying the eligibility criteria in Part 1, point 8 the volatility adjustments shall be the same as for securities issued by institutions or corporates with an external credit assessment associated with credit quality steps 2 or 3. |
| --- | --- |

41.

For unrated debt securities issued by institutions and satisfying the eligibility criteria in Part 1, point 8 the volatility adjustments shall be the same as for securities issued by institutions or corporates with an external credit assessment associated with credit quality steps 2 or 3.

(ii)   Own estimates of volatility adjustments

| 42. | The competent authorities shall permit credit institutions complying with the requirements set out in points 47 to 56 to use their own volatility estimates for calculating the volatility adjustments to be applied to collateral and exposures. |
| --- | --- |

42.

The competent authorities shall permit credit institutions complying with the requirements set out in points 47 to 56 to use their own volatility estimates for calculating the volatility adjustments to be applied to collateral and exposures.

| 43. | When debt securities have a credit assessment from a recognised ECAI equivalent to investment grade or better, the competent authorities may allow credit institutions to calculate a volatility estimate for each category of security. |
| --- | --- |

43.

When debt securities have a credit assessment from a recognised ECAI equivalent to investment grade or better, the competent authorities may allow credit institutions to calculate a volatility estimate for each category of security.

| 44. | In determining relevant categories, credit institutions shall take into account the type of issuer of the security the external credit assessment of the securities, their residual maturity, and their modified duration. Volatility estimates must be representative of the securities included in the category by the credit institution. |
| --- | --- |

44.

In determining relevant categories, credit institutions shall take into account the type of issuer of the security the external credit assessment of the securities, their residual maturity, and their modified duration. Volatility estimates must be representative of the securities included in the category by the credit institution.

| 45. | For debt securities having a credit assessment from a recognised ECAI equivalent to below investment grade, and for other eligible collateral, the volatility adjustments must be calculated for each individual item. |
| --- | --- |

45.

For debt securities having a credit assessment from a recognised ECAI equivalent to below investment grade, and for other eligible collateral, the volatility adjustments must be calculated for each individual item.

| 46. | Credit institutions using the Own estimates approach must estimate volatility of the collateral or foreign exchange mismatch without taking into account any correlations between the unsecured exposure, collateral and/or exchange rates. |
| --- | --- |

46.

Credit institutions using the Own estimates approach must estimate volatility of the collateral or foreign exchange mismatch without taking into account any correlations between the unsecured exposure, collateral and/or exchange rates.

Quantitative Criteria

| 47. | In calculating the volatility adjustments, a 99th percentile one-tailed confidence interval shall be used. |
| --- | --- |

47.

In calculating the volatility adjustments, a 99th percentile one-tailed confidence interval shall be used.

| 48. | The liquidation period shall be 20 business days for secured lending transactions; 5 business days for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities and securities lending or borrowing transactions, and 10 business days for other capital market driven transactions. |
| --- | --- |

48.

The liquidation period shall be 20 business days for secured lending transactions; 5 business days for repurchase transactions, except insofar as such transactions involve the transfer of commodities or guaranteed rights relating to title to commodities and securities lending or borrowing transactions, and 10 business days for other capital market driven transactions.

| 49. | Credit institutions may use volatility adjustment numbers calculated according to shorter or longer liquidation periods, scaled up or down to the liquidation period set out in point 48 for the type of transaction in question, using the square root of time formula:



  where TM is the relevant liquidation period;
  HM is the volatility adjustment under TM and
  HN is the volatility adjustment based on the liquidation period TN. |
| --- | --- |

49.

Credit institutions may use volatility adjustment numbers calculated according to shorter or longer liquidation periods, scaled up or down to the liquidation period set out in point 48 for the type of transaction in question, using the square root of time formula:

Formula

where TM is the relevant liquidation period;

HM is the volatility adjustment under TM and

HN is the volatility adjustment based on the liquidation period TN.

| 50. | Credit institutions shall take into account the illiquidity of lower-quality assets. The liquidation period shall be adjusted upwards in cases where there is doubt concerning the liquidity of the collateral. They shall also identify where historical data may understate potential volatility, e.g., a pegged currency. Such cases shall be dealt with by means of a stress scenario. |
| --- | --- |

50.

Credit institutions shall take into account the illiquidity of lower-quality assets. The liquidation period shall be adjusted upwards in cases where there is doubt concerning the liquidity of the collateral. They shall also identify where historical data may understate potential volatility, e.g., a pegged currency. Such cases shall be dealt with by means of a stress scenario.

| 51. | The historical observation period (sample period) for calculating volatility adjustments shall be a minimum length of one year. For credit institutions that use a weighting scheme or other methods for the historical observation period, the effective observation period shall be at least one year (that is, the weighted average time lag of the individual observations shall not be less than 6 months). The competent authorities may also require a credit institution to calculate its volatility adjustments using a shorter observation period if, in the competent authorities' judgement, this is justified by a significant upsurge in price volatility. |
| --- | --- |

51.

The historical observation period (sample period) for calculating volatility adjustments shall be a minimum length of one year. For credit institutions that use a weighting scheme or other methods for the historical observation period, the effective observation period shall be at least one year (that is, the weighted average time lag of the individual observations shall not be less than 6 months). The competent authorities may also require a credit institution to calculate its volatility adjustments using a shorter observation period if, in the competent authorities' judgement, this is justified by a significant upsurge in price volatility.

| 52. | Credit institutions shall update their data sets at least once every three months and shall also reassess them whenever market prices are subject to material changes. This implies that volatility adjustments shall be computed at least every three months. |
| --- | --- |

52.

Credit institutions shall update their data sets at least once every three months and shall also reassess them whenever market prices are subject to material changes. This implies that volatility adjustments shall be computed at least every three months.

Qualitative Criteria

| 53. | The volatility estimates shall be used in the day-to-day risk management process of the credit institution including in relation to its internal exposure limits. |
| --- | --- |

53.

The volatility estimates shall be used in the day-to-day risk management process of the credit institution including in relation to its internal exposure limits.

| 54. | If the liquidation period used by the credit institution in its day-to-day risk management process is longer than that set out in this Part for the type of transaction in question, the credit institution's volatility adjustments shall be scaled up in accordance with the square root of time formula set out in point 49. |
| --- | --- |

54.

If the liquidation period used by the credit institution in its day-to-day risk management process is longer than that set out in this Part for the type of transaction in question, the credit institution's volatility adjustments shall be scaled up in accordance with the square root of time formula set out in point 49.

| 55. | The credit institution shall have established procedures for monitoring and ensuring compliance with a documented set of policies and controls for the operation of its system for the estimation of volatility adjustments and for the integration of such estimations into its risk management process. |
| --- | --- |

55.

The credit institution shall have established procedures for monitoring and ensuring compliance with a documented set of policies and controls for the operation of its system for the estimation of volatility adjustments and for the integration of such estimations into its risk management process.

| 56. | An independent review of the credit institution's system for the estimation of volatility adjustments shall be carried out regularly in the credit institution's own internal auditing process. A review of the overall system for the estimation of volatility adjustments and for integration of those adjustments into the credit institution's risk management process shall take place at least once a year and shall specifically address, at a minimum:






  a) | the integration of estimated volatility adjustments into daily risk management; |
| --- | --- | --- |

56.

An independent review of the credit institution's system for the estimation of volatility adjustments shall be carried out regularly in the credit institution's own internal auditing process. A review of the overall system for the estimation of volatility adjustments and for integration of those adjustments into the credit institution's risk management process shall take place at least once a year and shall specifically address, at a minimum:

a)

the integration of estimated volatility adjustments into daily risk management;

| b) | the validation of any significant change in the process for the estimation of volatility adjustments; |
| --- | --- |

b)

the validation of any significant change in the process for the estimation of volatility adjustments;

| c) | the verification of the consistency, timeliness and reliability of data sources used to run the system for the estimation of volatility adjustments, including the independence of such data sources; and |
| --- | --- |

c)

the verification of the consistency, timeliness and reliability of data sources used to run the system for the estimation of volatility adjustments, including the independence of such data sources; and

| d) | the accuracy and appropriateness of the volatility assumptions. |
| --- | --- |

d)

the accuracy and appropriateness of the volatility assumptions.

(iii)   Scaling up of volatility adjustments

| 57. | The volatility adjustments set out in points 36 to 41 are the volatility adjustments to be applied where there is daily revaluation. Similarly, where a credit institution uses its own estimates of the volatility adjustments in accordance with points 42 to 56, these must be calculated in the first instance on the basis of daily revaluation. If the frequency of revaluation is less than daily, larger volatility adjustments shall be applied. These shall be calculated by scaling up the daily revaluation volatility adjustments, using the following ‘square root of time’ formula:



  where:
  H is the volatility adjustment to be applied
  HM is the volatility adjustment where there is daily revaluation
  NR is the actual number of business days between revaluations
  TM is the liquidation period for the type of transaction in question. |
| --- | --- |

57.

The volatility adjustments set out in points 36 to 41 are the volatility adjustments to be applied where there is daily revaluation. Similarly, where a credit institution uses its own estimates of the volatility adjustments in accordance with points 42 to 56, these must be calculated in the first instance on the basis of daily revaluation. If the frequency of revaluation is less than daily, larger volatility adjustments shall be applied. These shall be calculated by scaling up the daily revaluation volatility adjustments, using the following ‘square root of time’ formula:

Formula

where:

H is the volatility adjustment to be applied

HM is the volatility adjustment where there is daily revaluation

NR is the actual number of business days between revaluations

TM is the liquidation period for the type of transaction in question.

(iv)   Conditions for applying a 0 % volatility adjustment

| 58. | In relation to repurchase transactions and securities lending or borrowing transactions, where a credit institution uses the Supervisory Volatility Adjustments Approach or the Own Estimates Approach and where the conditions set out in points (a) to (h) are satisfied, credit institutions may, instead of applying the volatility adjustments calculated under points 34 to 57, apply a 0 % volatility adjustment. This option is not available in respect of credit institutions using the internal models approach set out in points 12 to 21:






  (a) | Both the exposure and the collateral are cash or debt securities issued by central governments or central banks within the meaning of Part 1, point 7(b) and eligible for a 0 % risk weight under Articles 78 to 83, |
| --- | --- | --- |

58.

In relation to repurchase transactions and securities lending or borrowing transactions, where a credit institution uses the Supervisory Volatility Adjustments Approach or the Own Estimates Approach and where the conditions set out in points (a) to (h) are satisfied, credit institutions may, instead of applying the volatility adjustments calculated under points 34 to 57, apply a 0 % volatility adjustment. This option is not available in respect of credit institutions using the internal models approach set out in points 12 to 21:

(a)

Both the exposure and the collateral are cash or debt securities issued by central governments or central banks within the meaning of Part 1, point 7(b) and eligible for a 0 % risk weight under Articles 78 to 83,

| (b) | Both the exposure and the collateral are denominated in the same currency, |
| --- | --- |

(b)

Both the exposure and the collateral are denominated in the same currency,

| (c) | Either the maturity of the transaction is no more than one day or both the exposure and the collateral are subject to daily marking-to-market or daily remargining, |
| --- | --- |

(c)

Either the maturity of the transaction is no more than one day or both the exposure and the collateral are subject to daily marking-to-market or daily remargining,

| (d) | It is considered that the time between the last marking-to-market before a failure to remargin by the counterparty and the liquidation of the collateral shall be no more than four business days, |
| --- | --- |

(d)

It is considered that the time between the last marking-to-market before a failure to remargin by the counterparty and the liquidation of the collateral shall be no more than four business days,

| (e) | The transaction is settled across a settlement system proven for that type of transaction, |
| --- | --- |

(e)

The transaction is settled across a settlement system proven for that type of transaction,

| (f) | The documentation covering the agreement is standard market documentation for repurchase transactions or securities lending or borrowing transactions in the securities concerned, |
| --- | --- |

(f)

The documentation covering the agreement is standard market documentation for repurchase transactions or securities lending or borrowing transactions in the securities concerned,

| (g) | The transaction is governed by documentation specifying that if the counterparty fails to satisfy an obligation to deliver cash or securities or to deliver margin or otherwise defaults, then the transaction is immediately terminable, and |
| --- | --- |

(g)

The transaction is governed by documentation specifying that if the counterparty fails to satisfy an obligation to deliver cash or securities or to deliver margin or otherwise defaults, then the transaction is immediately terminable, and

| (h) | The counterparty is considered a ‘core market participant’ by the competent authorities. Core market participants shall include the following entities:






  — | the entities mentioned in point 7(b) of Part 1 exposures to which are assigned a 0 % risk weight under Articles 78 to 83; |
| --- | --- | --- |

(h)

The counterparty is considered a ‘core market participant’ by the competent authorities. Core market participants shall include the following entities:

—

the entities mentioned in point 7(b) of Part 1 exposures to which are assigned a 0 % risk weight under Articles 78 to 83;

| — | institutions; |
| --- | --- |

—

institutions;

| — | other financial companies (including insurance companies) exposures to which are assigned a 20 % risk weight under Articles 78 to 83 or which, in the case of credit institutions calculating risk-weighted exposure amounts and expected loss amounts under Articles 83 to 89, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83 |
| --- | --- |

—

other financial companies (including insurance companies) exposures to which are assigned a 20 % risk weight under Articles 78 to 83 or which, in the case of credit institutions calculating risk-weighted exposure amounts and expected loss amounts under Articles 83 to 89, do not have a credit assessment by a recognised ECAI and are internally rated as having a PD equivalent to that associated with the credit assessments of ECAIs determined by the competent authorities to be associated with credit quality step 2 or above under the rules for the risk weighting of exposures to corporates under Articles 78 to 83

| — | regulated collective investment undertakings that are subject to capital or leverage requirements; |
| --- | --- |

—

regulated collective investment undertakings that are subject to capital or leverage requirements;

| — | regulated pension funds; and |
| --- | --- |

—

regulated pension funds; and

| — | recognised clearing organisations. |
| --- | --- |

—

recognised clearing organisations.

| 59. | Where a competent authority permits the treatment set out in point 58 to be applied in the case of repurchase transactions or securities lending or borrowing transactions in securities issued by its domestic government, then other competent authorities may choose to allow credit institutions incorporated in their jurisdiction to adopt the same approach to the same transactions. |
| --- | --- |

59.

Where a competent authority permits the treatment set out in point 58 to be applied in the case of repurchase transactions or securities lending or borrowing transactions in securities issued by its domestic government, then other competent authorities may choose to allow credit institutions incorporated in their jurisdiction to adopt the same approach to the same transactions.

(c)   Calculating risk-weighted exposure amounts and expected loss amounts

Standardised Approach

| 60. | E* as calculated under point 33 shall be taken as the exposure value for the purposes of Article 80. In the case of off-balance sheet items listed in Annex II, E* shall be taken as the value at which the percentages indicated in Article 78(1) shall be applied to arrive at the exposure value. |
| --- | --- |

60.

E* as calculated under point 33 shall be taken as the exposure value for the purposes of Article 80. In the case of off-balance sheet items listed in Annex II, E* shall be taken as the value at which the percentages indicated in Article 78(1) shall be applied to arrive at the exposure value.

IRB Approach

| 61. | LGD* (the effective LGD)calculated as set out in this point shall be taken as the LGD for the purposes of Annex VII.
  LGD* = LGD × (E*/E)
  where:
  LGD is the LGD that would apply to the exposure under Articles 84 to 89 if the exposure was not collateralised;
  E is the exposure value as described under point 33;
  E* is as calculated under point 33. |
| --- | --- |

61.

LGD* (the effective LGD)calculated as set out in this point shall be taken as the LGD for the purposes of Annex VII.

LGD* = LGD × (E*/E)

where:

LGD is the LGD that would apply to the exposure under Articles 84 to 89 if the exposure was not collateralised;

E is the exposure value as described under point 33;

E* is as calculated under point 33.

1.5.   Other eligible collateral for Articles 84 to 89

1.5.1.   Valuation

(a)   Real estate collateral

| 62. | The property shall be valued by an independent valuer at or less than the market value. In those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the property may instead be valued by an independent valuer at or less than the mortgage lending value. |
| --- | --- |

62.

The property shall be valued by an independent valuer at or less than the market value. In those Member States that have laid down rigorous criteria for the assessment of the mortgage lending value in statutory or regulatory provisions the property may instead be valued by an independent valuer at or less than the mortgage lending value.

| 63. | ‘Market value’ means the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value shall be documented in a transparent and clear manner. |
| --- | --- |

63.

‘Market value’ means the estimated amount for which the property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion. The market value shall be documented in a transparent and clear manner.

| 64. | ‘Mortgage lending value’ means the value of the property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. Speculative elements shall not be taken into account in the assessment of the mortgage lending value. The mortgage lending value shall be documented in a transparent and clear manner. |
| --- | --- |

64.

‘Mortgage lending value’ means the value of the property as determined by a prudent assessment of the future marketability of the property taking into account long-term sustainable aspects of the property, the normal and local market conditions, the current use and alternative appropriate uses of the property. Speculative elements shall not be taken into account in the assessment of the mortgage lending value. The mortgage lending value shall be documented in a transparent and clear manner.

| 65. | The value of the collateral shall be the market value or mortgage lending value reduced as appropriate to reflect the results of the monitoring required under Part 2, point 8 and to take account of the any prior claims on the property. |
| --- | --- |

65.

The value of the collateral shall be the market value or mortgage lending value reduced as appropriate to reflect the results of the monitoring required under Part 2, point 8 and to take account of the any prior claims on the property.

(b)   Receivables

| 66. | The value of receivables shall be the amount receivable. |
| --- | --- |

66.

The value of receivables shall be the amount receivable.

(c)   Other physical collateral

| 67. | The property shall be valued at its market value — that is the estimated amount for which the property would exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction. |
| --- | --- |

67.

The property shall be valued at its market value — that is the estimated amount for which the property would exchange on the date of valuation between a willing buyer and a willing seller in an arm's-length transaction.

1.5.2.   Calculating risk-weighted exposure amounts and expected loss amounts

(a)   General treatment

| 68. | LGD* calculated as set out in points 69 to 72 shall be taken as the LGD for the purposes of Annex VII. |
| --- | --- |

68.

LGD* calculated as set out in points 69 to 72 shall be taken as the LGD for the purposes of Annex VII.

| 69. | Where the ratio of the value of the collateral (C) to the exposure value (E) is below a threshold level of C* (the required minimum collateralisation level for the exposure) as laid down in Table 5, LGD* shall be the LGD laid down in Annex VII for uncollateralised exposures to the counterparty. |
| --- | --- |

69.

Where the ratio of the value of the collateral (C) to the exposure value (E) is below a threshold level of C* (the required minimum collateralisation level for the exposure) as laid down in Table 5, LGD* shall be the LGD laid down in Annex VII for uncollateralised exposures to the counterparty.

| 70. | Where the ratio of the value of the collateral to the exposure value exceeds a second, higher threshold level of C** (i.e. the required level of collateralisation to receive full LGD recognition) as laid down in Table 5, LGD* shall be that prescribed in Table 5. |
| --- | --- |

70.

Where the ratio of the value of the collateral to the exposure value exceeds a second, higher threshold level of C** (i.e. the required level of collateralisation to receive full LGD recognition) as laid down in Table 5, LGD* shall be that prescribed in Table 5.

| 71. | Where the required level of collateralisation C** is not achieved in respect of the exposure as a whole, the exposure shall be considered to be two exposures — that part in respect of which the required level of collateralisation C** is achieved and the remainder. |
| --- | --- |

71.

Where the required level of collateralisation C** is not achieved in respect of the exposure as a whole, the exposure shall be considered to be two exposures — that part in respect of which the required level of collateralisation C** is achieved and the remainder.

| 72. | Table 5 sets out the applicable LGD* and required collateralisation levels for the secured parts of exposures.
  Table 5
  Minimum LGD for secured parts of exposures | LGD* for senior claims or contingent claims | LGD* for subordinated claims or contingent claims | Required minimum collateralisation level of the exposure (C*) | Required minimum collateralisation level of the exposure (C**) |
| --- | --- | --- | --- | --- | --- |
| Receivables | 35 % | 65 % | 0 % | 125 % |
| Residential real estate/commercial real estate | 35 % | 65 % | 30 % | 140 % |
| Other collateral | 40 % | 70 % | 30 % | 140 % |

72.

Table 5 sets out the applicable LGD* and required collateralisation levels for the secured parts of exposures.

Table 5

Minimum LGD for secured parts of exposures

LGD* for senior claims or contingent claims

LGD* for subordinated claims or contingent claims

Required minimum collateralisation level of the exposure (C*)

Required minimum collateralisation level of the exposure (C**)

Receivables

35 %

65 %

0 %

125 %

Residential real estate/commercial real estate

35 %

65 %

30 %

140 %

Other collateral

40 %

70 %

30 %

140 %

By way of derogation, until 31 December 2012 the competent authorities may, subject to the levels of collateralisation indicated in Table 5:

| a) | allow credit institutions to assign a 30 % LGD for senior exposures in the form of Commercial Real Estate leasing; |
| --- | --- |

a)

allow credit institutions to assign a 30 % LGD for senior exposures in the form of Commercial Real Estate leasing;

| b) | allow credit institutions to assign a 35 % LGD for senior exposures in the form of equipment leasing; and |
| --- | --- |

b)

allow credit institutions to assign a 35 % LGD for senior exposures in the form of equipment leasing; and

| c) | allow credit institutions to assign a 30 % LGD for senior exposures secured by residential or commercial real estate. |
| --- | --- |

c)

allow credit institutions to assign a 30 % LGD for senior exposures secured by residential or commercial real estate.

At the end of this period, this derogation shall be reviewed.

(b)   Alternative treatment for real estate collateral

| 73. | Subject to the requirements of this point and point 74 and as an alternative to the treatment in points 68 to 72, the competent authorities of a Member State may authorise credit institutions to assign a 50 % risk weight to the Part of the exposure fully collateralised by residential real estate property or commercial real estate property situated within the territory of the Member State if they have evidence that the relevant markets are well-developed and long-established with loss-rates from lending collateralised by residential real estate property or commercial real estate property respectively that do not exceed the following limits:






  a) | losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by that form of real estate property in any given year; and |
| --- | --- | --- |

73.

Subject to the requirements of this point and point 74 and as an alternative to the treatment in points 68 to 72, the competent authorities of a Member State may authorise credit institutions to assign a 50 % risk weight to the Part of the exposure fully collateralised by residential real estate property or commercial real estate property situated within the territory of the Member State if they have evidence that the relevant markets are well-developed and long-established with loss-rates from lending collateralised by residential real estate property or commercial real estate property respectively that do not exceed the following limits:

a)

losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively up to 50 % of the market value (or where applicable and if lower 60 % of the mortgage-lending-value) do not exceed 0,3 % of the outstanding loans collateralised by that form of real estate property in any given year; and

| b) | overall losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively do not exceed 0,5 % of the outstanding loans collateralised by that form of real estate property in any given year. |
| --- | --- |

b)

overall losses stemming from lending collateralised by residential real estate property or commercial real estate property respectively do not exceed 0,5 % of the outstanding loans collateralised by that form of real estate property in any given year.

| 74. | If either of the conditions in point 73 is not satisfied in a given year, the eligibility to use this treatment shall cease until the conditions are satisfied in a subsequent year. |
| --- | --- |

74.

If either of the conditions in point 73 is not satisfied in a given year, the eligibility to use this treatment shall cease until the conditions are satisfied in a subsequent year.

| 75. | The competent authorities, which do not authorise the treatment in point 73, may authorise credit institutions to assign the risk weights permitted under this treatment in respect of exposures collateralised by residential real estate property of commercial real estate property respectively located in the territory of those Member States the competent authorities of which authorise this treatment subject to the same conditions as apply in that Member State. |
| --- | --- |

75.

The competent authorities, which do not authorise the treatment in point 73, may authorise credit institutions to assign the risk weights permitted under this treatment in respect of exposures collateralised by residential real estate property of commercial real estate property respectively located in the territory of those Member States the competent authorities of which authorise this treatment subject to the same conditions as apply in that Member State.

1.6.   Calculating risk-weighted exposure amounts and expected loss amounts in the case of mixed pools of collateral

| 76. | Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, and an exposure is collateralised by both financial collateral and other eligible collateral, LGD*, to be taken as the LGD for the purposes of Annex VII, shall be calculated as follows. |
| --- | --- |

76.

Where risk-weighted exposure amounts and expected loss amounts are calculated under Articles 84 to 89, and an exposure is collateralised by both financial collateral and other eligible collateral, LGD*, to be taken as the LGD for the purposes of Annex VII, shall be calculated as follows.

| 77. | The credit institution shall be required to subdivide the volatility-adjusted value of the exposure (i.e. the value after the application of the volatility adjustment as set out in point 33) into parts each covered by only one type of collateral. That is, the credit institution must divide the exposure into the part covered by eligible financial collateral, the portion covered by receivables, the portions covered by commercial real estate property collateral and/or residential real estate property collateral, the part covered by other eligible collateral, and the unsecured portion, as relevant. |
| --- | --- |

77.

The credit institution shall be required to subdivide the volatility-adjusted value of the exposure (i.e. the value after the application of the volatility adjustment as set out in point 33) into parts each covered by only one type of collateral. That is, the credit institution must divide the exposure into the part covered by eligible financial collateral, the portion covered by receivables, the portions covered by commercial real estate property collateral and/or residential real estate property collateral, the part covered by other eligible collateral, and the unsecured portion, as relevant.

| 78. | LGD* for each part of exposure shall be calculated separately in accordance with the relevant provisions of this Annex. |
| --- | --- |

78.

LGD* for each part of exposure shall be calculated separately in accordance with the relevant provisions of this Annex.

1.7.   Other funded credit protection

1.7.1.   Deposits with third party institutions

| 79. | Where the conditions set out in Part 2, point 12 are satisfied, credit protection falling within the terms of Part 1, point 23 may be treated as a guarantee by the third party institution. |
| --- | --- |

79.

Where the conditions set out in Part 2, point 12 are satisfied, credit protection falling within the terms of Part 1, point 23 may be treated as a guarantee by the third party institution.

1.7.2.   Life insurance policies pledged to the lending credit institution

| 80. | Where the conditions set out in Part 2, point 13 are satisfied, credit protection falling within the terms of Part 1, point 24 may be treated as a guarantee by the company providing the life insurance. The value of the credit protection recognised shall be the surrender value of the life insurance policy. |
| --- | --- |

80.

Where the conditions set out in Part 2, point 13 are satisfied, credit protection falling within the terms of Part 1, point 24 may be treated as a guarantee by the company providing the life insurance. The value of the credit protection recognised shall be the surrender value of the life insurance policy.

1.7.3.   Institution instruments repurchased on request

| 81. | Instruments eligible under Part 1, point 25 may be treated as a guarantee by the issuing institution. |
| --- | --- |

81.

Instruments eligible under Part 1, point 25 may be treated as a guarantee by the issuing institution.

| 82. | The value of the credit protection recognised shall be the following:






  a) | where the instrument will be repurchased at its face value, the value of the protection shall be that amount; |
| --- | --- | --- |

82.

The value of the credit protection recognised shall be the following:

a)

where the instrument will be repurchased at its face value, the value of the protection shall be that amount;

| b) | where the instrument will be repurchased at market price, the value of the protection shall be the value of the instrument valued in the same way as the debt securities specified in Part 1, point 8. |
| --- | --- |

b)

where the instrument will be repurchased at market price, the value of the protection shall be the value of the instrument valued in the same way as the debt securities specified in Part 1, point 8.

2.   UNFUNDED CREDIT PROTECTION

2.1.   Valuation

| 83. | The value of unfunded credit protection (G) shall be the amount that the protection provider has undertaken to pay in the event of the default or non-payment of the borrower or on the occurrence of other specified credit events. In the case of credit derivatives which do not include as a credit event restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that result in a credit loss event (e.g. value adjustment, the making of a value adjustment or other similar debit to the profit and loss account),






  a) | where the amount that the protection provider has undertaken to pay is not higher than the exposure value, the value of the credit protection calculated under the first sentence of this point shall be reduced by 40 %;or |
| --- | --- | --- |

83.

The value of unfunded credit protection (G) shall be the amount that the protection provider has undertaken to pay in the event of the default or non-payment of the borrower or on the occurrence of other specified credit events. In the case of credit derivatives which do not include as a credit event restructuring of the underlying obligation involving forgiveness or postponement of principal, interest or fees that result in a credit loss event (e.g. value adjustment, the making of a value adjustment or other similar debit to the profit and loss account),

a)

where the amount that the protection provider has undertaken to pay is not higher than the exposure value, the value of the credit protection calculated under the first sentence of this point shall be reduced by 40 %;or

| b) | where the amount that the protection provider has undertaken to pay is higher than the exposure value, the value of the credit protection shall be no higher than 60 % of the exposure value. |
| --- | --- |

b)

where the amount that the protection provider has undertaken to pay is higher than the exposure value, the value of the credit protection shall be no higher than 60 % of the exposure value.

| 84. | Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated (a currency mismatch) the value of the credit protection shall be reduced by the application of a volatility adjustment HFX as follows:
  G* = G × (1 - HFX)
  where:
  G is the nominal amount of the credit protection,
  G* is G adjusted for any foreign exchange risk, and
  HFX is the volatility adjustment for any currency mismatch between the credit protection and the underlying obligation.
  Where there is no currency mismatch
  G* = G |
| --- | --- |

84.

Where unfunded credit protection is denominated in a currency different from that in which the exposure is denominated (a currency mismatch) the value of the credit protection shall be reduced by the application of a volatility adjustment HFX as follows:

G* = G × (1 - HFX)

where:

G is the nominal amount of the credit protection,

G* is G adjusted for any foreign exchange risk, and

HFX is the volatility adjustment for any currency mismatch between the credit protection and the underlying obligation.

Where there is no currency mismatch

G* = G

| 85. | The volatility adjustments for any currency mismatch may be calculated based on the Supervisory volatility adjustments approach or the Own estimates approach as set out in points 34 to 57. |
| --- | --- |

85.

The volatility adjustments for any currency mismatch may be calculated based on the Supervisory volatility adjustments approach or the Own estimates approach as set out in points 34 to 57.

2.2.   Calculating risk-weighted exposure amounts and expected loss amounts

2.2.1.   Partial protection — tranching

| 86. | Where the credit institution transfers a part of the risk of a loan in one or more tranches, the rules set out in Articles 94 to 101 shall apply. Materiality thresholds on payments below which no payment shall be made in the event of loss are considered to be equivalent to retained first loss positions and to give rise to a tranched transfer of risk. |
| --- | --- |

86.

Where the credit institution transfers a part of the risk of a loan in one or more tranches, the rules set out in Articles 94 to 101 shall apply. Materiality thresholds on payments below which no payment shall be made in the event of loss are considered to be equivalent to retained first loss positions and to give rise to a tranched transfer of risk.

2.2.2.   Standardised Approach

(a)   Full protection

| 87. | For the purposes of Article 80, g shall be the risk weight to be assigned to an exposure which is fully protected by unfunded protection (GA),
  where:
  g is the risk weight of exposures to the protection provider as specified under Articles 78 to 83; and
  GA is the value of G* as calculated under point 84 further adjusted for any maturity mismatch as laid down in Part 4. |
| --- | --- |

87.

For the purposes of Article 80, g shall be the risk weight to be assigned to an exposure which is fully protected by unfunded protection (GA),

where:

g is the risk weight of exposures to the protection provider as specified under Articles 78 to 83; and

GA is the value of G* as calculated under point 84 further adjusted for any maturity mismatch as laid down in Part 4.

(b)   Partial protection — equal seniority

| 88. | Where the protected amount is less than the exposure value and the protected and unprotected parts are of equal seniority — i.e. the credit institution and the protection provider share losses on a pro-rata basis, proportional regulatory capital relief shall be afforded. For the purposes of Article 80, risk-weighted exposure amounts shall be calculated in accordance with the following formula:
  (E - GA) × r + GA × g
  where:
  E is the exposure value;
  GA is the value of G* as calculated under point 84 further adjusted for any maturity mismatch as laid down in Part 4;
  r is the risk weight of exposures to the obligor as specified under Articles 78 to 83; and
  g is the risk weight of exposures to the protection provider as specified under Articles 78 to 83. |
| --- | --- |

88.

Where the protected amount is less than the exposure value and the protected and unprotected parts are of equal seniority — i.e. the credit institution and the protection provider share losses on a pro-rata basis, proportional regulatory capital relief shall be afforded. For the purposes of Article 80, risk-weighted exposure amounts shall be calculated in accordance with the following formula:

(E - GA) × r + GA × g

where:

E is the exposure value;

GA is the value of G* as calculated under point 84 further adjusted for any maturity mismatch as laid down in Part 4;

r is the risk weight of exposures to the obligor as specified under Articles 78 to 83; and

g is the risk weight of exposures to the protection provider as specified under Articles 78 to 83.

(c)   Sovereign guarantees

| 89. | The competent authorities may extend the treatment provided for in Annex VI, Part 1, points 4 and 5 to exposures or parts of exposures guaranteed by the central government or central bank, where the guarantee is denominated in the domestic currency of the borrower and the exposure is funded in that currency. |
| --- | --- |

89.

The competent authorities may extend the treatment provided for in Annex VI, Part 1, points 4 and 5 to exposures or parts of exposures guaranteed by the central government or central bank, where the guarantee is denominated in the domestic currency of the borrower and the exposure is funded in that currency.

2.2.3.   IRB Approach

Full protection/Partial protection — equal seniority

| 90. | For the covered portion of the exposure (based on the adjusted value of the credit protection GA), the PD for the purposes of Annex VII, Part 2 may be the PD of the protection provider, or a PD between that of the borrower and that of the guarantor if a full substitution is deemed not to be warranted. In the case of subordinated exposures and non-subordinated unfunded protection, the LGD to be applied for the purposes of Annex VII, Part 2 may be that associated with senior claims. |
| --- | --- |

90.

For the covered portion of the exposure (based on the adjusted value of the credit protection GA), the PD for the purposes of Annex VII, Part 2 may be the PD of the protection provider, or a PD between that of the borrower and that of the guarantor if a full substitution is deemed not to be warranted. In the case of subordinated exposures and non-subordinated unfunded protection, the LGD to be applied for the purposes of Annex VII, Part 2 may be that associated with senior claims.

| 91. | For any uncovered portion of the exposure the PD shall be that of the borrower and the LGD shall be that of the underlying exposure. |
| --- | --- |

91.

For any uncovered portion of the exposure the PD shall be that of the borrower and the LGD shall be that of the underlying exposure.

| 92. | GA is the value of G* as calculated under point 84 further adjusted for any maturity mismatch as laid down in Part 4. |
| --- | --- |

92.

GA is the value of G* as calculated under point 84 further adjusted for any maturity mismatch as laid down in Part 4.

Part 4 — Maturity Mismatches

| 1. | For the purposes of calculating risk-weighted exposure amounts, a maturity mismatch occurs when the residual maturity of the credit protection is less than that of the protected exposure. Protection of less than three months residual maturity, the maturity of which is less than the maturity of the underlying exposure, shall not be recognised. |
| --- | --- |

1.

For the purposes of calculating risk-weighted exposure amounts, a maturity mismatch occurs when the residual maturity of the credit protection is less than that of the protected exposure. Protection of less than three months residual maturity, the maturity of which is less than the maturity of the underlying exposure, shall not be recognised.

| 2. | Where there is a maturity mismatch the credit protection shall not be recognised where:






  a) | the original maturity of the protection is less than 1 year; or |
| --- | --- | --- |

2.

Where there is a maturity mismatch the credit protection shall not be recognised where:

a)

the original maturity of the protection is less than 1 year; or

| b) | the exposure is a short term exposure specified by the competent authorities as being subject to a one–day floor rather than a one-year floor in respect of the maturity value (M) under Annex VII, Part 2, point 14. |
| --- | --- |

b)

the exposure is a short term exposure specified by the competent authorities as being subject to a one–day floor rather than a one-year floor in respect of the maturity value (M) under Annex VII, Part 2, point 14.

1.   DEFINITION OF MATURITY

| 3. | Subject to a maximum of 5 years, the effective maturity of the underlying shall be the longest possible remaining time before the obligor is scheduled to fulfil its obligations. Subject to point 4, the maturity of the credit protection shall be the time to the earliest date at which the protection may terminate or be terminated. |
| --- | --- |

3.

Subject to a maximum of 5 years, the effective maturity of the underlying shall be the longest possible remaining time before the obligor is scheduled to fulfil its obligations. Subject to point 4, the maturity of the credit protection shall be the time to the earliest date at which the protection may terminate or be terminated.

| 4. | Where there is an option to terminate the protection which is at the discretion of the protection seller, the maturity of the protection shall be taken to be the time to the earliest date at which that option may be exercised. Where there is an option to terminate the protection which is at the discretion of the protection buyer and the terms of the arrangement at origination of the protection contain a positive incentive for the credit institution to call the transaction before contractual maturity, the maturity of the protection shall be taken to be the time to the earliest date at which that option may be exercised; otherwise such an option may be considered not to affect the maturity of the protection. |
| --- | --- |

4.

Where there is an option to terminate the protection which is at the discretion of the protection seller, the maturity of the protection shall be taken to be the time to the earliest date at which that option may be exercised. Where there is an option to terminate the protection which is at the discretion of the protection buyer and the terms of the arrangement at origination of the protection contain a positive incentive for the credit institution to call the transaction before contractual maturity, the maturity of the protection shall be taken to be the time to the earliest date at which that option may be exercised; otherwise such an option may be considered not to affect the maturity of the protection.

| 5. | Where a credit derivative is not prevented from terminating prior to expiration of any grace period required for a default on the underlying obligation to occur as a result of a failure to pay the maturity of the protection shall be reduced by the amount of the grace period. |
| --- | --- |

5.

Where a credit derivative is not prevented from terminating prior to expiration of any grace period required for a default on the underlying obligation to occur as a result of a failure to pay the maturity of the protection shall be reduced by the amount of the grace period.

2.   VALUATION OF PROTECTION

2.1.   Transactions subject to funded credit protection — Financial Collateral Simple Method

| 6. | Where there is a mismatch between the maturity of the exposure and the maturity of the protection, the collateral shall not be recognised. |
| --- | --- |

6.

Where there is a mismatch between the maturity of the exposure and the maturity of the protection, the collateral shall not be recognised.

2.2.   Transactions subject to funded credit protection — Financial Collateral Comprehensive Method

| 7. | The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the collateral according to the following formula:
  CVAM = CVA × (t - t*)/(T - t*)
  where:
  CVA is the volatility adjusted value of the collateral as specified in Part 3, point 33 or the amount of the exposure, whichever is the lowest;
  t is the number of years remaining to the maturity date of the credit protection calculated in accordance with points 3 to 5, or the value of T, whichever is the lower;
  T is the number of years remaining to the maturity date of the exposure calculated in accordance with points 3 to 5, or 5 years, whichever is the lower; and
  t* is 0,25.
  CVAM shall be taken as CVA further adjusted for maturity mismatch to be included in the formula for the calculation of the fully adjusted value of the exposure (E*) set out at Part 3, point 33. |
| --- | --- |

7.

The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the collateral according to the following formula:

CVAM = CVA × (t - t*)/(T - t*)

where:

CVA is the volatility adjusted value of the collateral as specified in Part 3, point 33 or the amount of the exposure, whichever is the lowest;

t is the number of years remaining to the maturity date of the credit protection calculated in accordance with points 3 to 5, or the value of T, whichever is the lower;

T is the number of years remaining to the maturity date of the exposure calculated in accordance with points 3 to 5, or 5 years, whichever is the lower; and

t* is 0,25.

CVAM shall be taken as CVA further adjusted for maturity mismatch to be included in the formula for the calculation of the fully adjusted value of the exposure (E*) set out at Part 3, point 33.

2.3.   Transactions subject to unfunded credit protection

| 8. | The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the credit protection according to the following formula
  GA = G* × (t - t*)/(T - t*)
  where:
  G* is the amount of the protection adjusted for any currency mismatch
  GA is G* adjusted for any maturity mismatch
  t is the number of years remaining to the maturity date of the credit protection calculated in accordance with points 3 to 5, or the value of T, whichever is the lower;
  T is the number of years remaining to the maturity date of the exposure calculated in accordance with points 3 to 5, or 5 years, whichever is the lower; and
  t* is 0,25.
  GA is then taken as the value of the protection for the purposes of Part 3, points 83 to 92. |
| --- | --- |

8.

The maturity of the credit protection and that of the exposure must be reflected in the adjusted value of the credit protection according to the following formula

GA = G* × (t - t*)/(T - t*)

where:

G* is the amount of the protection adjusted for any currency mismatch

GA is G* adjusted for any maturity mismatch

t is the number of years remaining to the maturity date of the credit protection calculated in accordance with points 3 to 5, or the value of T, whichever is the lower;

T is the number of years remaining to the maturity date of the exposure calculated in accordance with points 3 to 5, or 5 years, whichever is the lower; and

t* is 0,25.

GA is then taken as the value of the protection for the purposes of Part 3, points 83 to 92.

Part 5 — Combinations of credit risk mitigation in the Standardised Approach

| 1. | In the case where a credit institution calculating risk-weighted exposure amounts under Articles 78 to 83 has more than one form of credit risk mitigation covering a single exposure (e.g. a credit institution has both collateral and a guarantee partially covering an exposure), the credit institution shall be required to subdivide the exposure into parts covered by each type of credit risk mitigation tool (e.g. a part covered by collateral and a portion covered by guarantee) and the risk-weighted exposure amount for each portion must be calculated separately in accordance with the provisions of Articles 78 to 83 and this Annex. |
| --- | --- |

1.

In the case where a credit institution calculating risk-weighted exposure amounts under Articles 78 to 83 has more than one form of credit risk mitigation covering a single exposure (e.g. a credit institution has both collateral and a guarantee partially covering an exposure), the credit institution shall be required to subdivide the exposure into parts covered by each type of credit risk mitigation tool (e.g. a part covered by collateral and a portion covered by guarantee) and the risk-weighted exposure amount for each portion must be calculated separately in accordance with the provisions of Articles 78 to 83 and this Annex.

| 2. | When credit protection provided by a single protection provider has differing maturities, a similar approach to that described in point 1 shall be applied. |
| --- | --- |

2.

When credit protection provided by a single protection provider has differing maturities, a similar approach to that described in point 1 shall be applied.

Part 6 — Basket CRM techniques

1.   FIRST-TO-DEFAULT CREDIT DERIVATIVES

| 1. | Where a credit institution obtains credit protection for a number of exposures under terms that the first default among the exposures shall trigger payment and that this credit event shall terminate the contract, the credit institution may modify the calculation of the risk-weighted exposure amount and, as relevant, the expected loss amount of the exposure which would, in the absence of the credit protection, produce the lowest risk-weighted exposure amount under Articles 78 to 83 or Articles 84 to 89 as appropriate in accordance with this Annex, but only if the exposure value is less than or equal to the value of the credit protection. |
| --- | --- |

1.

Where a credit institution obtains credit protection for a number of exposures under terms that the first default among the exposures shall trigger payment and that this credit event shall terminate the contract, the credit institution may modify the calculation of the risk-weighted exposure amount and, as relevant, the expected loss amount of the exposure which would, in the absence of the credit protection, produce the lowest risk-weighted exposure amount under Articles 78 to 83 or Articles 84 to 89 as appropriate in accordance with this Annex, but only if the exposure value is less than or equal to the value of the credit protection.

2.   N NTH-TO-DEFAULT CREDIT DERIVATIVES

| 2. | Where the nth default among the exposures triggers payment under the credit protection, the credit institution purchasing the protection may only recognise the protection for the calculation of risk-weighted exposure amounts and, as relevant, expected loss amounts if protection has also been obtained for defaults 1 to n – 1 or when n – 1 defaults have already occurred. In such cases, the methodology shall follow that set out in point 1 for first-to-default derivatives appropriately modified for nth-to-default products. |
| --- | --- |

2.

Where the nth default among the exposures triggers payment under the credit protection, the credit institution purchasing the protection may only recognise the protection for the calculation of risk-weighted exposure amounts and, as relevant, expected loss amounts if protection has also been obtained for defaults 1 to n – 1 or when n – 1 defaults have already occurred. In such cases, the methodology shall follow that set out in point 1 for first-to-default derivatives appropriately modified for nth-to-default products.

ANNEX IX

SECURITISATION

Part 1 — Definitions for the purposes of Annex IX

| 1. | For the purposes of this Annex:






  — | ‘Excess spread’ means finance charge collections and other fee income received in respect of the securitised exposures net of costs and expenses; |
| --- | --- | --- |

1.

For the purposes of this Annex:

—

‘Excess spread’ means finance charge collections and other fee income received in respect of the securitised exposures net of costs and expenses;

| — | ‘Clean-up call option’ means a contractual option for the originator to repurchase or extinguish the securitisation positions before all of the underlying exposures have been repaid, when the amount of outstanding exposures falls below a specified level; |
| --- | --- |

—

‘Clean-up call option’ means a contractual option for the originator to repurchase or extinguish the securitisation positions before all of the underlying exposures have been repaid, when the amount of outstanding exposures falls below a specified level;

| — | ‘Liquidity facility’ means the securitisation position arising from a contractual agreement to provide funding to ensure timeliness of cash flows to investors; |
| --- | --- |

—

‘Liquidity facility’ means the securitisation position arising from a contractual agreement to provide funding to ensure timeliness of cash flows to investors;

| — | ‘Kirb’ means 8 % of the risk-weighted exposure amounts that would be calculated under Articles 84 to 89 in respect of the securitised exposures, had they not been securitised, plus the amount of expected losses associated with those exposures calculated under those Articles; |
| --- | --- |

—

‘Kirb’ means 8 % of the risk-weighted exposure amounts that would be calculated under Articles 84 to 89 in respect of the securitised exposures, had they not been securitised, plus the amount of expected losses associated with those exposures calculated under those Articles;

| — | ‘Ratings based method’ means the method of calculating risk-weighted exposure amounts for securitisation positions in accordance with Part 4, points 46 to 51; |
| --- | --- |

—

‘Ratings based method’ means the method of calculating risk-weighted exposure amounts for securitisation positions in accordance with Part 4, points 46 to 51;

| — | ‘Supervisory formula method’ means the method of calculating risk-weighted exposure amounts for securitisation positions in accordance with Part 4, points 52 to 54; |
| --- | --- |

—

‘Supervisory formula method’ means the method of calculating risk-weighted exposure amounts for securitisation positions in accordance with Part 4, points 52 to 54;

| — | ‘Unrated position’ means a securitisation position which does not have an eligible credit assessment by an eligible ECAI as defined in Article 97; |
| --- | --- |

—

‘Unrated position’ means a securitisation position which does not have an eligible credit assessment by an eligible ECAI as defined in Article 97;

| — | ‘Rated position’ means a securitisation position which has an eligible credit assessment by an eligible ECAI as defined in Article 97; and |
| --- | --- |

—

‘Rated position’ means a securitisation position which has an eligible credit assessment by an eligible ECAI as defined in Article 97; and

| — | ‘Asset-backed commercial paper (ABCP) programme’ means a programme of securitisations the securities issued by which predominantly take the form of commercial paper with an original maturity of one year or less. |
| --- | --- |

—

‘Asset-backed commercial paper (ABCP) programme’ means a programme of securitisations the securities issued by which predominantly take the form of commercial paper with an original maturity of one year or less.

Part 2 — Minimum requirements for recognition of significant credit risk transfer and calculation of risk-weighted exposure amounts and expected loss amounts for securitised exposures

1.   MINIMUM REQUIREMENTS FOR RECOGNITION OF SIGNIFICANT CREDIT RISK TRANSFER IN A TRADITIONAL SECURITISATION

| 1. | The originator credit institution of a traditional securitisation may exclude securitised exposures from the calculation of risk-weighted exposure amounts and expected loss amounts if significant credit risk associated with the securitised exposures has been transferred to third parties and the transfer complies with the following conditions:






  (a) | The securitisation documentation reflects the economic substance of the transaction; |
| --- | --- | --- |

1.

The originator credit institution of a traditional securitisation may exclude securitised exposures from the calculation of risk-weighted exposure amounts and expected loss amounts if significant credit risk associated with the securitised exposures has been transferred to third parties and the transfer complies with the following conditions:

(a)

The securitisation documentation reflects the economic substance of the transaction;

| (b) | The securitised exposures are put beyond the reach of the originator credit institution and its creditors, including in bankruptcy and receivership. This shall be supported by the opinion of qualified legal counsel; |
| --- | --- |

(b)

The securitised exposures are put beyond the reach of the originator credit institution and its creditors, including in bankruptcy and receivership. This shall be supported by the opinion of qualified legal counsel;

| (c) | The securities issued do not represent payment obligations of the originator credit institution; |
| --- | --- |

(c)

The securities issued do not represent payment obligations of the originator credit institution;

| (d) | The transferee is a securitisation special-purpose entity (SSPE); |
| --- | --- |

(d)

The transferee is a securitisation special-purpose entity (SSPE);

| (e) | The originator credit institution does not maintain effective or indirect control over the transferred exposures. An originator shall be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator credit institution's retention of servicing rights or obligations in respect of the exposures shall not of itself constitute indirect control of the exposures; |
| --- | --- |

(e)

The originator credit institution does not maintain effective or indirect control over the transferred exposures. An originator shall be considered to have maintained effective control over the transferred exposures if it has the right to repurchase from the transferee the previously transferred exposures in order to realise their benefits or if it is obligated to re-assume transferred risk. The originator credit institution's retention of servicing rights or obligations in respect of the exposures shall not of itself constitute indirect control of the exposures;

| (f) | Where there is a clean-up call option, the following conditions are satisfied:






  (i) | The clean-up call option is exercisable at the discretion of the originator credit institution; |
| --- | --- | --- |

(f)

Where there is a clean-up call option, the following conditions are satisfied:

(i)

The clean-up call option is exercisable at the discretion of the originator credit institution;

| (ii) | The clean-up call option may only be exercised when 10 % or less of the original value of the exposures securitised remains unamortised; and |
| --- | --- |

(ii)

The clean-up call option may only be exercised when 10 % or less of the original value of the exposures securitised remains unamortised; and

| (iii) | The clean-up call option is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement; and |
| --- | --- |

(iii)

The clean-up call option is not structured to avoid allocating losses to credit enhancement positions or other positions held by investors and is not otherwise structured to provide credit enhancement; and

| (g) | The securitisation documentation does not contain clauses that






  i) | other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures; or |
| --- | --- | --- |

(g)

The securitisation documentation does not contain clauses that

i)

other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution including but not limited to altering the underlying credit exposures or increasing the yield payable to investors in response to a deterioration in the credit quality of the securitised exposures; or

| ii) | increase the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool. |
| --- | --- |

ii)

increase the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool.

2.   MINIMUM REQUIREMENTS FOR RECOGNITION OF SIGNIFICANT CREDIT RISK TRANSFER IN A SYNTHETIC SECURITISATION

| 2. | An originator credit institution of a synthetic securitisation may calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, for the securitised exposures in accordance with points 3 and 4 below, if significant credit risk has been transferred to third parties either through funded or unfunded credit protection and the transfer complies with the following conditions:






  (a) | The securitisation documentation reflects the economic substance of the transaction; |
| --- | --- | --- |

2.

An originator credit institution of a synthetic securitisation may calculate risk-weighted exposure amounts, and, as relevant, expected loss amounts, for the securitised exposures in accordance with points 3 and 4 below, if significant credit risk has been transferred to third parties either through funded or unfunded credit protection and the transfer complies with the following conditions:

(a)

The securitisation documentation reflects the economic substance of the transaction;

| (b) | The credit protection by which the credit risk is transferred complies with the eligibility and other requirements under Articles 90 to 93 for the recognition of such credit protection. For the purposes of this point, special purpose entities shall not be recognised as eligible unfunded protection providers. |
| --- | --- |

(b)

The credit protection by which the credit risk is transferred complies with the eligibility and other requirements under Articles 90 to 93 for the recognition of such credit protection. For the purposes of this point, special purpose entities shall not be recognised as eligible unfunded protection providers.

| (c) | The instruments used to transfer credit risk do not contain terms or conditions that:






  i) | impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs; |
| --- | --- | --- |

(c)

The instruments used to transfer credit risk do not contain terms or conditions that:

i)

impose significant materiality thresholds below which credit protection is deemed not to be triggered if a credit event occurs;

| ii) | allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures; |
| --- | --- |

ii)

allow for the termination of the protection due to deterioration of the credit quality of the underlying exposures;

| iii) | other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution; |
| --- | --- |

iii)

other than in the case of early amortisation provisions, require positions in the securitisation to be improved by the originator credit institution;

| iv) | increase the credit institutions' cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool; and |
| --- | --- |

iv)

increase the credit institutions' cost of credit protection or the yield payable to holders of positions in the securitisation in response to a deterioration in the credit quality of the underlying pool; and

| (d) | An opinion is obtained from qualified legal counsel confirming the enforceability of the credit protection in all relevant jurisdictions. |
| --- | --- |

(d)

An opinion is obtained from qualified legal counsel confirming the enforceability of the credit protection in all relevant jurisdictions.

3.   ORIGINATOR CREDIT INSTITUTIONS' CALCULATION OF RISK-WEIGHTED EXPOSURE AMOUNTS FOR EXPOSURES SECURITISED IN A SYNTHETIC SECURITISATION

| 3. | In calculating risk-weighted exposure amounts for the securitised exposures, where the conditions in point 2 are met, the originator credit institution of a synthetic securitisation shall, subject to points 5 to 7, use the relevant calculation methodologies set out in Part 4 and not those set out in Articles 78 to 89. For credit institutions calculating risk-weighted exposure amounts and expected loss amounts under Articles 84 to 89, the expected loss amount in respect of such exposures shall be zero. |
| --- | --- |

3.

In calculating risk-weighted exposure amounts for the securitised exposures, where the conditions in point 2 are met, the originator credit institution of a synthetic securitisation shall, subject to points 5 to 7, use the relevant calculation methodologies set out in Part 4 and not those set out in Articles 78 to 89. For credit institutions calculating risk-weighted exposure amounts and expected loss amounts under Articles 84 to 89, the expected loss amount in respect of such exposures shall be zero.

| 4. | For clarity, point 3 refers to the entire pool of exposures included in the securitisation. Subject to points 5 to 7, the originator credit institution is required to calculate risk-weighted exposure amounts in respect of all tranches in the securitisation in accordance with the provisions of Part 4 including those relating to the recognition of credit risk mitigation. For example, where a tranche is transferred by means of unfunded credit protection to a third party, the risk weight of that third party shall be applied to the tranche in the calculation of the originator credit institution's risk-weighted exposure amounts. |
| --- | --- |

4.

For clarity, point 3 refers to the entire pool of exposures included in the securitisation. Subject to points 5 to 7, the originator credit institution is required to calculate risk-weighted exposure amounts in respect of all tranches in the securitisation in accordance with the provisions of Part 4 including those relating to the recognition of credit risk mitigation. For example, where a tranche is transferred by means of unfunded credit protection to a third party, the risk weight of that third party shall be applied to the tranche in the calculation of the originator credit institution's risk-weighted exposure amounts.

3.1.   Treatment of maturity mismatches in synthetic securitisations

| 5. | For the purposes of calculating risk-weighted exposure amounts in accordance with point 3, any maturity mismatch between the credit protection by which the tranching is achieved and the securitised exposures shall be taken into consideration in accordance with points 6 to 7. |
| --- | --- |

5.

For the purposes of calculating risk-weighted exposure amounts in accordance with point 3, any maturity mismatch between the credit protection by which the tranching is achieved and the securitised exposures shall be taken into consideration in accordance with points 6 to 7.

| 6. | The maturity of the securitised exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of five years. The maturity of the credit protection shall be determined in accordance with Annex VIII . |
| --- | --- |

6.

The maturity of the securitised exposures shall be taken to be the longest maturity of any of those exposures subject to a maximum of five years. The maturity of the credit protection shall be determined in accordance with Annex VIII .

| 7. | An originator credit institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for tranches appearing pursuant to Part 4 with a risk weighting of 1 250 %. For all other tranches, the maturity mismatch treatment set out in Annex VIII shall be applied in accordance with the following formula:
  RW* is [RW(SP) × (t - t*)/(T - t*)] + [RW(Ass) × (T - t)/(T - t*)]
  Where:
  RW* is Risk-weighted exposure amounts for the purposes of Article 75(a) ;
  RW(Ass) is Risk-weighted exposure amounts for exposures if they had not been securitised, calculated on a pro-rata basis;
  RW(SP) is Risk-weighted exposure amounts calculated under point 3 if there was no maturity mismatch;
  T is maturity of the underlying exposures expressed in years;
  t is maturity of credit protection. expressed in years; and
  t* is 0,25. |
| --- | --- |

7.

An originator credit institution shall ignore any maturity mismatch in calculating risk-weighted exposure amounts for tranches appearing pursuant to Part 4 with a risk weighting of 1 250 %. For all other tranches, the maturity mismatch treatment set out in Annex VIII shall be applied in accordance with the following formula:

RW* is [RW(SP) × (t - t*)/(T - t*)] + [RW(Ass) × (T - t)/(T - t*)]

Where:

RW* is Risk-weighted exposure amounts for the purposes of Article 75(a) ;

RW(Ass) is Risk-weighted exposure amounts for exposures if they had not been securitised, calculated on a pro-rata basis;

RW(SP) is Risk-weighted exposure amounts calculated under point 3 if there was no maturity mismatch;

T is maturity of the underlying exposures expressed in years;

t is maturity of credit protection. expressed in years; and

t* is 0,25.

Part 3 — External credit assessments

1.   REQUIREMENTS TO BE MET BY THE CREDIT ASSESSMENTS OF ECAIS

| 1. | To be used for the purposes of calculating risk-weighted exposure amounts under Part 4, a credit assessment of an eligible ECAI shall comply with the following conditions.






  (a) | There shall be no mismatch between the types of payments reflected in the credit assessment and the types of payment to which the credit institution is entitled under the contract giving rise to the securitisation position in question; and |
| --- | --- | --- |

1.

To be used for the purposes of calculating risk-weighted exposure amounts under Part 4, a credit assessment of an eligible ECAI shall comply with the following conditions.

(a)

There shall be no mismatch between the types of payments reflected in the credit assessment and the types of payment to which the credit institution is entitled under the contract giving rise to the securitisation position in question; and

| (b) | The credit assessments shall be available publicly to the market. Credit assessments are considered to be publicly available only if they have been published in a publicly accessible forum and they are included in the ECAI's transition matrix. Credit assessments that are made available only to a limited number of entities shall not be considered to be publicly available. |
| --- | --- |

(b)

The credit assessments shall be available publicly to the market. Credit assessments are considered to be publicly available only if they have been published in a publicly accessible forum and they are included in the ECAI's transition matrix. Credit assessments that are made available only to a limited number of entities shall not be considered to be publicly available.

2.   USE OF CREDIT ASSESSMENTS

| 2. | A credit institution may nominate one or more eligible ECAIs the credit assessments of which shall be used in the calculation of its risk-weighted exposure amounts under Articles 94 to 101 (a ‘nominated ECAI’). |
| --- | --- |

2.

A credit institution may nominate one or more eligible ECAIs the credit assessments of which shall be used in the calculation of its risk-weighted exposure amounts under Articles 94 to 101 (a ‘nominated ECAI’).

| 3. | Subject to points 5 to 7 below, a credit institution must use credit assessments from nominated ECAIs consistently in respect of its securitisation positions. |
| --- | --- |

3.

Subject to points 5 to 7 below, a credit institution must use credit assessments from nominated ECAIs consistently in respect of its securitisation positions.

| 4. | Subject to points 5 and 6, a credit institution may not use an ECAI's credit assessments for its positions in some tranches and another ECAI's credit assessments for its positions in other tranches within the same structure that may or may not be rated by the first ECAI. |
| --- | --- |

4.

Subject to points 5 and 6, a credit institution may not use an ECAI's credit assessments for its positions in some tranches and another ECAI's credit assessments for its positions in other tranches within the same structure that may or may not be rated by the first ECAI.

| 5. | Where a position has two credit assessments by nominated ECAIs, the credit institution shall use the less favourable credit assessment. |
| --- | --- |

5.

Where a position has two credit assessments by nominated ECAIs, the credit institution shall use the less favourable credit assessment.

| 6. | Where a position has more than two credit assessments by nominated ECAIs, the two most favourable credit assessments shall be used. If the two most favourable assessments are different, the least favourable of the two shall be used. |
| --- | --- |

6.

Where a position has more than two credit assessments by nominated ECAIs, the two most favourable credit assessments shall be used. If the two most favourable assessments are different, the least favourable of the two shall be used.

| 7. | Where credit protection eligible under Articles 90 to 93 is provided directly to the SSPE, and that protection is reflected in the credit assessment of a position by a nominated ECAI, the risk weight associated with that credit assessment may be used. If the protection is not eligible under Articles 90 to 93, the credit assessment shall not be recognised. In the situation where the credit protection is not provided to the SSPE but rather directly to a securitisation position, the credit assessment shall not be recognised. |
| --- | --- |

7.

Where credit protection eligible under Articles 90 to 93 is provided directly to the SSPE, and that protection is reflected in the credit assessment of a position by a nominated ECAI, the risk weight associated with that credit assessment may be used. If the protection is not eligible under Articles 90 to 93, the credit assessment shall not be recognised. In the situation where the credit protection is not provided to the SSPE but rather directly to a securitisation position, the credit assessment shall not be recognised.

3.   MAPPING

| 8. | The competent authorities shall determine with which credit quality step in the tables set out in Part 4 each credit assessment of an eligible ECAI shall be associated. In doing so the competent authorities shall differentiate between the relative degrees of risk expressed by each assessment. They shall consider quantitative factors, such as default and/or loss rates, and qualitative factors such as the range of transactions assessed by the ECAI and the meaning of the credit assessment. |
| --- | --- |

8.

The competent authorities shall determine with which credit quality step in the tables set out in Part 4 each credit assessment of an eligible ECAI shall be associated. In doing so the competent authorities shall differentiate between the relative degrees of risk expressed by each assessment. They shall consider quantitative factors, such as default and/or loss rates, and qualitative factors such as the range of transactions assessed by the ECAI and the meaning of the credit assessment.

| 9. | The competent authorities shall seek to ensure that securitisation positions to which the same risk weight is applied on the basis of the credit assessments of eligible ECAIs are subject to equivalent degrees of credit risk. This shall include modifying their determination as to the credit quality step with which a particular credit assessment shall be associated, as appropriate. |
| --- | --- |

9.

The competent authorities shall seek to ensure that securitisation positions to which the same risk weight is applied on the basis of the credit assessments of eligible ECAIs are subject to equivalent degrees of credit risk. This shall include modifying their determination as to the credit quality step with which a particular credit assessment shall be associated, as appropriate.

Part 4 — Calculation

1.   CALCULATION OF RISK-WEIGHTED EXPOSURE AMOUNTS

| 1. | For the purposes of Article 96, the risk-weighted exposure amount of a securitisation position shall be calculated by applying to the exposure value of the position the relevant risk weight as set out in this Part. |
| --- | --- |

1.

For the purposes of Article 96, the risk-weighted exposure amount of a securitisation position shall be calculated by applying to the exposure value of the position the relevant risk weight as set out in this Part.

| 2. | Subject to point 3:






  a) | where a credit institution calculates risk-weighted exposure amounts under points 6 to 36, the exposure value of an on-balance sheet securitisation position shall be its balance sheet value; |
| --- | --- | --- |

2.

Subject to point 3:

a)

where a credit institution calculates risk-weighted exposure amounts under points 6 to 36, the exposure value of an on-balance sheet securitisation position shall be its balance sheet value;

| b) | where a credit institution calculates risk-weighted exposure amounts under points 37 to 76, the exposure value of an on-balance sheet securitisation position shall be measured gross of value adjustments; and |
| --- | --- |

b)

where a credit institution calculates risk-weighted exposure amounts under points 37 to 76, the exposure value of an on-balance sheet securitisation position shall be measured gross of value adjustments; and

| c) | the exposure value of an off-balance sheet securitisation position shall be its nominal value multiplied by a conversion figure as prescribed in this Annex. This conversion figure shall be 100 % unless otherwise specified. |
| --- | --- |

c)

the exposure value of an off-balance sheet securitisation position shall be its nominal value multiplied by a conversion figure as prescribed in this Annex. This conversion figure shall be 100 % unless otherwise specified.

| 3. | The exposure value of a securitisation position arising from a derivative instrument listed in Annex IV, shall be determined in accordance with Annex III. |
| --- | --- |

3.

The exposure value of a securitisation position arising from a derivative instrument listed in Annex IV, shall be determined in accordance with Annex III.

| 4. | Where a securitisation position is subject to funded credit protection, the exposure value of that position may be modified in accordance with and subject to the requirements in Annex VIII as further specified in this Annex. |
| --- | --- |

4.

Where a securitisation position is subject to funded credit protection, the exposure value of that position may be modified in accordance with and subject to the requirements in Annex VIII as further specified in this Annex.

| 5. | Where a credit institution has two or more overlapping positions in a securitisation, it will be required to the extent that they overlap to include in its calculation of risk-weighted exposure amounts only the position or portion of a position producing the higher risk-weighted exposure amounts. For the purpose of this point ‘overlapping’ means that the positions, wholly or partially, represent an exposure to the same risk such that to the extent of the overlap there is a single exposure. |
| --- | --- |

5.

Where a credit institution has two or more overlapping positions in a securitisation, it will be required to the extent that they overlap to include in its calculation of risk-weighted exposure amounts only the position or portion of a position producing the higher risk-weighted exposure amounts. For the purpose of this point ‘overlapping’ means that the positions, wholly or partially, represent an exposure to the same risk such that to the extent of the overlap there is a single exposure.

2.   CALCULATION OF RISK-WEIGHTED EXPOSURE AMOUNTS UNDER THE STANDARDISED APPROACH

| 6. | Subject to point 8, the risk-weighted exposure amount of a rated securitisation position shall be calculated by applying to the exposure value the risk weight associated with the credit quality step with which the credit assessment has been determined to be associated by the competent authorities in accordance with Article 98 as laid down in Tables 1 and 2. |
| --- | --- |

6.

Subject to point 8, the risk-weighted exposure amount of a rated securitisation position shall be calculated by applying to the exposure value the risk weight associated with the credit quality step with which the credit assessment has been determined to be associated by the competent authorities in accordance with Article 98 as laid down in Tables 1 and 2.

Table 1

Positions other than ones with short-term credit assessments

| Credit quality step | 1 | 2 | 3 | 4 | 5 and below |
| --- | --- | --- | --- | --- | --- |
| Risk weight | 20 % | 50 % | 100 % | 350 % | 1 250 % |

Credit quality step

1

2

3

4

5 and below

Risk weight

20 %

50 %

100 %

350 %

1 250 %

Table 2

Positions with short-term credit assessments

| Credit quality step | 1 | 2 | 3 | All other credit assessments |
| --- | --- | --- | --- | --- |
| Risk weight | 20 % | 50 % | 100 % | 1 250 % |

Credit quality step

1

2

3

All other credit assessments

Risk weight

20 %

50 %

100 %

1 250 %

| 7. | Subject to points 10 to 15, the risk-weighted exposure amount of an unrated securitisation position shall be calculated by applying a risk weight of 1 250 %. |
| --- | --- |

7.

Subject to points 10 to 15, the risk-weighted exposure amount of an unrated securitisation position shall be calculated by applying a risk weight of 1 250 %.

2.1.   Originator and sponsor credit institutions

| 8. | For an originator credit institution or sponsor credit institution, the risk-weighted exposure amounts calculated in respect of its positions in a securitisation may be limited to the risk-weighted exposure amounts which would be calculated for the securitised exposures had they not been securitised subject to the presumed application of a 150 % risk weight to all past due items and items belonging to ‘regulatory high risk categories’ amongst the securitised exposures. |
| --- | --- |

8.

For an originator credit institution or sponsor credit institution, the risk-weighted exposure amounts calculated in respect of its positions in a securitisation may be limited to the risk-weighted exposure amounts which would be calculated for the securitised exposures had they not been securitised subject to the presumed application of a 150 % risk weight to all past due items and items belonging to ‘regulatory high risk categories’ amongst the securitised exposures.

2.2.   Treatment of unrated positions

| 9. | Credit institutions having an unrated securitisation position may apply the treatment set out in point 10 for calculating the risk-weighted exposure amount for that position provided the composition of the pool of exposures securitised is known at all times. |
| --- | --- |

9.

Credit institutions having an unrated securitisation position may apply the treatment set out in point 10 for calculating the risk-weighted exposure amount for that position provided the composition of the pool of exposures securitised is known at all times.

| 10. | A credit institution may apply the weighted-average risk weight that would be applied to the securitised exposures under Articles 78 to 83 by a credit institution holding the exposures, multiplied by a concentration ratio. This concentration ratio is equal to the sum of the nominal amounts of all the tranches divided by the sum of the nominal amounts of the tranches junior to or pari passu with the tranche in which the position is held including that tranche itself. The resulting risk weight shall not be higher than 1 250 % or lower than any risk weight applicable to a rated more senior tranche. Where the credit institution is unable to determine the risk weights that would be applied to the securitised exposures under Articles 78 to 83, it shall apply a risk weight of 1 250 % to the position. |
| --- | --- |

10.

A credit institution may apply the weighted-average risk weight that would be applied to the securitised exposures under Articles 78 to 83 by a credit institution holding the exposures, multiplied by a concentration ratio. This concentration ratio is equal to the sum of the nominal amounts of all the tranches divided by the sum of the nominal amounts of the tranches junior to or pari passu with the tranche in which the position is held including that tranche itself. The resulting risk weight shall not be higher than 1 250 % or lower than any risk weight applicable to a rated more senior tranche. Where the credit institution is unable to determine the risk weights that would be applied to the securitised exposures under Articles 78 to 83, it shall apply a risk weight of 1 250 % to the position.

2.3.   Treatment of securitisation positions in a second loss tranche or better in an ABCP programme

| 11. | Subject to the availability of a more favourable treatment by virtue of the provisions concerning liquidity facilities in points 13 to 15, a credit institution may apply to securitisation positions meeting the conditions set out in point 12 a risk weight that is the greater of 100 % or the highest of the risk weights that would be applied to any of the securitised exposures under Articles 78 to 83 by a credit institution holding the exposures. |
| --- | --- |

11.

Subject to the availability of a more favourable treatment by virtue of the provisions concerning liquidity facilities in points 13 to 15, a credit institution may apply to securitisation positions meeting the conditions set out in point 12 a risk weight that is the greater of 100 % or the highest of the risk weights that would be applied to any of the securitised exposures under Articles 78 to 83 by a credit institution holding the exposures.

| 12. | For the treatment set out in point 11 to be available, the securitisation position shall be:






  a) | in a tranche which is economically in a second loss position or better in the securitisation and the first loss tranche must provide meaningful credit enhancement to the second loss tranche; |
| --- | --- | --- |

12.

For the treatment set out in point 11 to be available, the securitisation position shall be:

a)

in a tranche which is economically in a second loss position or better in the securitisation and the first loss tranche must provide meaningful credit enhancement to the second loss tranche;

| b) | of a quality the equivalent of investment grade or better; and |
| --- | --- |

b)

of a quality the equivalent of investment grade or better; and

| c) | held by a credit institution which does not hold a position in the first loss tranche. |
| --- | --- |

c)

held by a credit institution which does not hold a position in the first loss tranche.

2.4.   Treatment of unrated liquidity facilities

2.4.1.   Eligible liquidity facilities

| 13. | When the following conditions are met, to determine its exposure value a conversion figure of 20 % may be applied to the nominal amount of a liquidity facility with an original maturity of one year or less and a conversion figure of 50 % may be applied to the nominal amount of a liquidity facility with an original maturity of more than one year:






  (a) | The liquidity facility documentation shall clearly identify and limit the circumstances under which the facility may be drawn; |
| --- | --- | --- |

13.

When the following conditions are met, to determine its exposure value a conversion figure of 20 % may be applied to the nominal amount of a liquidity facility with an original maturity of one year or less and a conversion figure of 50 % may be applied to the nominal amount of a liquidity facility with an original maturity of more than one year:

(a)

The liquidity facility documentation shall clearly identify and limit the circumstances under which the facility may be drawn;

| (b) | It shall not be possible for the facility to be drawn so as to provide credit support by covering losses already incurred at the time of draw — for example, by providing liquidity in respect of exposures in default at the time of draw or by acquiring assets at more than fair value; |
| --- | --- |

(b)

It shall not be possible for the facility to be drawn so as to provide credit support by covering losses already incurred at the time of draw — for example, by providing liquidity in respect of exposures in default at the time of draw or by acquiring assets at more than fair value;

| (c) | The facility shall not be used to provide permanent or regular funding for the securitisation; |
| --- | --- |

(c)

The facility shall not be used to provide permanent or regular funding for the securitisation;

| (d) | Repayment of draws on the facility shall not be subordinated to the claims of investors other than to claims arising in respect of interest rate or currency derivative contracts, fees or other such payments, nor be subject to waiver or deferral; |
| --- | --- |

(d)

Repayment of draws on the facility shall not be subordinated to the claims of investors other than to claims arising in respect of interest rate or currency derivative contracts, fees or other such payments, nor be subject to waiver or deferral;

| (e) | It shall not be possible for the facility to be drawn after all applicable credit enhancements from which the liquidity facility would benefit are exhausted; and |
| --- | --- |

(e)

It shall not be possible for the facility to be drawn after all applicable credit enhancements from which the liquidity facility would benefit are exhausted; and

| (f) | The facility must include a provision that results in an automatic reduction in the amount that can be drawn by the amount of exposures that are in default, where ‘default’ has the meaning given to it under Articles 84 to 89, or where the pool of securitised exposures consists of rated instruments, that terminates the facility if the average quality of the pool falls below investment grade. |
| --- | --- |

(f)

The facility must include a provision that results in an automatic reduction in the amount that can be drawn by the amount of exposures that are in default, where ‘default’ has the meaning given to it under Articles 84 to 89, or where the pool of securitised exposures consists of rated instruments, that terminates the facility if the average quality of the pool falls below investment grade.

The risk weight to be applied shall be the highest risk weight that would be applied to any of the securitised exposures under Articles 78 to 83 by a credit institution holding the exposures.

2.4.2.   Liquidity facilities that may be drawn only in the event of a general market disruption

| 14. | To determine its exposure value, a conversion figure of 0 % may be applied to the nominal amount of a liquidity facility that may be drawn only in the event of a general market disruption (i.e. where more than one SPE across different transactions are unable to roll over maturing commercial paper and that inability is not the result of an impairment of the SPE's credit quality or of the credit quality of the securitised exposures), provided that the conditions set out in point 13 are satisfied. |
| --- | --- |

14.

To determine its exposure value, a conversion figure of 0 % may be applied to the nominal amount of a liquidity facility that may be drawn only in the event of a general market disruption (i.e. where more than one SPE across different transactions are unable to roll over maturing commercial paper and that inability is not the result of an impairment of the SPE's credit quality or of the credit quality of the securitised exposures), provided that the conditions set out in point 13 are satisfied.

2.4.3.   Cash advance facilities

| 15. | To determine its exposure value, a conversion figure of 0 % may be applied to the nominal amount of a liquidity facility that is unconditionally cancellable provided that the conditions set out at point 13 are satisfied and that repayment of draws on the facility are senior to any other claims on the cash flows arising from the securitised exposures. |
| --- | --- |

15.

To determine its exposure value, a conversion figure of 0 % may be applied to the nominal amount of a liquidity facility that is unconditionally cancellable provided that the conditions set out at point 13 are satisfied and that repayment of draws on the facility are senior to any other claims on the cash flows arising from the securitised exposures.

2.5.   Additional capital requirements for securitisations of revolving exposures with early amortisation provisions

| 16. | In addition to the risk-weighted exposure amounts calculated in respect of its securitisation positions, an originator credit institution shall calculate a risk-weighted exposure amount according to the method set out in points 17 to 33 when it sells revolving exposures into a securitisation that contains an early amortisation provision. |
| --- | --- |

16.

In addition to the risk-weighted exposure amounts calculated in respect of its securitisation positions, an originator credit institution shall calculate a risk-weighted exposure amount according to the method set out in points 17 to 33 when it sells revolving exposures into a securitisation that contains an early amortisation provision.

| 17. | The credit institution shall calculate a risk-weighted exposure amount in respect of the sum of the originator's interest and the investors' interest. |
| --- | --- |

17.

The credit institution shall calculate a risk-weighted exposure amount in respect of the sum of the originator's interest and the investors' interest.

| 18. | For securitisation structures where the securitised exposures comprise revolving and non-revolving exposures, an originator credit institution shall apply the treatment set out in point 19 to 31 to that portion of the underlying pool containing revolving exposures. |
| --- | --- |

18.

For securitisation structures where the securitised exposures comprise revolving and non-revolving exposures, an originator credit institution shall apply the treatment set out in point 19 to 31 to that portion of the underlying pool containing revolving exposures.

| 19. | For the purposes of point 16 to 31, ‘originator's interest’ means the exposure value of that notional Part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation.
  To qualify as such, the originator's interest may not be subordinate to the investors' interest.
  ‘Investors' interest’ means the exposure value of the remaining notional Part of the pool of drawn amounts. |
| --- | --- |

19.

For the purposes of point 16 to 31, ‘originator's interest’ means the exposure value of that notional Part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation.

To qualify as such, the originator's interest may not be subordinate to the investors' interest.

‘Investors' interest’ means the exposure value of the remaining notional Part of the pool of drawn amounts.

| 20. | The exposure of the originator credit institution, associated with its rights in respect of the originator's interest, shall not be considered a securitisation position but as a pro rata exposure to the securitised exposures as if they had not been securitised. |
| --- | --- |

20.

The exposure of the originator credit institution, associated with its rights in respect of the originator's interest, shall not be considered a securitisation position but as a pro rata exposure to the securitised exposures as if they had not been securitised.

2.5.1.   Exemptions from early amortisation treatment

| 21. | Originators of the following types of securitisation are exempt from the capital requirement in point 16:






  a) | securitisations of revolving exposures whereby investors remain fully exposed to all future draws by borrowers so that the risk on the underlying facilities does not return to the originator credit institution even after an early amortisation event has occurred, and |
| --- | --- | --- |

21.

Originators of the following types of securitisation are exempt from the capital requirement in point 16:

a)

securitisations of revolving exposures whereby investors remain fully exposed to all future draws by borrowers so that the risk on the underlying facilities does not return to the originator credit institution even after an early amortisation event has occurred, and

| b) | securitisations where any early amortisation provision is solely triggered by events not related to the performance of the securitised assets or the originator credit institution, such as material changes in tax laws or regulations. |
| --- | --- |

b)

securitisations where any early amortisation provision is solely triggered by events not related to the performance of the securitised assets or the originator credit institution, such as material changes in tax laws or regulations.

2.5.2.   Maximum capital requirement

| 22. | For an originator credit institution subject to the capital requirement in point 16 the total of the risk-weighted exposure amounts in respect of its positions in the investors' interest and the risk-weighted exposure amounts calculated under point 16 shall be no greater than the greater of:






  a) | the risk-weighted exposure amounts calculated in respect of its positions in the investors' interest; and |
| --- | --- | --- |

22.

For an originator credit institution subject to the capital requirement in point 16 the total of the risk-weighted exposure amounts in respect of its positions in the investors' interest and the risk-weighted exposure amounts calculated under point 16 shall be no greater than the greater of:

a)

the risk-weighted exposure amounts calculated in respect of its positions in the investors' interest; and

| b) | the risk-weighted exposure amounts that would be calculated in respect of the securitised exposures by a credit institution holding the exposures as if they had not been securitised in an amount equal to the investors' interest. |
| --- | --- |

b)

the risk-weighted exposure amounts that would be calculated in respect of the securitised exposures by a credit institution holding the exposures as if they had not been securitised in an amount equal to the investors' interest.

| 23. | Deduction of net gains, if any, arising from the capitalisation of future income required under Article 57, shall be treated outside the maximum amount indicated in point 22. |
| --- | --- |

23.

Deduction of net gains, if any, arising from the capitalisation of future income required under Article 57, shall be treated outside the maximum amount indicated in point 22.

2.5.3.   Calculation of risk-weighted exposure amounts

| 24. | The risk-weighted exposure amount to be calculated in accordance with point 16 shall be determined by multiplying the amount of the investors' interest by the product of the appropriate conversion figure as indicated in points 26 to 33 and the weighted average risk weight that would apply to the securitised exposures if the exposures had not been securitised. |
| --- | --- |

24.

The risk-weighted exposure amount to be calculated in accordance with point 16 shall be determined by multiplying the amount of the investors' interest by the product of the appropriate conversion figure as indicated in points 26 to 33 and the weighted average risk weight that would apply to the securitised exposures if the exposures had not been securitised.

| 25. | An early amortisation provision shall be considered to be ‘controlled’ where the following conditions are met:






  a) | the originator credit institution has an appropriate capital/liquidity plan in place to ensure that it has sufficient capital and liquidity available in the event of an early amortisation; |
| --- | --- | --- |

25.

An early amortisation provision shall be considered to be ‘controlled’ where the following conditions are met:

a)

the originator credit institution has an appropriate capital/liquidity plan in place to ensure that it has sufficient capital and liquidity available in the event of an early amortisation;

| b) | throughout the duration of the transaction there is pro-rata sharing between the originator's interest and the investor's interest of payments of interest and principal, expenses, losses and recoveries based on the balance of receivables outstanding at one or more reference points during each month; |
| --- | --- |

b)

throughout the duration of the transaction there is pro-rata sharing between the originator's interest and the investor's interest of payments of interest and principal, expenses, losses and recoveries based on the balance of receivables outstanding at one or more reference points during each month;

| c) | the amortisation period is considered sufficient for 90 % of the total debt (originator's and investors' interest) outstanding at the beginning of the early amortisation period to have been repaid or recognised as in default; and |
| --- | --- |

c)

the amortisation period is considered sufficient for 90 % of the total debt (originator's and investors' interest) outstanding at the beginning of the early amortisation period to have been repaid or recognised as in default; and

| d) | the speed of repayment is no more rapid than would be achieved by straight-line amortisation over the period set out in point (c). |
| --- | --- |

d)

the speed of repayment is no more rapid than would be achieved by straight-line amortisation over the period set out in point (c).

| 26. | In the case of securitisations subject to an early amortisation provision of retail exposures which are uncommitted and unconditionally cancellable without prior notice, where the early amortisation is triggered by the excess spread level falling to a specified level, credit institutions shall compare the three-month average excess spread level with the excess spread levels at which excess spread is required to be trapped. |
| --- | --- |

26.

In the case of securitisations subject to an early amortisation provision of retail exposures which are uncommitted and unconditionally cancellable without prior notice, where the early amortisation is triggered by the excess spread level falling to a specified level, credit institutions shall compare the three-month average excess spread level with the excess spread levels at which excess spread is required to be trapped.

| 27. | Where the securitisation does not require excess spread to be trapped, the trapping point is deemed to be 4,5 percentage points greater than the excess spread level at which an early amortisation is triggered. |
| --- | --- |

27.

Where the securitisation does not require excess spread to be trapped, the trapping point is deemed to be 4,5 percentage points greater than the excess spread level at which an early amortisation is triggered.

| 28. | The conversion figure to be applied shall be determined by the level of the actual three month average excess spread in accordance with Table 3. |
| --- | --- |

28.

The conversion figure to be applied shall be determined by the level of the actual three month average excess spread in accordance with Table 3.

Table 3

| | Securitisations subject to a controlled early amortisation provision | Securitisations subject to a non-controlled early amortisation provision |
| --- | --- | --- |
| 3 months average excess spread | Conversion figure | Conversion figure |
| Above level A | 0 % | 0 % |
| Level A | 1 % | 5 % |
| Level B | 2 % | 15 % |
| Level C | 10 % | 50 % |
| Level D | 20 % | 100 % |
| Level E | 40 % | 100 % |

Securitisations subject to a controlled early amortisation provision

Securitisations subject to a non-controlled early amortisation provision

3 months average excess spread

Conversion figure

Conversion figure

Above level A

0 %

0 %

Level A

1 %

5 %

Level B

2 %

15 %

Level C

10 %

50 %

Level D

20 %

100 %

Level E

40 %

100 %

| 29. | In Table 3, ‘Level A’ means levels of excess spread less than 133,33 % of the trapping level of excess spread but not less than 100 % of that trapping level, ‘Level B’ means levels of excess spread less than 100 % of the trapping level of excess spread but not less than 75 % of that trapping level, ‘Level C’ means levels of excess spread less than 75 % of the trapping level of excess spread but not less than 50 % of that trapping level, ‘Level D’ means levels of excess spread less than 50 % of the trapping level of excess spread but not less than 25 % of that trapping level and ‘Level E’ means levels of excess spread less than 25 % of the trapping level of excess spread. |
| --- | --- |

29.

In Table 3, ‘Level A’ means levels of excess spread less than 133,33 % of the trapping level of excess spread but not less than 100 % of that trapping level, ‘Level B’ means levels of excess spread less than 100 % of the trapping level of excess spread but not less than 75 % of that trapping level, ‘Level C’ means levels of excess spread less than 75 % of the trapping level of excess spread but not less than 50 % of that trapping level, ‘Level D’ means levels of excess spread less than 50 % of the trapping level of excess spread but not less than 25 % of that trapping level and ‘Level E’ means levels of excess spread less than 25 % of the trapping level of excess spread.

| 30. | In the case of securitisations subject to an early amortisation provision of retail exposures which are uncommitted and unconditionally cancellable without prior notice and where the early amortisation is triggered by a quantitative value in respect of something other than the three months average excess spread, the competent authorities may apply a treatment which approximates closely to that prescribed in points 26 to 29 for determining the conversion figure indicated. |
| --- | --- |

30.

In the case of securitisations subject to an early amortisation provision of retail exposures which are uncommitted and unconditionally cancellable without prior notice and where the early amortisation is triggered by a quantitative value in respect of something other than the three months average excess spread, the competent authorities may apply a treatment which approximates closely to that prescribed in points 26 to 29 for determining the conversion figure indicated.

| 31. | Where a competent authority intends to apply a treatment in accordance with point 30 in respect of a particular securitisation, it shall first inform the relevant competent authorities of all the other Member States. Before the application of such a treatment becomes Part of the general policy approach of the competent authority to securitisations containing early amortisation clauses of the type in question, the competent authority shall consult the relevant competent authorities of all the other Member States and take into consideration the views expressed. The views expressed in such consultation and the treatment applied shall be publicly disclosed by the competent authority in question. |
| --- | --- |

31.

Where a competent authority intends to apply a treatment in accordance with point 30 in respect of a particular securitisation, it shall first inform the relevant competent authorities of all the other Member States. Before the application of such a treatment becomes Part of the general policy approach of the competent authority to securitisations containing early amortisation clauses of the type in question, the competent authority shall consult the relevant competent authorities of all the other Member States and take into consideration the views expressed. The views expressed in such consultation and the treatment applied shall be publicly disclosed by the competent authority in question.

| 32. | All other securitisations subject to a controlled early amortisation provision of revolving exposures shall be subject to a conversion figure of 90 %. |
| --- | --- |

32.

All other securitisations subject to a controlled early amortisation provision of revolving exposures shall be subject to a conversion figure of 90 %.

| 33. | All other securitisations subject to a non-controlled early amortisation provision of revolving exposures shall be subject to a conversion figure of 100 %. |
| --- | --- |

33.

All other securitisations subject to a non-controlled early amortisation provision of revolving exposures shall be subject to a conversion figure of 100 %.

2.6.   Recognition of credit risk mitigation on securitisation positions

| 34. | Where credit protection is obtained on a securitisation position, the calculation of risk-weighted exposure amounts may be modified in accordance with Annex VIII. |
| --- | --- |

34.

Where credit protection is obtained on a securitisation position, the calculation of risk-weighted exposure amounts may be modified in accordance with Annex VIII.

2.7.   Reduction in risk-weighted exposure amounts

| 35. | As provided in Article 66(2), in respect of a securitisation position in respect of which a 1 250 % risk weight is assigned, credit institutions may, as an alternative to including the position in their calculation of risk-weighted exposure amounts, deduct from own funds the exposure value of the position. For these purposes, the calculation of the exposure value may reflect eligible funded credit protection in a manner consistent with point 34. |
| --- | --- |

35.

As provided in Article 66(2), in respect of a securitisation position in respect of which a 1 250 % risk weight is assigned, credit institutions may, as an alternative to including the position in their calculation of risk-weighted exposure amounts, deduct from own funds the exposure value of the position. For these purposes, the calculation of the exposure value may reflect eligible funded credit protection in a manner consistent with point 34.

| 36. | Where a credit institution makes use of the alternative indicated in point 35, 12,5 times the amount deducted in accordance with that point shall, for the purposes of point 8, be subtracted from the amount specified in point 8 as the maximum risk-weighted exposure amount to be calculated by the credit institutions there indicated. |
| --- | --- |

36.

Where a credit institution makes use of the alternative indicated in point 35, 12,5 times the amount deducted in accordance with that point shall, for the purposes of point 8, be subtracted from the amount specified in point 8 as the maximum risk-weighted exposure amount to be calculated by the credit institutions there indicated.

3.   CALCULATION OF RISK-WEIGHTED EXPOSURE AMOUNTS UNDER THE INTERNAL RATINGS BASED APPROACH

3.1.   Hierarchy of methods

| 37. | For the purposes of Article 96, the risk-weighted exposure amount of a securitisation positions shall be calculated in accordance with points 38 to 76. |
| --- | --- |

37.

For the purposes of Article 96, the risk-weighted exposure amount of a securitisation positions shall be calculated in accordance with points 38 to 76.

| 38. | For a rated position or a position in respect of which an inferred rating may be used, the Ratings Based Method set out in points 46 to 51 shall be used to calculate the risk-weighted exposure amount. |
| --- | --- |

38.

For a rated position or a position in respect of which an inferred rating may be used, the Ratings Based Method set out in points 46 to 51 shall be used to calculate the risk-weighted exposure amount.

| 39. | For an unrated position the Supervisory Formula Method set out in points 52 to 54 shall be used except where the Internal Assessment Approach is permitted to be used as set out in points 43 and 44. |
| --- | --- |

39.

For an unrated position the Supervisory Formula Method set out in points 52 to 54 shall be used except where the Internal Assessment Approach is permitted to be used as set out in points 43 and 44.

| 40. | A credit institution other than an originator credit institution or a sponsor credit institution may only use the Supervisory Formula Method with the approval of the competent authorities. |
| --- | --- |

40.

A credit institution other than an originator credit institution or a sponsor credit institution may only use the Supervisory Formula Method with the approval of the competent authorities.

| 41. | In the case of an originator or sponsor credit institution unable to calculate Kirb and which has not obtained approval to use the Internal Assessment Approach for positions in ABCP programmes, and in the case of other credit institutions where they have not obtained approval to use the Supervisory Formula Method or, for positions in ABCP programmes, the Internal Assessment Approach, a risk weight of 1 250 % shall be assigned to securitisation positions which are unrated and in respect of which an inferred rating may not be used. |
| --- | --- |

41.

In the case of an originator or sponsor credit institution unable to calculate Kirb and which has not obtained approval to use the Internal Assessment Approach for positions in ABCP programmes, and in the case of other credit institutions where they have not obtained approval to use the Supervisory Formula Method or, for positions in ABCP programmes, the Internal Assessment Approach, a risk weight of 1 250 % shall be assigned to securitisation positions which are unrated and in respect of which an inferred rating may not be used.

3.1.1.   Use of inferred ratings

| 42. | When the following minimum operational requirements are satisfied, an institution shall attribute to an unrated position an inferred credit assessment equivalent to the credit assessment of those rated positions (the ‘reference positions’) which are the most senior positions which are in all respects subordinate to the unrated securitisation position in question:






  a) | the reference positions must be subordinate in all respects to the unrated securitisationposition; |
| --- | --- | --- |

42.

When the following minimum operational requirements are satisfied, an institution shall attribute to an unrated position an inferred credit assessment equivalent to the credit assessment of those rated positions (the ‘reference positions’) which are the most senior positions which are in all respects subordinate to the unrated securitisation position in question:

a)

the reference positions must be subordinate in all respects to the unrated securitisationposition;

| b) | the maturity of the reference positions must be equal to or longer than that of the unrated position in question; and |
| --- | --- |

b)

the maturity of the reference positions must be equal to or longer than that of the unrated position in question; and

| c) | on an ongoing basis, any inferred rating must be updated to reflect any changes in the credit assessment of the reference positions. |
| --- | --- |

c)

on an ongoing basis, any inferred rating must be updated to reflect any changes in the credit assessment of the reference positions.

3.1.2.   The ‘Internal Assessment Approach’ for positions in ABCP programmes

| 43. | Subject to the approval of the competent authorities, when the following conditions are satisfied a credit institution may attribute to an unrated position in an ABCP programme a derived rating as laid down in point 44:






  a) | positions in the commercial paper issued from the ABCP programme shall be rated positions; |
| --- | --- | --- |

43.

Subject to the approval of the competent authorities, when the following conditions are satisfied a credit institution may attribute to an unrated position in an ABCP programme a derived rating as laid down in point 44:

a)

positions in the commercial paper issued from the ABCP programme shall be rated positions;

| b) | the credit institution shall satisfy the competent authorities that its internal assessment of the credit quality of the position reflects the publicly available assessment methodology of one or more eligible ECAIs, for the rating of securities backed by the exposures of the type securitised; |
| --- | --- |

b)

the credit institution shall satisfy the competent authorities that its internal assessment of the credit quality of the position reflects the publicly available assessment methodology of one or more eligible ECAIs, for the rating of securities backed by the exposures of the type securitised;

| c) | the ECAIs, the methodology of which shall be reflected as required by the point (b), shall include those ECAIs which have provided an external rating for the commercial paper issued from the ABCP programme. Quantitative elements, such as stress factors, used in assessing the position to a particular credit quality must be at least as conservative as those used in the relevant assessment methodology of the ECAIs in question; |
| --- | --- |

c)

the ECAIs, the methodology of which shall be reflected as required by the point (b), shall include those ECAIs which have provided an external rating for the commercial paper issued from the ABCP programme. Quantitative elements, such as stress factors, used in assessing the position to a particular credit quality must be at least as conservative as those used in the relevant assessment methodology of the ECAIs in question;

| d) | in developing its internal assessment methodology the credit institution shall take into consideration relevant published ratings methodologies of the eligible ECAIs that rate the commercial paper of the ABCP programme. This consideration shall be documented by the credit institution and updated regularly, as outlined in point (g); |
| --- | --- |

d)

in developing its internal assessment methodology the credit institution shall take into consideration relevant published ratings methodologies of the eligible ECAIs that rate the commercial paper of the ABCP programme. This consideration shall be documented by the credit institution and updated regularly, as outlined in point (g);

| e) | the credit institution's internal assessment methodology shall include rating grades. There shall be a correspondence between such rating grades and the credit assessments of eligible ECAIs. This correspondence shall be explicitly documented; |
| --- | --- |

e)

the credit institution's internal assessment methodology shall include rating grades. There shall be a correspondence between such rating grades and the credit assessments of eligible ECAIs. This correspondence shall be explicitly documented;

| f) | the internal assessment methodology shall be used in the credit institution's internal risk management processes, including its decision making, management information and capital allocation processes; |
| --- | --- |

f)

the internal assessment methodology shall be used in the credit institution's internal risk management processes, including its decision making, management information and capital allocation processes;

| g) | internal or external auditors, an ECAI, or the credit institution's internal credit review or risk management function shall perform regular reviews of the internal assessment process and the quality of the internal assessments of the credit quality of the credit institution's exposures to an ABCP programme. If the credit institution's internal audit, credit review, or risk management functions perform the review, then these functions shall be independent of the ABCP programme business line, as well as the customer relationship; |
| --- | --- |

g)

internal or external auditors, an ECAI, or the credit institution's internal credit review or risk management function shall perform regular reviews of the internal assessment process and the quality of the internal assessments of the credit quality of the credit institution's exposures to an ABCP programme. If the credit institution's internal audit, credit review, or risk management functions perform the review, then these functions shall be independent of the ABCP programme business line, as well as the customer relationship;

| h) | the credit institution shall track the performance of its internal ratings over time to evaluate the performance of its internal assessment methodology and shall make adjustments, as necessary, to that methodology when the performance of the exposures routinely diverges from that indicated by the internal ratings; |
| --- | --- |

h)

the credit institution shall track the performance of its internal ratings over time to evaluate the performance of its internal assessment methodology and shall make adjustments, as necessary, to that methodology when the performance of the exposures routinely diverges from that indicated by the internal ratings;

| i) | the ABCP programme shall incorporate underwriting standards in the form of credit and investment guidelines. In deciding on an asset purchase, the ABCP programme administrator shall consider the type of asset being purchased, the type and monetary value of the exposures arising from the provision of liquidity facilities and credit enhancements, the loss distribution, and the legal and economic isolation of the transferred assets from the entity selling the assets. A credit analysis of the asset seller's risk profile shall be performed and shall include analysis of past and expected future financial performance, current market position, expected future competitiveness, leverage, cash flow, interest coverage and debt rating. In addition, a review of the seller's underwriting standards, servicing capabilities, and collection processes shall be performed; |
| --- | --- |

i)

the ABCP programme shall incorporate underwriting standards in the form of credit and investment guidelines. In deciding on an asset purchase, the ABCP programme administrator shall consider the type of asset being purchased, the type and monetary value of the exposures arising from the provision of liquidity facilities and credit enhancements, the loss distribution, and the legal and economic isolation of the transferred assets from the entity selling the assets. A credit analysis of the asset seller's risk profile shall be performed and shall include analysis of past and expected future financial performance, current market position, expected future competitiveness, leverage, cash flow, interest coverage and debt rating. In addition, a review of the seller's underwriting standards, servicing capabilities, and collection processes shall be performed;

| j) | the ABCP programme's underwriting standards shall establish minimum asset eligibility criteria that, in particular:






  i) | exclude the purchase of assets that are significantly past due or defaulted; |
| --- | --- | --- |

j)

the ABCP programme's underwriting standards shall establish minimum asset eligibility criteria that, in particular:

i)

exclude the purchase of assets that are significantly past due or defaulted;

| ii) | limit excess concentration to individual obligor or geographic area; and |
| --- | --- |

ii)

limit excess concentration to individual obligor or geographic area; and

| iii) | limits the tenor of the assets to be purchased; |
| --- | --- |

iii)

limits the tenor of the assets to be purchased;

| k) | the ABCP programme shall have collections policies and processes that take into account the operational capability and credit quality of the servicer. The ABCP programme shall mitigate seller/servicer risk through various methods, such as triggers based on current credit quality that would preclude commingling of funds; |
| --- | --- |

k)

the ABCP programme shall have collections policies and processes that take into account the operational capability and credit quality of the servicer. The ABCP programme shall mitigate seller/servicer risk through various methods, such as triggers based on current credit quality that would preclude commingling of funds;

| l) | the aggregated estimate of loss on an asset pool that the ABCP programme is considering purchasing must take into account all sources of potential risk, such as credit and dilution risk. If the seller-provided credit enhancement is sized based only on credit-related losses, then a separate reserve shall be established for dilution risk, if dilution risk is material for the particular exposure pool. In addition, in sizing the required enhancement level, the program shall review several years of historical information, including losses, delinquencies, dilutions, and the turnover rate of the receivables; and |
| --- | --- |

l)

the aggregated estimate of loss on an asset pool that the ABCP programme is considering purchasing must take into account all sources of potential risk, such as credit and dilution risk. If the seller-provided credit enhancement is sized based only on credit-related losses, then a separate reserve shall be established for dilution risk, if dilution risk is material for the particular exposure pool. In addition, in sizing the required enhancement level, the program shall review several years of historical information, including losses, delinquencies, dilutions, and the turnover rate of the receivables; and

| m) | the ABCP programme shall incorporate structural features — for example wind down triggers — into the purchase of exposures in order to mitigate potential credit deterioration of the underlying portfolio. |
| --- | --- |

m)

the ABCP programme shall incorporate structural features — for example wind down triggers — into the purchase of exposures in order to mitigate potential credit deterioration of the underlying portfolio.

The requirement for the assessment methodology of the ECAI to be publicly available may be waived by the competent authorities where they are satisfied that due to the specific features of the securitisation — for example its unique structure — there is as yet no publicly available ECAI assessment methodology.

| 44. | The unrated position shall be assigned by the credit institution to one of the rating grades described in point 43. The position shall be attributed a derived rating the same as the credit assessments corresponding to that rating grade as laid down in point 43. Where this derived rating is, at the inception of the securitisation, at the level of investment grade or better, it shall be considered the same as an eligible credit assessment by an eligible ECAI for the purposes of calculating risk-weighted exposure amounts. |
| --- | --- |

44.

The unrated position shall be assigned by the credit institution to one of the rating grades described in point 43. The position shall be attributed a derived rating the same as the credit assessments corresponding to that rating grade as laid down in point 43. Where this derived rating is, at the inception of the securitisation, at the level of investment grade or better, it shall be considered the same as an eligible credit assessment by an eligible ECAI for the purposes of calculating risk-weighted exposure amounts.

3.2.   Maximum risk-weighted exposure amounts

| 45. | For an originator credit institution, a sponsor credit institution, or for other credit institutions which can calculate KIRB, the risk-weighted exposure amounts calculated in respect of its positions in a securitisation may be limited to that which would produce a capital requirement under Article 75(a) equal to the sum of 8 % of the risk-weighted exposure amounts which would be produced if the securitised assets had not been securitised and were on the balance sheet of the credit institution plus the expected loss amounts of those exposures. |
| --- | --- |

45.

For an originator credit institution, a sponsor credit institution, or for other credit institutions which can calculate KIRB, the risk-weighted exposure amounts calculated in respect of its positions in a securitisation may be limited to that which would produce a capital requirement under Article 75(a) equal to the sum of 8 % of the risk-weighted exposure amounts which would be produced if the securitised assets had not been securitised and were on the balance sheet of the credit institution plus the expected loss amounts of those exposures.

3.3.   Ratings Based Method

| 46. | Under the Ratings Based Method, the risk-weighted exposure amount of a rated securitisation position shall be calculated by applying to the exposure value the risk weight associated with the credit quality step with which the credit assessment has been determined to be associated by the competent authorities in accordance with Article 98, as set out in the Tables 4 and 5, multiplied by 1,06. |
| --- | --- |

46.

Under the Ratings Based Method, the risk-weighted exposure amount of a rated securitisation position shall be calculated by applying to the exposure value the risk weight associated with the credit quality step with which the credit assessment has been determined to be associated by the competent authorities in accordance with Article 98, as set out in the Tables 4 and 5, multiplied by 1,06.

Table 4

Positions other than ones with short-term credit assessments

| Credit Quality Step (CQS) | Risk weight |
| --- | --- |
| | A | B | C |
| CQS 1 | 7 % | 12 % | 20 % |
| CQS 2 | 8 % | 15 % | 25 % |
| CQS 3 | 10 % | 18 % | 35 % |
| CQS 4 | 12 % | 20 % | 35 % |
| CQS 5 | 20 % | 35 % | 35 % |
| CQS 6 | 35 % | 50 % | 50 % |
| CQS 7 | 60 % | 75 % | 75 % |
| CQS 8 | 100 % | 100 % | 100 % |
| CQS 9 | 250 % | 250 % | 250 % |
| CQS 10 | 425 % | 425 % | 425 % |
| CQS 11 | 650 % | 650 % | 650 % |
| Below CQS 11 | 1 250 % | 1 250 % | 1 250 % |

Credit Quality Step (CQS)

Risk weight

A

B

C

CQS 1

7 %

12 %

20 %

CQS 2

8 %

15 %

25 %

CQS 3

10 %

18 %

35 %

CQS 4

12 %

20 %

35 %

CQS 5

20 %

35 %

35 %

CQS 6

35 %

50 %

50 %

CQS 7

60 %

75 %

75 %

CQS 8

100 %

100 %

100 %

CQS 9

250 %

250 %

250 %

CQS 10

425 %

425 %

425 %

CQS 11

650 %

650 %

650 %

Below CQS 11

1 250 %

1 250 %

1 250 %

Table 5

Positions with short term credit assessments

| Credit Quality Step (CQS) | Risk weight |
| --- | --- |
| | A | B | C |
| CQS 1 | 7 % | 12 % | 20 % |
| CQS 2 | 12 % | 20 % | 35 % |
| CQS 3 | 60 % | 75 % | 75 % |
| All other credit assessments | 1 250 % | 1 250 % | 1 250 % |

Credit Quality Step (CQS)

Risk weight

A

B

C

CQS 1

7 %

12 %

20 %

CQS 2

12 %

20 %

35 %

CQS 3

60 %

75 %

75 %

All other credit assessments

1 250 %

1 250 %

1 250 %

| 47. | Subject to points 48 and 49, the risk weights in column A of each table shall be applied where the position is in the most senior tranche of a securitisation. When determining whether a tranche is the most senior, it is not required to take into consideration amounts due under interest rate or currency derivative contracts, fees due, or other similar payments. |
| --- | --- |

47.

Subject to points 48 and 49, the risk weights in column A of each table shall be applied where the position is in the most senior tranche of a securitisation. When determining whether a tranche is the most senior, it is not required to take into consideration amounts due under interest rate or currency derivative contracts, fees due, or other similar payments.

| 48. | A risk weight of 6 % may be applied to a position in the most senior tranche of a securitisation where that tranche is senior in all respects to another tranche of the securitisation positions which would receive a risk weight of 7 % under point 46, provided that:






  a) | the competent authority is satisfied that this is justified due to the loss absorption qualities of subordinate tranches in the securitisation; and |
| --- | --- | --- |

48.

A risk weight of 6 % may be applied to a position in the most senior tranche of a securitisation where that tranche is senior in all respects to another tranche of the securitisation positions which would receive a risk weight of 7 % under point 46, provided that:

a)

the competent authority is satisfied that this is justified due to the loss absorption qualities of subordinate tranches in the securitisation; and

| b) | either the position has an external credit assessment which has been determined to be associated with credit quality step 1 in Table 4 or 5 or, if it is unrated, requirements (a) to (c) in point 42 are satisfied where ‘reference positions’ are taken to mean positions in the subordinate tranche which would receive a risk weight of 7 % under point 46. |
| --- | --- |

b)

either the position has an external credit assessment which has been determined to be associated with credit quality step 1 in Table 4 or 5 or, if it is unrated, requirements (a) to (c) in point 42 are satisfied where ‘reference positions’ are taken to mean positions in the subordinate tranche which would receive a risk weight of 7 % under point 46.

| 49. | The risk weights in column C of each table shall be applied where the position is in a securitisation where the effective number of exposures securitised is less than six. In calculating the effective number of exposures securitised multiple exposures to one obligor must be treated as one exposure. The effective number of exposures is calculated as:



  where EADi represents the sum of the exposure values of all exposures to the ith obligor. In the case of resecuritisation (securitisation of securitisation exposures), the credit institution must look at the number of securitisation exposures in the pool and not the number of underlying exposures in the original pools from which the underlying securitisation exposures stem. If the portfolio share associated with the largest exposure, C1, is available, the credit institution may compute N as 1/C1. |
| --- | --- |

49.

The risk weights in column C of each table shall be applied where the position is in a securitisation where the effective number of exposures securitised is less than six. In calculating the effective number of exposures securitised multiple exposures to one obligor must be treated as one exposure. The effective number of exposures is calculated as:

Formula

where EADi represents the sum of the exposure values of all exposures to the ith obligor. In the case of resecuritisation (securitisation of securitisation exposures), the credit institution must look at the number of securitisation exposures in the pool and not the number of underlying exposures in the original pools from which the underlying securitisation exposures stem. If the portfolio share associated with the largest exposure, C1, is available, the credit institution may compute N as 1/C1.

| 50. | The risk weights in Column B shall be applied to all other positions. |
| --- | --- |

50.

The risk weights in Column B shall be applied to all other positions.

| 51. | Credit risk mitigation on securitisation positions may be recognised in accordance with points 60 to 62. |
| --- | --- |

51.

Credit risk mitigation on securitisation positions may be recognised in accordance with points 60 to 62.

3.4.   Supervisory Formula Method

| 52. | Subject to points 58 and 59, under the Supervisory Formula Method, the risk weight for a securitisation position shall be the greater of 7 % or the risk weight to be applied in accordance with point 53. |
| --- | --- |

52.

Subject to points 58 and 59, under the Supervisory Formula Method, the risk weight for a securitisation position shall be the greater of 7 % or the risk weight to be applied in accordance with point 53.

| 53. | Subject to points 58 and 59, the risk weight to be applied to the exposure amount shall be:
  12,5 × (S[L + T] — S[L])/T
  where:



  where:








  h | = | (1 –Kirbr / ELGD)
  N |
| --- | --- | --- | --- |
| c | = | Kirbr /(1 – h) |
| v | = | |
| f | = | |
| g | = | |
| a | = | g · c |
| b | = | g · (1 – c) |
| d | = | 1 - (1 – h)·(1 – Beta[Kirbr; a, b]) |
| K[x] | = | (1 - h)·((1 - Beta [x; a, b]) x + Beta [x; a + 1, b], c). |

53.

Subject to points 58 and 59, the risk weight to be applied to the exposure amount shall be:

12,5 × (S[L + T] — S[L])/T

where:

Image

where:

h

=

(1 –Kirbr / ELGD)
  N

c

=

Kirbr /(1 – h)

v

=

Formula

f

=

Formula

g

=

Formula

a

=

g · c

b

=

g · (1 – c)

d

=

1 - (1 – h)·(1 – Beta[Kirbr; a, b])

K[x]

=

(1 - h)·((1 - Beta [x; a, b]) x + Beta [x; a + 1, b], c).

τ = 1 000, and

ω = 20.

In these expressions, Beta [x; a, b] refers to the cumulative beta distribution with parameters a and b evaluated at x.

T (the thickness of the tranche in which the position is held) is measured as the ratio of (a) the nominal amount of the tranche to (b) the sum of the exposure values of the exposures that have been securitised. For the purposes of calculating T the exposure value of a derivative instrument listed in Annex IV shall, where the current replacement cost is not a positive value, be the potential future credit exposure calculated in accordance with Annex III.

Kirbr is the ratio of (a) Kirb to (b) the sum of the exposure values of the exposures that have been securitised. Kirbr is expressed in decimal form (e.g. Kirb equal to 15 % of the pool would be expressed as Kirbr of 0,15).

L (the credit enhancement level) is measured as the ratio of the nominal amount of all tranches subordinate to the tranche in which the position is held to the sum of the exposure values of the exposures that have been securitised. Capitalised future income shall not be included in the measured L. Amounts due by counterparties to derivative instruments listed in Annex IV that represent tranches more junior than the tranche in question may be measured at their current replacement cost (without the potential future credit exposures) in calculating the enhancement level.

N is the effective number of exposures calculated in accordance with point 49.

ELGD, the exposure-weighted average loss-given-default, is calculated as follows:

Formula

where LGDi represents the average LGD associated with all exposures to the ith obligor, where LGD is determined in accordance with Articles 84 to 89. In the case of resecuritisation, an LGD of 100 % shall be applied to the securitised positions. When default and dilution risk for purchased receivables are treated in an aggregate manner within a securitisation (e.g. a single reserve or over-collateralisation is available to cover losses from either source), the LGDi input shall be constructed as a weighted average of the LGD for credit risk and the 75 % LGD for dilution risk. The weights shall be the stand-alone capital charges for credit risk and dilution risk respectively.

Simplified inputs

If the exposure value of the largest securitised exposure, C1, is no more than 3 % of the sum of the exposure values of the securitised exposures, then, for the purposes of the Supervisory Formula Method, the credit institution may set LGD=50 % and N equal to either:

Formula

or

N=1/ C1.

Cm is the ratio of the sum of the exposure values of the largest ‘m’ exposures to the sum of the exposure values of the exposures securitised . The level of ‘m’ may be set by the credit institution.

For securitisations involving retail exposures, the competent authorities may permit the Supervisory Formula Method to be implemented using the simplifications: h = 0 and v = 0.

| 54. | Credit risk mitigation on securitisation positions may be recognised in accordance with points 60, 61 and 63 to 67. |
| --- | --- |

54.

Credit risk mitigation on securitisation positions may be recognised in accordance with points 60, 61 and 63 to 67.

3.5.   Liquidity Facilities

| 55. | The provisions in points 56 to 59 apply for the purposes of determining the exposure value of an unrated securitisation position in the form of certain types of liquidity facility. |
| --- | --- |

55.

The provisions in points 56 to 59 apply for the purposes of determining the exposure value of an unrated securitisation position in the form of certain types of liquidity facility.

3.5.1.   Liquidity Facilities Only Available in the Event of General Market Disruption

| 56. | A conversion figure of 20 % may be applied to the nominal amount of a liquidity facility that may only be drawn in the event of a general market disruption and that meets the conditions to be an ‘eligible liquidity facility’ set out in point 13. |
| --- | --- |

56.

A conversion figure of 20 % may be applied to the nominal amount of a liquidity facility that may only be drawn in the event of a general market disruption and that meets the conditions to be an ‘eligible liquidity facility’ set out in point 13.

3.5.2.   Cash advance facilities

| 57. | A conversion figure of 0 % may be applied to the nominal amount of a liquidity facility that meets the conditions set out in point 15. |
| --- | --- |

57.

A conversion figure of 0 % may be applied to the nominal amount of a liquidity facility that meets the conditions set out in point 15.

3.5.3.   Exceptional treatment where Kirb cannot be calculated.

| 58. | When it is not practical for the credit institution to calculate the risk-weighted exposure amounts for the securitised exposures as if they had not been securitised, a credit institution may, on an exceptional basis and subject to the consent of the competent authorities, temporarily be allowed to apply the method set out in point 59 for the calculation of risk-weighted exposure amounts for an unrated securitisation position in the form of a liquidity facility that meets the conditions to be an ‘eligible liquidity facility’ set out in point 13 or that falls within the terms of point 56. |
| --- | --- |

58.

When it is not practical for the credit institution to calculate the risk-weighted exposure amounts for the securitised exposures as if they had not been securitised, a credit institution may, on an exceptional basis and subject to the consent of the competent authorities, temporarily be allowed to apply the method set out in point 59 for the calculation of risk-weighted exposure amounts for an unrated securitisation position in the form of a liquidity facility that meets the conditions to be an ‘eligible liquidity facility’ set out in point 13 or that falls within the terms of point 56.

| 59. | The highest risk weight that would be applied under Articles 78 to 83 to any of the securitised exposures, had they not been securitised, may be applied to the securitisation position represented by the liquidity facility. To determine the exposure value of the position a conversion figure of 50 % may be applied to the nominal amount of the liquidity facility if the facility has an original maturity of one year or less. If the liquidity facility complies with the conditions in point 56 a conversion figure of 20 % may be applied. In other cases a conversion factor of 100 % shall be applied. |
| --- | --- |

59.

The highest risk weight that would be applied under Articles 78 to 83 to any of the securitised exposures, had they not been securitised, may be applied to the securitisation position represented by the liquidity facility. To determine the exposure value of the position a conversion figure of 50 % may be applied to the nominal amount of the liquidity facility if the facility has an original maturity of one year or less. If the liquidity facility complies with the conditions in point 56 a conversion figure of 20 % may be applied. In other cases a conversion factor of 100 % shall be applied.

3.6.   Recognition of credit risk mitigation in respect of securitisation positions

3.6.1.   Funded credit protection

| 60. | Eligible funded protection is limited to that which is eligible for the calculation of risk-weighted exposure amounts under Articles 78 to 83 as laid down under Articles 90 to 93 and recognition is subject to compliance with the relevant minimum requirements as laid down under those Articles. |
| --- | --- |

60.

Eligible funded protection is limited to that which is eligible for the calculation of risk-weighted exposure amounts under Articles 78 to 83 as laid down under Articles 90 to 93 and recognition is subject to compliance with the relevant minimum requirements as laid down under those Articles.

3.6.2.   Unfunded credit protection

| 61. | Eligible unfunded credit protection and unfunded protection providers are limited to those which are eligible under Articles 90 to 93 and recognition is subject to compliance with the relevant minimum requirements laid down under those Articles. |
| --- | --- |

61.

Eligible unfunded credit protection and unfunded protection providers are limited to those which are eligible under Articles 90 to 93 and recognition is subject to compliance with the relevant minimum requirements laid down under those Articles.

3.6.3.   Calculation of capital requirements for securitisation positions with credit risk mitigation

Ratings Based Method

| 62. | Where risk-weighted exposure amounts are calculated using the Ratings Based Method, the exposure value and/or the risk-weighted exposure amount for a securitisation position in respect of which credit protection has been obtained may be modified in accordance with the provisions of Annex VIII as they apply for the calculation of risk-weighted exposure amounts under Articles 78 to 83. |
| --- | --- |

62.

Where risk-weighted exposure amounts are calculated using the Ratings Based Method, the exposure value and/or the risk-weighted exposure amount for a securitisation position in respect of which credit protection has been obtained may be modified in accordance with the provisions of Annex VIII as they apply for the calculation of risk-weighted exposure amounts under Articles 78 to 83.

Supervisory Formula Method — full credit protection

| 63. | Where risk-weighted exposure amounts are calculated using the Supervisory Formula Method, the credit institution shall determine the ‘effective risk weight’ of the position. It shall do this by dividing the risk-weighted exposure amount of the position by the exposure value of the position and multiplying the result by 100. |
| --- | --- |

63.

Where risk-weighted exposure amounts are calculated using the Supervisory Formula Method, the credit institution shall determine the ‘effective risk weight’ of the position. It shall do this by dividing the risk-weighted exposure amount of the position by the exposure value of the position and multiplying the result by 100.

| 64. | In the case of funded credit protection, the risk-weighted exposure amount of the securitisation position shall be calculated by multiplying the funded protection-adjusted exposure amount of the position (E*, as calculated under Articles 90 to 93 for the calculation of risk-weighted exposure amounts under Articles 78 to 83 taking the amount of the securitisation position to be E) by the effective risk weight. |
| --- | --- |

64.

In the case of funded credit protection, the risk-weighted exposure amount of the securitisation position shall be calculated by multiplying the funded protection-adjusted exposure amount of the position (E*, as calculated under Articles 90 to 93 for the calculation of risk-weighted exposure amounts under Articles 78 to 83 taking the amount of the securitisation position to be E) by the effective risk weight.

| 65. | In the case of unfunded credit protection, the risk-weighted exposure amount of the securitisation position shall be calculated by multiplying GA (the amount of the protection adjusted for any currency mismatch and maturity mismatch in accordance with the provisions of Annex VIII) by the risk weight of the protection provider; and adding this to the amount arrived at by multiplying the amount of the securitisation position minus GA by the effective risk weight. |
| --- | --- |

65.

In the case of unfunded credit protection, the risk-weighted exposure amount of the securitisation position shall be calculated by multiplying GA (the amount of the protection adjusted for any currency mismatch and maturity mismatch in accordance with the provisions of Annex VIII) by the risk weight of the protection provider; and adding this to the amount arrived at by multiplying the amount of the securitisation position minus GA by the effective risk weight.

Supervisory formula method — partial protection

| 66. | If the credit risk mitigation covers the ‘first loss’ or losses on a proportional basis on the securitisation position, the credit institution may apply points 63 to 65. |
| --- | --- |

66.

If the credit risk mitigation covers the ‘first loss’ or losses on a proportional basis on the securitisation position, the credit institution may apply points 63 to 65.

| 67. | In other cases, the credit institution shall treat the securitisation position as two or more positions with the uncovered portion being considered the position with the lower credit quality. For the purposes of calculating the risk-weighted exposure amount for this position, the provisions in points 52 to 54 shall apply subject to the modifications that ‘T’ shall be adjusted to e* in the case of funded credit protection; and to T-g in the case of unfunded credit protection, where e* denotes the ratio of E* to the total notional amount of the underlying pool, where E* is the adjusted exposure amount of the securitisation position calculated in accordance with the provisions of Annex VIII as they apply for the calculation of risk-weighted exposure amounts under Articles 78 to 83 taking the amount of the securitisation position to be E; and g is the ratio of the nominal amount of credit protection (adjusted for any currency or maturity mismatch in accordance with the provisions of Annex VIII) to the sum of the exposure amounts of the securitised exposures. In the case of unfunded credit protection the risk weight of the protection provider shall be applied to that portion of the position not falling within the adjusted value of ‘T’. |
| --- | --- |

67.

In other cases, the credit institution shall treat the securitisation position as two or more positions with the uncovered portion being considered the position with the lower credit quality. For the purposes of calculating the risk-weighted exposure amount for this position, the provisions in points 52 to 54 shall apply subject to the modifications that ‘T’ shall be adjusted to e* in the case of funded credit protection; and to T-g in the case of unfunded credit protection, where e* denotes the ratio of E* to the total notional amount of the underlying pool, where E* is the adjusted exposure amount of the securitisation position calculated in accordance with the provisions of Annex VIII as they apply for the calculation of risk-weighted exposure amounts under Articles 78 to 83 taking the amount of the securitisation position to be E; and g is the ratio of the nominal amount of credit protection (adjusted for any currency or maturity mismatch in accordance with the provisions of Annex VIII) to the sum of the exposure amounts of the securitised exposures. In the case of unfunded credit protection the risk weight of the protection provider shall be applied to that portion of the position not falling within the adjusted value of ‘T’.

3.7.   Additional capital requirements for securitisations of revolving exposures with early amortisation provisions

| 68. | In addition to the risk-weighted exposure amounts calculated in respect of its securitisation positions, an originator credit institution shall be required to calculate a risk-weighted exposure amount according to the methodology set out in points 16 to 33 when it sells revolving exposures into a securitisation that contains an early amortisation provision. |
| --- | --- |

68.

In addition to the risk-weighted exposure amounts calculated in respect of its securitisation positions, an originator credit institution shall be required to calculate a risk-weighted exposure amount according to the methodology set out in points 16 to 33 when it sells revolving exposures into a securitisation that contains an early amortisation provision.

| 69. | For the purposes of point 68, points 70 and 71 shall replace points 19 and 20. |
| --- | --- |

69.

For the purposes of point 68, points 70 and 71 shall replace points 19 and 20.

| 70. | For the purposes of these provisions, ‘originators interest’ shall be the sum of:






  a) | the exposure value of that notional Part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation; plus |
| --- | --- | --- |

70.

For the purposes of these provisions, ‘originators interest’ shall be the sum of:

a)

the exposure value of that notional Part of a pool of drawn amounts sold into a securitisation, the proportion of which in relation to the amount of the total pool sold into the structure determines the proportion of the cash flows generated by principal and interest collections and other associated amounts which are not available to make payments to those having securitisation positions in the securitisation; plus

| b) | the exposure value of that Part of the pool of undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation, the proportion of which to the total amount of such undrawn amounts is the same as the proportion of the exposure value described in point (a) to the exposure value of the pool of drawn amounts sold into the securitisation. |
| --- | --- |

b)

the exposure value of that Part of the pool of undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation, the proportion of which to the total amount of such undrawn amounts is the same as the proportion of the exposure value described in point (a) to the exposure value of the pool of drawn amounts sold into the securitisation.

To qualify as such, the originator's interest may not be subordinate to the investors' interest.

‘Investors' interest’ means the exposure value of the notional part of the pool of drawn amounts not falling within point (a) plus the exposure value of that part of the pool of undrawn amounts of credit lines, the drawn amounts of which have been sold into the securitisation, not falling within point (b).

| 71. | The exposure of the originator credit institution associated with its rights in respect of that Part of the originator's interest described in point 70(a) shall not be considered a securitisation position but as a pro rata exposure to the securitised drawn amounts exposures as if they had not been securitised in an amount equal to that described in point 70(a). The originator credit institution shall also be considered to have a pro rata exposure to the undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation, in an amount equal to that described in point 70(b). |
| --- | --- |

71.

The exposure of the originator credit institution associated with its rights in respect of that Part of the originator's interest described in point 70(a) shall not be considered a securitisation position but as a pro rata exposure to the securitised drawn amounts exposures as if they had not been securitised in an amount equal to that described in point 70(a). The originator credit institution shall also be considered to have a pro rata exposure to the undrawn amounts of the credit lines, the drawn amounts of which have been sold into the securitisation, in an amount equal to that described in point 70(b).

3.8.   Reduction in risk-weighted exposure amounts

| 72. | The risk-weighted exposure amount of a securitisation position to which a 1 250 % risk weight is assigned may be reduced by 12,5 times the amount of any value adjustments made by the credit institution in respect of the securitised exposures. To the extent that value adjustments are taken account of for this purpose they shall not be taken account of for the purposes of the calculation indicated in Annex VII, Part 1, point 36. |
| --- | --- |

72.

The risk-weighted exposure amount of a securitisation position to which a 1 250 % risk weight is assigned may be reduced by 12,5 times the amount of any value adjustments made by the credit institution in respect of the securitised exposures. To the extent that value adjustments are taken account of for this purpose they shall not be taken account of for the purposes of the calculation indicated in Annex VII, Part 1, point 36.

| 73. | The risk-weighted exposure amount of a securitisation position may be reduced by 12,5 times the amount of any value adjustments made by the credit institution in respect of the position. |
| --- | --- |

73.

The risk-weighted exposure amount of a securitisation position may be reduced by 12,5 times the amount of any value adjustments made by the credit institution in respect of the position.

| 74. | As provided in Article 66(2), in respect of a securitisation position in respect of which a 1 250 % risk weight applies, credit institutions may, as an alternative to including the position in their calculation of risk-weighted exposure amounts, deduct from own funds the exposure value of the position. |
| --- | --- |

74.

As provided in Article 66(2), in respect of a securitisation position in respect of which a 1 250 % risk weight applies, credit institutions may, as an alternative to including the position in their calculation of risk-weighted exposure amounts, deduct from own funds the exposure value of the position.

| 75. | For the purposes of point 74:






  a) | the exposure value of the position may be derived from the risk-weighted exposure amounts taking into account any reductions made in accordance with points 72 and 73; |
| --- | --- | --- |

75.

For the purposes of point 74:

a)

the exposure value of the position may be derived from the risk-weighted exposure amounts taking into account any reductions made in accordance with points 72 and 73;

| b) | the calculation of the exposure value may reflect eligible funded protection in a manner consistent with the methodology prescribed in points 60 to 67; and |
| --- | --- |

b)

the calculation of the exposure value may reflect eligible funded protection in a manner consistent with the methodology prescribed in points 60 to 67; and

| c) | where the Supervisory Formula Method is used to calculate risk-weighted exposure amounts and L ≤ KIRBR and [L+T] > KIRBR the position may be treated as two positions with L equal to KIRBR for the more senior of the positions. |
| --- | --- |

c)

where the Supervisory Formula Method is used to calculate risk-weighted exposure amounts and L ≤ KIRBR and [L+T] > KIRBR the position may be treated as two positions with L equal to KIRBR for the more senior of the positions.

| 76. | Where a credit institution makes use of the alternative indicated in point 74, 12,5 times the amount deducted in accordance with that point shall, for the purposes of point 45, be subtracted from the amount specified in point 45 as the maximum risk-weighted exposure amount to be calculated by the credit institutions there indicated. |
| --- | --- |

76.

Where a credit institution makes use of the alternative indicated in point 74, 12,5 times the amount deducted in accordance with that point shall, for the purposes of point 45, be subtracted from the amount specified in point 45 as the maximum risk-weighted exposure amount to be calculated by the credit institutions there indicated.

ANNEX X

OPERATIONAL RISK

Part 1 — Basic Indicator Approach

1.   CAPITAL REQUIREMENT

| 1. | Under the Basic Indicator Approach, the capital requirement for operational risk is equal to 15 % of the relevant indicator defined in points 2 to 9. |
| --- | --- |

1.

Under the Basic Indicator Approach, the capital requirement for operational risk is equal to 15 % of the relevant indicator defined in points 2 to 9.

2.   RELEVANT INDICATOR

| 2. | The relevant indicator is the average over three years of the sum of net interest income and net non-interest income. |
| --- | --- |

2.

The relevant indicator is the average over three years of the sum of net interest income and net non-interest income.

| 3. | The three-year average is calculated on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, business estimates may be used. |
| --- | --- |

3.

The three-year average is calculated on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, business estimates may be used.

| 4. | If for any given observation, the sum of net interest income and net non-interest income is negative or equal to zero, this figure shall not be taken into account in the calculation of the three-year average. The relevant indicator shall be calculated as the sum of positive figures divided by the number of positive figures. |
| --- | --- |

4.

If for any given observation, the sum of net interest income and net non-interest income is negative or equal to zero, this figure shall not be taken into account in the calculation of the three-year average. The relevant indicator shall be calculated as the sum of positive figures divided by the number of positive figures.

2.1.   Credit institutions subject to Directive 86/635/EEC

| 5. | Based on the accounting categories for the profit and loss account of credit institutions under Article 27 of Directive 86/635/EEC, the relevant indicator shall be expressed as the sum of the elements listed in Table 1. Each element shall be included in the sum with its positive or negative sign. |
| --- | --- |

5.

Based on the accounting categories for the profit and loss account of credit institutions under Article 27 of Directive 86/635/EEC, the relevant indicator shall be expressed as the sum of the elements listed in Table 1. Each element shall be included in the sum with its positive or negative sign.

| 6. | These elements may need to be adjusted to reflect the qualifications in points 7 and 8.
  Table 1:











  1 | Interest receivable and similar income |
| --- | --- | --- |

6.

These elements may need to be adjusted to reflect the qualifications in points 7 and 8.

Table 1:

1

Interest receivable and similar income

| 2 | Interest payable and similar charges |
| --- | --- |

2

Interest payable and similar charges

| 3 | Income from shares and other variable/fixed-yield securities |
| --- | --- |

3

Income from shares and other variable/fixed-yield securities

| 4 | Commissions/fees receivable |
| --- | --- |

4

Commissions/fees receivable

| 5 | Commissions/fees payable |
| --- | --- |

5

Commissions/fees payable

| 6 | Net profit or net loss on financial operations |
| --- | --- |

6

Net profit or net loss on financial operations

| 7 | Other operating income |
| --- | --- |

7

Other operating income

2.1.1.   Qualifications:

| 7. | The indicator shall be calculated before the deduction of any provisions and operating expenses. Operating expenses shall include fees paid for outsourcing services rendered by third parties which are not a parent or subsidiary of the credit institution or a subsidiary of a parent which is also the parent of the credit institution. Expenditure on the outsourcing of services rendered by third parties may reduce the relevant indicator if the expenditure is incurred from an undertaking subject to supervision under, or equivalent to, this Directive. |
| --- | --- |

7.

The indicator shall be calculated before the deduction of any provisions and operating expenses. Operating expenses shall include fees paid for outsourcing services rendered by third parties which are not a parent or subsidiary of the credit institution or a subsidiary of a parent which is also the parent of the credit institution. Expenditure on the outsourcing of services rendered by third parties may reduce the relevant indicator if the expenditure is incurred from an undertaking subject to supervision under, or equivalent to, this Directive.

| 8. | The following elements shall not be used in the calculation of the relevant indicator:






  (a) | Realised profits/losses from the sale of non-trading book items; |
| --- | --- | --- |

8.

The following elements shall not be used in the calculation of the relevant indicator:

(a)

Realised profits/losses from the sale of non-trading book items;

| (b) | Income from extraordinary or irregular items; |
| --- | --- |

(b)

Income from extraordinary or irregular items;

| (c) | Income derived from insurance. |
| --- | --- |

(c)

Income derived from insurance.

When revaluation of trading items is part of the profit and loss statement, revaluation could be included. When Article 36 (2) of Directive 86/635/EEC is applied, revaluation booked in the profit and loss account should be included.

2.2.   Credit institutions subject to a different accounting framework

| 9. | When credit institutions are subject to an accounting framework different from the one established by Directive 86/635/EEC, they should calculate the relevant indicator on the basis of data that best reflect the definition set out in points 2 to 8. |
| --- | --- |

9.

When credit institutions are subject to an accounting framework different from the one established by Directive 86/635/EEC, they should calculate the relevant indicator on the basis of data that best reflect the definition set out in points 2 to 8.

Part 2 — Standardised Approach

1.   CAPITAL REQUIREMENT

| 1. | Under the Standardised Approach, the capital requirement for operational risk is the average over three years of the risk-weighted relevant indicators calculated each year across the business lines referred to in Table 2. In each year, a negative capital requirement in one business line, resulting from a negative relevant indicator may be imputed to the whole. However, where the aggregate capital charge across all business lines within a given year is negative, then the input to the average for that year shall be zero. |
| --- | --- |

1.

Under the Standardised Approach, the capital requirement for operational risk is the average over three years of the risk-weighted relevant indicators calculated each year across the business lines referred to in Table 2. In each year, a negative capital requirement in one business line, resulting from a negative relevant indicator may be imputed to the whole. However, where the aggregate capital charge across all business lines within a given year is negative, then the input to the average for that year shall be zero.

| 2. | The three-year average is calculated on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, business estimates may be used.
  Table 2:







  Business line | List of activities | Percentage |
| --- | --- | --- | --- |
| Corporate finance | Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis
  Services related to underwriting
  Investment advice
  Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to the mergers and the purchase of undertakings
  Investment research and financial analysis and other forms of general recommendation relating to transactions in financial instruments | 18 % |
| Trading and sales | Dealing on own account
  Money broking
  Reception and transmission of orders in relation to one or more financial instruments
  Execution of orders on behalf of clients
  Placing of financial instruments without a firm commitment basis
  Operation of Multilateral Trading Facilities | 18 % |
| Retail brokerage
  (Activities with a individual physical persons or with small and medium sized entities meeting the criteria set out in Article 79 for the retail exposure class) | Reception and transmission of orders in relation to one or more financial instruments
  Execution of orders on behalf of clients
  Placing of financial instruments without a firm commitment basis | 12 % |
| Commercial banking | Acceptance of deposits and other repayable funds
  Lending
  Financial leasing
  Guarantees and commitments | 15 % |
| Retail banking
  (Activities with a individual physical persons or with small and medium sized entities meeting the criteria set out in Article 79 for the retail exposure class) | Acceptance of deposits and other repayable funds
  Lending
  Financial leasing
  Guarantees and commitments | 12 % |
| Payment and settlement | Money transmission services,
  Issuing and administering means of payment | 18 % |
| Agency services | Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management | 15 % |
| Asset management | Portfolio management
  Managing of UCITS
  Other forms of asset management | 12 % |

2.

The three-year average is calculated on the basis of the last three twelve-monthly observations at the end of the financial year. When audited figures are not available, business estimates may be used.

Table 2:

Business line

List of activities

Percentage

Corporate finance

Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis

Services related to underwriting

Investment advice

Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to the mergers and the purchase of undertakings

Investment research and financial analysis and other forms of general recommendation relating to transactions in financial instruments

18 %

Trading and sales

Dealing on own account

Money broking

Reception and transmission of orders in relation to one or more financial instruments

Execution of orders on behalf of clients

Placing of financial instruments without a firm commitment basis

Operation of Multilateral Trading Facilities

18 %

Retail brokerage

(Activities with a individual physical persons or with small and medium sized entities meeting the criteria set out in Article 79 for the retail exposure class)

Reception and transmission of orders in relation to one or more financial instruments

Execution of orders on behalf of clients

Placing of financial instruments without a firm commitment basis

12 %

Commercial banking

Acceptance of deposits and other repayable funds

Lending

Financial leasing

Guarantees and commitments

15 %

Retail banking

(Activities with a individual physical persons or with small and medium sized entities meeting the criteria set out in Article 79 for the retail exposure class)

Acceptance of deposits and other repayable funds

Lending

Financial leasing

Guarantees and commitments

12 %

Payment and settlement

Money transmission services,

Issuing and administering means of payment

18 %

Agency services

Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management

15 %

Asset management

Portfolio management

Managing of UCITS

Other forms of asset management

12 %

| 3. | Competent authorities may authorise a credit institution to calculate its capital requirement for operational risk using an alternative standardised approach, as set out in points 5 to 11. |
| --- | --- |

3.

Competent authorities may authorise a credit institution to calculate its capital requirement for operational risk using an alternative standardised approach, as set out in points 5 to 11.

2.   PRINCIPLES FOR BUSINESS LINE MAPPING

| 4. | Credit institutions must develop and document specific policies and criteria for mapping the relevant indicator for current business lines and activities into the standardised framework. The criteria must be reviewed and adjusted as appropriate for new or changing business activities and risks. The principles for business line mapping are:






  a) | all activities must be mapped into the business lines in a mutually exclusive and jointly exhaustive manner; |
| --- | --- | --- |

4.

Credit institutions must develop and document specific policies and criteria for mapping the relevant indicator for current business lines and activities into the standardised framework. The criteria must be reviewed and adjusted as appropriate for new or changing business activities and risks. The principles for business line mapping are:

a)

all activities must be mapped into the business lines in a mutually exclusive and jointly exhaustive manner;

| b) | any activity which cannot be readily mapped into the business line framework, but which represents an ancillary function to an activity included in the framework, must be allocated to the business line it supports. If more than one business line is supported through the ancillary activity, an objective-mapping criterion must be used; |
| --- | --- |

b)

any activity which cannot be readily mapped into the business line framework, but which represents an ancillary function to an activity included in the framework, must be allocated to the business line it supports. If more than one business line is supported through the ancillary activity, an objective-mapping criterion must be used;

| c) | if an activity cannot be mapped into a particular business line then the business line yielding the highest percentage must be used. The same business line equally applies to any associated ancillary activity; |
| --- | --- |

c)

if an activity cannot be mapped into a particular business line then the business line yielding the highest percentage must be used. The same business line equally applies to any associated ancillary activity;

| d) | credit institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain, for instance by using a treatment based on internal transfer costs between the two business lines; |
| --- | --- |

d)

credit institutions may use internal pricing methods to allocate the relevant indicator between business lines. Costs generated in one business line which are imputable to a different business line may be reallocated to the business line to which they pertain, for instance by using a treatment based on internal transfer costs between the two business lines;

| e) | the mapping of activities into business lines for operational risk capital purposes must be consistent with the categories used for credit and market risks; |
| --- | --- |

e)

the mapping of activities into business lines for operational risk capital purposes must be consistent with the categories used for credit and market risks;

| f) | senior management is responsible for the mapping policy under the control of the governing bodies of the credit institution; and |
| --- | --- |

f)

senior management is responsible for the mapping policy under the control of the governing bodies of the credit institution; and

| g) | the mapping process to business lines must be subject to independent review. |
| --- | --- |

g)

the mapping process to business lines must be subject to independent review.

3.   ALTERNATIVE INDICATORS FOR CERTAIN BUSINESS LINES

3.1.   Modalities

| 5. | The competent authorities may authorise the credit institution to use an alternative relevant indicator for the business lines: retail banking and commercial banking. |
| --- | --- |

5.

The competent authorities may authorise the credit institution to use an alternative relevant indicator for the business lines: retail banking and commercial banking.

| 6. | For these business lines, the relevant indicator shall be a normalised income indicator equal to the three-year average of the total nominal amount of loans and advances multiplied by 0,035. |
| --- | --- |

6.

For these business lines, the relevant indicator shall be a normalised income indicator equal to the three-year average of the total nominal amount of loans and advances multiplied by 0,035.

| 7. | For the retail and/or commercial banking business lines, the loans and advances shall consist of the total drawn amounts in the corresponding credit portfolios. For the commercial banking business line, securities held in the non trading book shall also be included. |
| --- | --- |

7.

For the retail and/or commercial banking business lines, the loans and advances shall consist of the total drawn amounts in the corresponding credit portfolios. For the commercial banking business line, securities held in the non trading book shall also be included.

3.2.   Conditions

| 8. | The authorisation to use alternative relevant indicators shall be subject to the conditions in points 9 to 11. |
| --- | --- |

8.

The authorisation to use alternative relevant indicators shall be subject to the conditions in points 9 to 11.

3.2.1.   General condition

| 9. | The credit institution meets the qualifying criteria set out in point 12. |
| --- | --- |

9.

The credit institution meets the qualifying criteria set out in point 12.

3.2.2.   Conditions specific to retail banking and commercial banking

| 10. | The credit institution is overwhelmingly active in retail and/or commercial banking activities, which shall account for at least 90 % of its income. |
| --- | --- |

10.

The credit institution is overwhelmingly active in retail and/or commercial banking activities, which shall account for at least 90 % of its income.

| 11. | The credit institution is able to demonstrate to the competent authorities that a significant proportion of its retail and/or commercial banking activities comprise loans associated with a high PD, and that the alternative standardised approach provides an improved basis for assessing the operational risk. |
| --- | --- |

11.

The credit institution is able to demonstrate to the competent authorities that a significant proportion of its retail and/or commercial banking activities comprise loans associated with a high PD, and that the alternative standardised approach provides an improved basis for assessing the operational risk.

4.   QUALIFYING CRITERIA

| 12. | Credit institutions must meet the qualifying criteria listed below, in addition to the general risk management standards set out in Article 22 and Annex V. Satisfaction of these criteria shall be determined having regard to the size and scale of activities of the credit institution and to the principle of proportionality.






  (a) | Credit institutions shall have a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. They shall identify their exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review. |
| --- | --- | --- |

12.

Credit institutions must meet the qualifying criteria listed below, in addition to the general risk management standards set out in Article 22 and Annex V. Satisfaction of these criteria shall be determined having regard to the size and scale of activities of the credit institution and to the principle of proportionality.

(a)

Credit institutions shall have a well-documented assessment and management system for operational risk with clear responsibilities assigned for this system. They shall identify their exposures to operational risk and track relevant operational risk data, including material loss data. This system shall be subject to regular independent review.

| (b) | The operational risk assessment system must be closely integrated into the risk management processes of the credit institution. Its output must be an integral Part of the process of monitoring and controlling the credit institution's operational risk profile. |
| --- | --- |

(b)

The operational risk assessment system must be closely integrated into the risk management processes of the credit institution. Its output must be an integral Part of the process of monitoring and controlling the credit institution's operational risk profile.

| (c) | Credit institutions shall implement a system of management reporting that provides operational risk reports to relevant functions within the credit institution. Credit institutions shall have procedures for taking appropriate action according to the information within the management reports. |
| --- | --- |

(c)

Credit institutions shall implement a system of management reporting that provides operational risk reports to relevant functions within the credit institution. Credit institutions shall have procedures for taking appropriate action according to the information within the management reports.

Part 3 — Advanced Measurement Approaches

1.   QUALIFYING CRITERIA

| 1. | To be eligible for an Advanced Measurement Approach, credit institutions must satisfy the competent authorities that they meet the qualifying criteria below, in addition to the general risk management standards in Article 22 and Annex V. |
| --- | --- |

1.

To be eligible for an Advanced Measurement Approach, credit institutions must satisfy the competent authorities that they meet the qualifying criteria below, in addition to the general risk management standards in Article 22 and Annex V.

1.1.   Qualitative Standards

| 2. | The credit institution's internal operational risk measurement system shall be closely integrated into its day-to-day risk management processes. |
| --- | --- |

2.

The credit institution's internal operational risk measurement system shall be closely integrated into its day-to-day risk management processes.

| 3. | The credit institution must have an independent risk management function for operational risk. |
| --- | --- |

3.

The credit institution must have an independent risk management function for operational risk.

| 4. | There must be regular reporting of operational risk exposures and loss experience. The credit institution shall have procedures for taking appropriate corrective action. |
| --- | --- |

4.

There must be regular reporting of operational risk exposures and loss experience. The credit institution shall have procedures for taking appropriate corrective action.

| 5. | The credit institution's risk management system must be well documented. The credit institution shall have routines in place for ensuring compliance and policies for the treatment of non-compliance. |
| --- | --- |

5.

The credit institution's risk management system must be well documented. The credit institution shall have routines in place for ensuring compliance and policies for the treatment of non-compliance.

| 6. | The operational risk management processes and measurement systems shall be subject to regular reviews performed by internal and/or external auditors. |
| --- | --- |

6.

The operational risk management processes and measurement systems shall be subject to regular reviews performed by internal and/or external auditors.

| 7. | The validation of the operational risk measurement system by the competent authorities shall include the following elements:






  a) | verifying that the internal validation processes are operating in a satisfactory manner; |
| --- | --- | --- |

7.

The validation of the operational risk measurement system by the competent authorities shall include the following elements:

a)

verifying that the internal validation processes are operating in a satisfactory manner;

| b) | making sure that data flows and processes associated with the risk measurement system are transparent and accessible. |
| --- | --- |

b)

making sure that data flows and processes associated with the risk measurement system are transparent and accessible.

1.2.   Quantitative Standards

1.2.1.   Process

| 8. | Credit institutions shall calculate their capital requirement as comprising both expected loss and unexpected loss, unless they can demonstrate that expected loss is adequately captured in their internal business practices. The operational risk measure must capture potentially severe tail events, achieving a soundness standard comparable to a 99,9 % confidence interval over a one year period. |
| --- | --- |

8.

Credit institutions shall calculate their capital requirement as comprising both expected loss and unexpected loss, unless they can demonstrate that expected loss is adequately captured in their internal business practices. The operational risk measure must capture potentially severe tail events, achieving a soundness standard comparable to a 99,9 % confidence interval over a one year period.

| 9. | The operational risk measurement system of a credit institution must have certain key elements to meet the soundness standard set out in point 8. These elements must include the use of internal data, external data, scenario analysis and factors reflecting the business environment and internal control systems as set out in points 13 to 24. A credit institution needs to have a well documented approach for weighting the use of these four elements in its overall operational risk measurement system. |
| --- | --- |

9.

The operational risk measurement system of a credit institution must have certain key elements to meet the soundness standard set out in point 8. These elements must include the use of internal data, external data, scenario analysis and factors reflecting the business environment and internal control systems as set out in points 13 to 24. A credit institution needs to have a well documented approach for weighting the use of these four elements in its overall operational risk measurement system.

| 10. | The risk measurement system shall capture the major drivers of risk affecting the shape of the tail of the loss estimates. |
| --- | --- |

10.

The risk measurement system shall capture the major drivers of risk affecting the shape of the tail of the loss estimates.

| 11. | Correlations in operational risk losses across individual operational risk estimates may be recognised only if credit institutions can demonstrate to the satisfaction of the competent authorities that their systems for measuring correlations are sound, implemented with integrity, and take into account the uncertainty surrounding any such correlation estimates, particularly in periods of stress. The credit institution must validate its correlation assumptions using appropriate quantitative and qualitative techniques. |
| --- | --- |

11.

Correlations in operational risk losses across individual operational risk estimates may be recognised only if credit institutions can demonstrate to the satisfaction of the competent authorities that their systems for measuring correlations are sound, implemented with integrity, and take into account the uncertainty surrounding any such correlation estimates, particularly in periods of stress. The credit institution must validate its correlation assumptions using appropriate quantitative and qualitative techniques.

| 12. | The risk measurement system shall be internally consistent and shall avoid the multiple counting of qualitative assessments or risk mitigation techniques recognised in other areas of the capital adequacy framework. |
| --- | --- |

12.

The risk measurement system shall be internally consistent and shall avoid the multiple counting of qualitative assessments or risk mitigation techniques recognised in other areas of the capital adequacy framework.

1.2.2.   Internal data

| 13. | Internally generated operational risk measures shall be based on a minimum historical observation period of five years. When a credit institution first moves to an Advanced Measurement Approach, a three-year historical observation period is acceptable. |
| --- | --- |

13.

Internally generated operational risk measures shall be based on a minimum historical observation period of five years. When a credit institution first moves to an Advanced Measurement Approach, a three-year historical observation period is acceptable.

| 14. | Credit institutions must be able to map their historical internal loss data into the business lines defined in Part 2 and into the event types defined in Part 5, and to provide these data to competent authorities upon request. There must be documented, objective criteria for allocating losses to the specified business lines and event types. The operational risk losses that are related to credit risk and have historically been included in the internal credit risk databases must be recorded in the operational risk databases and be separately identified. Such losses will not be subject to the operational risk charge, as long as they continue to be treated as credit risk for the purposes of calculating minimum capital requirements. Operational risk losses that are related to market risks shall be included in the scope of the capital requirement for operational risk. |
| --- | --- |

14.

Credit institutions must be able to map their historical internal loss data into the business lines defined in Part 2 and into the event types defined in Part 5, and to provide these data to competent authorities upon request. There must be documented, objective criteria for allocating losses to the specified business lines and event types. The operational risk losses that are related to credit risk and have historically been included in the internal credit risk databases must be recorded in the operational risk databases and be separately identified. Such losses will not be subject to the operational risk charge, as long as they continue to be treated as credit risk for the purposes of calculating minimum capital requirements. Operational risk losses that are related to market risks shall be included in the scope of the capital requirement for operational risk.

| 15. | The credit institution's internal loss data must be comprehensive in that it captures all material activities and exposures from all appropriate sub-systems and geographic locations. Credit institutions must be able to justify that any excluded activities or exposures, both individually and in combination, would not have a material impact on the overall risk estimates. Appropriate minimum loss thresholds for internal loss data collection must be defined. |
| --- | --- |

15.

The credit institution's internal loss data must be comprehensive in that it captures all material activities and exposures from all appropriate sub-systems and geographic locations. Credit institutions must be able to justify that any excluded activities or exposures, both individually and in combination, would not have a material impact on the overall risk estimates. Appropriate minimum loss thresholds for internal loss data collection must be defined.

| 16. | Aside from information on gross loss amounts, credit institutions shall collect information about the date of the event, any recoveries of gross loss amounts, as well as some descriptive information about the drivers or causes of the loss event. |
| --- | --- |

16.

Aside from information on gross loss amounts, credit institutions shall collect information about the date of the event, any recoveries of gross loss amounts, as well as some descriptive information about the drivers or causes of the loss event.

| 17. | There shall be specific criteria for assigning loss data arising from an event in a centralised function or an activity that spans more than one business line, as well as from related events over time. |
| --- | --- |

17.

There shall be specific criteria for assigning loss data arising from an event in a centralised function or an activity that spans more than one business line, as well as from related events over time.

| 18. | Credit institutions must have documented procedures for assessing the on-going relevance of historical loss data, including those situations in which judgement overrides, scaling, or other adjustments may be used, to what extent they may be used and who is authorised to make such decisions. |
| --- | --- |

18.

Credit institutions must have documented procedures for assessing the on-going relevance of historical loss data, including those situations in which judgement overrides, scaling, or other adjustments may be used, to what extent they may be used and who is authorised to make such decisions.

1.2.3.   External data

| 19. | The credit institution's operational risk measurement system shall use relevant external data, especially when there is reason to believe that the credit institution is exposed to infrequent, yet potentially severe, losses. A credit institution must have a systematic process for determining the situations for which external data must be used and the methodologies used to incorporate the data in its measurement system. The conditions and practices for external data use must be regularly reviewed, documented and subject to periodic independent review. |
| --- | --- |

19.

The credit institution's operational risk measurement system shall use relevant external data, especially when there is reason to believe that the credit institution is exposed to infrequent, yet potentially severe, losses. A credit institution must have a systematic process for determining the situations for which external data must be used and the methodologies used to incorporate the data in its measurement system. The conditions and practices for external data use must be regularly reviewed, documented and subject to periodic independent review.

1.2.4.   Scenario analysis

| 20. | The credit institution shall use scenario analysis of expert opinion in conjunction with external data to evaluate its exposure to high severity events. Over time, such assessments need to be validated and re-assessed through comparison to actual loss experience to ensure their reasonableness. |
| --- | --- |

20.

The credit institution shall use scenario analysis of expert opinion in conjunction with external data to evaluate its exposure to high severity events. Over time, such assessments need to be validated and re-assessed through comparison to actual loss experience to ensure their reasonableness.

1.2.5.   Business environment and internal control factors

| 21. | The credit institution's firm-wide risk assessment methodology must capture key business environment and internal control factors that can change its operational risk profile. |
| --- | --- |

21.

The credit institution's firm-wide risk assessment methodology must capture key business environment and internal control factors that can change its operational risk profile.

| 22. | The choice of each factor needs to be justified as a meaningful driver of risk, based on experience and involving the expert judgment of the affected business areas. |
| --- | --- |

22.

The choice of each factor needs to be justified as a meaningful driver of risk, based on experience and involving the expert judgment of the affected business areas.

| 23. | The sensitivity of risk estimates to changes in the factors and the relative weighting of the various factors need to be well reasoned. In addition to capturing changes in risk due to improvements in risk controls, the framework must also capture potential increases in risk due to greater complexity of activities or increased business volume. |
| --- | --- |

23.

The sensitivity of risk estimates to changes in the factors and the relative weighting of the various factors need to be well reasoned. In addition to capturing changes in risk due to improvements in risk controls, the framework must also capture potential increases in risk due to greater complexity of activities or increased business volume.

| 24. | This framework must be documented and subject to independent review within the credit institution and by competent authorities. Over time, the process and the outcomes need to be validated and re-assessed through comparison to actual internal loss experience and relevant external data. |
| --- | --- |

24.

This framework must be documented and subject to independent review within the credit institution and by competent authorities. Over time, the process and the outcomes need to be validated and re-assessed through comparison to actual internal loss experience and relevant external data.

2.   IMPACT OF INSURANCE AND OTHER RISK TRANSFER MECHANISMS

| 25. | Credit institutions shall be able to recognise the impact of insurance subject to the conditions set out in points 26 to 29 and other risk transfer mechanisms where the credit institution can demonstrate to the satisfaction of the competent authorities that a noticeable risk mitigating effect is achieved. |
| --- | --- |

25.

Credit institutions shall be able to recognise the impact of insurance subject to the conditions set out in points 26 to 29 and other risk transfer mechanisms where the credit institution can demonstrate to the satisfaction of the competent authorities that a noticeable risk mitigating effect is achieved.

| 26. | The provider is authorised to provide insurance or re-insurance and the provider has a minimum claims paying ability rating by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to credit institutions under Articles 78 to 83. |
| --- | --- |

26.

The provider is authorised to provide insurance or re-insurance and the provider has a minimum claims paying ability rating by an eligible ECAI which has been determined by the competent authority to be associated with credit quality step 3 or above under the rules for the risk weighting of exposures to credit institutions under Articles 78 to 83.

| 27. | The insurance and the credit institutions' insurance framework shall meet the following conditions:






  a) | the insurance policy must have an initial term of no less than one year. For policies with a residual term of less than one year, the credit institution must make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100 % haircut for policies with a residual term of 90 days or less; |
| --- | --- | --- |

27.

The insurance and the credit institutions' insurance framework shall meet the following conditions:

a)

the insurance policy must have an initial term of no less than one year. For policies with a residual term of less than one year, the credit institution must make appropriate haircuts reflecting the declining residual term of the policy, up to a full 100 % haircut for policies with a residual term of 90 days or less;

| b) | the insurance policy has a minimum notice period for cancellation of the contract of 90 days; |
| --- | --- |

b)

the insurance policy has a minimum notice period for cancellation of the contract of 90 days;

| c) | the insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed credit institution, that preclude the credit institution receiver or liquidator, from recovering for damages suffered or expenses incurred by the credit institution, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the credit institution; provided that the insurance policy may exclude any fine, penalty, or punitive damages resulting from actions by the competent authorities; |
| --- | --- |

c)

the insurance policy has no exclusions or limitations triggered by supervisory actions or, in the case of a failed credit institution, that preclude the credit institution receiver or liquidator, from recovering for damages suffered or expenses incurred by the credit institution, except in respect of events occurring after the initiation of receivership or liquidation proceedings in respect of the credit institution; provided that the insurance policy may exclude any fine, penalty, or punitive damages resulting from actions by the competent authorities;

| d) | the risk mitigation calculations must reflect the insurance coverage in a manner that is transparent in its relationship to, and consistent with, the actual likelihood and impact of loss used in the overall determination of operational risk capital; |
| --- | --- |

d)

the risk mitigation calculations must reflect the insurance coverage in a manner that is transparent in its relationship to, and consistent with, the actual likelihood and impact of loss used in the overall determination of operational risk capital;

| e) | the insurance is provided by a third party entity. In the case of insurance through captives and affiliates, the exposure has to be laid off to an independent third party entity, for example through re-insurance, that meets the eligibility criteria; and |
| --- | --- |

e)

the insurance is provided by a third party entity. In the case of insurance through captives and affiliates, the exposure has to be laid off to an independent third party entity, for example through re-insurance, that meets the eligibility criteria; and

| f) | the framework for recognising insurance is well reasoned and documented. |
| --- | --- |

f)

the framework for recognising insurance is well reasoned and documented.

| 28. | The methodology for recognising insurance shall capture the following elements through discounts or haircuts in the amount of insurance recognition:






  a) | the residual term of an insurance policy, where less than one year, as noted above; |
| --- | --- | --- |

28.

The methodology for recognising insurance shall capture the following elements through discounts or haircuts in the amount of insurance recognition:

a)

the residual term of an insurance policy, where less than one year, as noted above;

| b) | a policy's cancellation terms, where less than one year; and |
| --- | --- |

b)

a policy's cancellation terms, where less than one year; and

| c) | the uncertainty of payment as well as mismatches in coverage of insurance policies. |
| --- | --- |

c)

the uncertainty of payment as well as mismatches in coverage of insurance policies.

| 29. | The capital alleviation arising from the recognition of insurance shall not exceed 20 % of the capital requirement for operational risk before the recognition of risk-mitigation techniques. |
| --- | --- |

29.

The capital alleviation arising from the recognition of insurance shall not exceed 20 % of the capital requirement for operational risk before the recognition of risk-mitigation techniques.

3.   APPLICATION TO USE AN ADVANCED MEASUREMENT APPROACH ON A GROUP-WIDE BASIS

| 30. | When an Advanced Measurement Approach is intended to be used by the EU parent credit institution and its subsidiaries, or by the subsidiaries of an EU parent financial holding company, the application shall include a description of the methodology used for allocating operational risk capital between the different entities of the group. |
| --- | --- |

30.

When an Advanced Measurement Approach is intended to be used by the EU parent credit institution and its subsidiaries, or by the subsidiaries of an EU parent financial holding company, the application shall include a description of the methodology used for allocating operational risk capital between the different entities of the group.

| 31. | The application shall indicate whether and how diversification effects are intended to be factored in the risk measurement system. |
| --- | --- |

31.

The application shall indicate whether and how diversification effects are intended to be factored in the risk measurement system.

Part 4 — Combined use of different methodologies

1.   USE OF AN ADVANCED MEASUREMENT APPROACH IN COMBINATION WITH OTHER APPROACHES

| 1. | A credit institution may use an Advanced Measurement Approach in combination with either the Basic Indicator Approach or the Standardised Approach, subject to the following conditions:






  a) | all operational risks of the credit institution are captured. The competent authority shall be satisfied with the methodology used to cover different activities, geographical locations, legal structures or other relevant divisions determined on an internal basis; and |
| --- | --- | --- |

1.

A credit institution may use an Advanced Measurement Approach in combination with either the Basic Indicator Approach or the Standardised Approach, subject to the following conditions:

a)

all operational risks of the credit institution are captured. The competent authority shall be satisfied with the methodology used to cover different activities, geographical locations, legal structures or other relevant divisions determined on an internal basis; and

| b) | the qualifying criteria set out in Parts 2 and 3 are fulfilled for the Part of activities covered by the Standardised Approach and Advanced Measurement Approaches respectively. |
| --- | --- |

b)

the qualifying criteria set out in Parts 2 and 3 are fulfilled for the Part of activities covered by the Standardised Approach and Advanced Measurement Approaches respectively.

| 2. | On a case-by case basis, the competent authority may impose the following additional conditions:






  a) | on the date of implementation of an Advanced Measurement Approach, a significant part of the credit institution's operational risks are captured by the Advanced Measurement Approach; and |
| --- | --- | --- |

2.

On a case-by case basis, the competent authority may impose the following additional conditions:

a)

on the date of implementation of an Advanced Measurement Approach, a significant part of the credit institution's operational risks are captured by the Advanced Measurement Approach; and

| b) | the credit institution takes a commitment to roll out the Advanced Measurement Approach across a material Part of its operations within a time schedule agreed with its competent authorities. |
| --- | --- |

b)

the credit institution takes a commitment to roll out the Advanced Measurement Approach across a material Part of its operations within a time schedule agreed with its competent authorities.

2.   COMBINED USE OF THE BASIC INDICATOR APPROACH AND OF THE STANDARDISED APPROACH

| 3. | A credit institution may use a combination of the Basic Indicator Approach and the Standardised Approach only in exceptional circumstances such as the recent acquisition of new business which may require a transition period for the roll out of the Standardised Approach. |
| --- | --- |

3.

A credit institution may use a combination of the Basic Indicator Approach and the Standardised Approach only in exceptional circumstances such as the recent acquisition of new business which may require a transition period for the roll out of the Standardised Approach.

| 4. | The combined use of the Basic Indicator Approach and the Standardised Approach shall be conditional upon a commitment by the credit institution to roll out the Standardised Approach within a time schedule agreed with the competent authorities. |
| --- | --- |

4.

The combined use of the Basic Indicator Approach and the Standardised Approach shall be conditional upon a commitment by the credit institution to roll out the Standardised Approach within a time schedule agreed with the competent authorities.

Part 5 — Loss event type classification

Table 3

| Event-Type Category | Definition |
| --- | --- |
| Internal fraud | Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/discrimination events, which involves at least one internal party |
| External fraud | Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party |
| Employment Practices and Workplace Safety | Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity/discrimination events |
| Clients, Products & Business Practices | Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product |
| Damage to Physical Assets | Losses arising from loss or damage to physical assets from natural disaster or other events |
| Business disruption and system failures | Losses arising from disruption of business or system failures |
| Execution, Delivery & Process Management | Losses from failed transaction processing or process management, from relations with trade counterparties and vendors |

Event-Type Category

Definition

Internal fraud

Losses due to acts of a type intended to defraud, misappropriate property or circumvent regulations, the law or company policy, excluding diversity/discrimination events, which involves at least one internal party

External fraud

Losses due to acts of a type intended to defraud, misappropriate property or circumvent the law, by a third party

Employment Practices and Workplace Safety

Losses arising from acts inconsistent with employment, health or safety laws or agreements, from payment of personal injury claims, or from diversity/discrimination events

Clients, Products & Business Practices

Losses arising from an unintentional or negligent failure to meet a professional obligation to specific clients (including fiduciary and suitability requirements), or from the nature or design of a product

Damage to Physical Assets

Losses arising from loss or damage to physical assets from natural disaster or other events

Business disruption and system failures

Losses arising from disruption of business or system failures

Execution, Delivery & Process Management

Losses from failed transaction processing or process management, from relations with trade counterparties and vendors

ANNEX XI

TECHNICAL CRITERIA ON REVIEW AND EVALUATION BY THE COMPETENT AUTHORITIES

| 1. | In addition to credit, market and operational risks, the review and evaluation performed by competent authorities pursuant to Article 124 shall include the following:






  a) | the results of the stress test carried out by the credit institutions applying an IRB approach; |
| --- | --- | --- |

1.

In addition to credit, market and operational risks, the review and evaluation performed by competent authorities pursuant to Article 124 shall include the following:

a)

the results of the stress test carried out by the credit institutions applying an IRB approach;

| b) | the exposure to and management of concentration risk by the credit institutions, including their compliance with the requirements laid down in Articles 108 to 118; |
| --- | --- |

b)

the exposure to and management of concentration risk by the credit institutions, including their compliance with the requirements laid down in Articles 108 to 118;

| c) | the robustness, suitability and manner of application of the policies and procedures implemented by credit institutions for the management of the residual risk associated with the use of recognized credit risk mitigation techniques; |
| --- | --- |

c)

the robustness, suitability and manner of application of the policies and procedures implemented by credit institutions for the management of the residual risk associated with the use of recognized credit risk mitigation techniques;

| d) | the extent to which the own funds held by a credit institution in respect of assets which it has securitised are adequate having regard to the economic substance of the transaction, including the degree of risk transfer achieved; |
| --- | --- |

d)

the extent to which the own funds held by a credit institution in respect of assets which it has securitised are adequate having regard to the economic substance of the transaction, including the degree of risk transfer achieved;

| e) | the exposure to and management of liquidity risk by the credit institutions; |
| --- | --- |

e)

the exposure to and management of liquidity risk by the credit institutions;

| f) | the impact of diversification effects and how such effects are factored into the risk measurement system; and |
| --- | --- |

f)

the impact of diversification effects and how such effects are factored into the risk measurement system; and

| g) | the results of stress tests carried out by institutions using an internal model to calculate market risk capital requirements under Annex V to Directive 2006/.../EC. |
| --- | --- |

g)

the results of stress tests carried out by institutions using an internal model to calculate market risk capital requirements under Annex V to Directive 2006/.../EC.

| 2. | Competent authorities shall monitor whether a credit institution has provided implicit support to a securitisation. If a credit institution is found to have provided implicit support on more than one occasion the competent authority shall take appropriate measures reflective of the increased expectation that it will provide future support to its securitisation thus failing to achieve a significant transfer of risk. |
| --- | --- |

2.

Competent authorities shall monitor whether a credit institution has provided implicit support to a securitisation. If a credit institution is found to have provided implicit support on more than one occasion the competent authority shall take appropriate measures reflective of the increased expectation that it will provide future support to its securitisation thus failing to achieve a significant transfer of risk.

| 3. | For the purposes of the determination to be made under Article 124(3), competent authorities shall consider whether the value adjustments and provisions taken for positions/portfolios in the trading book, as set out in Part B of Annex VII to Directive 2006/.../EC, enable the credit institution to sell or hedge out its positions within a short period without incurring material losses under normal market conditions. |
| --- | --- |

3.

For the purposes of the determination to be made under Article 124(3), competent authorities shall consider whether the value adjustments and provisions taken for positions/portfolios in the trading book, as set out in Part B of Annex VII to Directive 2006/.../EC, enable the credit institution to sell or hedge out its positions within a short period without incurring material losses under normal market conditions.

ANNEX XII

TECHNICAL CRITERIA ON DISCLOSURE

Part 1 — General criteria

| 1. | Information shall be regarded as material in disclosures if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions. |
| --- | --- |

1.

Information shall be regarded as material in disclosures if its omission or misstatement could change or influence the assessment or decision of a user relying on that information for the purpose of making economic decisions.

| 2. | Information shall be regarded as proprietary to a credit institution if sharing that information with the public would undermine its competitive position. It may include information on products or systems which, if shared with competitors, would render a credit institution's investments therein less valuable. |
| --- | --- |

2.

Information shall be regarded as proprietary to a credit institution if sharing that information with the public would undermine its competitive position. It may include information on products or systems which, if shared with competitors, would render a credit institution's investments therein less valuable.

| 3. | Information shall be regarded as confidential if there are obligations to customers or other counterparty relationships binding a credit institution to confidentiality. |
| --- | --- |

3.

Information shall be regarded as confidential if there are obligations to customers or other counterparty relationships binding a credit institution to confidentiality.

| 4. | Competent authorities shall require credit institution to assess the need to publish some or all disclosures more frequently than annually in the light of the relevant characteristics of their business such as scale of operations, range of activities, presence in different countries, involvement in different financial sectors, and participation in international financial markets and payment, settlement and clearing systems. That assessment shall pay particular attention to the possible need for more frequent disclosure of items of information laid down in Part 2, points 3(b) and 3(e) and 4(b) to 4(e), and information on risk exposure and other items prone to rapid change. |
| --- | --- |

4.

Competent authorities shall require credit institution to assess the need to publish some or all disclosures more frequently than annually in the light of the relevant characteristics of their business such as scale of operations, range of activities, presence in different countries, involvement in different financial sectors, and participation in international financial markets and payment, settlement and clearing systems. That assessment shall pay particular attention to the possible need for more frequent disclosure of items of information laid down in Part 2, points 3(b) and 3(e) and 4(b) to 4(e), and information on risk exposure and other items prone to rapid change.

| 5. | The disclosure requirement in Part 2, points 3 and 4 shall be provided pursuant to Article 72(1) and (2). |
| --- | --- |

5.

The disclosure requirement in Part 2, points 3 and 4 shall be provided pursuant to Article 72(1) and (2).

Part 2 — General requirements

| 1. | The risk management objectives and policies of the credit institution shall be disclosed for each separate category of risk, including the risks referred to under points 1 to 14. These disclosures shall include:






  a) | the strategies and processes to manage those risks; |
| --- | --- | --- |

1.

The risk management objectives and policies of the credit institution shall be disclosed for each separate category of risk, including the risks referred to under points 1 to 14. These disclosures shall include:

a)

the strategies and processes to manage those risks;

| b) | the structure and organisation of the relevant risk management function or other appropriate arrangements; |
| --- | --- |

b)

the structure and organisation of the relevant risk management function or other appropriate arrangements;

| c) | the scope and nature of risk reporting and measurement systems; and |
| --- | --- |

c)

the scope and nature of risk reporting and measurement systems; and

| d) | the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants. |
| --- | --- |

d)

the policies for hedging and mitigating risk, and the strategies and processes for monitoring the continuing effectiveness of hedges and mitigants.

| 2. | The following information shall be disclosed regarding the scope of application of the requirements of this Directive:






  a) | the name of the credit institution to which the requirements of this Directive apply; |
| --- | --- | --- |

2.

The following information shall be disclosed regarding the scope of application of the requirements of this Directive:

a)

the name of the credit institution to which the requirements of this Directive apply;

| b) | an outline of the differences in the basis of consolidation for accounting and prudential purposes, with a brief description of the entities that are:






  i) | fully consolidated; |
| --- | --- | --- |

b)

an outline of the differences in the basis of consolidation for accounting and prudential purposes, with a brief description of the entities that are:

i)

fully consolidated;

| ii) | proportionally consolidated; |
| --- | --- |

ii)

proportionally consolidated;

| iii) | deducted from own funds; or |
| --- | --- |

iii)

deducted from own funds; or

| iv) | neither consolidated nor deducted; |
| --- | --- |

iv)

neither consolidated nor deducted;

| c) | any current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities among the parent undertaking and its subsidiaries; |
| --- | --- |

c)

any current or foreseen material practical or legal impediment to the prompt transfer of own funds or repayment of liabilities among the parent undertaking and its subsidiaries;

| d) | the aggregate amount by which the actual own funds are less than the required minimum in all subsidiaries not included in the consolidation, and the name or names of such subsidiaries; and |
| --- | --- |

d)

the aggregate amount by which the actual own funds are less than the required minimum in all subsidiaries not included in the consolidation, and the name or names of such subsidiaries; and

| e) | if applicable, the circumstance of making use of the provisions laid down in Articles 69 and 70. |
| --- | --- |

e)

if applicable, the circumstance of making use of the provisions laid down in Articles 69 and 70.

| 3. | The following information shall be disclosed by the credit institutions regarding their own funds:






  a) | summary information on the terms and conditions of the main features of all own funds items and components thereof; |
| --- | --- | --- |

3.

The following information shall be disclosed by the credit institutions regarding their own funds:

a)

summary information on the terms and conditions of the main features of all own funds items and components thereof;

| b) | the amount of the original own funds, with separate disclosure of all positive items and deductions; |
| --- | --- |

b)

the amount of the original own funds, with separate disclosure of all positive items and deductions;

| c) | the total amount of additional own funds, and own funds as defined in Chapter IV of Directive 2006/.../EC; |
| --- | --- |

c)

the total amount of additional own funds, and own funds as defined in Chapter IV of Directive 2006/.../EC;

| d) | deductions from original and additional own funds pursuant to Article 66(2), with separate disclosure of items referred to in Article 57(q); and |
| --- | --- |

d)

deductions from original and additional own funds pursuant to Article 66(2), with separate disclosure of items referred to in Article 57(q); and

| e) | total eligible own funds, net of deductions and limits laid down in Article 66. |
| --- | --- |

e)

total eligible own funds, net of deductions and limits laid down in Article 66.

| 4. | The following information shall be disclosed regarding the compliance by the credit institution with the requirements laid down in Articles 75 and 123:






  a) | a summary of the credit institution's approach to assessing the adequacy of its internal capital to support current and future activities; |
| --- | --- | --- |

4.

The following information shall be disclosed regarding the compliance by the credit institution with the requirements laid down in Articles 75 and 123:

a)

a summary of the credit institution's approach to assessing the adequacy of its internal capital to support current and future activities;

| b) | for credit institutions calculating the risk-weighted exposure amounts in accordance with Articles 78 to 83, 8 per cent of the risk-weighted exposure amounts for each of the exposure classes specified in Article 79; |
| --- | --- |

b)

for credit institutions calculating the risk-weighted exposure amounts in accordance with Articles 78 to 83, 8 per cent of the risk-weighted exposure amounts for each of the exposure classes specified in Article 79;

| c) | for credit institutions calculating risk-weighted exposure amounts in accordance with Articles 84 to 89, 8 per cent of the risk-weighted exposure amounts for each of the exposure classes specified in Article 86. For the retail exposure class, this requirement applies to each of the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond. For the equity exposure class, this requirement applies to:






  i) | each of the approaches provided in Annex VII, Part 1, points 17 to 26; |
| --- | --- | --- |

c)

for credit institutions calculating risk-weighted exposure amounts in accordance with Articles 84 to 89, 8 per cent of the risk-weighted exposure amounts for each of the exposure classes specified in Article 86. For the retail exposure class, this requirement applies to each of the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond. For the equity exposure class, this requirement applies to:

i)

each of the approaches provided in Annex VII, Part 1, points 17 to 26;

| ii) | exchange traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures; |
| --- | --- |

ii)

exchange traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures;

| iii) | exposures subject to supervisory transition regarding capital requirements; and |
| --- | --- |

iii)

exposures subject to supervisory transition regarding capital requirements; and

| iv) | exposures subject to grandfathering provisions regarding capital requirements; |
| --- | --- |

iv)

exposures subject to grandfathering provisions regarding capital requirements;

| d) | minimum capital requirements calculated in accordance with Article 75, points (b) and (c); and |
| --- | --- |

d)

minimum capital requirements calculated in accordance with Article 75, points (b) and (c); and

| e) | minimum capital requirements calculated in accordance with Articles 103 to 105, and disclosed separately. |
| --- | --- |

e)

minimum capital requirements calculated in accordance with Articles 103 to 105, and disclosed separately.

| 5. | The following information shall be disclosed regarding the credit institution's exposure to counterparty credit risk as defined in Annex III, Part 1:






  a) | a discussion of the methodology used to assign internal capital and credit limits for counterparty credit exposures; |
| --- | --- | --- |

5.

The following information shall be disclosed regarding the credit institution's exposure to counterparty credit risk as defined in Annex III, Part 1:

a)

a discussion of the methodology used to assign internal capital and credit limits for counterparty credit exposures;

| b) | a discussion of policies for securing collateral and establishing credit reserves; |
| --- | --- |

b)

a discussion of policies for securing collateral and establishing credit reserves;

| c) | a discussion of policies with respect to wrong-way risk exposures; |
| --- | --- |

c)

a discussion of policies with respect to wrong-way risk exposures;

| d) | a discussion of the impact of the amount of collateral the credit institution would have to provide given a downgrade in its credit rating; |
| --- | --- |

d)

a discussion of the impact of the amount of collateral the credit institution would have to provide given a downgrade in its credit rating;

| e) | gross positive fair value of contracts, netting benefits, netted current credit exposure, collateral held and net derivatives credit exposure. Net derivatives credit exposure is the credit exposure on derivatives transactions after considering both the benefits from legally enforceable netting agreements and collateral arrangements; |
| --- | --- |

e)

gross positive fair value of contracts, netting benefits, netted current credit exposure, collateral held and net derivatives credit exposure. Net derivatives credit exposure is the credit exposure on derivatives transactions after considering both the benefits from legally enforceable netting agreements and collateral arrangements;

| f) | measures for exposure value under the methods set out in Parts 3 to 6 of Annex III, whichever method is applicable; |
| --- | --- |

f)

measures for exposure value under the methods set out in Parts 3 to 6 of Annex III, whichever method is applicable;

| g) | the notional value of credit derivative hedges, and the distribution of current credit exposure by types of credit exposure; |
| --- | --- |

g)

the notional value of credit derivative hedges, and the distribution of current credit exposure by types of credit exposure;

| h) | credit derivative transactions (notional), segregated between use for the credit institution's own credit portfolio, as well as in its intermediation activities, including the distribution of the credit derivatives products used, broken down further by protection bought and sold within each product group; and |
| --- | --- |

h)

credit derivative transactions (notional), segregated between use for the credit institution's own credit portfolio, as well as in its intermediation activities, including the distribution of the credit derivatives products used, broken down further by protection bought and sold within each product group; and

| i) | the estimate of α if the credit institution has received the approval of the competent authorities to estimate α. |
| --- | --- |

i)

the estimate of α if the credit institution has received the approval of the competent authorities to estimate α.

| 6. | The following information shall be disclosed regarding the credit institution's exposure to credit risk and dilution risk:






  a) | the definitions for accounting purposes of ‘past due’ and ‘impaired’; |
| --- | --- | --- |

6.

The following information shall be disclosed regarding the credit institution's exposure to credit risk and dilution risk:

a)

the definitions for accounting purposes of ‘past due’ and ‘impaired’;

| b) | a description of the approaches and methods adopted for determining value adjustments and provisions; |
| --- | --- |

b)

a description of the approaches and methods adopted for determining value adjustments and provisions;

| c) | the total amount of exposures after accounting offsets and without taking into account the effects of credit risk mitigation, and the average amount of the exposures over the period broken down by different types of exposure classes; |
| --- | --- |

c)

the total amount of exposures after accounting offsets and without taking into account the effects of credit risk mitigation, and the average amount of the exposures over the period broken down by different types of exposure classes;

| d) | the geographic distribution of the exposures, broken down in significant areas by material exposure classes, and further detailed if appropriate; |
| --- | --- |

d)

the geographic distribution of the exposures, broken down in significant areas by material exposure classes, and further detailed if appropriate;

| e) | the distribution of the exposures by industry or counterparty type, broken down by exposure classes, and further detailed if appropriate; |
| --- | --- |

e)

the distribution of the exposures by industry or counterparty type, broken down by exposure classes, and further detailed if appropriate;

| f) | the residual maturity breakdown of all the exposures, broken down by exposure classes, and further detailed if appropriate; |
| --- | --- |

f)

the residual maturity breakdown of all the exposures, broken down by exposure classes, and further detailed if appropriate;

| g) | by significant industry or counterparty type, the amount of:






  i) | impaired exposures and past due exposures, provided separately; |
| --- | --- | --- |

g)

by significant industry or counterparty type, the amount of:

i)

impaired exposures and past due exposures, provided separately;

| ii) | value adjustments and provisions; and |
| --- | --- |

ii)

value adjustments and provisions; and

| iii) | charges for value adjustments and provisions during the period; |
| --- | --- |

iii)

charges for value adjustments and provisions during the period;

| h) | the amount of the impaired exposures and past due exposures, provided separately, broken down by significant geographical areas including, if practical, the amounts of value adjustments and provisions related to each geographical area; |
| --- | --- |

h)

the amount of the impaired exposures and past due exposures, provided separately, broken down by significant geographical areas including, if practical, the amounts of value adjustments and provisions related to each geographical area;

| i) | the reconciliation of changes in the value adjustments and provisions for impaired exposures, shown separately. The information shall comprise:






  i) | a description of the type of value adjustments and provisions; |
| --- | --- | --- |

i)

the reconciliation of changes in the value adjustments and provisions for impaired exposures, shown separately. The information shall comprise:

i)

a description of the type of value adjustments and provisions;

| ii) | the opening balances; |
| --- | --- |

ii)

the opening balances;

| iii) | the amounts taken against the provisions during the period; |
| --- | --- |

iii)

the amounts taken against the provisions during the period;

| iv) | the amounts set aside or reversed for estimated probable losses on exposures during the period, any other adjustments including those determined by exchange rate differences, business combinations, acquisitions and disposals of subsidiaries, and transfers between provisions; and |
| --- | --- |

iv)

the amounts set aside or reversed for estimated probable losses on exposures during the period, any other adjustments including those determined by exchange rate differences, business combinations, acquisitions and disposals of subsidiaries, and transfers between provisions; and

| v) | the closing balances. |
| --- | --- |

v)

the closing balances.

Value adjustments and recoveries recorded directly to the income statement shall be disclosed separately.

| 7. | For credit institutions calculating the risk-weighted exposure amounts in accordance with Articles 78 to 83, the following information shall be disclosed for each of the exposure classes specified in Article 79:






  a) | the names of the nominated ECAIs and ECAs and the reasons for any changes; |
| --- | --- | --- |

7.

For credit institutions calculating the risk-weighted exposure amounts in accordance with Articles 78 to 83, the following information shall be disclosed for each of the exposure classes specified in Article 79:

a)

the names of the nominated ECAIs and ECAs and the reasons for any changes;

| b) | the exposure classes for which each ECAI or ECA is used; |
| --- | --- |

b)

the exposure classes for which each ECAI or ECA is used;

| c) | a description of the process used to transfer the issuer and issue credit assessments onto items not included in the trading book; |
| --- | --- |

c)

a description of the process used to transfer the issuer and issue credit assessments onto items not included in the trading book;

| d) | the association of the external rating of each nominated ECAI or ECA with the credit quality steps prescribed in Annex VI, taking into account that this information needs not be disclosed if the credit institution complies with the standard association published by the competent authority; and |
| --- | --- |

d)

the association of the external rating of each nominated ECAI or ECA with the credit quality steps prescribed in Annex VI, taking into account that this information needs not be disclosed if the credit institution complies with the standard association published by the competent authority; and

| e) | the exposure values and the exposure values after credit risk mitigation associated with each credit quality step prescribed in Annex VI, as well as those deducted from own funds. |
| --- | --- |

e)

the exposure values and the exposure values after credit risk mitigation associated with each credit quality step prescribed in Annex VI, as well as those deducted from own funds.

| 8. | The credit institutions calculating the risk-weighted exposure amounts in accordance with Annex VII, Part 1, points 6 or 19 to 21 shall disclose the exposures assigned to each category in Table 1 in point 6 of Annex VII, Part 1, or to each risk weight mentioned in points 19 to 21 of Annex VII, Part 1. |
| --- | --- |

8.

The credit institutions calculating the risk-weighted exposure amounts in accordance with Annex VII, Part 1, points 6 or 19 to 21 shall disclose the exposures assigned to each category in Table 1 in point 6 of Annex VII, Part 1, or to each risk weight mentioned in points 19 to 21 of Annex VII, Part 1.

| 9. | The credit institutions calculating their capital requirements in accordance with Article 75, points (b) and (c) shall disclose those requirements separately for each risk referred to in those provisions. |
| --- | --- |

9.

The credit institutions calculating their capital requirements in accordance with Article 75, points (b) and (c) shall disclose those requirements separately for each risk referred to in those provisions.

| 10. | The following information shall be disclosed by each credit institution which calculates its capital requirements in accordance with Annex V to Directive 2006/.../EC:






  a) | for each sub-portfolio covered:






  i) | the characteristics of the models used; |
| --- | --- | --- | --- |

10.

The following information shall be disclosed by each credit institution which calculates its capital requirements in accordance with Annex V to Directive 2006/.../EC:

a)

for each sub-portfolio covered:

i)

the characteristics of the models used;

| ii) | a description of stress testing applied to the sub-portfolio; |
| --- | --- |

ii)

a description of stress testing applied to the sub-portfolio;

| iii) | a description of the approaches used for back-testing and validating the accuracy and consistency of the internal models and modelling processes; |
| --- | --- |

iii)

a description of the approaches used for back-testing and validating the accuracy and consistency of the internal models and modelling processes;

| b) | the scope of acceptance by the competent authority; and |
| --- | --- |

b)

the scope of acceptance by the competent authority; and

| c) | a description of the extent and methodologies for compliance with the requirements set out in Annex VII, Part B to Directive 2006/.../EC. |
| --- | --- |

c)

a description of the extent and methodologies for compliance with the requirements set out in Annex VII, Part B to Directive 2006/.../EC.

| 11. | The following information shall be disclosed by the credit institutions on operational risk:






  a) | the approaches for the assessment of own funds requirements for operational risk that the credit institution qualifies for; and |
| --- | --- | --- |

11.

The following information shall be disclosed by the credit institutions on operational risk:

a)

the approaches for the assessment of own funds requirements for operational risk that the credit institution qualifies for; and

| b) | a description of the methodology set out in Article 105, if used by the credit institution, including a discussion of relevant internal and external factors considered in the credit institution's measurement approach. In the case of partial use, the scope and coverage of the different methodologies used. |
| --- | --- |

b)

a description of the methodology set out in Article 105, if used by the credit institution, including a discussion of relevant internal and external factors considered in the credit institution's measurement approach. In the case of partial use, the scope and coverage of the different methodologies used.

| 12. | The following information shall be disclosed regarding the exposures in equities not included in the trading book:






  a) | the differentiation between exposures based on their objectives, including for capital gains relationship and strategic reasons, and an overview of the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation and any significant changes in these practices; |
| --- | --- | --- |

12.

The following information shall be disclosed regarding the exposures in equities not included in the trading book:

a)

the differentiation between exposures based on their objectives, including for capital gains relationship and strategic reasons, and an overview of the accounting techniques and valuation methodologies used, including key assumptions and practices affecting valuation and any significant changes in these practices;

| b) | the balance sheet value, the fair value and, for those exchange-traded, a comparison to the market price where it is materially different from the fair value; |
| --- | --- |

b)

the balance sheet value, the fair value and, for those exchange-traded, a comparison to the market price where it is materially different from the fair value;

| c) | the types, nature and amounts of exchange-traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures; |
| --- | --- |

c)

the types, nature and amounts of exchange-traded exposures, private equity exposures in sufficiently diversified portfolios, and other exposures;

| d) | the cumulative realised gains or losses arising from sales and liquidations in the period; and |
| --- | --- |

d)

the cumulative realised gains or losses arising from sales and liquidations in the period; and

| e) | the total unrealised gains or losses, the total latent revaluation gains or losses, and any of these amounts included in the original or additional own funds. |
| --- | --- |

e)

the total unrealised gains or losses, the total latent revaluation gains or losses, and any of these amounts included in the original or additional own funds.

| 13. | The following information shall be disclosed by credit institutions on their exposure to interest rate risk on positions not included in the trading book:






  a) | the nature of the interest rate risk and the key assumptions (including assumptions regarding loan prepayments and behaviour of non-maturity deposits), and frequency of measurement of the interest rate risk; and |
| --- | --- | --- |

13.

The following information shall be disclosed by credit institutions on their exposure to interest rate risk on positions not included in the trading book:

a)

the nature of the interest rate risk and the key assumptions (including assumptions regarding loan prepayments and behaviour of non-maturity deposits), and frequency of measurement of the interest rate risk; and

| b) | the variation in earnings, economic value or other relevant measure used by the management for upward and downward rate shocks according to management's method for measuring the interest rate risk, broken down by currency. |
| --- | --- |

b)

the variation in earnings, economic value or other relevant measure used by the management for upward and downward rate shocks according to management's method for measuring the interest rate risk, broken down by currency.

| 14. | The credit institutions calculating risk weighted exposure amounts in accordance with Articles 94 to 101 shall disclose the following information:






  a) | a description of the credit institution's objectives in relation to securitisation activity; |
| --- | --- | --- |

14.

The credit institutions calculating risk weighted exposure amounts in accordance with Articles 94 to 101 shall disclose the following information:

a)

a description of the credit institution's objectives in relation to securitisation activity;

| b) | the roles played by the credit institution in the securitisation process; |
| --- | --- |

b)

the roles played by the credit institution in the securitisation process;

| c) | an indication of the extent of the credit institution's involvement in each of them; |
| --- | --- |

c)

an indication of the extent of the credit institution's involvement in each of them;

| d) | the approaches to calculating risk weighted exposure amounts that the credit institution follows for its securitisation activities; |
| --- | --- |

d)

the approaches to calculating risk weighted exposure amounts that the credit institution follows for its securitisation activities;

| e) | a summary of the credit institution's accounting policies for securitisation activities, including:






  i) | whether the transactions are treated as sales or financings; |
| --- | --- | --- |

e)

a summary of the credit institution's accounting policies for securitisation activities, including:

i)

whether the transactions are treated as sales or financings;

| ii) | the recognition of gains on sales; |
| --- | --- |

ii)

the recognition of gains on sales;

| iii) | the key assumptions for valuing retained interests; and |
| --- | --- |

iii)

the key assumptions for valuing retained interests; and

| iv) | the treatment of synthetic securitisations if this is not covered by other accounting policies; |
| --- | --- |

iv)

the treatment of synthetic securitisations if this is not covered by other accounting policies;

| f) | the names of the ECAIs used for securitisations and the types of exposure for which each agency is used; |
| --- | --- |

f)

the names of the ECAIs used for securitisations and the types of exposure for which each agency is used;

| g) | the total outstanding amount of exposures securitised by the credit institution and subject to the securitisation framework (broken down into traditional and synthetic), by exposure type; |
| --- | --- |

g)

the total outstanding amount of exposures securitised by the credit institution and subject to the securitisation framework (broken down into traditional and synthetic), by exposure type;

| h) | for exposures securitised by the credit institution and subject to the securitisation framework, a breakdown by exposure type of the amount of impaired and past due exposures securitised, and the losses recognised by the credit institution during the period; |
| --- | --- |

h)

for exposures securitised by the credit institution and subject to the securitisation framework, a breakdown by exposure type of the amount of impaired and past due exposures securitised, and the losses recognised by the credit institution during the period;

| i) | the aggregate amount of securitisation positions retained or purchased, broken down by exposure type; |
| --- | --- |

i)

the aggregate amount of securitisation positions retained or purchased, broken down by exposure type;

| j) | the aggregate amount of securitisation positions retained or purchased, broken down into a meaningful number of risk weight bands. Positions that have been risk weighted at 1 250 % or deducted shall be disclosed separately; |
| --- | --- |

j)

the aggregate amount of securitisation positions retained or purchased, broken down into a meaningful number of risk weight bands. Positions that have been risk weighted at 1 250 % or deducted shall be disclosed separately;

| k) | the aggregate outstanding amount of securitised revolving exposures segregated by the originator's interest and the investors' interest; and |
| --- | --- |

k)

the aggregate outstanding amount of securitised revolving exposures segregated by the originator's interest and the investors' interest; and

| l) | a summary of the securitisation activity in the period, including the amount of exposures securitised (by exposure type), and recognised gain or loss on sale by exposure type. |
| --- | --- |

l)

a summary of the securitisation activity in the period, including the amount of exposures securitised (by exposure type), and recognised gain or loss on sale by exposure type.

Part 3 — Qualifying requirements for the use of particular instruments or methodologies

| 1. | The credit institutions calculating the risk-weighted exposure amounts in accordance with Articles 84 to 89 shall disclose the following information:






  a) | the competent authority's acceptance of approach or approved transition; |
| --- | --- | --- |

1.

The credit institutions calculating the risk-weighted exposure amounts in accordance with Articles 84 to 89 shall disclose the following information:

a)

the competent authority's acceptance of approach or approved transition;

| b) | an explanation and review of:






  i) | the structure of internal rating systems and relation between internal and external ratings; |
| --- | --- | --- |

b)

an explanation and review of:

i)

the structure of internal rating systems and relation between internal and external ratings;

| ii) | the use of internal estimates other than for calculating risk-weighted exposure amounts in accordance with Articles 84 to 89; |
| --- | --- |

ii)

the use of internal estimates other than for calculating risk-weighted exposure amounts in accordance with Articles 84 to 89;

| iii) | the process for managing and recognising credit risk mitigation; and |
| --- | --- |

iii)

the process for managing and recognising credit risk mitigation; and

| iv) | the control mechanisms for rating systems including a description of independence, accountability, and rating systems review; |
| --- | --- |

iv)

the control mechanisms for rating systems including a description of independence, accountability, and rating systems review;

| c) | a description of the internal ratings process, provided separately for the following exposure classes:






  i) | central governments and central banks; |
| --- | --- | --- |

c)

a description of the internal ratings process, provided separately for the following exposure classes:

i)

central governments and central banks;

| ii) | institutions; |
| --- | --- |

ii)

institutions;

| iii) | corporate, including SMEs, specialised lending and purchased corporate receivables; |
| --- | --- |

iii)

corporate, including SMEs, specialised lending and purchased corporate receivables;

| iv) | retail, for each of the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond; and |
| --- | --- |

iv)

retail, for each of the categories of exposures to which the different correlations in Annex VII, Part 1, points 10 to 13 correspond; and

| v) | equities; |
| --- | --- |

v)

equities;

| d) | the exposure values for each of the exposure classes specified in Article 86. Exposures to central governments and central banks, institutions and corporates where credit institutions use own estimates of LGDs or conversion factors for the calculation of risk-weighted exposure amounts shall be disclosed separately from exposures for which the credit institutions do not use such estimates; |
| --- | --- |

d)

the exposure values for each of the exposure classes specified in Article 86. Exposures to central governments and central banks, institutions and corporates where credit institutions use own estimates of LGDs or conversion factors for the calculation of risk-weighted exposure amounts shall be disclosed separately from exposures for which the credit institutions do not use such estimates;

| e) | for each of the exposure classes central governments and central banks, institutions, corporate and equity, and across a sufficient number of obligor grades (including default) to allow for a meaningful differentiation of credit risk, credit institutions shall disclose:






  i) | the total exposures (for the exposure classes central governments and central banks, institutions and corporate, the sum of outstanding loans and exposure values for undrawn commitments; for equities, the outstanding amount); |
| --- | --- | --- |

e)

for each of the exposure classes central governments and central banks, institutions, corporate and equity, and across a sufficient number of obligor grades (including default) to allow for a meaningful differentiation of credit risk, credit institutions shall disclose:

i)

the total exposures (for the exposure classes central governments and central banks, institutions and corporate, the sum of outstanding loans and exposure values for undrawn commitments; for equities, the outstanding amount);

| ii) | for the credit institutions using own LGD estimates for the calculation of risk-weighted exposure amounts, the exposure-weighted average LGD in percentage; |
| --- | --- |

ii)

for the credit institutions using own LGD estimates for the calculation of risk-weighted exposure amounts, the exposure-weighted average LGD in percentage;

| iii) | the exposure-weighted average risk weight; and |
| --- | --- |

iii)

the exposure-weighted average risk weight; and

| iv) | for the credit institutions using own estimates of conversion factors for the calculation of risk-weighted exposure amounts, the amount of undrawn commitments and exposure-weighted average exposure values for each exposure class; |
| --- | --- |

iv)

for the credit institutions using own estimates of conversion factors for the calculation of risk-weighted exposure amounts, the amount of undrawn commitments and exposure-weighted average exposure values for each exposure class;

| f) | for the retail exposure class and for each of the categories as defined under point (c)(iv), either the disclosures outlined under (e) above (if applicable, on a pooled basis), or an analysis of exposures (outstanding loans and exposure values for undrawn commitments) against a sufficient number of EL grades to allow for a meaningful differentiation of credit risk (if applicable, on a pooled basis); |
| --- | --- |

f)

for the retail exposure class and for each of the categories as defined under point (c)(iv), either the disclosures outlined under (e) above (if applicable, on a pooled basis), or an analysis of exposures (outstanding loans and exposure values for undrawn commitments) against a sufficient number of EL grades to allow for a meaningful differentiation of credit risk (if applicable, on a pooled basis);

| g) | the actual value adjustments in the preceding period for each exposure class (for retail, for each of the categories as defined under point (c)(iv) and how they differ from past experience; |
| --- | --- |

g)

the actual value adjustments in the preceding period for each exposure class (for retail, for each of the categories as defined under point (c)(iv) and how they differ from past experience;

| h) | a description of the factors that impacted on the loss experience in the preceding period (for example, has the credit institution experienced higher than average default rates, or higher than average LGDs and conversion factors); and |
| --- | --- |

h)

a description of the factors that impacted on the loss experience in the preceding period (for example, has the credit institution experienced higher than average default rates, or higher than average LGDs and conversion factors); and

| i) | the credit institution's estimates against actual outcomes over a longer period. At a minimum, this shall include information on estimates of losses against actual losses in each exposure class (for retail, for each of the categories as defined under point (c)(iv) over a period sufficient to allow for a meaningful assessment of the performance of the internal rating processes for each exposure class (for retail for each of the categories as defined under point (c)(iv). Where appropriate, the credit institutions shall further decompose this to provide analysis of PD and, for the credit institutions using own estimates of LGDs and/or conversion factors, LGD and conversion factor outcomes against estimates provided in the quantitative risk assessment disclosures above. |
| --- | --- |

i)

the credit institution's estimates against actual outcomes over a longer period. At a minimum, this shall include information on estimates of losses against actual losses in each exposure class (for retail, for each of the categories as defined under point (c)(iv) over a period sufficient to allow for a meaningful assessment of the performance of the internal rating processes for each exposure class (for retail for each of the categories as defined under point (c)(iv). Where appropriate, the credit institutions shall further decompose this to provide analysis of PD and, for the credit institutions using own estimates of LGDs and/or conversion factors, LGD and conversion factor outcomes against estimates provided in the quantitative risk assessment disclosures above.

For the purposes of point (c), the description shall include the types of exposure included in the exposure class, the definitions, methods and data for estimation and validation of PD and, if applicable, LGD and conversion factors, including assumptions employed in the derivation of these variables, and the descriptions of material deviations from the definition of default as set out in Annex VII, Part 4, points 44 to 48, including the broad segments affected by such deviations.

| 2. | The credit institutions applying credit risk mitigation techniques shall disclose the following information:






  a) | the policies and processes for, and an indication of the extent to which the entity makes use of, on- and off-balance sheet netting; |
| --- | --- | --- |

2.

The credit institutions applying credit risk mitigation techniques shall disclose the following information:

a)

the policies and processes for, and an indication of the extent to which the entity makes use of, on- and off-balance sheet netting;

| b) | the policies and processes for collateral valuation and management; |
| --- | --- |

b)

the policies and processes for collateral valuation and management;

| c) | a description of the main types of collateral taken by the credit institution; |
| --- | --- |

c)

a description of the main types of collateral taken by the credit institution;

| d) | the main types of guarantor and credit derivative counterparty and their creditworthiness; |
| --- | --- |

d)

the main types of guarantor and credit derivative counterparty and their creditworthiness;

| e) | information about market or credit risk concentrations within the credit mitigation taken; |
| --- | --- |

e)

information about market or credit risk concentrations within the credit mitigation taken;

| f) | for credit institutions calculating risk-weighted exposure amounts in accordance with Articles 78 to 83 or 84 to 89, but not providing own estimates of LGDs or conversion factors in respect of the exposure class, separately for each exposure class, the total exposure value (after, where applicable, on- or off-balance sheet netting) that is covered — after the application of volatility adjustments — by eligible financial collateral, and other eligible collateral; and |
| --- | --- |

f)

for credit institutions calculating risk-weighted exposure amounts in accordance with Articles 78 to 83 or 84 to 89, but not providing own estimates of LGDs or conversion factors in respect of the exposure class, separately for each exposure class, the total exposure value (after, where applicable, on- or off-balance sheet netting) that is covered — after the application of volatility adjustments — by eligible financial collateral, and other eligible collateral; and

| g) | for credit institutions calculating risk-weighted exposure amounts in accordance with Articles 78 to 83 or 84 to 89, separately for each exposure class, the total exposure (after, where applicable, on- or off-balance sheet netting) that is covered by guarantees or credit derivatives. For the equity exposure class, this requirement applies to each of the approaches provided in Annex VII, Part 1, points 17 to 26. |
| --- | --- |

g)

for credit institutions calculating risk-weighted exposure amounts in accordance with Articles 78 to 83 or 84 to 89, separately for each exposure class, the total exposure (after, where applicable, on- or off-balance sheet netting) that is covered by guarantees or credit derivatives. For the equity exposure class, this requirement applies to each of the approaches provided in Annex VII, Part 1, points 17 to 26.

| 3. | The credit institutions using the approach set out in Article 105 for the calculation of their own funds requirements for operational risk shall disclose a description of the use of insurance for the purpose of mitigating the risk. |
| --- | --- |

3.

The credit institutions using the approach set out in Article 105 for the calculation of their own funds requirements for operational risk shall disclose a description of the use of insurance for the purpose of mitigating the risk.

ANNEX XIII

PART A — REPEALED DIRECTIVES TOGETHER WITH THEIR SUCCESSIVE AMENDMENTS (referred to in Article 158)

Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions

Directive 2000/28/EC of the European Parliament and of the Council of 18 September 2000 amending Directive 2000/12/EC relating to the taking up and pursuit of the business of credit institutions

Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council

| | Only Art. 29.1(a)(b), Art. 29.2, Art. 29.4(a)(b), Art. 29.5, Art. 29.6, Art. 29.7, Art. 29.8, Art. 29.9, Art. 29.10, Art. 29.11 |
| --- | --- |

Only Art. 29.1(a)(b), Art. 29.2, Art. 29.4(a)(b), Art. 29.5, Art. 29.6, Art. 29.7, Art. 29.8, Art. 29.9, Art. 29.10, Art. 29.11

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC

| | Only Art. 68 |
| --- | --- |

Only Art. 68

Commission Directive 2004/69/EC of 27 April 2004 amending Directive 2000/12/EC of the European Parliament and of the Council as regards the definition of ‘multilateral development banks’

Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 amending Council Directives 73/239/EEC, 85/611/EEC, 91/675/EEC, 92/49/EEC and 93/6/EEC and Directives 94/19/EC, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and 2002/87/EC in order to establish a new organisational structure for financial services committees

| | Only Article 3 |
| --- | --- |

Only Article 3

NON-REPEALED MODIFICATIONS

| | Act of Accession 2003 |
| --- | --- |

Act of Accession 2003

PART B — DEADLINES FOR TRANSPOSITION (referred to in Article 158)

| Directive | | Deadline for transposition |
| --- | --- | --- |
| Directive 2000/12/EC | | — |
| Directive 2000/28/EC | | 27.4.2002 |
| Directive 2002/87/EC | | 11.8.2004 |
| Directive 2004/39/EC | | 30.4.2006/31.1.2007 |
| Directive 2004/69/EC | | 30.6.2004 |
| Directive 2005/1/EC | | 13.5.2005 |

Directive

Deadline for transposition

Directive 2000/12/EC

—

Directive 2000/28/EC

27.4.2002

Directive 2002/87/EC

11.8.2004

Directive 2004/39/EC

30.4.2006/31.1.2007

Directive 2004/69/EC

30.6.2004

Directive 2005/1/EC

13.5.2005

ANΝΕΧ XIV

CORRELATION TABLE

| This Directive | Directive 2000/12/EC | Directive 2000/28/EC | Directive 2002/87/EC | Directive 2004/39/EC | Directive 2005/1/EC |
| --- | --- | --- | --- | --- | --- |
| Article 1 | Article 2(1) and (2) | | | | |
| Article 2 | Article 2(3)
  Act of Accession | | | | |
| Article 2 | Article 2(4) | | | | |
| Article 3 | Article 2(5) and (6) | | | | |
| Article 3(1), third subparagraph | | | | | Article 3(2) |
| Article 4(1) | Article 1(1) | | | | |
| Article 4(2) to (5) | | Article 1(2) to (5) | | | |
| Article 4(7) to (9) | | Article 1(6) to (8) | | | |
| Article 4(10) | | | Article 29(1)(a) | | |
| Article 4(11) to (14) | Article 1(10), (12) and (13) | | | | |
| Article 4(21) and 22) | | | Article 29(1)(b) | | |
| Article 4(23) | Article 1(23) | | | | |
| Article 4(45) to (47) | Article 1(25) to (27) | | | | |
| Article 5 | | | | | |
| Article 6 | Article 4 | | | | |
| Article 7 | Article 8 | | | | |
| Article 8 | Article 9 | | | | |
| Article 9(1) | Article 5(1) and 1(11) | | | | |
| Article 9(2) | Article 5(2) | | | | |
| Article 10 | Article 5(3) to (7) | | | | |
| Article 11 | Article 6 | | | | |
| Article 12 | Article 7 | | | | |
| Article 13 | Article 10 | | | | |
| Article 14 | Article 11 | | | | |
| Article 15(1) | Article 12 | | | | |
| Article 15(2) and (3) | | | Article 29(2) | | |
| Article 16 | Article 13 | | | | |
| Article 17 | Article 14 | | | | |
| Article 18 | Article 15 | | | | |
| Article 19(1) | Article 16(1) | | | | |
| Article 19(2) | | | Article 29(3) | | |
| Article 20 | Article 16(3) | | | | |
| Article 21 | Article 16(4) to (6) | | | | |
| Article 22 | Article 17 | | | | |
| Article 23 | Article 18 | | | | |
| Article 24(1) | Article 19(1) to (3) | | | | |
| Article 24(2) | Article 19(6) | | | | |
| Article 24(3) | Article 19(4) | | | | |
| Article 25(1) to (3) | Article 20(1) to (3), first and second subparagraphs | | | | |
| Article 25(3) | Article 19(5) | | | | |
| Article 25(4) | Article 20(3) third subparagraph | | | | |
| Article 26 | Article 20(4) to (7) | | | | |
| Article 27 | Article 1(3), second sentence | | | | |
| Article 28 | Article 21 | | | | |
| Article 29 | Article 22 | | | | |
| Article 30 | Article 22(2) to (4) | | | | |
| Article 31 | Article 22(5) | | | | |
| Article 32 | Article 22(6) | | | | |
| Article 33 | Article 22(7) | | | | |
| Article 34 | Article 22(8) | | | | |
| Article 35 | Article 22(9) | | | | |
| Article 36 | Article 22(10) | | | | |
| Article 37 | Article 22(11) | | | | |
| Article 38 | Article 24 | | | | |
| Article 39(1) and (2) | Article 25 | | | | |
| Article 39(3) | | | | | Article 3(8) |
| Article 40 | Article 26 | | | | |
| Article 41 | Article 27 | | | | |
| Article 42 | Article 28 | | | | |
| Article 43 | Article 29 | | | | |
| Article 44 | Article 30(1) to (3) | | | | |
| Article 45 | Article 30(4) | | | | |
| Article 46 | Article 30(3) | | | | |
| Article 47 | Article 30(5) | | | | |
| Article 48 | Article 30(6) and (7) | | | | |
| Article 49 | Article 30(8) | | | | |
| Article 50 | Article 30(9), first and second subparagraphs | | | | |
| Article 51 | Article 30(9), third subparagraph | | | | |
| Article 52 | Article 30(10) | | | | |
| Article 53 | Article 31 | | | | |
| Article 54 | Article 32 | | | | |
| Article 55 | Article 33 | | | | |
| Article 56 | Article 34(1) | | | | |
| Article 57 | Article 34(2), first subparagraph;
  and Article 34(2), point 2, second sentence | | Article 29(4)(a) | | |
| Article 58 | | | Article 29(4)(b) | | |
| Article 59 | | | Article 29(4)(b) | | |
| Article 60 | | | Article 29(4)(b) | | |
| Article 61 | Article 34(3) and (4) | | | | |
| Article 63 | Article 35 | | | | |
| Article 64 | Article 36 | | | | |
| Article 65 | Article 37 | | | | |
| Article 66(1) and (2) | Article 38(1) and (2) | | | | |
| Article 67 | Article 39 | | | | |
| Article 73 | Article 52(3) | | | | |
| Article 106 | Article 1(24) | | | | |
| Article 107 | Article 1(1), third subparagraph | | | | |
| Article 108 | Article 48(1) | | | | |
| Article 109 | Article 48(4), first subparagraph | | | | |
| Article 110 | Article 48(2) to (4), second subparagraph | | | | |
| Article 111 | Article 49(1) to (5) | | | | |
| Article 113 | Article 49(4), (6) and (7) | | | | |
| Article 115 | Article 49(8) and (9) | | | | |
| Article 116 | Article 49(10) | | | | |
| Article 117 | Article 49(11) | | | | |
| Article 118 | Article 50 | | | | |
| Article 120 | Article 51(1), (2) and (5) | | | | |
| Article 121 | Article 51(4) | | | | |
| Article 122(1) and (2) | Article 51(6) | | Article 29(5) | | |
| Article 125 | Article 53(1) and (2) | | | | |
| Article 126 | Article 53(3) | | | | |
| Article 128 | Article 53(5) | | | | |
| Article 133(1) | Article 54(1) | | Article 29(7)(a) | | |
| Article 133(2) and (3) | Article 54(2) and (3) | | | | |
| Article 134(1) | Article 54(4), first subparagraph | | | | |
| Article 134(2) | Article 54(4), second subparagraph | | | | |
| Article 135 | | | Article 29(8) | | |
| Article 137 | Article 55 | | | | |
| Article 138 | | | Article 29(9) | | |
| Article 139 | Article 56(1) to (3) | | | | |
| Article 140 | Article 56(4) to (6) | | | | |
| Article 141 | Article 56(7) | | Article 29(10) | | |
| Article 142 | Article 56(8) | | | | |
| Article 143 | | | Article 29(11) | | Article 3(10) |
| Article 150 | Article 60(1) | | | | |
| Article 151 | Article 60(2) | | | | Article 3(10) |
| Article 158 | Article 67 | | | | |
| Article 159 | Article 68 | | | | |
| Article 160 | Article 69 | | | | |
| Annex I, points 1 to 14, excluding the final paragraph | Annex I | | | | |
| Annex I, final paragraph | | | | Article 68 | |
| Annex II | Annex II | | | | |
| Annex III | Annex III | | | | |
| Annex IV | Annex IV | | | | |

This Directive

Directive 2000/12/EC

Directive 2000/28/EC

Directive 2002/87/EC

Directive 2004/39/EC

Directive 2005/1/EC

Article 1

Article 2(1) and (2)

Article 2

Article 2(3)

Act of Accession

Article 2

Article 2(4)

Article 3

Article 2(5) and (6)

Article 3(1), third subparagraph

Article 3(2)

Article 4(1)

Article 1(1)

Article 4(2) to (5)

Article 1(2) to (5)

Article 4(7) to (9)

Article 1(6) to (8)

Article 4(10)

Article 29(1)(a)

Article 4(11) to (14)

Article 1(10), (12) and (13)

Article 4(21) and 22)

Article 29(1)(b)

Article 4(23)

Article 1(23)

Article 4(45) to (47)

Article 1(25) to (27)

Article 5

Article 6

Article 4

Article 7

Article 8

Article 8

Article 9

Article 9(1)

Article 5(1) and 1(11)

Article 9(2)

Article 5(2)

Article 10

Article 5(3) to (7)

Article 11

Article 6

Article 12

Article 7

Article 13

Article 10

Article 14

Article 11

Article 15(1)

Article 12

Article 15(2) and (3)

Article 29(2)

Article 16

Article 13

Article 17

Article 14

Article 18

Article 15

Article 19(1)

Article 16(1)

Article 19(2)

Article 29(3)

Article 20

Article 16(3)

Article 21

Article 16(4) to (6)

Article 22

Article 17

Article 23

Article 18

Article 24(1)

Article 19(1) to (3)

Article 24(2)

Article 19(6)

Article 24(3)

Article 19(4)

Article 25(1) to (3)

Article 20(1) to (3), first and second subparagraphs

Article 25(3)

Article 19(5)

Article 25(4)

Article 20(3) third subparagraph

Article 26

Article 20(4) to (7)

Article 27

Article 1(3), second sentence

Article 28

Article 21

Article 29

Article 22

Article 30

Article 22(2) to (4)

Article 31

Article 22(5)

Article 32

Article 22(6)

Article 33

Article 22(7)

Article 34

Article 22(8)

Article 35

Article 22(9)

Article 36

Article 22(10)

Article 37

Article 22(11)

Article 38

Article 24

Article 39(1) and (2)

Article 25

Article 39(3)

Article 3(8)

Article 40

Article 26

Article 41

Article 27

Article 42

Article 28

Article 43

Article 29

Article 44

Article 30(1) to (3)

Article 45

Article 30(4)

Article 46

Article 30(3)

Article 47

Article 30(5)

Article 48

Article 30(6) and (7)

Article 49

Article 30(8)

Article 50

Article 30(9), first and second subparagraphs

Article 51

Article 30(9), third subparagraph

Article 52

Article 30(10)

Article 53

Article 31

Article 54

Article 32

Article 55

Article 33

Article 56

Article 34(1)

Article 57

Article 34(2), first subparagraph;

and Article 34(2), point 2, second sentence

Article 29(4)(a)

Article 58

Article 29(4)(b)

Article 59

Article 29(4)(b)

Article 60

Article 29(4)(b)

Article 61

Article 34(3) and (4)

Article 63

Article 35

Article 64

Article 36

Article 65

Article 37

Article 66(1) and (2)

Article 38(1) and (2)

Article 67

Article 39

Article 73

Article 52(3)

Article 106

Article 1(24)

Article 107

Article 1(1), third subparagraph

Article 108

Article 48(1)

Article 109

Article 48(4), first subparagraph

Article 110

Article 48(2) to (4), second subparagraph

Article 111

Article 49(1) to (5)

Article 113

Article 49(4), (6) and (7)

Article 115

Article 49(8) and (9)

Article 116

Article 49(10)

Article 117

Article 49(11)

Article 118

Article 50

Article 120

Article 51(1), (2) and (5)

Article 121

Article 51(4)

Article 122(1) and (2)

Article 51(6)

Article 29(5)

Article 125

Article 53(1) and (2)

Article 126

Article 53(3)

Article 128

Article 53(5)

Article 133(1)

Article 54(1)

Article 29(7)(a)

Article 133(2) and (3)

Article 54(2) and (3)

Article 134(1)

Article 54(4), first subparagraph

Article 134(2)

Article 54(4), second subparagraph

Article 135

Article 29(8)

Article 137

Article 55

Article 138

Article 29(9)

Article 139

Article 56(1) to (3)

Article 140

Article 56(4) to (6)

Article 141

Article 56(7)

Article 29(10)

Article 142

Article 56(8)

Article 143

Article 29(11)

Article 3(10)

Article 150

Article 60(1)

Article 151

Article 60(2)

Article 3(10)

Article 158

Article 67

Article 159

Article 68

Article 160

Article 69

Annex I, points 1 to 14, excluding the final paragraph

Annex I

Annex I, final paragraph

Article 68

Annex II

Annex II

Annex III

Annex III

Annex IV

Annex IV

P6_TA(2005)0352

Capital adequacy of investment firms and credit institutions ***I

European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council recasting Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions (COM(2004)0486 — C6-0144/2004 — 2004/0159(COD))

(Codecision procedure: first reading)

The European Parliament,

| — | having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0486) (1), |
| --- | --- |

—

having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0486) (1),

| — | having regard to Article 251(2) and Article 47(2) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0144/2004), |
| --- | --- |

—

having regard to Article 251(2) and Article 47(2) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0144/2004),

| — | having regard to Rule 51 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 51 of its Rules of Procedure,

| — | having regard to the report of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Legal Affairs (A6-0257/2005), |
| --- | --- |

—

having regard to the report of the Committee on Economic and Monetary Affairs and the opinion of the Committee on Legal Affairs (A6-0257/2005),

| 1. | Approves the Commission proposal as amended; |
| --- | --- |

1.

Approves the Commission proposal as amended;

| 2. | Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text; |
| --- | --- |

2.

Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

| 3. | Instructs its President to forward its position to the Council and Commission. |
| --- | --- |

3.

Instructs its President to forward its position to the Council and Commission.

---

(1)  Not yet published in OJ.

P6_TC1-COD(2004)0159

Position of the European Parliament adopted at first reading on 28 September 2005 with a view to the adoption of Directive 2006/.../ΕC of the European Parliament and of the Council on the capital adequacy of investment firms and credit institutions (recast)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 47(2) thereof,

Having regard to the proposal from the Commission,

Having regard to the Opinion of the European Economic and Social Committee (1),

Having regard to the Opinion of the European Central Bank (2),

After consulting the Committee of the Regions,

Acting in accordance with the procedure laid down in Article 251 of the Treaty (3),

Whereas:

| (1) | Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions (4) has been significantly amended on several occasions. Now that new amendments are being made to the said Directive, it is desirable, in order to clarify matters, that it should be recast. |
| --- | --- |

(1)

Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investment firms and credit institutions (4) has been significantly amended on several occasions. Now that new amendments are being made to the said Directive, it is desirable, in order to clarify matters, that it should be recast.

| (2) | One of the objectives of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (5) is to allow investment firms authorised by the competent authorities of their home Member State and supervised by the same authorities to establish branches and provide services freely in other Member States. That Directive accordingly provides for the coordination of the rules governing the authorisation and pursuit of the business of investment firms. |
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(2)

One of the objectives of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (5) is to allow investment firms authorised by the competent authorities of their home Member State and supervised by the same authorities to establish branches and provide services freely in other Member States. That Directive accordingly provides for the coordination of the rules governing the authorisation and pursuit of the business of investment firms.

| (3) | Directive 2004/39/EC does not, however, establish common standards for the own funds of investment firms nor indeed does it establish the amounts of the initial capital of such firms or a common framework for monitoring the risks incurred by them. |
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(3)

Directive 2004/39/EC does not, however, establish common standards for the own funds of investment firms nor indeed does it establish the amounts of the initial capital of such firms or a common framework for monitoring the risks incurred by them.

| (4) | It is appropriate to effect only the essential harmonisation that is necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision systems; in order to achieve mutual recognition within the framework of the internal financial market, measures should be laid down to coordinate the definition of the own funds of investment firms, the establishment of the amounts of their initial capital and the establishment of a common framework for monitoring the risks incurred by investment firms. |
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(4)

It is appropriate to effect only the essential harmonisation that is necessary and sufficient to secure the mutual recognition of authorisation and of prudential supervision systems; in order to achieve mutual recognition within the framework of the internal financial market, measures should be laid down to coordinate the definition of the own funds of investment firms, the establishment of the amounts of their initial capital and the establishment of a common framework for monitoring the risks incurred by investment firms.

| (5) | Since the objectives of this Directive, namely the establishment of the capital adequacy requirements applying to investment firms and credit institutions, the rules for their calculation and the rules for their prudential supervision, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and the effects of the proposed action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve its objectives. |
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(5)

Since the objectives of this Directive, namely the establishment of the capital adequacy requirements applying to investment firms and credit institutions, the rules for their calculation and the rules for their prudential supervision, cannot be sufficiently achieved by the Member States and can therefore, by reason of the scale and the effects of the proposed action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve its objectives.

| (6) | It is appropriate to establish different amounts of initial capital depending on the range of activities that investment firms are authorised to undertake. |
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(6)

It is appropriate to establish different amounts of initial capital depending on the range of activities that investment firms are authorised to undertake.

| (7) | Existing investment firms should be permitted, under certain conditions, to continue their business even if they do not comply with the minimum amount of initial capital fixed for new investment firms. |
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(7)

Existing investment firms should be permitted, under certain conditions, to continue their business even if they do not comply with the minimum amount of initial capital fixed for new investment firms.

| (8) | Member States should be able to establish rules stricter than those provided for in this Directive. |
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(8)

Member States should be able to establish rules stricter than those provided for in this Directive.

| (9) | The smooth operation of the internal market requires not only legal rules but also close and regular cooperation and significantly enhanced convergence of regulatory and supervisory practices between the competent authorities of the Member States. |
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(9)

The smooth operation of the internal market requires not only legal rules but also close and regular cooperation and significantly enhanced convergence of regulatory and supervisory practices between the competent authorities of the Member States.

| (10) | The Commission Communication of 11 May 1999 entitled ‘Implementing the framework for financial markets: Action Plan’ listed a number of goals that need to be achieved in order to complete the internal market in financial services. The Lisbon European Council of 23 and 24 March 2000 set the goal of implementing the action plan by 2005. Recasting of the provisions on own funds is a key element of the action plan. |
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(10)

The Commission Communication of 11 May 1999 entitled ‘Implementing the framework for financial markets: Action Plan’ listed a number of goals that need to be achieved in order to complete the internal market in financial services. The Lisbon European Council of 23 and 24 March 2000 set the goal of implementing the action plan by 2005. Recasting of the provisions on own funds is a key element of the action plan.

| (11) | Since investment firms face in respect of their trading book business the same risks as credit institutions, it is appropriate for the pertinent provisions of Directive 2006/.../EC of the European Parliament and of the Council of ... relating to the taking up and pursuit of the business of credit institutions (6) to apply equally to investment firms. |
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(11)

Since investment firms face in respect of their trading book business the same risks as credit institutions, it is appropriate for the pertinent provisions of Directive 2006/.../EC of the European Parliament and of the Council of ... relating to the taking up and pursuit of the business of credit institutions (6) to apply equally to investment firms.

| (12) | The own funds of investment firms or credit institutions (hereinafter referred to collectively as ‘institutions’) can serve to absorb losses which are not matched by a sufficient volume of profits, to ensure the continuity of institutions and to protect investors. The own funds also serve as an important yardstick for the competent authorities, in particular for the assessment of the solvency of institutions and for other prudential purposes. Furthermore, institutions, engage in direct competition with each other in the internal market. Therefore, in order to strengthen the Community financial system and to prevent distortions of competition, it is appropriate to lay down common basic standards for own funds. |
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(12)

The own funds of investment firms or credit institutions (hereinafter referred to collectively as ‘institutions’) can serve to absorb losses which are not matched by a sufficient volume of profits, to ensure the continuity of institutions and to protect investors. The own funds also serve as an important yardstick for the competent authorities, in particular for the assessment of the solvency of institutions and for other prudential purposes. Furthermore, institutions, engage in direct competition with each other in the internal market. Therefore, in order to strengthen the Community financial system and to prevent distortions of competition, it is appropriate to lay down common basic standards for own funds.

| (13) | For the purposes of recital (12), it is appropriate for the definition of own funds as laid down in Directive 2006/.../EC to serve as a basis, and to provide for supplementary specific rules which take into account the different scope of market risk related capital requirements. |
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(13)

For the purposes of recital (12), it is appropriate for the definition of own funds as laid down in Directive 2006/.../EC to serve as a basis, and to provide for supplementary specific rules which take into account the different scope of market risk related capital requirements.

| (14) | As regards credit institutions, common standards have already been established for the supervision and monitoring of different types of risks by Directive 2000/12/EC. |
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(14)

As regards credit institutions, common standards have already been established for the supervision and monitoring of different types of risks by Directive 2000/12/EC.

| (15) | In that respect, the provisions on minimum capital requirements should be considered in conjunction with other specific instruments which also harmonise the fundamental techniques of the supervision of institutions. |
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(15)

In that respect, the provisions on minimum capital requirements should be considered in conjunction with other specific instruments which also harmonise the fundamental techniques of the supervision of institutions.

| (16) | It is necessary to develop common standards for market risks incurred by credit institutions and provide a complementary framework for the supervision of the risks incurred by institutions, in particular market risks, and more especially position risks, counterparty/settlement risks and foreign-exchange risks. |
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(16)

It is necessary to develop common standards for market risks incurred by credit institutions and provide a complementary framework for the supervision of the risks incurred by institutions, in particular market risks, and more especially position risks, counterparty/settlement risks and foreign-exchange risks.

| (17) | It is necessary to provide for the concept of a ‘trading book’ comprising positions in securities and other financial instruments which are held for trading purposes and which are subject mainly to market risks and exposures relating to certain financial services provided to customers. |
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(17)

It is necessary to provide for the concept of a ‘trading book’ comprising positions in securities and other financial instruments which are held for trading purposes and which are subject mainly to market risks and exposures relating to certain financial services provided to customers.

| (18) | With a view to reducing the administrative burden for institutions with negligible trading-book business in both absolute and relative terms, such institutions should be able to apply Directive 2006/.../EC, rather than the requirements laid down in Annexes I and II to this Directive. |
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(18)

With a view to reducing the administrative burden for institutions with negligible trading-book business in both absolute and relative terms, such institutions should be able to apply Directive 2006/.../EC, rather than the requirements laid down in Annexes I and II to this Directive.

| (19) | It is important that monitoring of settlement/delivery risks should take account of the existence of systems offering adequate protection reducing those risks. |
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(19)

It is important that monitoring of settlement/delivery risks should take account of the existence of systems offering adequate protection reducing those risks.

| (20) | In any case, institutions should comply with this Directive as regards the coverage of the foreign-exchange risks on their overall business. Lower capital requirements should be imposed for positions in closely correlated currencies, whether statistically confirmed or arising out of binding intergovernmental agreements. |
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(20)

In any case, institutions should comply with this Directive as regards the coverage of the foreign-exchange risks on their overall business. Lower capital requirements should be imposed for positions in closely correlated currencies, whether statistically confirmed or arising out of binding intergovernmental agreements.

| (21) | The capital requirements for commodity dealers, including those dealers currently exempt from the requirements of Directive 2004/39/EC, will be reviewed as appropriate in conjunction with the review of that exemption as set out in Article 65(3) of that Directive. |
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(21)

The capital requirements for commodity dealers, including those dealers currently exempt from the requirements of Directive 2004/39/EC, will be reviewed as appropriate in conjunction with the review of that exemption as set out in Article 65(3) of that Directive.

| (22) | The goal of liberalisation of gas and electricity markets is both economically and politically important for the Community. With this in mind, the capital requirements and other prudential rules to be applied to firms active in those markets should be proportionate and should not unduly interfere with achievement of the goal of liberalisation. This goal should, in particular, be kept in mind when the reviews referred to in recital 21 are carried out. |
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(22)

The goal of liberalisation of gas and electricity markets is both economically and politically important for the Community. With this in mind, the capital requirements and other prudential rules to be applied to firms active in those markets should be proportionate and should not unduly interfere with achievement of the goal of liberalisation. This goal should, in particular, be kept in mind when the reviews referred to in recital 21 are carried out.

| (23) | The existence of internal systems for monitoring and controlling interest-rate risks on all business of institutions is a particularly important way of minimising such risks. Consequently, such systems should be supervised by the competent authorities. |
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(23)

The existence of internal systems for monitoring and controlling interest-rate risks on all business of institutions is a particularly important way of minimising such risks. Consequently, such systems should be supervised by the competent authorities.

| (24) | Since Directive 2006/.../EC does not establish common rules for the monitoring and control of large exposures in activities which are principally subject to market risks, it is therefore appropriate to provide for such rules. |
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(24)

Since Directive 2006/.../EC does not establish common rules for the monitoring and control of large exposures in activities which are principally subject to market risks, it is therefore appropriate to provide for such rules.

| (25) | Operational risk is a significant risk faced by institutions and requires coverage by own funds. It is essential to take account of the diversity of institutions in the EU by providing alternative approaches. |
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(25)

Operational risk is a significant risk faced by institutions and requires coverage by own funds. It is essential to take account of the diversity of institutions in the EU by providing alternative approaches.

| (26) | Directive 2006/.../EC states the principle of consolidation. It does not establish common rules for the consolidation of financial institutions which are involved in activities principally subject to market risks. |
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(26)

Directive 2006/.../EC states the principle of consolidation. It does not establish common rules for the consolidation of financial institutions which are involved in activities principally subject to market risks.

| (27) | In order to ensure adequate solvency of institutions within a group, it is essential that the minimum capital requirements apply on the basis of the consolidated financial situation of the group. In order to ensure that own funds are appropriately distributed within the group and are available to protect investments where needed, the minimum capital requirements should apply to individual institutions within a group, unless this objective can be effectively achieved by other means. |
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(27)

In order to ensure adequate solvency of institutions within a group, it is essential that the minimum capital requirements apply on the basis of the consolidated financial situation of the group. In order to ensure that own funds are appropriately distributed within the group and are available to protect investments where needed, the minimum capital requirements should apply to individual institutions within a group, unless this objective can be effectively achieved by other means.

| (28) | Directive 2006/.../EC does not apply to groups which include one or more investment firms but no credit institutions. A common framework for the introduction of the supervision of investment firms on a consolidated basis should therefore be provided for. |
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(28)

Directive 2006/.../EC does not apply to groups which include one or more investment firms but no credit institutions. A common framework for the introduction of the supervision of investment firms on a consolidated basis should therefore be provided for.

| (29) | Institutions should ensure that they have internal capital which, having regard to the risks to which they are or might be exposed, is adequate in quantity, quality and distribution. Accordingly, institutions should have strategies and processes in place for assessing and maintaining the adequacy of their internal capital. |
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(29)

Institutions should ensure that they have internal capital which, having regard to the risks to which they are or might be exposed, is adequate in quantity, quality and distribution. Accordingly, institutions should have strategies and processes in place for assessing and maintaining the adequacy of their internal capital.

| (30) | Competent authorities should evaluate the adequacy of own funds of institutions, having regard to the risks to which the latter are exposed. |
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(30)

Competent authorities should evaluate the adequacy of own funds of institutions, having regard to the risks to which the latter are exposed.

| (31) | In order for the internal banking market to operate effectively, the Committee of European Banking Supervisors should contribute to the consistent application of this Directive and to the convergence of supervisory practices throughout the Community, and should report on a yearly basis to the Community Institutions on progress made. |
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(31)

In order for the internal banking market to operate effectively, the Committee of European Banking Supervisors should contribute to the consistent application of this Directive and to the convergence of supervisory practices throughout the Community, and should report on a yearly basis to the Community Institutions on progress made.

| (32) | In order for the internal market to operate with increasing effectiveness it is essential that there should be significantly enhanced convergence in the implementation and application of the provisions of harmonising Community legislation. |
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(32)

In order for the internal market to operate with increasing effectiveness it is essential that there should be significantly enhanced convergence in the implementation and application of the provisions of harmonising Community legislation.

| (33) | For the same reason, and to ensure that Community institutions which are active in several Member States are not disproportionately burdened as a result of the continued responsibilities of individual Member State competent authorities for authorisation and supervision, it is essential significantly to enhance the cooperation between competent authorities. In this context the role of the consolidating supervisor should be strengthened. |
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(33)

For the same reason, and to ensure that Community institutions which are active in several Member States are not disproportionately burdened as a result of the continued responsibilities of individual Member State competent authorities for authorisation and supervision, it is essential significantly to enhance the cooperation between competent authorities. In this context the role of the consolidating supervisor should be strengthened.

| (34) | In order for the internal market to operate with increasing effectiveness and for citizens of the Union to be afforded adequate levels of transparency, it is necessary that competent authorities disclose publicly and in a way which allows for meaningful comparison the manner in which the requirements of this Directive are implemented. |
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(34)

In order for the internal market to operate with increasing effectiveness and for citizens of the Union to be afforded adequate levels of transparency, it is necessary that competent authorities disclose publicly and in a way which allows for meaningful comparison the manner in which the requirements of this Directive are implemented.

| (35) | In order to strengthen market discipline and stimulate institutions to improve their market strategy, risk control and internal management organisation, appropriate public disclosures by institutions should be provided for. |
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(35)

In order to strengthen market discipline and stimulate institutions to improve their market strategy, risk control and internal management organisation, appropriate public disclosures by institutions should be provided for.

| (36) | The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (7). |
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(36)

The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (7).

| (37) | In its Resolution of 5 February 2002 on the implementation of financial services legislation (8), the Parliament requested that the Parliament and the Council should have an equal role in supervising the way in which the Commission exercises its executive role in order to reflect the legislative powers of Parliament under Article 251 of the Treaty. In the solemn declaration made before the Parliament the same day, by its President, the Commission supported this request. On 11 December 2002, the Commission proposed amendments to Decision 1999/468/EC and then submitted an amended proposal on 22 April 2004. The Parliament considers that this proposal does not preserve its legislative prerogatives. In the Parliament's view, the Parliament and the Council should have the opportunity of evaluating the conferral of implementing powers on the Commission within a determined period. It is therefore appropriate to limit the period during which the Commission may adopt implementing measures. |
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(37)

In its Resolution of 5 February 2002 on the implementation of financial services legislation (8), the Parliament requested that the Parliament and the Council should have an equal role in supervising the way in which the Commission exercises its executive role in order to reflect the legislative powers of Parliament under Article 251 of the Treaty. In the solemn declaration made before the Parliament the same day, by its President, the Commission supported this request. On 11 December 2002, the Commission proposed amendments to Decision 1999/468/EC and then submitted an amended proposal on 22 April 2004. The Parliament considers that this proposal does not preserve its legislative prerogatives. In the Parliament's view, the Parliament and the Council should have the opportunity of evaluating the conferral of implementing powers on the Commission within a determined period. It is therefore appropriate to limit the period during which the Commission may adopt implementing measures.

| (38) | The Parliament should be given a period of three months from the first transmission of draft amendments and implementing measures to allow it to examine them and to give its opinion. However, in urgent and duly justified cases, it should be possible to shorten this period. If, within that period, a resolution is adopted by the Parliament, the Commission should re-examine the draft amendments or measures. |
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(38)

The Parliament should be given a period of three months from the first transmission of draft amendments and implementing measures to allow it to examine them and to give its opinion. However, in urgent and duly justified cases, it should be possible to shorten this period. If, within that period, a resolution is adopted by the Parliament, the Commission should re-examine the draft amendments or measures.

| (39) | In order to avoid disruption to markets and to ensure continuity in overall levels of own funds, it is appropriate to provide for specific transitional arrangements. |
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(39)

In order to avoid disruption to markets and to ensure continuity in overall levels of own funds, it is appropriate to provide for specific transitional arrangements.

| (40) | This Directive respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union as general principles of Community law. |
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(40)

This Directive respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union as general principles of Community law.

| (41) | The obligation to transpose this Directive into national law should be confined to those provisions that represent a substantive change compared to earlier directives. The obligation to transpose the provisions that remain unchanged exists under the earlier directives. |
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(41)

The obligation to transpose this Directive into national law should be confined to those provisions that represent a substantive change compared to earlier directives. The obligation to transpose the provisions that remain unchanged exists under the earlier directives.

| (42) | This Directive should be without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Part B of Annex VIII, |
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(42)

This Directive should be without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Part B of Annex VIII,

HAVE ADOPTED THIS DIRECTIVE:

CHAPTER I

SUBJECT MATTER, SCOPE AND DEFINITIONS

Section 1

Subject matter and scope

Article 1

1.   This Directive lays down the capital adequacy requirements applying to investment firms and credit institutions, the rules for their calculation and the rules for their prudential supervision. Member States shall apply the requirements of this Directive to investment firms and credit institutions as defined in Article 3.

2.   A Member State may impose additional or more stringent requirements on those investment firms and credit institutions that it has authorised.

Article 2

1.   Subject to Articles 18, 20, 22 to 32, 34 and 39 of this Directive, Articles 68 to 73 of Directive 2006/.../EC shall apply mutatis mutandis to investment firms. In applying Articles 70 to 72 of Directive 2006/.../EC to investment firms, every reference to a parent credit institution in a Member State shall be construed as a reference to a parent investment firm in a Member State and every reference to an EU parent credit institution shall be construed as a reference to an EU parent investment firm.

Where a credit institution has as a parent undertaking a parent investment firm in a Member State, only that parent investment firm shall be subject to requirements on a consolidated basis in accordance with Articles 71 to 73 of Directive 2006/.../EC.

Where an investment firm has as a parent undertaking a parent credit institution in a Member State, only that parent credit institution shall be subject to requirements on a consolidated basis in accordance with Articles 71 to 73 of Directive 2006/.../EC.

Where a financial holding company has as a subsidiary both a credit institution and an investment firm, requirements on the basis of the consolidated financial situation of the financial holding company shall apply to the credit institution.

2.   When a group covered by paragraph 1 does not include a credit institution, Directive 2006/.../EC shall apply, subject to the following:

| a) | every reference to credit institutions shall be construed as a reference to investment firms; |
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a)

every reference to credit institutions shall be construed as a reference to investment firms;

| b) | in Articles 125 and 140(2) of Directive 2006/.../EC, each reference to other articles of that Directive shall be construed as a reference to Directive 2004/39/EC; |
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b)

in Articles 125 and 140(2) of Directive 2006/.../EC, each reference to other articles of that Directive shall be construed as a reference to Directive 2004/39/EC;

| c) | for the purposes of Article 39(3) of Directive 2006/.../EC, references to the European Banking Committee shall be construed as references to the Council and the Commission; and |
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c)

for the purposes of Article 39(3) of Directive 2006/.../EC, references to the European Banking Committee shall be construed as references to the Council and the Commission; and

| d) | by way of derogation from Article 140(1) of Directive 2006/.../EC, where a group does not include a credit institution, the first sentence of that Article shall be replaced by the following: ‘Where an investment firm, a financial holding company or a mixed-activity holding company controls one or more subsidiaries which are insurance companies, the competent authorities and the authorities entrusted with the public task of supervising insurance undertakings shall cooperate closely’. |
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d)

by way of derogation from Article 140(1) of Directive 2006/.../EC, where a group does not include a credit institution, the first sentence of that Article shall be replaced by the following: ‘Where an investment firm, a financial holding company or a mixed-activity holding company controls one or more subsidiaries which are insurance companies, the competent authorities and the authorities entrusted with the public task of supervising insurance undertakings shall cooperate closely’.

Section 2

Definitions

Article 3

1.   For the purposes of this Directive the following definitions shall apply:

| a) | ‘credit institutions’ means credit institutions as defined in Article 4(1) of Directive 2006/.../EC; |
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a)

‘credit institutions’ means credit institutions as defined in Article 4(1) of Directive 2006/.../EC;

| b) | ‘investment firms’ means institutions as defined in Article 4(1)(1) of Directive 2004/39/EC, which are subject to the requirements imposed by that Directive, excluding:






  i) | credit institutions; |
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b)

‘investment firms’ means institutions as defined in Article 4(1)(1) of Directive 2004/39/EC, which are subject to the requirements imposed by that Directive, excluding:

i)

credit institutions;

| ii) | local firms as defined in point (p); and |
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ii)

local firms as defined in point (p); and

| iii) | firms which are only authorised to provide the service of investment advice and/or receive and transmit orders from investors without holding money or securities belonging to their clients and which for that reason may not at any time place themselves in debt with those clients; |
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iii)

firms which are only authorised to provide the service of investment advice and/or receive and transmit orders from investors without holding money or securities belonging to their clients and which for that reason may not at any time place themselves in debt with those clients;

| c) | ‘institutions’ means credit institutions and investment firms; |
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c)

‘institutions’ means credit institutions and investment firms;

| d) | ‘recognised third-country investment firms’ means firms meeting the following conditions:






  i) | firms which, if they were established within the Community, would be covered by the definition of investment firm; |
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d)

‘recognised third-country investment firms’ means firms meeting the following conditions:

i)

firms which, if they were established within the Community, would be covered by the definition of investment firm;

| ii) | firms which are authorised in a third country; and |
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ii)

firms which are authorised in a third country; and

| iii) | firms which are subject to and comply with prudential rules considered by the competent authorities as at least as stringent as those laid down by this Directive; |
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iii)

firms which are subject to and comply with prudential rules considered by the competent authorities as at least as stringent as those laid down by this Directive;

| e) | ‘financial instruments’ means any contract that gives rise to both a financial asset of one party and a financial liability or equity instrument of another party; |
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e)

‘financial instruments’ means any contract that gives rise to both a financial asset of one party and a financial liability or equity instrument of another party;

| f) | ‘parent investment firm in a Member State’ means an investment firm which has an institution or financial institution as a subsidiary or which holds a participation in one or both such entities, and which is not itself a subsidiary of another institution authorised in the same Member State or of a financial holding company set up in the same Member State; |
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f)

‘parent investment firm in a Member State’ means an investment firm which has an institution or financial institution as a subsidiary or which holds a participation in one or both such entities, and which is not itself a subsidiary of another institution authorised in the same Member State or of a financial holding company set up in the same Member State;

| (g) | ‘EU parent investment firm’ means a parent investment firm in a Member State which is not a subsidiary of another institution authorised in any Member State or of a financial holding company set up in any Member State; |
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(g)

‘EU parent investment firm’ means a parent investment firm in a Member State which is not a subsidiary of another institution authorised in any Member State or of a financial holding company set up in any Member State;

| h) | ‘over-the-counter (OTC) derivative instruments’ means the items falling within the list in Annex IV to Directive 2006/.../EC other than those items to which an exposure value of zero is attributed under point 6 of Part 2 of Annex III to that Directive; |
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h)

‘over-the-counter (OTC) derivative instruments’ means the items falling within the list in Annex IV to Directive 2006/.../EC other than those items to which an exposure value of zero is attributed under point 6 of Part 2 of Annex III to that Directive;

| i) | ‘regulated market’ means a market as defined in Article 4(1)(14) of Directive 2004/39/EC; |
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i)

‘regulated market’ means a market as defined in Article 4(1)(14) of Directive 2004/39/EC;

| j) | ‘convertible’ means a security which, at the option of the holder, may be exchanged for another security; |
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j)

‘convertible’ means a security which, at the option of the holder, may be exchanged for another security;

| k) | ‘warrant’ means a security which gives the holder the right to purchase an underlying asset at a stipulated price until or at the expiry date of the warrant and which may be settled by the delivery of the underlying itself or by cash settlement; |
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k)

‘warrant’ means a security which gives the holder the right to purchase an underlying asset at a stipulated price until or at the expiry date of the warrant and which may be settled by the delivery of the underlying itself or by cash settlement;

| l) | ‘stock financing’ means positions where physical stock has been sold forward and the cost of funding has been locked in until the date of the forward sale; |
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l)

‘stock financing’ means positions where physical stock has been sold forward and the cost of funding has been locked in until the date of the forward sale;

| m) | ‘repurchase agreement’ and ‘reverse repurchase agreement’ mean any agreement in which an institution or its counterparty - transfers securities or commodities or guaranteed rights relating to title to securities or commodities where that guarantee is issued by a recognised exchange which holds the rights to the securities or commodities and the agreement does not allow an institution to transfer or pledge a particular security or commodity to more than one counterparty at one time, subject to a commitment to repurchase them — or substituted securities or commodities of the same description — at a specified price on a future date specified, or to be specified, by the transferor, being a repurchase agreement for the institution selling the securities or commodities and a reverse repurchase agreement for the institution buying them; |
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m)

‘repurchase agreement’ and ‘reverse repurchase agreement’ mean any agreement in which an institution or its counterparty - transfers securities or commodities or guaranteed rights relating to title to securities or commodities where that guarantee is issued by a recognised exchange which holds the rights to the securities or commodities and the agreement does not allow an institution to transfer or pledge a particular security or commodity to more than one counterparty at one time, subject to a commitment to repurchase them — or substituted securities or commodities of the same description — at a specified price on a future date specified, or to be specified, by the transferor, being a repurchase agreement for the institution selling the securities or commodities and a reverse repurchase agreement for the institution buying them;

| n) | ‘securities or commodities lending’ and ‘securities or commodities borrowing’ mean any transaction in which an institution or its counterparty transfers securities or commodities against appropriate collateral, subject to a commitment that the borrower will return equivalent securities or commodities at some future date or when requested to do so by the transferor, that transaction being securities or commodities lending for the institution transferring the securities or commodities and being securities or commodities borrowing for the institution to which they are transferred; |
| --- | --- |

n)

‘securities or commodities lending’ and ‘securities or commodities borrowing’ mean any transaction in which an institution or its counterparty transfers securities or commodities against appropriate collateral, subject to a commitment that the borrower will return equivalent securities or commodities at some future date or when requested to do so by the transferor, that transaction being securities or commodities lending for the institution transferring the securities or commodities and being securities or commodities borrowing for the institution to which they are transferred;

| o) | ‘clearing member’ means a member of the exchange or the clearing house which has a direct contractual relationship with the central counterparty (market guarantor); |
| --- | --- |

o)

‘clearing member’ means a member of the exchange or the clearing house which has a direct contractual relationship with the central counterparty (market guarantor);

| p) | ‘local firm’ means a firm dealing for its own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets; |
| --- | --- |

p)

‘local firm’ means a firm dealing for its own account on markets in financial futures or options or other derivatives and on cash markets for the sole purpose of hedging positions on derivatives markets, or dealing for the accounts of other members of those markets and being guaranteed by clearing members of the same markets, where responsibility for ensuring the performance of contracts entered into by such a firm is assumed by clearing members of the same markets;

| q) | ‘delta’ means the expected change in an option price as a proportion of a small change in the price of the instrument underlying the option; |
| --- | --- |

q)

‘delta’ means the expected change in an option price as a proportion of a small change in the price of the instrument underlying the option;

| r) | ‘own funds’ means own funds as defined in Directive 2006/.../EC; and |
| --- | --- |

r)

‘own funds’ means own funds as defined in Directive 2006/.../EC; and

| s) | ‘capital’ means own funds. |
| --- | --- |

s)

‘capital’ means own funds.

For the purposes of applying supervision on a consolidated basis, the term ‘investment firm’ shall include third-country investment firms.

For the purposes of point (e), financial instruments shall include both primary financial instruments or cash instruments and derivative financial instruments the value of which is derived from the price of an underlying financial instrument, a rate, an index or the price of another underlying item, and include as a minimum the instruments specified in Section C of Annex I to Directive 2004/39/EC.

2.   The terms ‘parent undertaking’, ‘subsidiary undertaking’, ‘asset management company’ and ‘financial institution’ shall cover undertakings defined in Article 4 of Directive 2006/.../EC.

The terms ‘financial holding company’, ‘parent financial holding company in a Member State’, ‘EU parent financial holding company’ and ‘ancillary services undertaking’ shall cover undertakings defined in Article 4 of Directive 2006/.../EC, save that every reference to credit institutions shall be read as a reference to institutions.

3.   For the purposes of applying Directive 2006/.../EC to groups covered by Article 2(1) which do not include a credit institution, the following definitions shall apply:

| a) | ‘financial holding company’ means a financial institution the subsidiary undertakings of which are either exclusively or mainly investment firms or other financial institutions, at least one of which is an investment firm, and which is not a mixed financial holding company within the meaning of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (9); |
| --- | --- |

a)

‘financial holding company’ means a financial institution the subsidiary undertakings of which are either exclusively or mainly investment firms or other financial institutions, at least one of which is an investment firm, and which is not a mixed financial holding company within the meaning of Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate (9);

| b) | ‘mixed-activity holding company’ means a parent undertaking, other than a financial holding company or an investment firm or a mixed financial holding company within the meaning of Directive 2002/87/EC, the subsidiaries of which include at least one investment firm; and |
| --- | --- |

b)

‘mixed-activity holding company’ means a parent undertaking, other than a financial holding company or an investment firm or a mixed financial holding company within the meaning of Directive 2002/87/EC, the subsidiaries of which include at least one investment firm; and

| c) | ‘competent authorities’ means the national authorities which are empowered by law or regulation to supervise investment firms. |
| --- | --- |

c)

‘competent authorities’ means the national authorities which are empowered by law or regulation to supervise investment firms.

CHAPTER II

INITIAL CAPITAL

Article 4

For the purposes of this Directive, ‘initial capital’ shall be comprised of the items referred to in Article 57(a) and (b) of Directive 2006/.../EC.

Article 5

1.   An investment firm that does not deal in any financial instruments for its own account or underwrite issues of financial instruments on a firm commitment basis, but which holds clients' money and/or securities and which offers one or more of the following services, shall have initial capital of 125 000 Euro:

| a) | the reception and transmission of investors' orders for financial instruments; |
| --- | --- |

a)

the reception and transmission of investors' orders for financial instruments;

| b) | the execution of investors' orders for financial instruments; or |
| --- | --- |

b)

the execution of investors' orders for financial instruments; or

| c) | the management of individual portfolios of investments in financial instruments. |
| --- | --- |

c)

the management of individual portfolios of investments in financial instruments.

2.   The competent authorities may allow an investment firm which executes investors' orders for financial instruments to hold such instruments for its own account if the following conditions are met:

| a) | such positions arise only as a result of the firm's failure to match investors' orders precisely; |
| --- | --- |

a)

such positions arise only as a result of the firm's failure to match investors' orders precisely;

| b) | the total market value of all such positions is subject to a ceiling of 15 % of the firm's initial capital; |
| --- | --- |

b)

the total market value of all such positions is subject to a ceiling of 15 % of the firm's initial capital;

| c) | the firm meets the requirements laid down in Articles 18, 20 and 28; and |
| --- | --- |

c)

the firm meets the requirements laid down in Articles 18, 20 and 28; and

| d) | such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question. |
| --- | --- |

d)

such positions are incidental and provisional in nature and strictly limited to the time required to carry out the transaction in question.

The holding of non-trading-book positions in financial instruments in order to invest own funds shall not be considered as dealing in relation to the services set out in paragraph 1 or for the purposes of paragraph 3.

3.   Member States may reduce the amount referred to in paragraph 1 to 50 000 Euro where a firm is not authorised to hold clients' money or securities, to deal for its own account, or to underwrite issues on a firm commitment basis.

Article 6

Local firms shall have initial capital of 50 000 Euro insofar as they benefit from the freedom of establishment or to provide services specified in Articles 31 and 32 of Directive 2004/39/EC.

Article 7

Coverage for the firms referred to in Article 3(1)(b)(iii) shall take one of the following forms:

| a) | initial capital of 50 000 Euro; |
| --- | --- |

a)

initial capital of 50 000 Euro;

| b) | professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least 1 000 000 Euro applying to each claim and in aggregate 1 500 000 Euro per year for all claims; or |
| --- | --- |

b)

professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least 1 000 000 Euro applying to each claim and in aggregate 1 500 000 Euro per year for all claims; or

| c) | a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to that referred to in points (a) or (b). |
| --- | --- |

c)

a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to that referred to in points (a) or (b).

The amounts referred to in the first sub-paragraph shall be periodically reviewed by the Commission in order to take account of changes in the European Index of Consumer Prices as published by Eurostat, in line with and at the same time as the adjustments made under Article 4(7) of Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation (10).

Article 8

If a firm as referred to in Article 3(1)(b)(iii) is also registered under Directive 2002/92/EC, it shall comply with Article 4(3) of that Directive and have coverage in one of the following forms:

| a) | initial capital of 25 000 Euro; |
| --- | --- |

a)

initial capital of 25 000 Euro;

| b) | professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least 500 000 Euro applying to each claim and in aggregate 750 000 Euro per year for all claims; or |
| --- | --- |

b)

professional indemnity insurance covering the whole territory of the Community or some other comparable guarantee against liability arising from professional negligence, representing at least 500 000 Euro applying to each claim and in aggregate 750 000 Euro per year for all claims; or

| c) | a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to that referred to in points (a) or (b). |
| --- | --- |

c)

a combination of initial capital and professional indemnity insurance in a form resulting in a level of coverage equivalent to that referred to in points (a) or (b).

Article 9

All investment firms other than those referred to in Articles 5 to 8 shall have initial capital of 730 000 Euro.

Article 10

1.   By way of derogation from Articles 5(1), 5(3), 6 and 9, Member States may continue an authorisation of investment firms and firms covered by Article 6 which was in existence before 31 December 1995, the own funds of which firms or investment firms are less than the initial capital levels specified for them in Articles 5(1), 5(3), 6 and 9.

The own funds of such firms or investment firms shall not fall below the highest reference level calculated after the date of notification contained in Directive 93/6/EEC. That reference level shall be the average daily level of own funds calculated over a six-month period preceding the date of calculation. It shall be calculated every six months in respect of the corresponding preceding period.

2.   If control of a firm covered by paragraph 1 is taken by a natural or legal person other than the person who controlled it previously, the own funds of that firm shall attain at least the level specified for them in Articles 5(1), 5(3), 6 and 9, except in the case of a first transfer by inheritance made after 31 December 1995, subject to the competent authorities' approval and for a period of not more than 10 years from the date of that transfer.

3.   In certain specific circumstances, and with the approval of the competent authorities, in the event of a merger of two or more investment firms and/or firms covered by Article 6, the own funds of the firm produced by the merger need not attain the level specified in Articles 5(1), 5(3), 6 and 9. Nevertheless, during any period when the level specified in Articles 5(1), 5(3), 6 and 9 has not been attained, the own funds of the new firm may not fall below the merged firms' total own funds at the time of the merger.

4.   The own funds of investment firms and firms covered by Article 6 may not fall below the level specified in Articles 5(1), 5(3), 6 and 9 and paragraphs 1 and 3 of this Article.

In the event that the own funds of such firms and investment firms fall below that level, the competent authorities may, where the circumstances justify it, allow such firms a limited period in which to rectify their situations or cease their activities.

CHAPTER III

TRADING BOOK

Article 11

1.   The trading book of an institution shall consist of all positions in financial instruments and commodities held either with trading intent or in order to hedge other elements of the trading book and which are either free of any restrictive covenants on their tradability or able to be hedged.

2.   Positions held with trading intent are those held intentionally for short-term resale and/or with the intention of benefiting from actual or expected short-term price differences between buying and selling prices or from other price or interest rate variations. The term ‘positions’ shall include proprietary positions and positions arising from client servicing and market making.

3.   Trading intent shall be evidenced on the basis of the strategies, policies and procedures set up by the institution to manage the position or portfolio in accordance with Part A of Annex VII.

4.   Institutions shall establish and maintain systems and controls to manage their trading book in accordance with Parts B and D of Annex VII.

5.   Internal hedges may be included in the trading book, in which case Part C of Annex VII shall apply.

CHAPTER IV

OWN FUNDS

Article 12

‘Original own funds’ means the sum of points (a) to (c), less the sum of points (i) to (k) of Article 57 of Directive 2006/.../EC.

The Commission shall, by 1 January 2009,,submit an appropriate proposal to the European Parliament and to the Council for amendment of this Chapter.

Article 13

1.   Subject to paragraphs 2 to 5 of this Article and Articles 14 to 17, the own funds of investment firms and credit institutions shall be determined in accordance with Directive 2006/.../EC.

In addition, the first subparagraph applies to investment firms which do not have one of the legal forms referred to in Article 1(1) of the Fourth Council Directive 78/660/EEC of 25 July 1978 on the annual accounts of certain types of companies (11).

2.   By way of derogation from paragraph 1, the competent authorities may permit those institutions which are obliged to meet the capital requirements calculated in accordance with Articles 21 and 28 to 32 and Annexes I and III to VI to use, for that purpose only, an alternative determination of own funds. No part of the own funds used for that purpose may be used simultaneously to meet other capital requirements.

Such an alternative determination shall be the sum of the items set out in points (a) to (c) of this subparagraph, minus the item set out in point (d), with the deduction of that last item being left to the discretion of the competent authorities:

| a) | own funds as defined in Directive 2006/.../EC, excluding only points (l) to (p) of Article 57 of that Directive for those investment firms which are required to deduct item (d) of this paragraph from the total of items (a) to (c); |
| --- | --- |

a)

own funds as defined in Directive 2006/.../EC, excluding only points (l) to (p) of Article 57 of that Directive for those investment firms which are required to deduct item (d) of this paragraph from the total of items (a) to (c);

| b) | an institution's net trading-book profits net of any foreseeable charges or dividends, less net losses on its other business, provided that none of those amounts has already been included in item (a) of this paragraph as one of the items set out in points (b) or (k) of Article 57 of Directive 2006/.../EC; |
| --- | --- |

b)

an institution's net trading-book profits net of any foreseeable charges or dividends, less net losses on its other business, provided that none of those amounts has already been included in item (a) of this paragraph as one of the items set out in points (b) or (k) of Article 57 of Directive 2006/.../EC;

| c) | subordinated loan capital and/or the items referred to in paragraph 5 of this Article, subject to the conditions set out in paragraphs 3 and 4 of this Article and in Article 14; and |
| --- | --- |

c)

subordinated loan capital and/or the items referred to in paragraph 5 of this Article, subject to the conditions set out in paragraphs 3 and 4 of this Article and in Article 14; and

| d) | illiquid assets as specified in Article 15. |
| --- | --- |

d)

illiquid assets as specified in Article 15.

3.   The subordinated loan capital referred to in point (c) of the second subparagraph of paragraph 2 shall have an initial maturity of at least two years. It shall be fully paid up and the loan agreement shall not include any clause providing that in specified circumstances, other than the winding up of the institution, the debt will become repayable before the agreed repayment date, unless the competent authorities approve the repayment. Neither the principal nor the interest on such subordinated loan capital may be repaid if such repayment would mean that the own funds of the institution in question would then amount to less than 100 % of that institution's overall capital requirements.

In addition, an institution shall notify the competent authorities of all repayments on such subordinated loan capital as soon as its own funds fall below 120 % of its overall capital requirements.

4.   The subordinated loan capital referred to in point (c) of the second subparagraph of paragraph 2 may not exceed a maximum of 150 % of the original own funds left to meet the requirements calculated in accordance with Articles 21 and 28 to 32 and Annexes I to VI and may approach that maximum only in particular circumstances acceptable to the competent authorities.

5.   The competent authorities may permit institutions to replace the subordinated loan capital referred to in point (c) of the second subparagraph of paragraph 2 with points (d) to (h) of Article 57 of Directive 2006/.../EC.

Article 14

1.   The competent authorities may permit investment firms to exceed the ceiling for subordinated loan capital set out in Article 13(4) if they judge it prudentially adequate and provided that the total of such subordinated loan capital and the items referred to in Article 13(5) does not exceed 200 % of the original own funds left to meet the requirements calculated in accordance with Articles 21 and 28 to 32 and Annexes I and III to VI, or 250 % of the same amount where investment firms deduct the item set out in Article 13(2)(d) when calculating own funds.

2.   The competent authorities may permit the ceiling for subordinated loan capital set out in Article 13(4) to be exceeded by a credit institution if they judge it prudentially adequate and provided that the total of such subordinated loan capital and points (d) to (h) of Article 57 of Directive 2006/.../EC does not exceed 250 % of the original own funds left to meet the requirements calculated in accordance with Articles 28 to 32 and Annexes I and III to VI to this Directive.

Article 15

Illiquid assets as referred to in point (d) of the second subparagraph of Article 13(2) shall include the following:

| a) | tangible fixed assets, except to the extent that land and buildings may be allowed to count against the loans which they are securing; |
| --- | --- |

a)

tangible fixed assets, except to the extent that land and buildings may be allowed to count against the loans which they are securing;

| b) | holdings in, including subordinated claims on, credit or financial institutions which may be included in the own funds of those institutions, unless they have been deducted under points (l) to (p) of Article 57 of Directive 2006/.../EC or under Article 16(d) of this Directive; |
| --- | --- |

b)

holdings in, including subordinated claims on, credit or financial institutions which may be included in the own funds of those institutions, unless they have been deducted under points (l) to (p) of Article 57 of Directive 2006/.../EC or under Article 16(d) of this Directive;

| c) | holdings and other investments in undertakings other than credit or financial institutions, which are not readily marketable; |
| --- | --- |

c)

holdings and other investments in undertakings other than credit or financial institutions, which are not readily marketable;

| d) | deficiencies in subsidiaries; |
| --- | --- |

d)

deficiencies in subsidiaries;

| e) | deposits made, other than those which are available for repayment within 90 days, and also excluding payments in connection with margined futures or options contracts; |
| --- | --- |

e)

deposits made, other than those which are available for repayment within 90 days, and also excluding payments in connection with margined futures or options contracts;

| f) | loans and other amounts due, other than those due to be repaid within 90 days; and |
| --- | --- |

f)

loans and other amounts due, other than those due to be repaid within 90 days; and

| g) | physical stocks, unless they are already subject to capital requirements at least as stringent as those set out in Articles 18 and 20. |
| --- | --- |

g)

physical stocks, unless they are already subject to capital requirements at least as stringent as those set out in Articles 18 and 20.

For the purposes of point (b), where shares in a credit or financial institution are held temporarily for the purpose of a financial assistance operation designed to reorganise and save that institution, the competent authorities may waive the application of this Article. They may also waive it in respect of those shares which are included in an investment firm's trading book.

Article 16

Investment firms included in a group which has been granted the waiver provided for in Article 22 shall calculate their own funds in accordance with Articles 13 to 15, subject to the following:

| a) | the illiquid assets referred to in Article 13(2)(d) shall be deducted; |
| --- | --- |

a)

the illiquid assets referred to in Article 13(2)(d) shall be deducted;

| b) | the exclusion referred to in point (a) of Article 13(2) shall not cover those components of points (l) to (p) of Article 57 of Directive 2006/.../EC which an investment firm holds in respect of undertakings included in the scope of consolidation as defined in Article 2(1) of this Directive; |
| --- | --- |

b)

the exclusion referred to in point (a) of Article 13(2) shall not cover those components of points (l) to (p) of Article 57 of Directive 2006/.../EC which an investment firm holds in respect of undertakings included in the scope of consolidation as defined in Article 2(1) of this Directive;

| c) | the limits referred to in points (a) and (b) of Article 66(1) of Directive 2006/.../EC shall be calculated with reference to the original own funds less the components of points (l) to (p) of Article 57 of that Directive as referred to in point (b) of this Article which are elements of the original own funds of those undertakings; and |
| --- | --- |

c)

the limits referred to in points (a) and (b) of Article 66(1) of Directive 2006/.../EC shall be calculated with reference to the original own funds less the components of points (l) to (p) of Article 57 of that Directive as referred to in point (b) of this Article which are elements of the original own funds of those undertakings; and

| d) | the components of points (l) to (p) of Article 57 of Directive 2006/.../EC referred to in point (c) of this Article shall be deducted from the original own funds rather than from the total of all items as laid down in Article 66(2) of that Directive for the purposes in particular of Articles 13(4), 13(5) and 14 of this Directive. |
| --- | --- |

d)

the components of points (l) to (p) of Article 57 of Directive 2006/.../EC referred to in point (c) of this Article shall be deducted from the original own funds rather than from the total of all items as laid down in Article 66(2) of that Directive for the purposes in particular of Articles 13(4), 13(5) and 14 of this Directive.

Article 17

1.   Where an institution calculates risk-weighted exposure amounts for the purposes of Annex II to this Directive in accordance with Articles 84 to 89 of Directive 2006/.../EC, then for the purposes of the calculation provided for in point 4 of Part 1 of Annex VII to Directive 2006/.../EC, the following shall apply:

| a) | value adjustments made to take account of the credit quality of the counterparty may be included in the sum of value adjustments and provisions made for the exposures indicated in Annex II; and |
| --- | --- |

a)

value adjustments made to take account of the credit quality of the counterparty may be included in the sum of value adjustments and provisions made for the exposures indicated in Annex II; and

| b) | subject to the approval of the competent authorities, if the credit risk of the counterparty is adequately taken into account in the valuation of a position included in the trading book, the expected loss amount for the counterparty risk exposure shall be zero. |
| --- | --- |

b)

subject to the approval of the competent authorities, if the credit risk of the counterparty is adequately taken into account in the valuation of a position included in the trading book, the expected loss amount for the counterparty risk exposure shall be zero.

For the purposes of point (a), for such institutions, such value adjustments shall not be included in own funds other than in accordance with the provisions of this paragraph.

2.   For the purposes of this Article, Article 153 and 154 of Directive 2006/.../EC shall apply.

CHAPTER V

Section 1

Provisions against risks

Article 18

1.   Institutions shall have own funds which are always more than or equal to the sum of the following:

| a) | the capital requirements, calculated in accordance with the methods and options laid down in Articles 28 to 32 and Annexes I, II and VI and, as appropriate, Annex V, for their trading-book business; and |
| --- | --- |

a)

the capital requirements, calculated in accordance with the methods and options laid down in Articles 28 to 32 and Annexes I, II and VI and, as appropriate, Annex V, for their trading-book business; and

| b) | the capital requirements, calculated in accordance with the methods and options laid down in Annexes III and IV and, as appropriate, Annex V, for all of their business activities. |
| --- | --- |

b)

the capital requirements, calculated in accordance with the methods and options laid down in Annexes III and IV and, as appropriate, Annex V, for all of their business activities.

2.   By way of derogation from paragraph 1, the competent authorities may allow institutions to calculate the capital requirements for their trading book business in accordance with Article 75(a) of Directive 2006/.../EC and points 6, 7, and 9 of Annex II to this Directive, where the size of the trading book business meets the following requirements:

| a) | the trading-book business of such institutions does not normally exceed 5 % of their total business; |
| --- | --- |

a)

the trading-book business of such institutions does not normally exceed 5 % of their total business;

| b) | their total trading-book positions do not normally exceed 15 million Euro; and |
| --- | --- |

b)

their total trading-book positions do not normally exceed 15 million Euro; and

| c) | the trading-book business of such institutions never exceeds 6 % of their total business and their total trading-book positions never exceed 20 million Euro. |
| --- | --- |

c)

the trading-book business of such institutions never exceeds 6 % of their total business and their total trading-book positions never exceed 20 million Euro.

3.   In order to calculate the proportion that trading-book business bears to total business for the purposes of points (a) and (c) of paragraph 2, the competent authorities may refer either to the size of the combined on- and off-balance-sheet business, to the profit and loss account or to the own funds of the institutions in question, or to a combination of those measures. When the size of on- and off-balance-sheet business is assessed, debt instruments shall be valued at their market prices or their principal values, equities at their market prices and derivatives according to the nominal or market values of the instruments underlying them. Long positions and short positions shall be summed regardless of their signs.

4.   If an institution should happen for more than a short period to exceed either or both of the limits imposed in paragraph 2(a) and (b) or either or both of the limits imposed in paragraph 2(c), it shall be required to meet the requirements imposed in paragraph 1(a) in respect of its trading-book business and to notify the competent authority thereof.

Article 19

1.   For the purposes of point 14 of Annex I, subject to the discretion of the national authorities, a 0 % weighting can be assigned to debt securities issued by the entities listed in Table 1 of Annex I, where these debt securities are denominated and funded in domestic currency.

2.   By way of derogation from points 13 and 14 of Annex I, Member States may set a specific risk requirement for any bonds falling within points 68 to 70 of Part 1 of Annex VI to Directive 2006/.../EC which shall be equal to the specific risk requirement for a qualifying item with the same residual maturity as such bonds and reduced in accordance with the percentages given in point 71 of Part 1 to Annex VI to that Directive.

3.   If, as set out in point 52 of Annex I, a competent authority approves a third country's collective investment undertaking (CIU) as eligible, a competent authority in another Member State may make use of this approval without conducting its own assessment.

Article 20

1.   Subject to paragraphs 2, 3 and 4 of this Article, and Article 34 of this Directive, the requirements in Article 75 of Directive 2006/.../EC shall apply to investment firms.

2.   By way of derogation from paragraph 1, competent authorities may allow investment firms that are not authorised to provide the investment services listed in points 3 and 6 of Section A of Annex I to Directive 2004/39/EC to provide own funds which are always more than or equal to the higher of the following:

| a) | the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and |
| --- | --- |

a)

the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and

| b) | the amount laid down in Article 21 of this Directive. |
| --- | --- |

b)

the amount laid down in Article 21 of this Directive.

3.   By way of derogation from paragraph 1, competent authorities may allow investment firms which hold initial capital as set out in Article 9, but which fall within the following categories, to provide own funds which are always more than or equal to the sum of the capital requirements calculated in accordance with the requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC and the amount laid down in Article 21 of this Directive:

| a) | investment firms that deal on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; and |
| --- | --- |

a)

investment firms that deal on own account only for the purpose of fulfilling or executing a client order or for the purpose of gaining entrance to a clearing and settlement system or a recognised exchange when acting in an agency capacity or executing a client order; and

| b) | investment firms:






  i) | that do not hold client money or securities; |
| --- | --- | --- |

b)

investment firms:

i)

that do not hold client money or securities;

| ii) | that undertake only dealing on own account; |
| --- | --- |

ii)

that undertake only dealing on own account;

| iii) | that have no external customers; |
| --- | --- |

iii)

that have no external customers;

| iv) | the execution and settlement of whose transactions takes place under the responsibility of a clearing institution and are guaranteed by that clearing institution. |
| --- | --- |

iv)

the execution and settlement of whose transactions takes place under the responsibility of a clearing institution and are guaranteed by that clearing institution.

4.   Investment firms referred to in paragraphs 2 and 3 shall remain subject to all other provisions regarding operational risk set out in Annex V of Directive 2006/.../EC.

5.   Article 21 shall apply only to investment firms to which paragraphs (2) or (3) or Article 46 apply and in the manner specified therein.

Article 21

Investment firms shall be required to hold own funds equivalent to one quarter of their preceding year's fixed overheads.

The competent authorities may adjust that requirement in the event of a material change in a firm's business since the preceding year.

Where a firm has not completed a year's business, starting from the day it starts up, the requirement shall be a quarter of the fixed overheads projected in its business plan, unless an adjustment to that plan is required by the competent authorities.

Section 2

Application of requirements on a consolidated basis

Article 22

1.   The competent authorities required or mandated to exercise supervision of groups covered by Article 2 on a consolidated basis may waive, on a case-by-case basis, the application of capital requirements on a consolidated basis provided that:

| a) | each EU investment firm in such a group uses the calculation of own funds set out in Article 16; |
| --- | --- |

a)

each EU investment firm in such a group uses the calculation of own funds set out in Article 16;

| b) | all investment firms in such a group fall within the categories in Article 20(2) and (3); |
| --- | --- |

b)

all investment firms in such a group fall within the categories in Article 20(2) and (3);

| c) | each EU investment firm in such a group meets the requirements imposed in Articles 18 and 20 on an individual basis and at the same time deducts from its own funds any contingent liability in favour of investment firms, financial institutions, asset management companies and ancillary services undertakings, which would otherwise be consolidated and; |
| --- | --- |

c)

each EU investment firm in such a group meets the requirements imposed in Articles 18 and 20 on an individual basis and at the same time deducts from its own funds any contingent liability in favour of investment firms, financial institutions, asset management companies and ancillary services undertakings, which would otherwise be consolidated and;

| d) | any financial holding company which is the parent financial holding company in a Member State of any investment firm in such a group holds at least as much capital, defined here as the sum of points (a) to (h) of Article 57 of Directive 2006/.../EC, as the sum of the full book value of any holdings, subordinated claims and instruments as referred to in Article 57 of that Directive in investment firms, financial institutions, asset management companies and ancillary services undertakings which would otherwise be consolidated, and the total amount of any contingent liability in favour of investment firms, financial institutions, asset management companies and ancillary services undertakings which would otherwise be consolidated. |
| --- | --- |

d)

any financial holding company which is the parent financial holding company in a Member State of any investment firm in such a group holds at least as much capital, defined here as the sum of points (a) to (h) of Article 57 of Directive 2006/.../EC, as the sum of the full book value of any holdings, subordinated claims and instruments as referred to in Article 57 of that Directive in investment firms, financial institutions, asset management companies and ancillary services undertakings which would otherwise be consolidated, and the total amount of any contingent liability in favour of investment firms, financial institutions, asset management companies and ancillary services undertakings which would otherwise be consolidated.

Where the criteria in the first subparagraph are met, each EU investment firm shall have in place systems to monitor and control the sources of capital and funding of all financial holding companies, investment firms, financial institutions, asset management companies and ancillary services undertakings within the group.

2.   By way of derogation from paragraph 1, competent authorities may permit financial holding companies which are the parent financial holding company in a Member State of an investment firm in such a group to use a value lower than the value calculated under paragraph 1(d), but no lower than the sum of the requirements imposed in Articles 18 and 20 on an individual basis to investment firms, financial institutions, asset management companies and ancillary services undertakings which would otherwise be consolidated and the total amount of any contingent liability in favour of investment firms, financial institutions, asset management companies and ancillary services undertakings which would otherwise be consolidated. For the purposes of this paragraph, the capital requirement for investment undertakings of third countries, financial institutions, asset management companies and ancillary services undertakings is a notional capital requirement.

Article 23

The competent authorities shall require investment firms in a group which has been granted the waiver provided for in Article 22 to notify them of the risks which could undermine their financial positions, including those associated with the composition and sources of their capital and funding. If the competent authorities then consider that the financial positions of those investment firms is not adequately protected, they shall require them to take measures including, if necessary, limitations on the transfer of capital from such firms to group entities.

Where the competent authorities waive the obligation of supervision on a consolidated basis provided for in Article 22, they shall take other appropriate measures to monitor the risks, namely large exposures, of the whole group, including any undertakings not located in a Member State.

Where the competent authorities waive the application of capital requirements on a consolidated basis provided for in Article 22, the requirements of Article 123 and Chapter 5 of Title V of Directive 2006/.../EC shall apply on an individual basis, and the requirements of Article 124 of that Directive shall apply to the supervision of investment firms on an individual basis.

Article 24

1.   By way of derogation from Article 2(2), competent authorities may exempt investment firms from the consolidated capital requirement established in that Article, provided that all the investment firms in the group are covered by Article 20(2) and the group does not include credit institutions.

2.   Where the requirements of paragraph 1 are met, a parent investment firm in a Member State shall be required to provide own funds at a consolidated level which are always more than or equal to the higher of the following two amounts, calculated on the basis of the parent investment firm's consolidated financial position and in compliance with Section 3 of this Chapter:

| a) | the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and |
| --- | --- |

a)

the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and

| b) | the amount prescribed in Article 21 of this Directive. |
| --- | --- |

b)

the amount prescribed in Article 21 of this Directive.

3.   Where the requirements of paragraph 1 are met, an investment firm controlled by a financial holding company shall be required to provide own funds at a consolidated level which are always more than or equal to the higher of the following two amounts, calculated on the basis of the financial holding company's consolidated financial position and in compliance with Section 3 of this Chapter:

| a) | the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and |
| --- | --- |

a)

the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and

| b) | the amount prescribed in Article 21 of this Directive. |
| --- | --- |

b)

the amount prescribed in Article 21 of this Directive.

Article 25

By way of derogation from Article 2(2), competent authorities may exempt investment firms from the consolidated capital requirement established in that Article, provided that all the investment firms in the group fall within the investment firms referred to in Article 20(2) and (3), and the group does not include credit institutions.

Where the requirements of the first paragraph are met, a parent investment firm in a Member State shall be required to provide own funds at a consolidated level which are always more than or equal to the sum of the requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC and the amount prescribed in Article 21 of this Directive, calculated on the basis of the parent investment firm's consolidated financial position and in compliance with Section 3 of this Chapter.

Where the requirements of the first paragraph are met, an investment firm controlled by a financial holding company shall be required to provide own funds at a consolidated level which are always more than or equal to the sum of the requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC and the amount prescribed in Article 21 of this Directive, calculated on the basis of the financial holding company's consolidated financial position and in compliance with Section 3 of this Chapter.

Section 3

Calculation of consolidated requirements

Article 26

1.   Where the waiver provided for in Article 22 is not exercised, the competent authorities may, for the purpose of calculating the capital requirements set out in Annexes I and V and the exposures to clients set out in Articles 28 to 32 and Annex VI on a consolidated basis, permit positions in the trading book of one institution to offset positions in the trading book of another institution according to the rules set out in Articles 28 to 32 Annexes I, V and VI.

In addition, the competent authorities may allow foreign-exchange positions in one institution to offset foreign-exchange positions in another institution in accordance with the rules set out in Annex III and/or Annex V. They may also allow commodities positions in one institution to offset commodities positions in another institution in accordance with the rules set out in Annex IV and/or Annex V.

2.   The competent authorities may permit offsetting of the trading book and of the foreign-exchange and commodities positions, respectively, of undertakings located in third countries, subject to the simultaneous fulfilment of the following conditions:

| a) | such undertakings have been authorised in a third country and either satisfy the definition of credit institution set out in Article 4(1) of Directive 2006/.../ECor are recognised third-country investment firms; |
| --- | --- |

a)

such undertakings have been authorised in a third country and either satisfy the definition of credit institution set out in Article 4(1) of Directive 2006/.../ECor are recognised third-country investment firms;

| b) | such undertakings comply, on an individual basis, with capital adequacy rules equivalent to those laid down in this Directive; and |
| --- | --- |

b)

such undertakings comply, on an individual basis, with capital adequacy rules equivalent to those laid down in this Directive; and

| c) | no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group. |
| --- | --- |

c)

no regulations exist in the third countries in question which might significantly affect the transfer of funds within the group.

3.   The competent authorities may also allow the offsetting provided for in paragraph 1 between institutions within a group that have been authorised in the Member State in question, provided that:

| a) | there is a satisfactory allocation of capital within the group; and |
| --- | --- |

a)

there is a satisfactory allocation of capital within the group; and

| b) | the regulatory, legal or contractual framework in which the institutions operate is such as to guarantee mutual financial support within the group. |
| --- | --- |

b)

the regulatory, legal or contractual framework in which the institutions operate is such as to guarantee mutual financial support within the group.

4.   Furthermore, the competent authorities may allow the offsetting provided for in paragraph 1 between institutions within a group that fulfil the conditions imposed in paragraph 3 and any institution included in the same group which has been authorised in another Member State provided that that institution is obliged to fulfil the capital requirements imposed in Articles 18, 20 and 28 on an individual basis.

Article 27

1.   In the calculation of own funds on a consolidated basis Article 65 of Directive 2006/.../EC shall apply.

2.   The competent authorities responsible for exercising supervision on a consolidated basis may recognise the validity of the specific own-funds definitions applicable to the institutions concerned under Chapter IV in the calculation of their consolidated own funds.

Section 4

Monitoring and control of large exposures

Article 28

1.   Institutions shall monitor and control their large exposures in accordance with Articles 106 to 118 of Directive 2006/.../EC.

2.   By way of derogation from paragraph 1, institutions which calculate the capital requirements for their trading-book business in accordance with Annexes I and II, and, as appropriate, Annex V to this Directive, shall monitor and control their large exposures in accordance with Articles 106 to 118 of Directive 2006/.../EC subject to the amendments laid down in Articles 29 to 32 of this Directive.

3.   By 31 December 2007, the Commission shall submit to the European Parliament and to the Council a report on the functioning of this Section, together with any appropriate proposals.

Article 29

1.   The exposures to individual clients which arise on the trading book shall be calculated by summing the following items:

| a) | the excess — where positive — of an institution's long positions over its short positions in all the financial instruments issued by the client in question, the net position in each of the different instruments being calculated according to the methods laid down in Annex I; |
| --- | --- |

a)

the excess — where positive — of an institution's long positions over its short positions in all the financial instruments issued by the client in question, the net position in each of the different instruments being calculated according to the methods laid down in Annex I;

| b) | the net exposure, in the case of the underwriting of a debt or an equity instrument; and |
| --- | --- |

b)

the net exposure, in the case of the underwriting of a debt or an equity instrument; and

| c) | the exposures due to the transactions, agreements and contracts referred to in Annex II with the client in question, such exposures being calculated in the manner laid down in that Annex, for the calculation of exposure values. |
| --- | --- |

c)

the exposures due to the transactions, agreements and contracts referred to in Annex II with the client in question, such exposures being calculated in the manner laid down in that Annex, for the calculation of exposure values.

For the purposes of point (b), the net exposure is calculated by deducting those underwriting positions which are subscribed or sub-underwritten by third parties on the basis of a formal agreement reduced by the factors set out in point 41 of Annex I.

For the purposes of point (b), pending further coordination, the competent authorities shall require institutions to set up systems to monitor and control their underwriting exposures between the time of the initial commitment and working day one in the light of the nature of the risks incurred in the markets in question.

For the purposes of point (c), Articles 84 to 89 of Directive 2006/.../EC shall be excluded from the reference in point 6 of Annex II to this Directive.

2.   The exposures to groups of connected clients on the trading book shall be calculated by summing the exposures to individual clients in a group, as calculated in paragraph 1.

Article 30

1.   The overall exposures to individual clients or groups of connected clients shall be calculated by summing the exposures which arise on the trading book and the exposures which arise on the non-trading book, taking into account Article 112 to 117 of Directive 2006/.../EC.

In order to calculate the exposure which arises on the non-trading book, institutions shall take the exposure arising from assets which are deducted from their own funds by virtue of point (d) of the second subparagraph of Article 13(2) to be zero.

2.   Institutions' overall exposures to individual clients and groups of connected clients calculated in accordance with paragraph 4 shall be reported in accordance with Article 110 of Directive 2006/.../EC.

Other than in relation to repurchase transactions, securities or commodities lending or borrowing transactions, the calculation of large exposures to individual clients and groups of connected clients for reporting purposes shall not include the recognition of credit risk mitigation.

3.   The sum of the exposures to an individual client or group of connected clients in paragraph 1 shall be limited in accordance with Articles 111 to 117 of Directive 2006/.../EC.

4.   By derogation from paragraph 3 competent authorities may allow assets constituting claims and other exposures on recognised third-country investment firms and recognised clearing houses and exchanges in financial instruments to be subject to the same treatment accorded to those on institutions laid out in Articles 113(3)(i), 115(2) and 116 of Directive 2006/.../EC.

Article 31

The competent authorities may authorise the limits laid down in Articles 111 to 117 of Directive 2006/.../EC to be exceeded if the following conditions are met:

| a) | the exposure on the non-trading book to the client or group of clients in question does not exceed the limits laid down in Articles 111 to 117 of Directive 2006/.../EC, those limits being calculated with reference to own funds as specified in that Directive, so that the excess arises entirely on the trading book; |
| --- | --- |

a)

the exposure on the non-trading book to the client or group of clients in question does not exceed the limits laid down in Articles 111 to 117 of Directive 2006/.../EC, those limits being calculated with reference to own funds as specified in that Directive, so that the excess arises entirely on the trading book;

| b) | the institution meets an additional capital requirement on the excess in respect of the limits laid down in Article 111(1) and (2) of Directive 2006/.../EC, that additional capital requirement being calculated in accordance with Annex VI to that Directive; |
| --- | --- |

b)

the institution meets an additional capital requirement on the excess in respect of the limits laid down in Article 111(1) and (2) of Directive 2006/.../EC, that additional capital requirement being calculated in accordance with Annex VI to that Directive;

| c) | where 10 days or less has elapsed since the excess occurred, the trading-book exposure to the client or group of connected clients in question shall not exceed 500 % of the institution's own funds; |
| --- | --- |

c)

where 10 days or less has elapsed since the excess occurred, the trading-book exposure to the client or group of connected clients in question shall not exceed 500 % of the institution's own funds;

| d) | any excesses that have persisted for more than 10 days must not, in aggregate, exceed 600 % of the institution's own funds; and |
| --- | --- |

d)

any excesses that have persisted for more than 10 days must not, in aggregate, exceed 600 % of the institution's own funds; and

| e) | institutions shall report to the competent authorities every three months all cases where the limits laid down in Article 111(1) and (2) of Directive 2006/.../EC have been exceeded during the preceding three months. |
| --- | --- |

e)

institutions shall report to the competent authorities every three months all cases where the limits laid down in Article 111(1) and (2) of Directive 2006/.../EC have been exceeded during the preceding three months.

In relation to point (e), in each case in which the limits have been exceeded the amount of the excess and the name of the client concerned shall be reported.

Article 32

1.   The competent authorities shall establish procedures to prevent institutions from deliberately avoiding the additional capital requirements that they would otherwise incur, on exposures exceeding the limits laid down in Article 111(1) and (2) of Directive 2006/.../EC once those exposures have been maintained for more than 10 days, by means of temporarily transferring the exposures in question to another company, whether within the same group or not, and/or by undertaking artificial transactions to close out the exposure during the 10-day period and create a new exposure.

The competent authorities shall notify the Council and the Commission of those procedures.

Institutions shall maintain systems which ensure that any transfer which has the effect referred to in the first subparagraph is immediately reported to the competent authorities.

2.   The competent authorities may permit institutions which are allowed to use the alternative determination of own funds under Article 13(2) to use that determination for the purposes of Articles 30(2), 30(3) and 31 provided that the institutions concerned are required to meet all of the obligations set out in Articles 110 to 117 of Directive 2006/.../EC, in respect of the exposures which arise outside their trading books by using own funds as defined in that Directive.

Section 5

Valuation of positions for reporting purposes

Article 33

1.   All trading book positions shall be subject to prudent valuation rules as specified in Annex VII, Part B. These rules shall require institutions to ensure that the value applied to each of its trading book positions appropriately reflects the current market value. The former value shall contain an appropriate degree of certainty having regard to the dynamic nature of trading book positions, the demands of prudential soundness and the mode of operation and purpose of capital requirements in respect of trading book positions.

2.   Trading book positions shall be re-valued at least daily.

3.   In the absence of readily available market prices, the competent authorities may waive the requirement imposed in paragraphs 1 and 2 and shall require institutions to use alternative methods of valuation provided that those methods are sufficiently prudent and have been approved by competent authorities.

Section 6

Risk management and capital assessment

Article 34

Competent authorities shall require that every investment firm, as well as meeting the requirements set out in Article 13 of Directive 2004/39/EC, shall meet the requirements set out in Articles 22 and 123 of Directive 2006/.../EC, subject to the provisions on level of application set out in Articles 68 to 73 of that Directive.

Section 7

Reporting requirements

Article 35

1.   Member States shall require that investment firms and credit institutions provide the competent authorities of their home Member States with all the information necessary for the assessment of their compliance with the rules adopted in accordance with this Directive. Member States shall also ensure that internal control mechanisms and administrative and accounting procedures of the institutions permit the verification of their compliance with such rules at all times.

2.   Investment firms shall report to the competent authorities in the manner specified by the latter at least once every month in the case of firms covered by Article 9, at least once every three months in the case of firms covered by Article 5(1) and at least once every six months in the case of firms covered by Article 5(3).

3.   Notwithstanding paragraph 2, investment firms covered by Articles 5(1) and 9 shall be required to provide the information on a consolidated or sub-consolidated basis only once every six months.

4.   Credit institutions shall be obliged to report in the manner specified by the competent authorities as often as they are obliged to report under Directive 2006/.../EC.

5.   The competent authorities shall oblige institutions to report to them immediately any case in which their counter parties in repurchase and reverse repurchase agreements or securities and commodities-lending and securities and commodities-borrowing transactions default on their obligations.

CHAPTER VI

Section 1

Competent authorities

Article 36

1.   Member States shall designate the authorities which are competent to carry out the duties provided for in this Directive. They shall inform the Commission thereof, indicating any division of duties.

2.   The competent authorities shall be public authorities or bodies officially recognized by national law or by public authorities as part of the supervisory system in operation in the Member State concerned.

3.   The competent authorities shall be granted all the powers necessary for the performance of their tasks, and in particular that of overseeing the constitution of trading books.

Section 2

Supervision

Article 37

1.   Chapter 4 of Title V of Directive 2006/.../EC shall apply mutatis mutandis to the supervision of investment firms in accordance with the following:

| a) | references to Article 6 of Directive 2006/.../EC shall be construed as references to Article 5 of Directive 2004/39/EC; |
| --- | --- |

a)

references to Article 6 of Directive 2006/.../EC shall be construed as references to Article 5 of Directive 2004/39/EC;

| b) | references to Article 22 and 123 of Directive 2006/.../EC shall be construed s references to Article 34 of this Directive; and |
| --- | --- |

b)

references to Article 22 and 123 of Directive 2006/.../EC shall be construed s references to Article 34 of this Directive; and

| c) | references to Articles 44 to 52 of Directive 2006/.../EC shall be construed as references to Articles 54 and 58 of Directive 2004/39/EC. |
| --- | --- |

c)

references to Articles 44 to 52 of Directive 2006/.../EC shall be construed as references to Articles 54 and 58 of Directive 2004/39/EC.

Where an EU parent financial holding company has as subsidiary both a credit institution and an investment firm, Title V, Chapter 4 of Directive 2006/.../EC shall apply to the supervision of institutions as if references to credit institutions were to institutions.

2.   Article 129(2) of Directive 2006/.../EC shall also apply to the recognition of internal models of institutions under Annex V to this Directive where the application is submitted by an EU parent credit institution and its subsidiaries or an EU parent investment firm and its subsidiaries, or jointly by the subsidiaries of an EU parent financial holding company.

The period for the recognition referred to in the first sub-paragraph shall be six months.

Article 38

1.   The competent authorities of the Member States shall cooperate closely in the performance of the duties provided for in this Directive, particularly where investment services are provided on the basis of the freedom to provide services or through the establishment of branches.

The competent authorities shall on request supply one another with all information likely to facilitate the supervision of the capital adequacy of institutions, in particular the verification of their compliance with the rules laid down in this Directive.

2.   Any exchange of information between competent authorities which is provided for in this Directive shall be subject to the following obligations of professional secrecy:

| a) | for investment firms, those imposed in Article 54 and 58 of Directive 2004/39/EC; and |
| --- | --- |

a)

for investment firms, those imposed in Article 54 and 58 of Directive 2004/39/EC; and

| b) | for credit institutions, those imposed in Articles 44 to 52 of Directive 2006/.../EC. |
| --- | --- |

b)

for credit institutions, those imposed in Articles 44 to 52 of Directive 2006/.../EC.

CHAPTER VII

DISCLOSURE

Article 39

The requirements set out in Title V, Chapter 5 of Directive 2006/.../EC shall apply to investment firms.

CHAPTER VIII

Section 1

Article 40

For the purposes of the calculation of minimum capital requirements for counterparty risk under this Directive, and for the calculation of minimum capital requirements for credit risk under Directive 2006/.../EC, and without prejudice to the provisions of Part 2, point 6 of Annex III to that Directive, exposures to recognised third-country investment firms and exposures to recognised clearing houses and exchanges shall be treated as exposures to institutions.

Section 2

Powers of execution

Article 41

1.   The Commission shall decide on any technical adaptations in the following areas in accordance with the procedure referred to in Article 42(2):

| a) | clarification of the definitions in Article 3 in order to ensure uniform application of this Directive; |
| --- | --- |

a)

clarification of the definitions in Article 3 in order to ensure uniform application of this Directive;

| b) | clarification of the definitions in Article 3 to take account of developments on financial markets; |
| --- | --- |

b)

clarification of the definitions in Article 3 to take account of developments on financial markets;

| c) | adjustment of the amounts of initial capital prescribed in Articles 5 to 9 and the amount referred to in Article 18(2) to take account of developments in the economic and monetary field; |
| --- | --- |

c)

adjustment of the amounts of initial capital prescribed in Articles 5 to 9 and the amount referred to in Article 18(2) to take account of developments in the economic and monetary field;

| d) | adjustment of the categories of investment firms in Article 20(2) and (3) to take account of developments on financial markets; |
| --- | --- |

d)

adjustment of the categories of investment firms in Article 20(2) and (3) to take account of developments on financial markets;

| e) | clarification of the requirement laid down in Article 21 to ensure uniform application of this Directive; |
| --- | --- |

e)

clarification of the requirement laid down in Article 21 to ensure uniform application of this Directive;

| f) | alignment of terminology on and the framing of definitions in accordance with subsequent acts on institutions and related matters; |
| --- | --- |

f)

alignment of terminology on and the framing of definitions in accordance with subsequent acts on institutions and related matters;

| g) | adjustment of the technical provisions in Annexes I to VII as a result of developments on financial markets, risk measurement, accounting standards or requirements which take account of Community legislation or which have regard to convergence of supervisory practices; or |
| --- | --- |

g)

adjustment of the technical provisions in Annexes I to VII as a result of developments on financial markets, risk measurement, accounting standards or requirements which take account of Community legislation or which have regard to convergence of supervisory practices; or

| h) | technical adaptations to take account of the outcome of the review referred to in Article 65(3) of Directive 2004/39/EC. |
| --- | --- |

h)

technical adaptations to take account of the outcome of the review referred to in Article 65(3) of Directive 2004/39/EC.

2.   None of the implementing measures enacted may change the essential provisions of this Directive

Article 42

1.   The Commission shall be assisted by the European Banking Committee established by Commission Decision 2004/10/EC of 5 November 2003 (12) (hereinafter referred to as ‘the Committee’).

2.   Where reference is made to this paragraph, the procedure laid down in Article 5 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 7(3) and 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC shall be three months.

3.   Without prejudice to the implementing measures already adopted, upon expiry of a two-year period following the adoption of this Directive, and by 1 April 2008, the application of the provisions of this Directive requiring the adoption of technical rules, amendments and decisions in accordance with paragraph 2 shall be suspended. Acting on a proposal from the Commission and in accordance with the procedure laid down in Article 251 of the Treaty, the Parliament and the Council may renew those provisions and, to that end, shall review them prior to the expiry of the period or by the date referred to in this paragraph, whichever the earlier.

4.   The Committee shall adopt its Rules of Procedure

Section 3

Transitional provisions

Article 43

Article 152(1) to (7) of Directive 2006/.../EC shall apply, in accordance with Article 2 and Chapter V, Sections 2 and 3 of this Directive, to investment firms calculating risk-weighted exposure amounts, for the purposes of Annex II to this Directive, in accordance with Articles 84 to 89 of Directive 2006/.../EC, or using the Advanced Measurement Approach as specified in Article 105 of that Directive for the calculation of their capital requirements for operational risk.

Article 44

Until 31 December 2012, for investment firms the relevant indicator for the trading and sales business line of which represents at least 50 % of the total of relevant indicators for all of their business lines calculated in accordance with Article 20 of this Directive and points 1 to 4 of Part 2 of Annex X to Directive 2006/.../EC, Member States may apply a percentage of 15 % to the business line ‘trading and sales’.

Article 45

1.   Competent authorities may permit investment firms to exceed the limits concerning large exposures set out in Article 111 of Directive 2006/.../EC. Investment firms need not include any excesses in their calculation of capital requirements exceeding such limits, as set out in Article 75(b) of that Directive. This discretion is available until 31 December 2010 or the date of entry into force of any modifications consequent to the treatment of large exposures pursuant to Article 119 of Directive 2006/.../EC, whichever is the earlier. For this discretion to be exercised, the following conditions shall be met:

| a) | the investment firm provides investment services or investment activities related to the financial instruments listed in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC; |
| --- | --- |

a)

the investment firm provides investment services or investment activities related to the financial instruments listed in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC;

| b) | the investment firm does not provide such investment services or undertake such investment activities for, or on behalf of, retail clients; |
| --- | --- |

b)

the investment firm does not provide such investment services or undertake such investment activities for, or on behalf of, retail clients;

| c) | breaches of the limits referred to in the introductory part of this paragraph arise in connection with exposures resulting from contracts that are financial instruments as listed in point (a) and relate to commodities or underlyings within the meaning of point 10 of Section C of Annex I to Directive 2004/39/EC (MiFID) and are calculated in accordance with Annexes III and IV of Directive 2006/.../EC, or in connection with exposures resulting from contracts concerning the delivery of commodities or emission allowances; and |
| --- | --- |

c)

breaches of the limits referred to in the introductory part of this paragraph arise in connection with exposures resulting from contracts that are financial instruments as listed in point (a) and relate to commodities or underlyings within the meaning of point 10 of Section C of Annex I to Directive 2004/39/EC (MiFID) and are calculated in accordance with Annexes III and IV of Directive 2006/.../EC, or in connection with exposures resulting from contracts concerning the delivery of commodities or emission allowances; and

| d) | the investment firm has a documented strategy for managing and, in particular, for controlling and limiting risks arising from the concentration of exposures. The investment firm shall inform the competent authorities of this strategy and all material changes to it without delay. The investment firm shall make appropriate arrangements to ensure a continuous monitoring of the creditworthiness of borrowers, according to their impact on concentration risk. These arrangements shall enable the investment firm to react adequately and sufficiently promptly to any deterioration in that creditworthiness. |
| --- | --- |

d)

the investment firm has a documented strategy for managing and, in particular, for controlling and limiting risks arising from the concentration of exposures. The investment firm shall inform the competent authorities of this strategy and all material changes to it without delay. The investment firm shall make appropriate arrangements to ensure a continuous monitoring of the creditworthiness of borrowers, according to their impact on concentration risk. These arrangements shall enable the investment firm to react adequately and sufficiently promptly to any deterioration in that creditworthiness.

2.   Where an investment firm exceeds the internal limits set according to the strategy referred to in point (d) of paragraph 1, it shall notify the competent authority without delay of the size and nature of the excess and of the counterparty.

Article 46

By way of derogation from Article 20(1), until 31 December 2011 competent authorities may choose, on a case-by-case basis, not to apply the capital requirements arising from point (d) of Article 75 of Directive 2006/.../EC in respect of investment firms to which Article 20(2) and (3) do not apply, whose total trading book positions never exceed 50 million Euro and whose average number of relevant employees during the financial year does not exceed 100.

Instead, the capital requirement in relation to those investment firms shall be at least the lower of:

| a) | the capital requirements arising from point (d) of Article 75 of Directive 2006/.../EC; and |
| --- | --- |

a)

the capital requirements arising from point (d) of Article 75 of Directive 2006/.../EC; and

| b) | 12/88 of the higher of the following:






  i) | the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and |
| --- | --- | --- |

b)

12/88 of the higher of the following:

i)

the sum of the capital requirements contained in points (a) to (c) of Article 75 of Directive 2006/.../EC; and

| ii) | the amount laid down in Article 21 of this Directive, notwithstanding Article 20(5). |
| --- | --- |

ii)

the amount laid down in Article 21 of this Directive, notwithstanding Article 20(5).

If point (b) applies, an incremental increase shall be applied on at least an annual basis.

Applying this derogation shall not result in a reduction in the overall level of capital requirements for an investment firm, in comparison to the requirements as at 31 December 2006, unless such a reduction is prudentially justified by a reduction in the size of the investment firm's business.

Article 47

Until 31 December 2009 or any earlier date specified by the competent authorities on a case-by-case basis, institutions that have received specific risk model recognition prior to 1 January 2007 in accordance with point 1 of Annex V may, for that existing recognition, treat points 4 and 8 of Annex V to Directive 93/6/EEC as those points stood prior to 1 January 2007.

Article 48

1.   The provisions on capital requirements as laid down in this Directive and Directive 2006/.../EC shall not apply to investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC and to whom Directive 93/22/EEC (13) did not apply on 31 December 2006. This exemption is available until 31 December 2010 or the date of entry into force of any modifications pursuant to paragraphs 2 and 3, whichever is the earlier.

2.   As part of the review required by Article 65(3) of Directive 2004/39/EC, the Commission shall, on the basis of public consultations and in the light of discussions with the competent authorities, report to the Parliament and the Council on:

| a) | an appropriate regime for the prudential supervision of investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the commodity derivatives or derivatives contracts set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC; and |
| --- | --- |

a)

an appropriate regime for the prudential supervision of investment firms whose main business consists exclusively of the provision of investment services or activities in relation to the commodity derivatives or derivatives contracts set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC; and

| b) | the desirability of amending Directive 2004/39/EC to create a further category of investment firm whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC relating to energy supplies (including electricity, coal, gas and oil). |
| --- | --- |

b)

the desirability of amending Directive 2004/39/EC to create a further category of investment firm whose main business consists exclusively of the provision of investment services or activities in relation to the financial instruments set out in points 5, 6, 7, 9 and 10 of Section C of Annex I to Directive 2004/39/EC relating to energy supplies (including electricity, coal, gas and oil).

3.   On the basis of the report referred to in paragraph 2, the Commission may submit proposals for amendments to this Directive and to Directive 2006/.../EC.

Section 4

Final provisions

Article 49

1.   Member States shall adopt and publish, by 31 December 2006, the laws, regulations and administrative provisions necessary to comply with Articles 2, 3, 11, 13, 17, 18, 19, 20, 22, 23, 24, 25, 29, 30, 33, 34, 35, 37, 39, 40, 41, 43, 44, 50 and the Annexes I, II, III, V, VII. They shall forthwith communicate to the Commission the text of those provisions and a correlation table between those provisions and this Directive.

They shall apply those provisions from 1 January 2007.

When Member States adopt those measures, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. They shall also include a statement that references in existing laws, regulations and administrative provisions to the directives repealed by this Directive shall be construed as references to this Directive.

2.   Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 50

1.   Article 152(8) to (14) of Directive 2006/.../EC shall apply mutatis mutandis for the purposes of this Directive subject to the following provisions which shall apply where the discretion referred to in Article 152(8) of Directive 2006/.../EC is exercised:

| a) | references in point 7 of Annex II to this Directive to Directive 2006/.../EC shall be read as references to Directive 2000/12/EC as that Directive stood prior to 1 January 2007; and |
| --- | --- |

a)

references in point 7 of Annex II to this Directive to Directive 2006/.../EC shall be read as references to Directive 2000/12/EC as that Directive stood prior to 1 January 2007; and

| b) | point 4 of Annex II to this Directive shall apply as it stood prior to 1 January 2007. |
| --- | --- |

b)

point 4 of Annex II to this Directive shall apply as it stood prior to 1 January 2007.

2.   Article 157(3) of Directive 2006/.../EC shall apply mutatis mutandis for the purposes of Articles 18 and 20 of this Directive.

Article 51

By 1 January 2011, the Commission shall review and report on the application of this Directive and submit its report to the Parliament and the Council together with any appropriate proposals for amendment.

Article 52

Directive 93/6/EEC, as amended by the Directives listed in Annex VIII, Part A, is repealed, without prejudice to the obligations of the Member States relating to the time-limits for transposition into national law of the Directives set out in Annex VIII, Part B.

References made to the repealed directives shall be construed as being made to this Directive and should be read in accordance with the correspondence table set out in Annex IX.

Article 53

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 54

This Directive is addressed to the Member States.

Done at Strasbourg,

For the European Parliament

The President

For the Council

The President

---

(1)  OJ C 234, 22.9.2005, p. 8.

1

(2)  OJ C 52, 2.3.2005, p. 37.

2

(3)  Position of the European Parliament of 28 September 2005.

3

(4)  OJ L 141, 11.6.1993, p. 1. Directive as last amended by Directive 2005/1/EC of the European Parliament and of the Council (OJ L 79, 24.3.2005, p. 9).

4

(5)  OJ L 145, 30.4.2004, p. 1.

5

(6)  OJ L ...

6

(7)  OJ L 184, 17.7.1999, p. 23.

7

(8)  OJ C 284 E, 21.11.2002, p. 115.

8

(9)  OJ L 35, 11.2.2003, p. 1. Directive as last amended by Directive 2005/1/EC.

9

(10)  OJ L 9, 15.1.2003, p. 3.

10

(11)  OJ L 222, 14.8.1978, p. 11. Directive as last amended by Directive 2003/51/EC of the European Parliament and of the Council (OJ L 178, 17.7.2003, p. 16).

11

(12)  OJ L 3, 7.1.2004, p. 36.

12

(13)  Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ L 141, 11.6.1993, p. 27). Directive as last amended by Directive 2002/87/EC.

13

ANNEX I

CALCULATING CAPITAL REQUIREMENTS FOR POSITION RISK

GENERAL PROVISIONS

Netting

| 1. | The excess of an institution's long (short) positions over its short (long) positions in the same equity, debt and convertible issues and identical financial futures, options, warrants and covered warrants shall be its net position in each of those different instruments. In calculating the net position the competent authorities shall allow positions in derivative instruments to be treated, as laid down in points 4 to 7, as positions in the underlying (or notional) security or securities. Institutions' holdings of their own debt instruments shall be disregarded in calculating specific risk under point 14. |
| --- | --- |

1.

The excess of an institution's long (short) positions over its short (long) positions in the same equity, debt and convertible issues and identical financial futures, options, warrants and covered warrants shall be its net position in each of those different instruments. In calculating the net position the competent authorities shall allow positions in derivative instruments to be treated, as laid down in points 4 to 7, as positions in the underlying (or notional) security or securities. Institutions' holdings of their own debt instruments shall be disregarded in calculating specific risk under point 14.

| 2. | No netting shall be allowed between a convertible and an offsetting position in the instrument underlying it, unless the competent authorities adopt an approach under which the likelihood of a particular convertible's being converted is taken into account or have a capital requirement to cover any loss which conversion might entail. |
| --- | --- |

2.

No netting shall be allowed between a convertible and an offsetting position in the instrument underlying it, unless the competent authorities adopt an approach under which the likelihood of a particular convertible's being converted is taken into account or have a capital requirement to cover any loss which conversion might entail.

| 3. | All net positions, irrespective of their signs, must be converted on a daily basis into the institution's reporting currency at the prevailing spot exchange rate before their aggregation. |
| --- | --- |

3.

All net positions, irrespective of their signs, must be converted on a daily basis into the institution's reporting currency at the prevailing spot exchange rate before their aggregation.

Particular instruments

| 4. | Interest-rate futures, forward-rate agreements (FRAs) and forward commitments to buy or sell debt instruments shall be treated as combinations of long and short positions. Thus a long interest-rate futures position shall be treated as a combination of a borrowing maturing on the delivery date of the futures contract and a holding of an asset with maturity date equal to that of the instrument or notional position underlying the futures contract in question. Similarly a sold FRA will be treated as a long position with a maturity date equal to the settlement date plus the contract period, and a short position with maturity equal to the settlement date. Both the borrowing and the asset holding shall be included in the first category set out in Table 1 in point 14 in order to calculate the capital required against specific risk for interest-rate futures and FRAs. A forward commitment to buy a debt instrument shall be treated as a combination of a borrowing maturing on the delivery date and a long (spot) position in the debt instrument itself. The borrowing shall be included in the first category set out in Table 1 in point 14 for purposes of specific risk, and the debt instrument under whichever column is appropriate for it in the same table.
  The competent authorities may allow the capital requirement for an exchange-traded future to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the future and that it is at least equal to the capital requirement for a future that would result from a calculation made using the method set out in this Annex or applying the internal models method described in Annex V. The competent authorities may also allow the capital requirement for an OTC derivatives contract of the type referred to in this point cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the derivatives contract and that it is at least equal to the capital requirement for the contract in question that would result from a calculation made using the method set out in the this Annex or applying the internal models method described in Annex V.
  For the purposes of this point, ‘long position’ means a position in which an institution has fixed the interest rate it will receive at some time in the future, and ‘short position’ means a position in which it has fixed the interest rate it will pay at some time in the future. |
| --- | --- |

4.

Interest-rate futures, forward-rate agreements (FRAs) and forward commitments to buy or sell debt instruments shall be treated as combinations of long and short positions. Thus a long interest-rate futures position shall be treated as a combination of a borrowing maturing on the delivery date of the futures contract and a holding of an asset with maturity date equal to that of the instrument or notional position underlying the futures contract in question. Similarly a sold FRA will be treated as a long position with a maturity date equal to the settlement date plus the contract period, and a short position with maturity equal to the settlement date. Both the borrowing and the asset holding shall be included in the first category set out in Table 1 in point 14 in order to calculate the capital required against specific risk for interest-rate futures and FRAs. A forward commitment to buy a debt instrument shall be treated as a combination of a borrowing maturing on the delivery date and a long (spot) position in the debt instrument itself. The borrowing shall be included in the first category set out in Table 1 in point 14 for purposes of specific risk, and the debt instrument under whichever column is appropriate for it in the same table.

The competent authorities may allow the capital requirement for an exchange-traded future to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the future and that it is at least equal to the capital requirement for a future that would result from a calculation made using the method set out in this Annex or applying the internal models method described in Annex V. The competent authorities may also allow the capital requirement for an OTC derivatives contract of the type referred to in this point cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the derivatives contract and that it is at least equal to the capital requirement for the contract in question that would result from a calculation made using the method set out in the this Annex or applying the internal models method described in Annex V.

For the purposes of this point, ‘long position’ means a position in which an institution has fixed the interest rate it will receive at some time in the future, and ‘short position’ means a position in which it has fixed the interest rate it will pay at some time in the future.

| 5. | Options on interest rates, debt instruments, equities, equity indices, financial futures, swaps and foreign currencies shall be treated as if they were positions equal in value to the amount of the underlying instrument to which the option refers, multiplied by its delta for the purposes of this Annex. The latter positions may be netted off against any offsetting positions in the identical underlying securities or derivatives. The delta used shall be that of the exchange concerned, that calculated by the competent authorities or, where that is not available or for OTC-options, that calculated by the institution itself, subject to the competent authorities being satisfied that the model used by the institution is reasonable.
  However, the competent authorities may also prescribe that institutions calculate their deltas using a methodology specified by the competent authorities.
  Other risks, apart from the delta risk, associated with options shall be safeguarded against. The competent authorities may allow the requirement against a written exchange-traded option to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement against an option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V. The competent authorities may also allow the capital requirement for an OTC option cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement for an OTC option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V. In addition they may allow the requirement on a bought exchange-traded or OTC option to be the same as that for the instrument underlying it, subject to the constraint that the resulting requirement does not exceed the market value of the option. The requirement against a written OTC option shall be set in relation to the instrument underlying it. |
| --- | --- |

5.

Options on interest rates, debt instruments, equities, equity indices, financial futures, swaps and foreign currencies shall be treated as if they were positions equal in value to the amount of the underlying instrument to which the option refers, multiplied by its delta for the purposes of this Annex. The latter positions may be netted off against any offsetting positions in the identical underlying securities or derivatives. The delta used shall be that of the exchange concerned, that calculated by the competent authorities or, where that is not available or for OTC-options, that calculated by the institution itself, subject to the competent authorities being satisfied that the model used by the institution is reasonable.

However, the competent authorities may also prescribe that institutions calculate their deltas using a methodology specified by the competent authorities.

Other risks, apart from the delta risk, associated with options shall be safeguarded against. The competent authorities may allow the requirement against a written exchange-traded option to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement against an option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V. The competent authorities may also allow the capital requirement for an OTC option cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement for an OTC option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V. In addition they may allow the requirement on a bought exchange-traded or OTC option to be the same as that for the instrument underlying it, subject to the constraint that the resulting requirement does not exceed the market value of the option. The requirement against a written OTC option shall be set in relation to the instrument underlying it.

| 6. | Warrants relating to debt instruments and equities shall be treated in the same way as options under point 5. |
| --- | --- |

6.

Warrants relating to debt instruments and equities shall be treated in the same way as options under point 5.

| 7. | Swaps shall be treated for interest-rate risk purposes on the same basis as on-balance-sheet instruments. Thus, an interest-rate swap under which an institution receives floating-rate interest and pays fixed-rate interest shall be treated as equivalent to a long position in a floating-rate instrument of maturity equivalent to the period until the next interest fixing and a short position in a fixed-rate instrument with the same maturity as the swap itself. |
| --- | --- |

7.

Swaps shall be treated for interest-rate risk purposes on the same basis as on-balance-sheet instruments. Thus, an interest-rate swap under which an institution receives floating-rate interest and pays fixed-rate interest shall be treated as equivalent to a long position in a floating-rate instrument of maturity equivalent to the period until the next interest fixing and a short position in a fixed-rate instrument with the same maturity as the swap itself.

A.   Treatment of the protection seller

| 8. | When calculating the capital requirement for market risk of the party who assumes the credit risk (the ‘protection seller’), unless specified differently, the notional amount of the credit derivative contract must be used. For the purpose of calculating the specific risk charge, other than for total return swaps, the maturity of the credit derivative contract is applicable instead of the maturity of the obligation. Positions are determined as follows:






  (i) | A total return swap creates a long position in the general market risk of the reference obligation and a short position in the general market risk of a government bond with a maturity equivalent to the period until the next interest fixing and which is assigned a 0 % risk weight under Annex VI of Directive 2006/.../EC. It also creates a long position in the specific risk of the reference obligation. |
| --- | --- | --- |

8.

When calculating the capital requirement for market risk of the party who assumes the credit risk (the ‘protection seller’), unless specified differently, the notional amount of the credit derivative contract must be used. For the purpose of calculating the specific risk charge, other than for total return swaps, the maturity of the credit derivative contract is applicable instead of the maturity of the obligation. Positions are determined as follows:

(i)

A total return swap creates a long position in the general market risk of the reference obligation and a short position in the general market risk of a government bond with a maturity equivalent to the period until the next interest fixing and which is assigned a 0 % risk weight under Annex VI of Directive 2006/.../EC. It also creates a long position in the specific risk of the reference obligation.

| (ii) | A credit default swap does not create a position for general market risk. For the purposes of specific risk, the institution must record a synthetic long position in an obligation of the reference entity, unless the derivative is rated externally and meets the conditions for a qualifying debt item, in which case a long position in the derivative is recorded. If premium or interest payments are due under the product, these cash flows must be represented as notional positions in government bonds. |
| --- | --- |

(ii)

A credit default swap does not create a position for general market risk. For the purposes of specific risk, the institution must record a synthetic long position in an obligation of the reference entity, unless the derivative is rated externally and meets the conditions for a qualifying debt item, in which case a long position in the derivative is recorded. If premium or interest payments are due under the product, these cash flows must be represented as notional positions in government bonds.

| (iii) | A single name credit linked note creates a long position in the general market risk of the note itself, as an interest rate product. For the purpose of specific risk, a synthetic long position is created in an obligation of the reference entity. An additional long position is created in the issuer of the note. Where the credit linked note has an external rating and meets the conditions for a qualifying debt item, a single long position with the specific risk of the note need only be recorded. |
| --- | --- |

(iii)

A single name credit linked note creates a long position in the general market risk of the note itself, as an interest rate product. For the purpose of specific risk, a synthetic long position is created in an obligation of the reference entity. An additional long position is created in the issuer of the note. Where the credit linked note has an external rating and meets the conditions for a qualifying debt item, a single long position with the specific risk of the note need only be recorded.

| (iv) | In addition to a long position in the specific risk of the issuer of the note, a multiple name credit linked note providing proportional protection creates a position in each reference entity, with the total notional amount of the contract assigned across the positions according to the proportion of the total notional amount that each exposure to a reference entity represents. Where more than one obligation of a reference entity can be selected, the obligation with the highest risk weighting determines the specific risk.
  Where a multiple name credit linked note has an external rating and meets the conditions for a qualifying debt item, a single long position with the specific risk of the note need only be recorded. |
| --- | --- |

(iv)

In addition to a long position in the specific risk of the issuer of the note, a multiple name credit linked note providing proportional protection creates a position in each reference entity, with the total notional amount of the contract assigned across the positions according to the proportion of the total notional amount that each exposure to a reference entity represents. Where more than one obligation of a reference entity can be selected, the obligation with the highest risk weighting determines the specific risk.

Where a multiple name credit linked note has an external rating and meets the conditions for a qualifying debt item, a single long position with the specific risk of the note need only be recorded.

| (v) | A first-asset-to-default credit derivative creates a position for the notional amount in an obligation of each reference entity. If the size of the maximum credit event payment is lower than the capital requirement under the method in the first sentence of this point, the maximum payment amount may be taken as the capital requirement for specific risk.
  A second-asset-to-default credit derivative creates a position for the notional amount in an obligation of each reference entity less one (that with the lowest specific risk capital requirement). If the size of the maximum credit event payment is lower than the capital requirement under the method in the first sentence of this point, this amount may be taken as the capital requirement for specific risk.
  If a first or second-asset to default derivative is externally rated and meets the conditions for a qualifying debt item, then the protection seller need only calculate one specific risk charge reflecting the rating of the derivative. |
| --- | --- |

(v)

A first-asset-to-default credit derivative creates a position for the notional amount in an obligation of each reference entity. If the size of the maximum credit event payment is lower than the capital requirement under the method in the first sentence of this point, the maximum payment amount may be taken as the capital requirement for specific risk.

A second-asset-to-default credit derivative creates a position for the notional amount in an obligation of each reference entity less one (that with the lowest specific risk capital requirement). If the size of the maximum credit event payment is lower than the capital requirement under the method in the first sentence of this point, this amount may be taken as the capital requirement for specific risk.

If a first or second-asset to default derivative is externally rated and meets the conditions for a qualifying debt item, then the protection seller need only calculate one specific risk charge reflecting the rating of the derivative.

B.   Treatment of the protection buyer

For the party who transfers credit risk (the ‘protection buyer’), the positions are determined as the mirror image of the protection seller, with the exception of a credit linked note (which entails no short position in the issuer). If at a given moment there is a call option in combination with a step-up, such moment is treated as the maturity of the protection. In the case of nth to default credit derivatives, protection buyers are allowed to off-set specific risk for n-1 of the underlyings (i.e., the n-1 assets with the lowest specific risk charge).

| 9. | Institutions which mark to market and manage the interest-rate risk on the derivative instruments covered in points 4 to 7 on a discounted-cash-flow basis may use sensitivity models to calculate the positions referred to in those points and may use them for any bond which is amortised over its residual life rather than via one final repayment of principal. Both the model and its use by the institution must be approved by the competent authorities. These models should generate positions which have the same sensitivity to interest-rate changes as the underlying cash flows. This sensitivity must be assessed with reference to independent movements in sample rates across the yield curve, with at least one sensitivity point in each of the maturity bands set out in Table 2 of point 20. The positions shall be included in the calculation of capital requirements according to the provisions laid down in points 17 to 32. |
| --- | --- |

9.

Institutions which mark to market and manage the interest-rate risk on the derivative instruments covered in points 4 to 7 on a discounted-cash-flow basis may use sensitivity models to calculate the positions referred to in those points and may use them for any bond which is amortised over its residual life rather than via one final repayment of principal. Both the model and its use by the institution must be approved by the competent authorities. These models should generate positions which have the same sensitivity to interest-rate changes as the underlying cash flows. This sensitivity must be assessed with reference to independent movements in sample rates across the yield curve, with at least one sensitivity point in each of the maturity bands set out in Table 2 of point 20. The positions shall be included in the calculation of capital requirements according to the provisions laid down in points 17 to 32.

| 10. | Institutions which do not use models under point 9 may, with the approval of the competent authorities, treat as fully offsetting any positions in derivative instruments covered in points 4 to 7 which meet the following conditions at least:






  a) | the positions are of the same value and denominated in the same currency; |
| --- | --- | --- |

10.

Institutions which do not use models under point 9 may, with the approval of the competent authorities, treat as fully offsetting any positions in derivative instruments covered in points 4 to 7 which meet the following conditions at least:

a)

the positions are of the same value and denominated in the same currency;

| b) | the reference rate (for floating-rate positions) or coupon (for fixed-rate positions) is closely matched; and |
| --- | --- |

b)

the reference rate (for floating-rate positions) or coupon (for fixed-rate positions) is closely matched; and

| c) | the next interest-fixing date or, for fixed coupon positions, residual maturity corresponds with the following limits:






  i) | less than one month hence: same day; |
| --- | --- | --- |

c)

the next interest-fixing date or, for fixed coupon positions, residual maturity corresponds with the following limits:

i)

less than one month hence: same day;

| ii) | between one month and one year hence: within seven days; and |
| --- | --- |

ii)

between one month and one year hence: within seven days; and

| iii) | over one year hence: within 30 days. |
| --- | --- |

iii)

over one year hence: within 30 days.

| 11. | The transferor of securities or guaranteed rights relating to title to securities in a repurchase agreement and the lender of securities in a securities lending shall include these securities in the calculation of its capital requirement under this Annex provided that such securities meet the criteria laid down in Article 11. |
| --- | --- |

11.

The transferor of securities or guaranteed rights relating to title to securities in a repurchase agreement and the lender of securities in a securities lending shall include these securities in the calculation of its capital requirement under this Annex provided that such securities meet the criteria laid down in Article 11.

Specific and general risks

| 12. | The position risk on a traded debt instrument or equity (or debt or equity derivative) shall be divided into two components in order to calculate the capital required against it. The first shall be its specific-risk component – this is the risk of a price change in the instrument concerned due to factors related to its issuer or, in the case of a derivative, the issuer of the underlying instrument. The second component shall cover its general risk – this is the risk of a price change in the instrument due (in the case of a traded debt instrument or debt derivative) to a change in the level of interest rates or (in the case of an equity or equity derivative) to a broad equity-market movement unrelated to any specific attributes of individual securities. |
| --- | --- |

12.

The position risk on a traded debt instrument or equity (or debt or equity derivative) shall be divided into two components in order to calculate the capital required against it. The first shall be its specific-risk component – this is the risk of a price change in the instrument concerned due to factors related to its issuer or, in the case of a derivative, the issuer of the underlying instrument. The second component shall cover its general risk – this is the risk of a price change in the instrument due (in the case of a traded debt instrument or debt derivative) to a change in the level of interest rates or (in the case of an equity or equity derivative) to a broad equity-market movement unrelated to any specific attributes of individual securities.

TRADED DEBT INSTRUMENTS

| 13. | Net positions shall be classified according to the currency in which they are denominated and shall calculate the capital requirement for general and specific risk in each individual currency separately. |
| --- | --- |

13.

Net positions shall be classified according to the currency in which they are denominated and shall calculate the capital requirement for general and specific risk in each individual currency separately.

Specific risk

| 14. | The institution shall assign its net positions in the trading book, as calculated in accordance with point 1 to the appropriate categories in Table 1 on the basis of their issuer/obligor, external or internal credit assessment, and residual maturity, and then multiply them by the weightings shown in that table. It shall sum its weighted positions (regardless of whether they are long or short) in order to calculate its capital requirement against specific risk.
  Table 1






  Categories | Specific risk capital charge |
| --- | --- | --- |
| Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional government or local authorities which would qualify for credit quality step 1 or which would receive a 0 % risk weight under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC. | 0 % |
| Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional governments or local authorities which would qualify for credit quality step 2 or 3 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by institutions which would qualify for credit quality step 1 or 2 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by institutions which would qualify for credit quality step 3 under the rules for the risk weighting of exposures under point 28, Part 1 of Annex VI to Directive 2006/.../EC, and debt securities issued or guaranteed by corporates which would qualify for credit quality step 1 or 2 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC.
  Other qualifying items as defined in point 15. | 0,25 % (residual term to final maturity 6 months or less)
  1,00 % (residual term to final maturity greater than 6 and up to and including 24 months)
  1,60 % (residual term to final maturity exceeding 24 months) |
| Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional governments or local authorities or institutions which would qualify for credit quality step 4 or 5 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by institutions which would qualify for credit quality step 3 under the rules for the risk weighting of exposures under point 26 of Part 1 of Annex VI to Directive 2006/.../EC, and debt securities issued or guaranteed by corporates which would qualify for credit quality step 3 or 4 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC.
  Exposures for which a credit assessment by a nominated ECAI is not available. | 8 % |
| Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional governments or local authorities or institutions which would qualify for credit quality step 6 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by corporates which would qualify for credit quality step 5 or 6 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC. | 12 % |

14.

The institution shall assign its net positions in the trading book, as calculated in accordance with point 1 to the appropriate categories in Table 1 on the basis of their issuer/obligor, external or internal credit assessment, and residual maturity, and then multiply them by the weightings shown in that table. It shall sum its weighted positions (regardless of whether they are long or short) in order to calculate its capital requirement against specific risk.

Table 1

Categories

Specific risk capital charge

Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional government or local authorities which would qualify for credit quality step 1 or which would receive a 0 % risk weight under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC.

0 %

Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional governments or local authorities which would qualify for credit quality step 2 or 3 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by institutions which would qualify for credit quality step 1 or 2 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by institutions which would qualify for credit quality step 3 under the rules for the risk weighting of exposures under point 28, Part 1 of Annex VI to Directive 2006/.../EC, and debt securities issued or guaranteed by corporates which would qualify for credit quality step 1 or 2 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC.

Other qualifying items as defined in point 15.

0,25 % (residual term to final maturity 6 months or less)

1,00 % (residual term to final maturity greater than 6 and up to and including 24 months)

1,60 % (residual term to final maturity exceeding 24 months)

Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional governments or local authorities or institutions which would qualify for credit quality step 4 or 5 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by institutions which would qualify for credit quality step 3 under the rules for the risk weighting of exposures under point 26 of Part 1 of Annex VI to Directive 2006/.../EC, and debt securities issued or guaranteed by corporates which would qualify for credit quality step 3 or 4 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC.

Exposures for which a credit assessment by a nominated ECAI is not available.

8 %

Debt securities issued or guaranteed by central governments, issued by central banks, international organisations, multilateral development banks or Member States' regional governments or local authorities or institutions which would qualify for credit quality step 6 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC, and debt securities issued or guaranteed by corporates which would qualify for credit quality step 5 or 6 under the rules for the risk weighting of exposures under Articles 78 to 83 of Directive 2006/.../EC.

12 %

For institutions which apply the rules for the risk weighting of exposures under Articles 84 to 89 of Directive 2006/.../EC, to qualify for a credit quality step the obligor of the exposure shall have an internal rating with a PD equivalent to or lower than that associated with the appropriate credit quality step under the rules for the risk weighting of exposures to corporates under Articles 78 to 83 of that Directive.

Instruments issued by a non-qualifying issuer shall receive a specific risk capital charge of 8 % or 12 % according to Table 1. Competent authorities may require institutions to apply a higher specific risk charge to such instruments and/or to disallow offsetting for the purposes of defining the extent of general market risk between such instruments and any other debt instruments.

Securitisation exposures that would be subject to a deduction treatment as set out in Article 66(2) of Directive 2006/.../EC, or risk-weighted at 1 250 % as set out in Part 4 of Annex IX to that Directive, shall be subject to a capital charge that is no less than that set out under those treatments. Unrated liquidity facilities shall be subject to a capital charge that is no less than that set out in Part 4 of Annex IX to Directive 2006/.../EC.

| 15. | For the purposes of point 14 qualifying items shall include:






  a) | long and short positions in assets qualifying for a credit quality step corresponding at least to investment grade in the mapping process described in Title V, Chapter 2, Section 3, Sub-section 1 of Directive 2006/.../EC; |
| --- | --- | --- |

15.

For the purposes of point 14 qualifying items shall include:

a)

long and short positions in assets qualifying for a credit quality step corresponding at least to investment grade in the mapping process described in Title V, Chapter 2, Section 3, Sub-section 1 of Directive 2006/.../EC;

| b) | long and short positions in assets which, because of the solvency of the issuer, have a PD which is not higher than that of the assets referred to under (a), under the approach described in Title V, Chapter 2, Section 3, Sub-section 2 of Directive 2006/.../EC; |
| --- | --- |

b)

long and short positions in assets which, because of the solvency of the issuer, have a PD which is not higher than that of the assets referred to under (a), under the approach described in Title V, Chapter 2, Section 3, Sub-section 2 of Directive 2006/.../EC;

| c) | long and short positions in assets for which a credit assessment by a nominated external credit assessment institution is not available and which meet the following conditions:






  i) | they are considered by the institutions concerned to be sufficiently liquid; |
| --- | --- | --- |

c)

long and short positions in assets for which a credit assessment by a nominated external credit assessment institution is not available and which meet the following conditions:

i)

they are considered by the institutions concerned to be sufficiently liquid;

| ii) | their investment quality is, according to the institution's own discretion, at least equivalent to that of the assets referred to under point (a); and |
| --- | --- |

ii)

their investment quality is, according to the institution's own discretion, at least equivalent to that of the assets referred to under point (a); and

| iii) | they are listed on at least one regulated market in a Member State or on a stock exchange in a third country provided that the exchange is recognised by the competent authorities of the relevant Member State; |
| --- | --- |

iii)

they are listed on at least one regulated market in a Member State or on a stock exchange in a third country provided that the exchange is recognised by the competent authorities of the relevant Member State;

| d) | long and short positions in assets issued by institutions subject to the capital adequacy requirements set out in Directive 2006/.../EC which are considered by the institutions concerned to be sufficiently liquid and whose investment quality is, according to the institution's own discretion, at least equivalent to that of the assets referred to under point (a); and |
| --- | --- |

d)

long and short positions in assets issued by institutions subject to the capital adequacy requirements set out in Directive 2006/.../EC which are considered by the institutions concerned to be sufficiently liquid and whose investment quality is, according to the institution's own discretion, at least equivalent to that of the assets referred to under point (a); and

| e) | securities issued by institutions that are deemed to be of equivalent, or higher, credit quality than those associated with credit quality step 2 under the rules for the risk weighting of exposures to institutions set out in Articles 78 to 83 of Directive 2006/.../EC and that are subject to supervisory and regulatory arrangements comparable to those under this Directive. |
| --- | --- |

e)

securities issued by institutions that are deemed to be of equivalent, or higher, credit quality than those associated with credit quality step 2 under the rules for the risk weighting of exposures to institutions set out in Articles 78 to 83 of Directive 2006/.../EC and that are subject to supervisory and regulatory arrangements comparable to those under this Directive.

The manner in which the debt instruments are assessed shall be subject to scrutiny by the competent authorities, which shall overturn the judgment of the institution if they consider that the instruments concerned are subject to too high a degree of specific risk to be qualifying items.

| 16. | The competent authorities shall require the institution to apply the maximum weighting shown in Table 1 to point 14 to instruments that show a particular risk because of the insufficient solvency of the issuer. |
| --- | --- |

16.

The competent authorities shall require the institution to apply the maximum weighting shown in Table 1 to point 14 to instruments that show a particular risk because of the insufficient solvency of the issuer.

General risk

(a)   Maturity-based

| 17. | The procedure for calculating capital requirements against general risk involves two basic steps. First, all positions shall be weighted according to maturity (as explained in point 18), in order to compute the amount of capital required against them. Second, allowance shall be made for this requirement to be reduced when a weighted position is held alongside an opposite weighted position within the same maturity band. A reduction in the requirement shall also be allowed when the opposite weighted positions fall into different maturity bands, with the size of this reduction depending both on whether the two positions fall into the same zone, or not, and on the particular zones they fall into. There are three zones (groups of maturity bands) altogether. |
| --- | --- |

17.

The procedure for calculating capital requirements against general risk involves two basic steps. First, all positions shall be weighted according to maturity (as explained in point 18), in order to compute the amount of capital required against them. Second, allowance shall be made for this requirement to be reduced when a weighted position is held alongside an opposite weighted position within the same maturity band. A reduction in the requirement shall also be allowed when the opposite weighted positions fall into different maturity bands, with the size of this reduction depending both on whether the two positions fall into the same zone, or not, and on the particular zones they fall into. There are three zones (groups of maturity bands) altogether.

| 18. | The institution shall assign its net positions to the appropriate maturity bands in column 2 or 3, as appropriate, in Table 2 in point 20. It shall do so on the basis of residual maturity in the case of fixed-rate instruments and on the basis of the period until the interest rate is next set in the case of instruments on which the interest rate is variable before final maturity. It shall also distinguish between debt instruments with a coupon of 3 % or more and those with a coupon of less than 3 % and thus allocate them to column 2 or column 3 in Table 2. It shall then multiply each of them by the weighing for the maturity band in question in column 4 in Table 2. |
| --- | --- |

18.

The institution shall assign its net positions to the appropriate maturity bands in column 2 or 3, as appropriate, in Table 2 in point 20. It shall do so on the basis of residual maturity in the case of fixed-rate instruments and on the basis of the period until the interest rate is next set in the case of instruments on which the interest rate is variable before final maturity. It shall also distinguish between debt instruments with a coupon of 3 % or more and those with a coupon of less than 3 % and thus allocate them to column 2 or column 3 in Table 2. It shall then multiply each of them by the weighing for the maturity band in question in column 4 in Table 2.

| 19. | It shall then work out the sum of the weighted long positions and the sum of the weighted short positions in each maturity band. The amount of the former which are matched by the latter in a given maturity band shall be the matched weighted position in that band, while the residual long or short position shall be the unmatched weighted position for the same band. The total of the matched weighted positions in all bands shall then be calculated. |
| --- | --- |

19.

It shall then work out the sum of the weighted long positions and the sum of the weighted short positions in each maturity band. The amount of the former which are matched by the latter in a given maturity band shall be the matched weighted position in that band, while the residual long or short position shall be the unmatched weighted position for the same band. The total of the matched weighted positions in all bands shall then be calculated.

| 20. | The institution shall compute the totals of the unmatched weighted long positions for the bands included in each of the zones in Table 2 in order to derive the unmatched weighted long position for each zone. Similarly, the sum of the unmatched weighted short positions for each band in a particular zone shall be summed to compute the unmatched weighted short position for that zone. That part of the unmatched weighted long position for a given zone that is matched by the unmatched weighted short position for the same zone shall be the matched weighted position for that zone. That part of the unmatched weighted long or unmatched weighted short position for a zone that cannot be thus matched shall be the unmatched weighted position for that zone.
  Table 2









  Zone | Maturity band | Weighting
  (in %) | Assumed interest rate change
  (in %) |
| --- | --- | --- | --- | --- |
| Coupon of 3 % or more | Coupon of less than 3 % |
| One | 0 ≤ 1 month | 0 ≤ 1 month | 0,00 | — |
| > 1 ≤ 3 months | > 1 ≤ 3 months | 0,20 | 1,00 |
| > 3 ≤ 6 months | > 3 ≤ 6 months | 0,40 | 1,00 |
| > 6 ≤ 12 months | > 6 ≤ 12 months | 0,70 | 1,00 |
| Two | > 1 ≤ 2 years | > 1,0 ≤ 1,9 years | 1,25 | 0,90 |
| > 2 ≤ 3 years | > 1,9 ≤ 2,8 years | 1,75 | 0,80 |
| > 3 ≤ 4 years | > 2,8 ≤ 3,6 years | 2,25 | 0,75 |
| Three | > 4 ≤ 5 years | > 3,6 ≤ 4,3 years | 2,75 | 0,75 |
| > 5 ≤ 7 years | > 4,3 ≤ 5,7 years | 3,25 | 0,70 |
| > 7 ≤ 10 years | > 5,7 ≤ 7,3 years | 3,75 | 0,65 |
| > 10 ≤ 15 years | > 7,3 ≤ 9,3 years | 4,50 | 0,60 |
| > 15 ≤ 20 years | > 9,3 ≤ 10,6 years | 5,25 | 0,60 |
| > 20 years | > 10,6 ≤ 12,0 years | 6,00 | 0,60 |
| | > 12,0 ≤ 20,0 years | 8,00 | 0,60 |
| | > 20 years | 12,50 | 0,60 |

20.

The institution shall compute the totals of the unmatched weighted long positions for the bands included in each of the zones in Table 2 in order to derive the unmatched weighted long position for each zone. Similarly, the sum of the unmatched weighted short positions for each band in a particular zone shall be summed to compute the unmatched weighted short position for that zone. That part of the unmatched weighted long position for a given zone that is matched by the unmatched weighted short position for the same zone shall be the matched weighted position for that zone. That part of the unmatched weighted long or unmatched weighted short position for a zone that cannot be thus matched shall be the unmatched weighted position for that zone.

Table 2

Zone

Maturity band

Weighting

(in %)

Assumed interest rate change

(in %)

Coupon of 3 % or more

Coupon of less than 3 %

One

0 ≤ 1 month

0 ≤ 1 month

0,00

—

> 1 ≤ 3 months

> 1 ≤ 3 months

0,20

1,00

> 3 ≤ 6 months

> 3 ≤ 6 months

0,40

1,00

> 6 ≤ 12 months

> 6 ≤ 12 months

0,70

1,00

Two

> 1 ≤ 2 years

> 1,0 ≤ 1,9 years

1,25

0,90

> 2 ≤ 3 years

> 1,9 ≤ 2,8 years

1,75

0,80

> 3 ≤ 4 years

> 2,8 ≤ 3,6 years

2,25

0,75

Three

> 4 ≤ 5 years

> 3,6 ≤ 4,3 years

2,75

0,75

> 5 ≤ 7 years

> 4,3 ≤ 5,7 years

3,25

0,70

> 7 ≤ 10 years

> 5,7 ≤ 7,3 years

3,75

0,65

> 10 ≤ 15 years

> 7,3 ≤ 9,3 years

4,50

0,60

> 15 ≤ 20 years

> 9,3 ≤ 10,6 years

5,25

0,60

> 20 years

> 10,6 ≤ 12,0 years

6,00

0,60

> 12,0 ≤ 20,0 years

8,00

0,60

> 20 years

12,50

0,60

| 21. | The amount of the unmatched weighted long (short) position in zone one which is matched by the unmatched weighted short (long) position in zone two shall then be computed. This shall be referred to in point 25 as the matched weighted position between zones one and two. The same calculation shall then be undertaken with regard to that part of the unmatched weighted position in zone two which is left over and the unmatched weighted position in zone three in order to calculate the matched weighted position between zones two and three. |
| --- | --- |

21.

The amount of the unmatched weighted long (short) position in zone one which is matched by the unmatched weighted short (long) position in zone two shall then be computed. This shall be referred to in point 25 as the matched weighted position between zones one and two. The same calculation shall then be undertaken with regard to that part of the unmatched weighted position in zone two which is left over and the unmatched weighted position in zone three in order to calculate the matched weighted position between zones two and three.

| 22. | The institution may, if it wishes, reverse the order in point 21 so as to calculate the matched weighted position between zones two and three before calculating that position between zones one and two. |
| --- | --- |

22.

The institution may, if it wishes, reverse the order in point 21 so as to calculate the matched weighted position between zones two and three before calculating that position between zones one and two.

| 23. | The remainder of the unmatched weighted position in zone one shall then be matched with what remains of that for zone three after the latter's matching with zone two in order to derive the matched weighted position between zones one and three. |
| --- | --- |

23.

The remainder of the unmatched weighted position in zone one shall then be matched with what remains of that for zone three after the latter's matching with zone two in order to derive the matched weighted position between zones one and three.

| 24. | Residual positions, following the three separate matching calculations in points 21, 22 and 23, shall be summed. |
| --- | --- |

24.

Residual positions, following the three separate matching calculations in points 21, 22 and 23, shall be summed.

| 25. | The institution's capital requirement shall be calculated as the sum of:






  a) | 10 % of the sum of the matched weighted positions in all maturity bands; |
| --- | --- | --- |

25.

The institution's capital requirement shall be calculated as the sum of:

a)

10 % of the sum of the matched weighted positions in all maturity bands;

| b) | 40 % of the matched weighted position in zone one; |
| --- | --- |

b)

40 % of the matched weighted position in zone one;

| c) | 30 % of the matched weighted position in zone two; |
| --- | --- |

c)

30 % of the matched weighted position in zone two;

| d) | 30 % of the matched weighted position in zone three; |
| --- | --- |

d)

30 % of the matched weighted position in zone three;

| e) | 40 % of the matched weighted position between zones one and two and between zones two and three (see point 21); |
| --- | --- |

e)

40 % of the matched weighted position between zones one and two and between zones two and three (see point 21);

| f) | 150 % of the matched weighted position between zones one and three; and |
| --- | --- |

f)

150 % of the matched weighted position between zones one and three; and

| g) | 100 % of the residual unmatched weighted positions. |
| --- | --- |

g)

100 % of the residual unmatched weighted positions.

(b)   Duration-based

| 26. | The competent authorities may allow institutions in general or on an individual basis to use a system for calculating the capital requirement for the general risk on traded debt instruments which reflects duration, instead of the system set out in points 17 to 25, provided that the institution does so on a consistent basis. |
| --- | --- |

26.

The competent authorities may allow institutions in general or on an individual basis to use a system for calculating the capital requirement for the general risk on traded debt instruments which reflects duration, instead of the system set out in points 17 to 25, provided that the institution does so on a consistent basis.

| 27. | Under a system referred to in point 26 the institution shall take the market value of each fixed-rate debt instrument and thence calculate its yield to maturity, which is implied discount rate for that instrument. In the case of floating-rate instruments, the institution shall take the market value of each instrument and thence calculate its yield on the assumption that the principal is due when the interest rate can next be changed. |
| --- | --- |

27.

Under a system referred to in point 26 the institution shall take the market value of each fixed-rate debt instrument and thence calculate its yield to maturity, which is implied discount rate for that instrument. In the case of floating-rate instruments, the institution shall take the market value of each instrument and thence calculate its yield on the assumption that the principal is due when the interest rate can next be changed.

| 28. | The institution shall then calculate the modified duration of each debt instrument on the basis of the following formula: modified duration = ((duration (D))/(1 + r)), where:







  D | = | ((Σt = 1
  m((t Ct)/((1 + r)t)))/(Σt = 1
  m((Ct)/((1 + r)t)))) |
| --- | --- | --- | --- |

28.

The institution shall then calculate the modified duration of each debt instrument on the basis of the following formula: modified duration = ((duration (D))/(1 + r)), where:

D

=

((Σt = 1
  m((t Ct)/((1 + r)t)))/(Σt = 1
  m((Ct)/((1 + r)t))))

where:

| R | = | yield to maturity (see point 25), |
| --- | --- | --- |
| Ct | = | cash payment in time t, |
| M | = | total maturity (see point 25). |

R

=

yield to maturity (see point 25),

Ct

=

cash payment in time t,

M

=

total maturity (see point 25).

| 29. | The institution shall then allocate each debt instrument to the appropriate zone in Table 3. It shall do so on the basis of the modified duration of each instrument.
  Table 3







  Zone | Modified duration
  (in years) | Assumed interest
  (change in %) |
| --- | --- | --- | --- |
| One | > 0 ≤ 1,0 | 1,0 |
| Two | > 1,0 ≤ 3,6 | 0,85 |
| Three | > 3,6 | 0,7 |

29.

The institution shall then allocate each debt instrument to the appropriate zone in Table 3. It shall do so on the basis of the modified duration of each instrument.

Table 3

Zone

Modified duration

(in years)

Assumed interest

(change in %)

One

> 0 ≤ 1,0

1,0

Two

> 1,0 ≤ 3,6

0,85

Three

> 3,6

0,7

| 30. | The institution shall then calculate the duration-weighted position for each instrument by multiplying its market price by its modified duration and by the assumed interest-rate change for an instrument with that particular modified duration (see column 3 in Table 3). |
| --- | --- |

30.

The institution shall then calculate the duration-weighted position for each instrument by multiplying its market price by its modified duration and by the assumed interest-rate change for an instrument with that particular modified duration (see column 3 in Table 3).

| 31. | The institution shall calculate its duration-weighted long and its duration-weighted short positions within each zone. The amount of the former which are matched by the latter within each zone shall be the matched duration-weighted position for that zone.
  The institution shall then calculate the unmatched duration-weighted positions for each zone. It shall then follow the procedures laid down for unmatched weighted positions in points 21 to 24. |
| --- | --- |

31.

The institution shall calculate its duration-weighted long and its duration-weighted short positions within each zone. The amount of the former which are matched by the latter within each zone shall be the matched duration-weighted position for that zone.

The institution shall then calculate the unmatched duration-weighted positions for each zone. It shall then follow the procedures laid down for unmatched weighted positions in points 21 to 24.

| 32. | The institution's capital requirement shall then be calculated as the sum of:






  a) | 2 % of the matched duration-weighted position for each zone; |
| --- | --- | --- |

32.

The institution's capital requirement shall then be calculated as the sum of:

a)

2 % of the matched duration-weighted position for each zone;

| b) | 40 % of the matched duration-weighted positions between zones one and two and between zones two and three; |
| --- | --- |

b)

40 % of the matched duration-weighted positions between zones one and two and between zones two and three;

| c) | 150 % of the matched duration-weighted position between zones one and three; and |
| --- | --- |

c)

150 % of the matched duration-weighted position between zones one and three; and

| d) | 100 % of the residual unmatched duration-weighted positions. |
| --- | --- |

d)

100 % of the residual unmatched duration-weighted positions.

EQUITIES

| 33. | The institution shall sum all its net long positions and all its net short positions in accordance with point 1. The sum of the two figures shall be its overall gross position. The difference between them shall be its overall net position. |
| --- | --- |

33.

The institution shall sum all its net long positions and all its net short positions in accordance with point 1. The sum of the two figures shall be its overall gross position. The difference between them shall be its overall net position.

Specific risk

| 34. | The institution shall sum all its net long positions and all its net short positions in accordance with point 1. It shall multiply its overall gross position by 4 % in order to calculate its capital requirement against specific risk. |
| --- | --- |

34.

The institution shall sum all its net long positions and all its net short positions in accordance with point 1. It shall multiply its overall gross position by 4 % in order to calculate its capital requirement against specific risk.

| 35. | By derogation from point 34, the competent authorities may allow the capital requirement against specific risk to be 2 % rather than 4 % for those portfolios of equities that an institution holds which meet the following conditions:






  a) | the equities shall not be those of issuers which have issued only traded debt instruments that currently attract an 8 % or 12 % requirement in Table 1 to point 14 or that attract a lower requirement only because they are guaranteed or secured; |
| --- | --- | --- |

35.

By derogation from point 34, the competent authorities may allow the capital requirement against specific risk to be 2 % rather than 4 % for those portfolios of equities that an institution holds which meet the following conditions:

a)

the equities shall not be those of issuers which have issued only traded debt instruments that currently attract an 8 % or 12 % requirement in Table 1 to point 14 or that attract a lower requirement only because they are guaranteed or secured;

| b) | the equities must be adjudged highly liquid by the competent authorities according to objective criteria; and |
| --- | --- |

b)

the equities must be adjudged highly liquid by the competent authorities according to objective criteria; and

| c) | no individual position shall comprise more than 5 % of the value of the institution's whole equity portfolio. |
| --- | --- |

c)

no individual position shall comprise more than 5 % of the value of the institution's whole equity portfolio.

For the purpose of point (c), the competent authorities may authorise individual positions of up to 10 % provided that the total of such positions does not exceed 50 % of the portfolio.

General risk

| 36. | Its capital requirement against general risk shall be its overall net position multiplied by 8 %. |
| --- | --- |

36.

Its capital requirement against general risk shall be its overall net position multiplied by 8 %.

Stock-index futures

| 37. | Stock-index futures, the delta-weighted equivalents of options in stock-index futures and stock indices collectively referred to hereafter as ‘stock-index futures’, may be broken down into positions in each of their constituent equities. These positions may be treated as underlying positions in the equities in question, and may, subject to the approval of the competent authorities, be netted against opposite positions in the underlying equities themselves. |
| --- | --- |

37.

Stock-index futures, the delta-weighted equivalents of options in stock-index futures and stock indices collectively referred to hereafter as ‘stock-index futures’, may be broken down into positions in each of their constituent equities. These positions may be treated as underlying positions in the equities in question, and may, subject to the approval of the competent authorities, be netted against opposite positions in the underlying equities themselves.

| 38. | The competent authorities shall ensure that any institution which has netted off its positions in one or more of the equities constituting a stock-index future against one or more positions in the stock-index future itself has adequate capital to cover the risk of loss caused by the future's values not moving fully in line with that of its constituent equities; they shall also do this when an institution holds opposite positions in stock-index futures which are not identical in respect of either their maturity or their composition or both. |
| --- | --- |

38.

The competent authorities shall ensure that any institution which has netted off its positions in one or more of the equities constituting a stock-index future against one or more positions in the stock-index future itself has adequate capital to cover the risk of loss caused by the future's values not moving fully in line with that of its constituent equities; they shall also do this when an institution holds opposite positions in stock-index futures which are not identical in respect of either their maturity or their composition or both.

| 39. | By derogation from points 37 and 38, stock-index futures which are exchange traded and – in the opinion of the competent authorities – represent broadly diversified indices shall attract a capital requirement against general risk of 8 %, but no capital requirement against specific risk. Such stock-index futures shall be included in the calculation of the overall net position in point 33, but disregarded in the calculation of the overall gross position in the same point. |
| --- | --- |

39.

By derogation from points 37 and 38, stock-index futures which are exchange traded and – in the opinion of the competent authorities – represent broadly diversified indices shall attract a capital requirement against general risk of 8 %, but no capital requirement against specific risk. Such stock-index futures shall be included in the calculation of the overall net position in point 33, but disregarded in the calculation of the overall gross position in the same point.

| 40. | If a stock-index future is not broken down into its underlying positions, it shall be treated as if it were an individual equity. However, the specific risk on this individual equity can be ignored if the stock-index future in question is exchange traded and, in the opinion of the competent authorities, represents a broadly diversified index. |
| --- | --- |

40.

If a stock-index future is not broken down into its underlying positions, it shall be treated as if it were an individual equity. However, the specific risk on this individual equity can be ignored if the stock-index future in question is exchange traded and, in the opinion of the competent authorities, represents a broadly diversified index.

UNDERWRITING

| 41. | In the case of the underwriting of debt and equity instruments, the competent authorities may allow an institution to use the following procedure in calculating its capital requirements. Firstly, it shall calculate the net positions by deducting the underwriting positions which are subscribed or sub-underwritten by third parties on the basis of formal agreements. Secondly, it shall reduce the net positions by the reduction factors in Table 4
  Table 4












  — | working day 0: |
| --- | --- | --- |

41.

In the case of the underwriting of debt and equity instruments, the competent authorities may allow an institution to use the following procedure in calculating its capital requirements. Firstly, it shall calculate the net positions by deducting the underwriting positions which are subscribed or sub-underwritten by third parties on the basis of formal agreements. Secondly, it shall reduce the net positions by the reduction factors in Table 4

Table 4

—

working day 0:

100 %

| — | working day 1: |
| --- | --- |

—

working day 1:

90 %

| — | working days 2 to 3: |
| --- | --- |

—

working days 2 to 3:

75 %

| — | working day 4: |
| --- | --- |

—

working day 4:

50 %

| — | working day 5: |
| --- | --- |

—

working day 5:

25 %

| — | after working day 5: |
| --- | --- |

—

after working day 5:

0 %.

‘Working day zero’ shall be the working day on which the institution becomes unconditionally committed to accepting a known quantity of securities at an agreed price.

Thirdly, it shall calculate its capital requirements using the reduced underwriting positions.

The competent authorities shall ensure that the institution holds sufficient capital against the risk of loss which exists between the time of the initial commitment and working day 1.

SPECIFIC RISK CAPITAL CHARGES FOR TRADING BOOK POSITIONS HEDGED BY CREDIT DERIVATIVES

| 42. | An allowance shall be given for protection provided by credit derivatives, in accordance with the principles set out in points 43 to 46. |
| --- | --- |

42.

An allowance shall be given for protection provided by credit derivatives, in accordance with the principles set out in points 43 to 46.

| 43. | Full allowance shall be given when the value of two legs always move in the opposite direction and broadly to the same extent. This will be the case in the following situations:






  a) | the two legs consist of completely identical instruments; or |
| --- | --- | --- |

43.

Full allowance shall be given when the value of two legs always move in the opposite direction and broadly to the same extent. This will be the case in the following situations:

a)

the two legs consist of completely identical instruments; or

| b) | a long cash position is hedged by a total rate of return swap (or vice versa) and there is an exact match between the reference obligation and the underlying exposure (i.e., the cash position). The maturity of the swap itself may be different from that of the underlying exposure. |
| --- | --- |

b)

a long cash position is hedged by a total rate of return swap (or vice versa) and there is an exact match between the reference obligation and the underlying exposure (i.e., the cash position). The maturity of the swap itself may be different from that of the underlying exposure.

In these situations, a specific risk capital charge should not be applied to either side of the position.

| 44. | An 80 % offset will be applied when the value of two legs always move in the opposite direction and where there is an exact match in terms of the reference obligation, the maturity of both the reference obligation and the credit derivative, and the currency of the underlying exposure. In addition, key features of the credit derivative contract should not cause the price movement of the credit derivative to materially deviate from the price movements of the cash position. To the extent that the transaction transfers risk, an 80 % specific risk offset will be applied to the side of the transaction with the higher capital charge, while the specific risk requirements on the other side shall be zero. |
| --- | --- |

44.

An 80 % offset will be applied when the value of two legs always move in the opposite direction and where there is an exact match in terms of the reference obligation, the maturity of both the reference obligation and the credit derivative, and the currency of the underlying exposure. In addition, key features of the credit derivative contract should not cause the price movement of the credit derivative to materially deviate from the price movements of the cash position. To the extent that the transaction transfers risk, an 80 % specific risk offset will be applied to the side of the transaction with the higher capital charge, while the specific risk requirements on the other side shall be zero.

| 45. | Partial allowance shall be given when the value of two legs usually move in the opposite direction. This would be the case in the following situations:






  a) | the position falls under point 43(b) but there is an asset mismatch between the reference obligation and the underlying exposure. However, the positions meet the following requirements:






  i) | the reference obligation ranks pari passu with or is junior to the underlying obligation; and |
| --- | --- | --- | --- |

45.

Partial allowance shall be given when the value of two legs usually move in the opposite direction. This would be the case in the following situations:

a)

the position falls under point 43(b) but there is an asset mismatch between the reference obligation and the underlying exposure. However, the positions meet the following requirements:

i)

the reference obligation ranks pari passu with or is junior to the underlying obligation; and

| ii) | the underlying obligation and reference obligation share the same obligor and have legally enforceable cross-default or cross-acceleration clauses; |
| --- | --- |

ii)

the underlying obligation and reference obligation share the same obligor and have legally enforceable cross-default or cross-acceleration clauses;

| b) | the position falls under point 43(a) or point 44 but there is a currency or maturity mismatch between the credit protection and the underlying asset (currency mismatches should be included in the normal reporting foreign exchange risk under Annex III); or |
| --- | --- |

b)

the position falls under point 43(a) or point 44 but there is a currency or maturity mismatch between the credit protection and the underlying asset (currency mismatches should be included in the normal reporting foreign exchange risk under Annex III); or

| c) | the position falls under point 44 but there is an asset mismatch between the cash position and the credit derivative. However, the underlying asset is included in the (deliverable) obligations in the credit derivative documentation. |
| --- | --- |

c)

the position falls under point 44 but there is an asset mismatch between the cash position and the credit derivative. However, the underlying asset is included in the (deliverable) obligations in the credit derivative documentation.

In each of those situations, rather than adding the specific risk capital requirements for each side of the transaction, only the higher of the two capital requirements shall apply.

| 46. | In all situations not falling under points 43 to 45, a specific risk capital charge will be assessed against both sides of the positions. |
| --- | --- |

46.

In all situations not falling under points 43 to 45, a specific risk capital charge will be assessed against both sides of the positions.

CAPITAL CHARGES FOR CIUS IN THE TRADING BOOK

| 47. | The capital requirements for positions in CIUs which meet the conditions specified in Article 11 for a trading book capital treatment shall be calculated in accordance with the methods set out in points 48 to 56. |
| --- | --- |

47.

The capital requirements for positions in CIUs which meet the conditions specified in Article 11 for a trading book capital treatment shall be calculated in accordance with the methods set out in points 48 to 56.

| 48. | Without prejudice to other provisions in this section, positions in CIUs shall be subject to a capital requirement for position risk (specific and general) of 32 %. Without prejudice to the provisions of the fourth paragraph of point 2.1 of Annex III or the sixth paragraph of point 12 of Annex V (commodity risk) taken together with the fourth paragraph of point 2.1 of Annex III, where the modified gold treatment set out in those points is used, positions in CIUs shall be subject to a capital requirement for position risk (specific and general) and foreign-exchange risk of no more than 40 %. |
| --- | --- |

48.

Without prejudice to other provisions in this section, positions in CIUs shall be subject to a capital requirement for position risk (specific and general) of 32 %. Without prejudice to the provisions of the fourth paragraph of point 2.1 of Annex III or the sixth paragraph of point 12 of Annex V (commodity risk) taken together with the fourth paragraph of point 2.1 of Annex III, where the modified gold treatment set out in those points is used, positions in CIUs shall be subject to a capital requirement for position risk (specific and general) and foreign-exchange risk of no more than 40 %.

| 49. | Institutions may determine the capital requirement for positions in CIUs which meet the criteria set out in point 51, by the methods set out in points 53 to 56. |
| --- | --- |

49.

Institutions may determine the capital requirement for positions in CIUs which meet the criteria set out in point 51, by the methods set out in points 53 to 56.

| 50. | Unless noted otherwise, no netting is permitted between the underlying investments of a CIU and other positions held by the institution. |
| --- | --- |

50.

Unless noted otherwise, no netting is permitted between the underlying investments of a CIU and other positions held by the institution.

GENERAL CRITERIA

| 51. | The general eligibility criteria for using the methods in points 53 to 56, for CIUs issued by companies supervised or incorporated within the Community are that:






  a) | the CIU's prospectus or equivalent document shall include:






  i) | the categories of assets the CIU is authorised to invest in; |
| --- | --- | --- | --- |

51.

The general eligibility criteria for using the methods in points 53 to 56, for CIUs issued by companies supervised or incorporated within the Community are that:

a)

the CIU's prospectus or equivalent document shall include:

i)

the categories of assets the CIU is authorised to invest in;

| ii) | if investment limits apply, the relative limits and the methodologies to calculate them; |
| --- | --- |

ii)

if investment limits apply, the relative limits and the methodologies to calculate them;

| iii) | if leverage is allowed, the maximum level of leverage; and |
| --- | --- |

iii)

if leverage is allowed, the maximum level of leverage; and

| iv) | if investment in OTC financial derivatives or repo-style transactions are allowed, a policy to limit counterparty risk arising from these transactions; |
| --- | --- |

iv)

if investment in OTC financial derivatives or repo-style transactions are allowed, a policy to limit counterparty risk arising from these transactions;

| b) | the business of the CIU shall be reported in half-yearly and annual reports to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period; |
| --- | --- |

b)

the business of the CIU shall be reported in half-yearly and annual reports to enable an assessment to be made of the assets and liabilities, income and operations over the reporting period;

| c) | the units/shares of the CIU are redeemable in cash, out of the undertaking's assets, on a daily basis at the request of the unit holder; |
| --- | --- |

c)

the units/shares of the CIU are redeemable in cash, out of the undertaking's assets, on a daily basis at the request of the unit holder;

| d) | investments in the CIU shall be segregated from the assets of the CIU manager; and |
| --- | --- |

d)

investments in the CIU shall be segregated from the assets of the CIU manager; and

| e) | there shall be adequate risk assessment of the CIU, by the investing institution. |
| --- | --- |

e)

there shall be adequate risk assessment of the CIU, by the investing institution.

| 52. | Third country CIUs may be eligible if the requirements in points (a) to (e) of point 51 are met, subject to the approval of the institution's competent authority. |
| --- | --- |

52.

Third country CIUs may be eligible if the requirements in points (a) to (e) of point 51 are met, subject to the approval of the institution's competent authority.

SPECIFIC METHODS

| 53. | Where the institution is aware of the underlying investments of the CIU on a daily basis, the institution may look through to those underlying investments in order to calculate the capital requirements for position risk (general and specific) for those positions in accordance with the methods set out in this Annex or, if permission has been granted, in accordance with the methods set out in Annex V. Under this approach, positions in CIUs shall be treated as positions in the underlying investments of the CIU. Netting is permitted between positions in the underlying investments of the CIU and other positions held by the institution, as long as the institution holds a sufficient quantity of units to allow for redemption/creation in exchange for the underlying investments. |
| --- | --- |

53.

Where the institution is aware of the underlying investments of the CIU on a daily basis, the institution may look through to those underlying investments in order to calculate the capital requirements for position risk (general and specific) for those positions in accordance with the methods set out in this Annex or, if permission has been granted, in accordance with the methods set out in Annex V. Under this approach, positions in CIUs shall be treated as positions in the underlying investments of the CIU. Netting is permitted between positions in the underlying investments of the CIU and other positions held by the institution, as long as the institution holds a sufficient quantity of units to allow for redemption/creation in exchange for the underlying investments.

| 54. | Institutions may calculate the capital requirements for position risk (general and specific) for positions in CIUs in accordance with the methods set out in this Annex or, if permission has been granted, in accordance with the methods set out in Annex V, to assumed positions representing those necessary to replicate the composition and performance of the externally generated index or fixed basket of equities or debt securities referred to in (a), subject to the following conditions:






  a) | the purpose of the CIU's mandate is to replicate the composition and performance of an externally generated index or fixed basket of equities or debt securities; and |
| --- | --- | --- |

54.

Institutions may calculate the capital requirements for position risk (general and specific) for positions in CIUs in accordance with the methods set out in this Annex or, if permission has been granted, in accordance with the methods set out in Annex V, to assumed positions representing those necessary to replicate the composition and performance of the externally generated index or fixed basket of equities or debt securities referred to in (a), subject to the following conditions:

a)

the purpose of the CIU's mandate is to replicate the composition and performance of an externally generated index or fixed basket of equities or debt securities; and

| b) | a minimum correlation of 0.9 between daily price movements of the CIU and the index or basket of equities or debt securities it tracks can be clearly established over a minimum period of six months. ‘Correlation’ in this context means the correlation coefficient between daily returns on the CIU and the index or basket of equities or debt securities it tracks. |
| --- | --- |

b)

a minimum correlation of 0.9 between daily price movements of the CIU and the index or basket of equities or debt securities it tracks can be clearly established over a minimum period of six months. ‘Correlation’ in this context means the correlation coefficient between daily returns on the CIU and the index or basket of equities or debt securities it tracks.

| 55. | Where the institution is not aware of the underlying investments of the CIU on a daily basis, the institution may calculate the capital requirements for position risk (general and specific) in accordance with the methods set out in this Annex, subject to the following conditions:






  a) | it will be assumed that the CIU first invests to the maximum extent allowed under its mandate in the asset classes attracting the highest capital requirement for position risk (general and specific), and then continues making investments in descending order until the maximum total investment limit is reached. The position in the CIU will be treated as a direct holding in the assumed position; |
| --- | --- | --- |

55.

Where the institution is not aware of the underlying investments of the CIU on a daily basis, the institution may calculate the capital requirements for position risk (general and specific) in accordance with the methods set out in this Annex, subject to the following conditions:

a)

it will be assumed that the CIU first invests to the maximum extent allowed under its mandate in the asset classes attracting the highest capital requirement for position risk (general and specific), and then continues making investments in descending order until the maximum total investment limit is reached. The position in the CIU will be treated as a direct holding in the assumed position;

| b) | institutions shall take account of the maximum indirect exposure that they could achieve by taking leveraged positions through the CIU when calculating their capital requirement for position risk, by proportionally increasing the position in the CIU up to the maximum exposure to the underlying investment items resulting from the mandate; and |
| --- | --- |

b)

institutions shall take account of the maximum indirect exposure that they could achieve by taking leveraged positions through the CIU when calculating their capital requirement for position risk, by proportionally increasing the position in the CIU up to the maximum exposure to the underlying investment items resulting from the mandate; and

| c) | should the capital requirement for position risk (general and specific) according to this point exceed that set out in point 48, the capital requirement shall be capped at that level. |
| --- | --- |

c)

should the capital requirement for position risk (general and specific) according to this point exceed that set out in point 48, the capital requirement shall be capped at that level.

| 56. | Institutions may rely on a third party to calculate and report capital requirements for position risk (general and specific) for positions in CIUs falling under points 53 and 55, in accordance with the methods set out in this Annex, provided that the correctness of the calculation and the report is adequately ensured. |
| --- | --- |

56.

Institutions may rely on a third party to calculate and report capital requirements for position risk (general and specific) for positions in CIUs falling under points 53 and 55, in accordance with the methods set out in this Annex, provided that the correctness of the calculation and the report is adequately ensured.

ANNEX II

CALCULATING CAPITAL REQUIREMENTS FOR SETTLEMENT AND COUNTERPARTY CREDIT RISK

SETTLEMENT/DELIVERY RISK

| 1. | In the case of transactions in which debt instruments, equities, foreign currencies and commodities (excluding repurchase and reverse repurchase agreements and securities or commodities lending and securities or commodities borrowing) are unsettled after their due delivery dates, an institution must calculate the price difference to which it is exposed. This is the difference between the agreed settlement price for the debt instrument, equity, foreign currency or commodity in question and its current market value, where the difference could involve a loss for the institution. It must multiply this difference by the appropriate factor in column A of Table 1 in order to calculate its capital requirement.
  Table 1






  Number of working days after due settlement date | (%) |
| --- | --- | --- |
| 5 — 15 | 8 |
| 16 — 30 | 50 |
| 31 — 45 | 75 |
| 46 or more | 100 |

1.

In the case of transactions in which debt instruments, equities, foreign currencies and commodities (excluding repurchase and reverse repurchase agreements and securities or commodities lending and securities or commodities borrowing) are unsettled after their due delivery dates, an institution must calculate the price difference to which it is exposed. This is the difference between the agreed settlement price for the debt instrument, equity, foreign currency or commodity in question and its current market value, where the difference could involve a loss for the institution. It must multiply this difference by the appropriate factor in column A of Table 1 in order to calculate its capital requirement.

Table 1

Number of working days after due settlement date

(%)

5 — 15

8

16 — 30

50

31 — 45

75

46 or more

100

FREE DELIVERIES

| 2. | An institution shall be required to hold own funds, as set out in Table 2, if:






  a) | it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securities, foreign currencies or commodities before receiving payment for them; and |
| --- | --- | --- |

2.

An institution shall be required to hold own funds, as set out in Table 2, if:

a)

it has paid for securities, foreign currencies or commodities before receiving them or it has delivered securities, foreign currencies or commodities before receiving payment for them; and

| b) | in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery. |
| --- | --- |

b)

in the case of cross-border transactions, one day or more has elapsed since it made that payment or delivery.

Table 2: Capital treatment for free deliveries

| Transaction Type | Up to first contractual payment or delivery leg | From first contractual payment or delivery leg up to four days after second contractual payment or delivery leg | From 5 business days post second contractual payment or delivery leg until extinction of the transaction |
| --- | --- | --- | --- |
| Free delivery | No capital charge | Treat as an exposure | Deduct value transferred plus current positive exposure from own funds |

Transaction Type

Up to first contractual payment or delivery leg

From first contractual payment or delivery leg up to four days after second contractual payment or delivery leg

From 5 business days post second contractual payment or delivery leg until extinction of the transaction

Free delivery

No capital charge

Treat as an exposure

Deduct value transferred plus current positive exposure from own funds

| 3. | In applying a risk weight to free delivery exposures treated according to column 3 of Table 2, institutions using the approach set out in Articles 84 to 89 of Directive 2006/.../EC, may assign PDs to counterparties, for which they have no other non-trading book exposure, on the basis of the counterparty's external rating. Institutions using own estimates of loss given defaults (‘LGDs’) may apply the LGD set out in point 8 of Part 2 of Annex VII to Directive 2006/.../EC to free delivery exposures treated according to column 3 of Table 2 provided that they apply it to all such exposures. Alternatively, institutions using the approach set out in Articles 84 to 89 of Directive 2006/.../EC may apply the risk weights, as set out in Articles 78 to 83 of that Directive provided that they apply them to all such exposures or may apply a 100 % risk weight to all such exposures.
  If the amount of positive exposure resulting from free delivery transactions is not material, institutions may apply a risk weight of 100 % to these exposures. |
| --- | --- |

3.

In applying a risk weight to free delivery exposures treated according to column 3 of Table 2, institutions using the approach set out in Articles 84 to 89 of Directive 2006/.../EC, may assign PDs to counterparties, for which they have no other non-trading book exposure, on the basis of the counterparty's external rating. Institutions using own estimates of loss given defaults (‘LGDs’) may apply the LGD set out in point 8 of Part 2 of Annex VII to Directive 2006/.../EC to free delivery exposures treated according to column 3 of Table 2 provided that they apply it to all such exposures. Alternatively, institutions using the approach set out in Articles 84 to 89 of Directive 2006/.../EC may apply the risk weights, as set out in Articles 78 to 83 of that Directive provided that they apply them to all such exposures or may apply a 100 % risk weight to all such exposures.

If the amount of positive exposure resulting from free delivery transactions is not material, institutions may apply a risk weight of 100 % to these exposures.

| 4. | In cases of a system wide failure of a settlement or clearing system, competent authorities may waive the capital requirements calculated as set out in points 1 and 2 until the situation is rectified. In this case, the failure of a counterparty to settle a trade shall not be deemed a default for purposes of credit risk. |
| --- | --- |

4.

In cases of a system wide failure of a settlement or clearing system, competent authorities may waive the capital requirements calculated as set out in points 1 and 2 until the situation is rectified. In this case, the failure of a counterparty to settle a trade shall not be deemed a default for purposes of credit risk.

COUNTERPARTY CREDIT RISK (CCR)

| 5. | An institution shall be required to hold capital against the CCR arising from exposures due to the following:






  (a) | OTC derivative instruments and credit derivatives; |
| --- | --- | --- |

5.

An institution shall be required to hold capital against the CCR arising from exposures due to the following:

(a)

OTC derivative instruments and credit derivatives;

| (b) | Repurchase agreements, reverse repurchase agreements, securities or commodities lending or borrowing transactions based on securities or commodities included in the trading book; |
| --- | --- |

(b)

Repurchase agreements, reverse repurchase agreements, securities or commodities lending or borrowing transactions based on securities or commodities included in the trading book;

| c) | margin lending transactions based on securities or commodities; and |
| --- | --- |

c)

margin lending transactions based on securities or commodities; and

| d) | long settlement transactions. |
| --- | --- |

d)

long settlement transactions.

| 6. | Subject to the provisions of points 7 to 10, exposure values and risk-weighted exposure amounts for such exposures shall be calculated in accordance with the provisions of Section 3 of Chapter 2 of Title V of Directive 2006/.../EC with references to ‘credit institutions’ in that Section interpreted as references to ‘institutions’, references to ‘parent credit institutions’ interpreted as references to ‘parent institutions’, and with concomitant terms interpreted accordingly. |
| --- | --- |

6.

Subject to the provisions of points 7 to 10, exposure values and risk-weighted exposure amounts for such exposures shall be calculated in accordance with the provisions of Section 3 of Chapter 2 of Title V of Directive 2006/.../EC with references to ‘credit institutions’ in that Section interpreted as references to ‘institutions’, references to ‘parent credit institutions’ interpreted as references to ‘parent institutions’, and with concomitant terms interpreted accordingly.

| 7. | For the purposes of point 6:
  Annex IV to Directive 2006/.../EC shall be considered to be amended to include point 8 of Section C of Annex I to Directive 2004/39/EC;
  Annex III to Directive 2006/.../EC shall be considered to be amended to include, after the footnotes of Table 1, the following text:
  To obtain a figure for potential future credit exposure in the case of total return swap credit derivatives and credit default swap credit derivatives, the nominal amount of the instrument is multiplied by the following percentages:






  — | where the reference obligation is one that if it gave rise to a direct exposure of the institution it would be a qualifying item for the purposes of Annex I: 5 %; and |
| --- | --- | --- |

7.

For the purposes of point 6:

Annex IV to Directive 2006/.../EC shall be considered to be amended to include point 8 of Section C of Annex I to Directive 2004/39/EC;

Annex III to Directive 2006/.../EC shall be considered to be amended to include, after the footnotes of Table 1, the following text:

To obtain a figure for potential future credit exposure in the case of total return swap credit derivatives and credit default swap credit derivatives, the nominal amount of the instrument is multiplied by the following percentages:

—

where the reference obligation is one that if it gave rise to a direct exposure of the institution it would be a qualifying item for the purposes of Annex I: 5 %; and

| — | where the reference obligation is one that if it gave rise to a direct exposure of the institution it would not be a qualifying item for the purposes of Annex I: 10 %. |
| --- | --- |

—

where the reference obligation is one that if it gave rise to a direct exposure of the institution it would not be a qualifying item for the purposes of Annex I: 10 %.

However, in the case of a credit default swap, an institution the exposure of which arising from the swap represents a long position in the underlying shall be permitted to use a figure of 0 % for potential future credit exposure, unless the credit default swap is subject to closeout upon the insolvency of the entity the exposure of which arising from the swap represents a short position in the underlying, even though the underlying has not defaulted.

Where the credit derivative provides protection in relation to ‘nth to default’ amongst a number of underlying obligations, which of the percentage figures prescribed above is to be applied is determined by the obligation with the nth lowest credit quality determined by whether it is one that if incurred by the institution would be a qualifying item for the purposes of Annex I.

| 8. | For the purposes of point 6, in calculating risk-weighted exposure amounts institutions shall not be permitted to use the Financial Collateral Simple Method, set out in points 24 to 29, Part 3, Annex VIII to Directive 2006/.../EC, for the recognition of the effects of financial collateral. |
| --- | --- |

8.

For the purposes of point 6, in calculating risk-weighted exposure amounts institutions shall not be permitted to use the Financial Collateral Simple Method, set out in points 24 to 29, Part 3, Annex VIII to Directive 2006/.../EC, for the recognition of the effects of financial collateral.

| 9. | For the purposes of point 6, in the case of repurchase transactions and securities or commodities lending or borrowing transactions booked in the trading book, all financial instruments and commodities that are eligible to be included in the trading book may be recognised as eligible collateral. For exposures due to OTC derivative instruments booked in the trading book, commodities that are eligible to be included in the trading book may also be recognised as eligible collateral. For the purposes of calculating volatility adjustments where such financial instruments or commodities which are not eligible under Annex VIII of Directive 2006/.../EC are lent, sold or provided, or borrowed, purchased or received by way of collateral or otherwise under such a transaction, and the institution is using the Supervisory volatility adjustments approach under Part 3 of Annex VIII to that Directive, such instruments and commodities shall be treated in the same way as non-main index equities listed on a recognised exchange.
  Where institutions are using the Own Estimates of Volatility adjustments approach under Part 3 of Annex VIII to Directive 2006/.../EC in respect of financial instruments or commodities which are not eligible under Annex VIII of that Directive, volatility adjustments must be calculated for each individual item. Where institutions are using the Internal Models Approach defined in Part 3 of Annex VIII to Directive 2006/.../EC, they may also apply this approach in the trading book. |
| --- | --- |

9.

For the purposes of point 6, in the case of repurchase transactions and securities or commodities lending or borrowing transactions booked in the trading book, all financial instruments and commodities that are eligible to be included in the trading book may be recognised as eligible collateral. For exposures due to OTC derivative instruments booked in the trading book, commodities that are eligible to be included in the trading book may also be recognised as eligible collateral. For the purposes of calculating volatility adjustments where such financial instruments or commodities which are not eligible under Annex VIII of Directive 2006/.../EC are lent, sold or provided, or borrowed, purchased or received by way of collateral or otherwise under such a transaction, and the institution is using the Supervisory volatility adjustments approach under Part 3 of Annex VIII to that Directive, such instruments and commodities shall be treated in the same way as non-main index equities listed on a recognised exchange.

Where institutions are using the Own Estimates of Volatility adjustments approach under Part 3 of Annex VIII to Directive 2006/.../EC in respect of financial instruments or commodities which are not eligible under Annex VIII of that Directive, volatility adjustments must be calculated for each individual item. Where institutions are using the Internal Models Approach defined in Part 3 of Annex VIII to Directive 2006/.../EC, they may also apply this approach in the trading book.

| 10. | For the purposes of point 6, in relation to the recognition of master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions netting across positions in the trading book and the non-trading book will only be recognised when the netted transactions fulfil the following conditions:






  a) | all transactions are marked to market daily; and |
| --- | --- | --- |

10.

For the purposes of point 6, in relation to the recognition of master netting agreements covering repurchase transactions and/or securities or commodities lending or borrowing transactions and/or other capital market-driven transactions netting across positions in the trading book and the non-trading book will only be recognised when the netted transactions fulfil the following conditions:

a)

all transactions are marked to market daily; and

| b) | any items borrowed, purchased or received under the transactions may be recognised as eligible financial collateral under Title V, Chapter 2, Section 3, Subsection 3 of Directive 2006/.../EC without the application of point 9 of this Annex. |
| --- | --- |

b)

any items borrowed, purchased or received under the transactions may be recognised as eligible financial collateral under Title V, Chapter 2, Section 3, Subsection 3 of Directive 2006/.../EC without the application of point 9 of this Annex.

| 11. | Where a credit derivative included in the trading book forms part of an internal hedge and the credit protection is recognised under Directive 2006/.../EC, there shall be deemed not to be counterparty risk arising from the position in the credit derivative. |
| --- | --- |

11.

Where a credit derivative included in the trading book forms part of an internal hedge and the credit protection is recognised under Directive 2006/.../EC, there shall be deemed not to be counterparty risk arising from the position in the credit derivative.

| 12. | The capital requirement shall be 8 % of the total risk-weighted exposure amounts. |
| --- | --- |

12.

The capital requirement shall be 8 % of the total risk-weighted exposure amounts.

ANNEX III

CALCULATING CAPITAL REQUIREMENTS FOR FOREIGN-EXCHANGE RISK

| 1. | If the sum of an institution's overall net foreign-exchange position and its net gold position, calculated in accordance with the procedure set out in point 2, exceeds 2 % of its total own funds, it shall multiply the sum of its net foreign-exchange position and its net gold position by 8 % in order to calculate its own-funds requirement against foreign-exchange risk. |
| --- | --- |

1.

If the sum of an institution's overall net foreign-exchange position and its net gold position, calculated in accordance with the procedure set out in point 2, exceeds 2 % of its total own funds, it shall multiply the sum of its net foreign-exchange position and its net gold position by 8 % in order to calculate its own-funds requirement against foreign-exchange risk.

| 2. | A two-stage calculation shall be used for capital requirements for foreign-exchange risk. |
| --- | --- |

2.

A two-stage calculation shall be used for capital requirements for foreign-exchange risk.

| 2.1. | Firstly, the institution's net open position in each currency (including the reporting currency) and in gold shall be calculated.
  This net open position shall consist of the sum of the following elements (positive or negative):






  a) | the net spot position (i.e. all asset items less all liability items, including accrued interest, in the currency in question or, for gold, the net spot position in gold); |
| --- | --- | --- |

2.1.

Firstly, the institution's net open position in each currency (including the reporting currency) and in gold shall be calculated.

This net open position shall consist of the sum of the following elements (positive or negative):

a)

the net spot position (i.e. all asset items less all liability items, including accrued interest, in the currency in question or, for gold, the net spot position in gold);

| b) | the net forward position (i.e. all amounts to be received less all amounts to be paid under forward exchange and gold transactions, including currency and gold futures and the principal on currency swaps not included in the spot position); |
| --- | --- |

b)

the net forward position (i.e. all amounts to be received less all amounts to be paid under forward exchange and gold transactions, including currency and gold futures and the principal on currency swaps not included in the spot position);

| c) | irrevocable guarantees (and similar instruments) that are certain to be called and likely to be irrecoverable; |
| --- | --- |

c)

irrevocable guarantees (and similar instruments) that are certain to be called and likely to be irrecoverable;

| d) | net future income/expenses not yet accrued but already fully hedged (at the discretion of the reporting institution and with the prior consent of the competent authorities, net future income/expenses not yet entered in accounting records but already fully hedged by forward foreign-exchange transactions may be included here). Such discretion must be exercised on a consistent basis; |
| --- | --- |

d)

net future income/expenses not yet accrued but already fully hedged (at the discretion of the reporting institution and with the prior consent of the competent authorities, net future income/expenses not yet entered in accounting records but already fully hedged by forward foreign-exchange transactions may be included here). Such discretion must be exercised on a consistent basis;

| e) | the net delta (or delta-based) equivalent of the total book of foreign-currency and gold options; and |
| --- | --- |

e)

the net delta (or delta-based) equivalent of the total book of foreign-currency and gold options; and

| f) | the market value of other (i.e. non-foreign-currency and non-gold) options. |
| --- | --- |

f)

the market value of other (i.e. non-foreign-currency and non-gold) options.

Any positions which an institution has deliberately taken in order to hedge against the adverse effect of the exchange rate on its capital ratio may be excluded from the calculation of net open currency positions. Such positions should be of a non-trading or structural nature and their exclusion, and any variation of the terms of their exclusion, shall require the consent of the competent authorities. The same treatment subject to the same conditions as above may be applied to positions which an institution has which relate to items that are already deducted in the calculation of own funds.

For the purposes of the calculation referred to in the first paragraph, in respect of CIUs the actual foreign exchange positions of the CIU shall be taken into account. Institutions may rely on third party reporting of the foreign exchange positions in the CIU, where the correctness of this report is adequately ensured. If an institution is not aware of the foreign exchange positions in a CIU, it shall be assumed that the CIU is invested up to the maximum extent allowed under the CIU's mandate in foreign exchange and institutions shall, for trading book positions, take account of the maximum indirect exposure that they could achieve by taking leveraged positions through the CIU when calculating their capital requirement for foreign exchange risk. This shall be done by proportionally increasing the position in the CIU up to the maximum exposure to the underlying investment items resulting from the investment mandate. The assumed position of the CIU in foreign exchange shall be treated as a separate currency according to the treatment of investments in gold, subject to the modification that, if the direction of the CIU's investment is available, the total long position may be added to the total long open foreign exchange position and the total short position may be added to the total short open foreign exchange position. There would be no netting allowed between such positions prior to the calculation.

The competent authorities shall have the discretion to allow institutions to use the net present value when calculating the net open position in each currency and in gold.

| 2.2. | Secondly, net short and long positions in each currency other than the reporting currency and the net long or short position in gold shall be converted at spot rates into the reporting currency. They shall then be summed separately to form the total of the net short positions and the total of the net long positions respectively. The higher of these two totals shall be the institution's overall net foreign-exchange position. |
| --- | --- |

2.2.

Secondly, net short and long positions in each currency other than the reporting currency and the net long or short position in gold shall be converted at spot rates into the reporting currency. They shall then be summed separately to form the total of the net short positions and the total of the net long positions respectively. The higher of these two totals shall be the institution's overall net foreign-exchange position.

| 3. | By derogation from points 1 and 2 and pending further coordination, the competent authorities may prescribe or allow institutions to use the following procedures for the purposes of this Annex. |
| --- | --- |

3.

By derogation from points 1 and 2 and pending further coordination, the competent authorities may prescribe or allow institutions to use the following procedures for the purposes of this Annex.

| 3.1. | The competent authorities may allow institutions to provide lower capital requirements against positions in closely correlated currencies than those which would result from applying points 1 and 2 to them. The competent authorities may deem a pair of currencies to be closely correlated only if the likelihood of a loss — calculated on the basis of daily exchange-rate data for the preceding three or five years — occurring on equal and opposite positions in such currencies over the following 10 working days, which is 4 % or less of the value of the matched position in question (valued in terms of the reporting currency) has a probability of at least 99 %, when an observation period of three years is used, or 95 %, when an observation period of five years is used. The own-funds requirement on the matched position in two closely correlated currencies shall be 4 % multiplied by the value of the matched position. The capital requirement on unmatched positions in closely correlated currencies, and all positions in other currencies, shall be 8 %, multiplied by the higher of the sum of the net short or the net long positions in those currencies after the removal of matched positions in closely correlated currencies. |
| --- | --- |

3.1.

The competent authorities may allow institutions to provide lower capital requirements against positions in closely correlated currencies than those which would result from applying points 1 and 2 to them. The competent authorities may deem a pair of currencies to be closely correlated only if the likelihood of a loss — calculated on the basis of daily exchange-rate data for the preceding three or five years — occurring on equal and opposite positions in such currencies over the following 10 working days, which is 4 % or less of the value of the matched position in question (valued in terms of the reporting currency) has a probability of at least 99 %, when an observation period of three years is used, or 95 %, when an observation period of five years is used. The own-funds requirement on the matched position in two closely correlated currencies shall be 4 % multiplied by the value of the matched position. The capital requirement on unmatched positions in closely correlated currencies, and all positions in other currencies, shall be 8 %, multiplied by the higher of the sum of the net short or the net long positions in those currencies after the removal of matched positions in closely correlated currencies.

| 3.2. | The competent authorities may allow institutions to remove positions in any currency which is subject to a legally binding intergovernmental agreement to limit its variation relative to other currencies covered by the same agreement from whichever of the methods described in points , 2 and 3.1 that they apply. Institutions shall calculate their matched positions in such currencies and subject them to a capital requirement no lower than half of the maximum permissible variation laid down in the intergovernmental agreement in question in respect of the currencies concerned. Unmatched positions in those currencies shall be treated in the same way as other currencies.
  By derogation from the first paragraph, the competent authorities may allow the capital requirement on the matched positions in currencies of Member States participating in the second stage of the economic and monetary union to be 1,6 %, multiplied by the value of such matched positions. |
| --- | --- |

3.2.

The competent authorities may allow institutions to remove positions in any currency which is subject to a legally binding intergovernmental agreement to limit its variation relative to other currencies covered by the same agreement from whichever of the methods described in points , 2 and 3.1 that they apply. Institutions shall calculate their matched positions in such currencies and subject them to a capital requirement no lower than half of the maximum permissible variation laid down in the intergovernmental agreement in question in respect of the currencies concerned. Unmatched positions in those currencies shall be treated in the same way as other currencies.

By derogation from the first paragraph, the competent authorities may allow the capital requirement on the matched positions in currencies of Member States participating in the second stage of the economic and monetary union to be 1,6 %, multiplied by the value of such matched positions.

| 4. | Net positions in composite currencies may be broken down into the component currencies according to the quotas in force. |
| --- | --- |

4.

Net positions in composite currencies may be broken down into the component currencies according to the quotas in force.

ANNEX IV

CALCULATING CAPITAL REQUIREMENTS FOR COMMODITIES RISK

| 1. | Each position in commodities or commodity derivatives shall be expressed in terms of the standard unit of measurement. The spot price in each commodity shall be expressed in the reporting currency. |
| --- | --- |

1.

Each position in commodities or commodity derivatives shall be expressed in terms of the standard unit of measurement. The spot price in each commodity shall be expressed in the reporting currency.

| 2. | Positions in gold or gold derivatives shall be considered as being subject to foreign-exchange risk and treated according to Annex III or Annex V, as appropriate, for the purpose of calculating market risk. |
| --- | --- |

2.

Positions in gold or gold derivatives shall be considered as being subject to foreign-exchange risk and treated according to Annex III or Annex V, as appropriate, for the purpose of calculating market risk.

| 3. | For the purposes of this Annex, positions which are purely stock financing may be excluded from the commodities risk calculation only. |
| --- | --- |

3.

For the purposes of this Annex, positions which are purely stock financing may be excluded from the commodities risk calculation only.

| 4. | The interest-rate and foreign-exchange risks not covered by other provisions of this Annex shall be included in the calculation of general risk for traded debt instruments and in the calculation of foreign-exchange risk. |
| --- | --- |

4.

The interest-rate and foreign-exchange risks not covered by other provisions of this Annex shall be included in the calculation of general risk for traded debt instruments and in the calculation of foreign-exchange risk.

| 5. | When the short position falls due before the long position, institutions shall also guard against the risk of a shortage of liquidity which may exist in some markets. |
| --- | --- |

5.

When the short position falls due before the long position, institutions shall also guard against the risk of a shortage of liquidity which may exist in some markets.

| 6. | For the purpose of point 19, the excess of an institution's long (short) positions over its short (long) positions in the same commodity and identical commodity futures, options and warrants shall be its net position in each commodity.
  The competent authorities shall allow positions in derivative instruments to be treated, as laid down in points 8, 9 and 10, as positions in the underlying commodity. |
| --- | --- |

6.

For the purpose of point 19, the excess of an institution's long (short) positions over its short (long) positions in the same commodity and identical commodity futures, options and warrants shall be its net position in each commodity.

The competent authorities shall allow positions in derivative instruments to be treated, as laid down in points 8, 9 and 10, as positions in the underlying commodity.

| 7. | The competent authorities may regard the following positions as positions in the same commodity:






  a) | positions in different sub-categories of commodities in cases where the sub-categories are deliverable against each other; and |
| --- | --- | --- |

7.

The competent authorities may regard the following positions as positions in the same commodity:

a)

positions in different sub-categories of commodities in cases where the sub-categories are deliverable against each other; and

| b) | positions in similar commodities if they are close substitutes and if a minimum correlation of 0,9 between price movements can be clearly established over a minimum period of one year. |
| --- | --- |

b)

positions in similar commodities if they are close substitutes and if a minimum correlation of 0,9 between price movements can be clearly established over a minimum period of one year.

Particular instruments

| 8. | Commodity futures and forward commitments to buy or sell individual commodities shall be incorporated in the measurement system as notional amounts in terms of the standard unit of measurement and assigned a maturity with reference to expiry date.
  The competent authorities may allow the capital requirement for an exchange-traded future to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the future and that it is at least equal to the capital requirement for a future that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.
  The competent authorities may also allow the capital requirement for an OTC commodity derivatives contract of the type referred to in this point cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the derivatives contract and that it is at least equal to the capital requirement for the contract in question that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V. |
| --- | --- |

8.

Commodity futures and forward commitments to buy or sell individual commodities shall be incorporated in the measurement system as notional amounts in terms of the standard unit of measurement and assigned a maturity with reference to expiry date.

The competent authorities may allow the capital requirement for an exchange-traded future to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the future and that it is at least equal to the capital requirement for a future that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.

The competent authorities may also allow the capital requirement for an OTC commodity derivatives contract of the type referred to in this point cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the derivatives contract and that it is at least equal to the capital requirement for the contract in question that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.

| 9. | Commodity swaps where one side of the transaction is a fixed price and the other the current market price shall be incorporated into the maturity ladder approach, as set out in points 13 to 18, as a series of positions equal to the notional amount of the contract, with one position corresponding with each payment on the swap and slotted into the maturity ladder set out in Table 1 to point 13. The positions would be long positions if the institution is paying a fixed price and receiving a floating price and short positions if the institution is receiving a fixed price and paying a floating price.
  Commodity swaps where the sides of the transaction are in different commodities are to be reported in the relevant reporting ladder for the maturity ladder approach. |
| --- | --- |

9.

Commodity swaps where one side of the transaction is a fixed price and the other the current market price shall be incorporated into the maturity ladder approach, as set out in points 13 to 18, as a series of positions equal to the notional amount of the contract, with one position corresponding with each payment on the swap and slotted into the maturity ladder set out in Table 1 to point 13. The positions would be long positions if the institution is paying a fixed price and receiving a floating price and short positions if the institution is receiving a fixed price and paying a floating price.

Commodity swaps where the sides of the transaction are in different commodities are to be reported in the relevant reporting ladder for the maturity ladder approach.

| 10. | Options on commodities or on commodity derivatives shall be treated as if they were positions equal in value to the amount of the underlying to which the option refers, multiplied by its delta for the purposes of this Annex. The latter positions may be netted off against any offsetting positions in the identical underlying commodity or commodity derivative. The delta used shall be that of the exchange concerned, that calculated by the competent authorities or, where none of those is available, or for OTC options, that calculated by the institution itself, subject to the competent authorities being satisfied that the model used by the institution is reasonable.
  However, the competent authorities may also prescribe that institutions calculate their deltas using a methodology specified by the competent authorities.
  Other risks, apart from the delta risk, associated with commodity options shall be safeguarded against.
  The competent authorities may allow the requirement for a written exchange-traded commodity option to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement against an option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.
  The competent authorities may also allow the capital requirement for an OTC commodity option cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement for an OTC option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.
  In addition they may allow the requirement on a bought exchange-traded or OTC commodity option to be the same as that for the commodity underlying it, subject to the constraint that the resulting requirement does not exceed the market value of the option. The requirement for a written OTC option shall be set in relation to the commodity underlying it. |
| --- | --- |

10.

Options on commodities or on commodity derivatives shall be treated as if they were positions equal in value to the amount of the underlying to which the option refers, multiplied by its delta for the purposes of this Annex. The latter positions may be netted off against any offsetting positions in the identical underlying commodity or commodity derivative. The delta used shall be that of the exchange concerned, that calculated by the competent authorities or, where none of those is available, or for OTC options, that calculated by the institution itself, subject to the competent authorities being satisfied that the model used by the institution is reasonable.

However, the competent authorities may also prescribe that institutions calculate their deltas using a methodology specified by the competent authorities.

Other risks, apart from the delta risk, associated with commodity options shall be safeguarded against.

The competent authorities may allow the requirement for a written exchange-traded commodity option to be equal to the margin required by the exchange if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement against an option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.

The competent authorities may also allow the capital requirement for an OTC commodity option cleared by a clearing house recognised by them to be equal to the margin required by the clearing house if they are fully satisfied that it provides an accurate measure of the risk associated with the option and that it is at least equal to the capital requirement for an OTC option that would result from a calculation made using the method set out in the remainder of this Annex or applying the internal models method described in Annex V.

In addition they may allow the requirement on a bought exchange-traded or OTC commodity option to be the same as that for the commodity underlying it, subject to the constraint that the resulting requirement does not exceed the market value of the option. The requirement for a written OTC option shall be set in relation to the commodity underlying it.

| 11. | Warrants relating to commodities shall be treated in the same way as commodity options referred to in point 10. |
| --- | --- |

11.

Warrants relating to commodities shall be treated in the same way as commodity options referred to in point 10.

| 12. | The transferor of commodities or guaranteed rights relating to title to commodities in a repurchase agreement and the lender of commodities in a commodities lending agreement shall include such commodities in the calculation of its capital requirement under this Annex. |
| --- | --- |

12.

The transferor of commodities or guaranteed rights relating to title to commodities in a repurchase agreement and the lender of commodities in a commodities lending agreement shall include such commodities in the calculation of its capital requirement under this Annex.

(a)   Maturity ladder approach

| 13. | The institution shall use a separate maturity ladder in line with Table 1 for each commodity. All positions in that commodity and all positions which are regarded as positions in the same commodity pursuant to point 7 shall be assigned to the appropriate maturity bands. Physical stocks shall be assigned to the first maturity band. |
| --- | --- |

13.

The institution shall use a separate maturity ladder in line with Table 1 for each commodity. All positions in that commodity and all positions which are regarded as positions in the same commodity pursuant to point 7 shall be assigned to the appropriate maturity bands. Physical stocks shall be assigned to the first maturity band.

Table 1

| Maturity band
  (1) | Spread rate
  (in %)
  (2) |
| --- | --- |
| 0 ≤ 1 month | 1,50 |
| > 1 ≤ 3 months | 1,50 |
| > 3 ≤ 6 months | 1,50 |
| > 6 ≤ 12 months | 1,50 |
| > 1 ≤ 2 years | 1,50 |
| > 2 ≤ 3 years | 1,50 |
| > 3 years | 1,50 |

Maturity band

(1)

Spread rate

(in %)

(2)

0 ≤ 1 month

1,50

> 1 ≤ 3 months

1,50

> 3 ≤ 6 months

1,50

> 6 ≤ 12 months

1,50

> 1 ≤ 2 years

1,50

> 2 ≤ 3 years

1,50

> 3 years

1,50

| 14. | Competent authorities may allow positions which are, or are regarded pursuant to point 7 as, positions in the same commodity to be offset and assigned to the appropriate maturity bands on a net basis for the following:






  a) | positions in contracts maturing on the same date; and |
| --- | --- | --- |

14.

Competent authorities may allow positions which are, or are regarded pursuant to point 7 as, positions in the same commodity to be offset and assigned to the appropriate maturity bands on a net basis for the following:

a)

positions in contracts maturing on the same date; and

| b) | positions in contracts maturing within 10 days of each other if the contracts are traded on markets which have daily delivery dates. |
| --- | --- |

b)

positions in contracts maturing within 10 days of each other if the contracts are traded on markets which have daily delivery dates.

| 15. | The institution shall then calculate the sum of the long positions and the sum of the short positions in each maturity band. The amount of the former (latter) which are matched by the latter (former) in a given maturity band shall be the matched positions in that band, while the residual long or short position shall be the unmatched position for the same band. |
| --- | --- |

15.

The institution shall then calculate the sum of the long positions and the sum of the short positions in each maturity band. The amount of the former (latter) which are matched by the latter (former) in a given maturity band shall be the matched positions in that band, while the residual long or short position shall be the unmatched position for the same band.

| 16. | That part of the unmatched long (short) position for a given maturity band that is matched by the unmatched short (long) position for a maturity band further out shall be the matched position between two maturity bands. That part of the unmatched long or unmatched short position that cannot be thus matched shall be the unmatched position. |
| --- | --- |

16.

That part of the unmatched long (short) position for a given maturity band that is matched by the unmatched short (long) position for a maturity band further out shall be the matched position between two maturity bands. That part of the unmatched long or unmatched short position that cannot be thus matched shall be the unmatched position.

| 17. | The institution's capital requirement for each commodity shall be calculated on the basis of the relevant maturity ladder as the sum of the following:






  a) | the sum of the matched long and short positions, multiplied by the appropriate spread rate as indicated in the second column of Table 1 to point 13 for each maturity band and by the spot price for the commodity; |
| --- | --- | --- |

17.

The institution's capital requirement for each commodity shall be calculated on the basis of the relevant maturity ladder as the sum of the following:

a)

the sum of the matched long and short positions, multiplied by the appropriate spread rate as indicated in the second column of Table 1 to point 13 for each maturity band and by the spot price for the commodity;

| b) | the matched position between two maturity bands for each maturity band into which an unmatched position is carried forward, multiplied by 0,6 % (carry rate) and by the spot price for the commodity; and |
| --- | --- |

b)

the matched position between two maturity bands for each maturity band into which an unmatched position is carried forward, multiplied by 0,6 % (carry rate) and by the spot price for the commodity; and

| c) | the residual unmatched positions, multiplied by 15 % (outright rate) and by the spot price for the commodity. |
| --- | --- |

c)

the residual unmatched positions, multiplied by 15 % (outright rate) and by the spot price for the commodity.

| 18. | The institution's overall capital requirement for commodities risk shall be calculated as the sum of the capital requirements calculated for each commodity according to point 17. |
| --- | --- |

18.

The institution's overall capital requirement for commodities risk shall be calculated as the sum of the capital requirements calculated for each commodity according to point 17.

(b)   Simplified approach

| 19. | The institution's capital requirement for each commodity shall be calculated as the sum of:






  a) | 15 % of the net position, long or short, multiplied by the spot price for the commodity; and |
| --- | --- | --- |

19.

The institution's capital requirement for each commodity shall be calculated as the sum of:

a)

15 % of the net position, long or short, multiplied by the spot price for the commodity; and

| b) | 3 % of the gross position, long plus short, multiplied by the spot price for the commodity. |
| --- | --- |

b)

3 % of the gross position, long plus short, multiplied by the spot price for the commodity.

| 20. | The institution's overall capital requirement for commodities risk shall be calculated as the sum of the capital requirements calculated for each commodity according to point 19. |
| --- | --- |

20.

The institution's overall capital requirement for commodities risk shall be calculated as the sum of the capital requirements calculated for each commodity according to point 19.

(c)   Extended Maturity ladder approach

| 21. | Competent authorities may authorise institutions to use the minimum spread, carry and outright rates set out in the following table (Table 2) instead of those indicated in points 13, 14, 17 and 18 provided that the institutions, in the opinion of their competent authorities:






  a) | undertake significant commodities business; |
| --- | --- | --- |

21.

Competent authorities may authorise institutions to use the minimum spread, carry and outright rates set out in the following table (Table 2) instead of those indicated in points 13, 14, 17 and 18 provided that the institutions, in the opinion of their competent authorities:

a)

undertake significant commodities business;

| b) | have a diversified commodities portfolio; and |
| --- | --- |

b)

have a diversified commodities portfolio; and

| c) | are not yet in a position to use internal models for the purpose of calculating the capital requirement on commodities risk in accordance with Annex V. |
| --- | --- |

c)

are not yet in a position to use internal models for the purpose of calculating the capital requirement on commodities risk in accordance with Annex V.

Table 2

| | Precious metals (except gold) | Base metals | Agricultural products (softs) | Other, including energy products |
| --- | --- | --- | --- | --- |
| Spread rate (%) | 1,0 | 1,2 | 1,5 | 1,5 |
| Carry rate (%) | 0,3 | 0,5 | 0,6 | 0,6 |
| Outright rate (%) | 8 | 10 | 12 | 15 |

Precious metals (except gold)

Base metals

Agricultural products (softs)

Other, including energy products

Spread rate (%)

1,0

1,2

1,5

1,5

Carry rate (%)

0,3

0,5

0,6

0,6

Outright rate (%)

8

10

12

15

ANNEX V

USE OF INTERNAL MODELS TO CALCULATE CAPITAL REQUIREMENTS

| 1. | The competent authorities may, subject to the conditions laid down in this Annex, allow institutions to calculate their capital requirements for position risk, foreign-exchange risk and/or commodities risk using their own internal risk-management models instead of or in combination with the methods described in Annexes I, III and IV. Explicit recognition by the competent authorities of the use of models for supervisory capital purposes shall be required in each case. |
| --- | --- |

1.

The competent authorities may, subject to the conditions laid down in this Annex, allow institutions to calculate their capital requirements for position risk, foreign-exchange risk and/or commodities risk using their own internal risk-management models instead of or in combination with the methods described in Annexes I, III and IV. Explicit recognition by the competent authorities of the use of models for supervisory capital purposes shall be required in each case.

| 2. | Recognition shall only be given if the competent authority is satisfied that the institution's risk-management system is conceptually sound and implemented with integrity and that, in particular, the following qualitative standards are met:






  a) | the internal risk-measurement model is closely integrated into the daily risk-management process of the institution and serves as the basis for reporting risk exposures to senior management of the institution; |
| --- | --- | --- |

2.

Recognition shall only be given if the competent authority is satisfied that the institution's risk-management system is conceptually sound and implemented with integrity and that, in particular, the following qualitative standards are met:

a)

the internal risk-measurement model is closely integrated into the daily risk-management process of the institution and serves as the basis for reporting risk exposures to senior management of the institution;

| b) | the institution has a risk control unit that is independent from business trading units and reports directly to senior management. The unit must be responsible for designing and implementing the institution's risk-management system. It shall produce and analyse daily reports on the output of the risk-measurement model and on the appropriate measures to be taken in terms of trading limits. The unit shall also conduct the initial and on-going validation of the internal model; |
| --- | --- |

b)

the institution has a risk control unit that is independent from business trading units and reports directly to senior management. The unit must be responsible for designing and implementing the institution's risk-management system. It shall produce and analyse daily reports on the output of the risk-measurement model and on the appropriate measures to be taken in terms of trading limits. The unit shall also conduct the initial and on-going validation of the internal model;

| c) | the institution's board of directors and senior management are actively involved in the risk-control process and the daily reports produced by the risk-control unit are reviewed by a level of management with sufficient authority to enforce both reductions of positions taken by individual traders as well as in the institution's overall risk exposure; |
| --- | --- |

c)

the institution's board of directors and senior management are actively involved in the risk-control process and the daily reports produced by the risk-control unit are reviewed by a level of management with sufficient authority to enforce both reductions of positions taken by individual traders as well as in the institution's overall risk exposure;

| d) | the institution has sufficient numbers of staff skilled in the use of sophisticated models in the trading, risk-control, audit and back-office areas; |
| --- | --- |

d)

the institution has sufficient numbers of staff skilled in the use of sophisticated models in the trading, risk-control, audit and back-office areas;

| e) | the institution has established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of the risk-measurement system; |
| --- | --- |

e)

the institution has established procedures for monitoring and ensuring compliance with a documented set of internal policies and controls concerning the overall operation of the risk-measurement system;

| f) | the institution's model has a proven track record of reasonable accuracy in measuring risks; |
| --- | --- |

f)

the institution's model has a proven track record of reasonable accuracy in measuring risks;

| g) | the institution frequently conducts a rigorous programme of stress testing and the results of these tests are reviewed by senior management and reflected in the policies and limits it sets. This process shall particularly address illiquidity of markets in stressed market conditions, concentration risk, one way markets, event and jump-to-default risks, non-linearity of products, deep out-of-the-money positions, positions subject to the gapping of prices and other risks that may not be captured appropriately in the internal models. The shocks applied shall reflect the nature of the portfolios and the time it could take to hedge out or manage risks under severe market conditions; and |
| --- | --- |

g)

the institution frequently conducts a rigorous programme of stress testing and the results of these tests are reviewed by senior management and reflected in the policies and limits it sets. This process shall particularly address illiquidity of markets in stressed market conditions, concentration risk, one way markets, event and jump-to-default risks, non-linearity of products, deep out-of-the-money positions, positions subject to the gapping of prices and other risks that may not be captured appropriately in the internal models. The shocks applied shall reflect the nature of the portfolios and the time it could take to hedge out or manage risks under severe market conditions; and

| h) | the institution must conduct, as part of its regular internal auditing process, an independent review of its risk-measurement system. |
| --- | --- |

h)

the institution must conduct, as part of its regular internal auditing process, an independent review of its risk-measurement system.

The review referred to in point (h) of the first paragraph shall include both the activities of the business trading units and of the independent risk-control unit. At least once a year, the institution must conduct a review of its overall risk-management process.

The review shall consider the following:

| a) | the adequacy of the documentation of the risk-management system and process and the organisation of the risk-control unit; |
| --- | --- |

a)

the adequacy of the documentation of the risk-management system and process and the organisation of the risk-control unit;

| b) | the integration of market risk measures into daily risk management and the integrity of the management information system; |
| --- | --- |

b)

the integration of market risk measures into daily risk management and the integrity of the management information system;

| c) | the process the institution employs for approving risk-pricing models and valuation systems that are used by front and back-office personnel; |
| --- | --- |

c)

the process the institution employs for approving risk-pricing models and valuation systems that are used by front and back-office personnel;

| d) | the scope of market risks captured by the risk-measurement model and the validation of any significant changes in the risk-measurement process; |
| --- | --- |

d)

the scope of market risks captured by the risk-measurement model and the validation of any significant changes in the risk-measurement process;

| e) | the accuracy and completeness of position data, the accuracy and appropriateness of volatility and correlation assumptions, and the accuracy of valuation and risk sensitivity calculations; |
| --- | --- |

e)

the accuracy and completeness of position data, the accuracy and appropriateness of volatility and correlation assumptions, and the accuracy of valuation and risk sensitivity calculations;

| f) | the verification process the institution employs to evaluate the consistency, timeliness and reliability of data sources used to run internal models, including the independence of such data sources; and |
| --- | --- |

f)

the verification process the institution employs to evaluate the consistency, timeliness and reliability of data sources used to run internal models, including the independence of such data sources; and

| g) | the verification process the institution uses to evaluate back-testing that is conducted to assess the models' accuracy. |
| --- | --- |

g)

the verification process the institution uses to evaluate back-testing that is conducted to assess the models' accuracy.

| 3. | Institutions shall have processes in place to ensure that their internal models have been adequately validated by suitably qualified parties independent of the development process to ensure that they are conceptually sound and adequately capture all material risks. The validation shall be conducted when the internal model is initially developed and when any significant changes are made to the internal model. The validation shall also be conducted on a periodic basis but especially where there have been any significant structural changes in the market or changes to the composition of the portfolio which might lead to the internal model no longer being adequate. As techniques and best practices evolve, institutions shall avail themselves of these advances. Internal model validation shall not be limited to back-testing, but shall, at a minimum, also include the following:






  a) | tests to demonstrate that any assumptions made within the internal model are appropriate and do not underestimate or overestimate the risk; |
| --- | --- | --- |

3.

Institutions shall have processes in place to ensure that their internal models have been adequately validated by suitably qualified parties independent of the development process to ensure that they are conceptually sound and adequately capture all material risks. The validation shall be conducted when the internal model is initially developed and when any significant changes are made to the internal model. The validation shall also be conducted on a periodic basis but especially where there have been any significant structural changes in the market or changes to the composition of the portfolio which might lead to the internal model no longer being adequate. As techniques and best practices evolve, institutions shall avail themselves of these advances. Internal model validation shall not be limited to back-testing, but shall, at a minimum, also include the following:

a)

tests to demonstrate that any assumptions made within the internal model are appropriate and do not underestimate or overestimate the risk;

| b) | in addition to the regulatory back-testing programmes, institutions shall carry out their own internal model validation tests in relation to the risks and structures of their portfolios; and |
| --- | --- |

b)

in addition to the regulatory back-testing programmes, institutions shall carry out their own internal model validation tests in relation to the risks and structures of their portfolios; and

| c) | the use of hypothetical portfolios to ensure that the internal model is able to account for particular structural features that may arise, for example material basis risks and concentration risk. |
| --- | --- |

c)

the use of hypothetical portfolios to ensure that the internal model is able to account for particular structural features that may arise, for example material basis risks and concentration risk.

| 4. | The institution shall monitor the accuracy and performance of its model by conducting a back-testing programme. The back-testing has to provide for each business day a comparison of the one-day value-at-risk measure generated by the institution's model for the portfolio's end-of-day positions to the one-day change of the portfolio's value by the end of the subsequent business day.
  Competent authorities shall examine the institution's capability to perform back-testing on both actual and hypothetical changes in the portfolio's value. Back-testing on hypothetical changes in the portfolio's value is based on a comparison between the portfolio's end-of-day value and, assuming unchanged positions, its value at the end of the subsequent day. Competent authorities shall require institutions to take appropriate measures to improve their back-testing programme if deemed deficient. Competent authorities may require institutions to perform back-testing on either hypothetical (using changes in portfolio value that would occur were end-of-day positions to remain unchanged), or actual trading (excluding fees, commissions, and net interest income) outcomes, or both. |
| --- | --- |

4.

The institution shall monitor the accuracy and performance of its model by conducting a back-testing programme. The back-testing has to provide for each business day a comparison of the one-day value-at-risk measure generated by the institution's model for the portfolio's end-of-day positions to the one-day change of the portfolio's value by the end of the subsequent business day.

Competent authorities shall examine the institution's capability to perform back-testing on both actual and hypothetical changes in the portfolio's value. Back-testing on hypothetical changes in the portfolio's value is based on a comparison between the portfolio's end-of-day value and, assuming unchanged positions, its value at the end of the subsequent day. Competent authorities shall require institutions to take appropriate measures to improve their back-testing programme if deemed deficient. Competent authorities may require institutions to perform back-testing on either hypothetical (using changes in portfolio value that would occur were end-of-day positions to remain unchanged), or actual trading (excluding fees, commissions, and net interest income) outcomes, or both.

| 5. | For the purpose of calculating capital requirements for specific risk associated with traded debt and equity positions, the competent authorities may recognise the use of an institution's internal model if, in addition to compliance with the conditions in the remainder of this Annex, the internal model meets the following conditions:






  a) | it explains the historical price variation in the portfolio; |
| --- | --- | --- |

5.

For the purpose of calculating capital requirements for specific risk associated with traded debt and equity positions, the competent authorities may recognise the use of an institution's internal model if, in addition to compliance with the conditions in the remainder of this Annex, the internal model meets the following conditions:

a)

it explains the historical price variation in the portfolio;

| b) | it captures concentration in terms of magnitude and changes of composition of the portfolio; |
| --- | --- |

b)

it captures concentration in terms of magnitude and changes of composition of the portfolio;

| c) | it is robust to an adverse environment; |
| --- | --- |

c)

it is robust to an adverse environment;

| d) | it is validated through back-testing aimed at assessing whether specific risk is being accurately captured. If competent authorities allow this back-testing to be performed on the basis of relevant sub-portfolios, these must be chosen in a consistent manner; |
| --- | --- |

d)

it is validated through back-testing aimed at assessing whether specific risk is being accurately captured. If competent authorities allow this back-testing to be performed on the basis of relevant sub-portfolios, these must be chosen in a consistent manner;

| e) | it captures name-related basis risk, that is institutions shall demonstrate that the internal model is sensitive to material idiosyncratic differences between similar but not identical positions; and |
| --- | --- |

e)

it captures name-related basis risk, that is institutions shall demonstrate that the internal model is sensitive to material idiosyncratic differences between similar but not identical positions; and

| f) | it captures event risk. |
| --- | --- |

f)

it captures event risk.

The institution shall also meet the following conditions:

| — | where an institution is subject to event risk that is not reflected in its value-at-risk measure, because it is beyond the 10-day holding period and 99 percent confidence interval (low probability and high severity events), the institution shall ensure that the impact of such events is factored in to its internal capital assessment; and |
| --- | --- |

—

where an institution is subject to event risk that is not reflected in its value-at-risk measure, because it is beyond the 10-day holding period and 99 percent confidence interval (low probability and high severity events), the institution shall ensure that the impact of such events is factored in to its internal capital assessment; and

| — | the institution's internal model shall conservatively assess the risk arising from less liquid positions and positions with limited price transparency under realistic market scenarios. In addition, the internal model shall meet minimum data standards. Proxies shall be appropriately conservative and may be used only where available data is insufficient or is not reflective of the true volatility of a position or portfolio. |
| --- | --- |

—

the institution's internal model shall conservatively assess the risk arising from less liquid positions and positions with limited price transparency under realistic market scenarios. In addition, the internal model shall meet minimum data standards. Proxies shall be appropriately conservative and may be used only where available data is insufficient or is not reflective of the true volatility of a position or portfolio.

Further, as techniques and best practices evolve, institutions shall avail themselves of these advances.

In addition, the institution shall have an approach in place to capture, in the calculation of its capital requirements, the default risk of its trading book positions that is incremental to the default risk captured by the value-at-risk measure as specified in the previous requirements of this point. To avoid double counting, an institution may, when calculating its incremental default risk charge, take into account the extent to which default risk has already been incorporated into the value-at-risk measure, especially for risk positions that could and would be closed within 10 days in the event of adverse market conditions or other indications of deterioration in the credit environment. Where an institution captures its incremental default risk through a surcharge, it shall have in place methodologies for validating the measure.

The institution shall demonstrate that its approach meets soundness standards comparable to the approach set out in Articles 84 to 89 of Directive 2006/.../EC, under the assumption of a constant level of risk, and adjusted where appropriate to reflect the impact of liquidity, concentrations, hedging and optionality.

An institution that does not capture the incremental default risk through an internally developed approach shall calculate the surcharge through an approach consistent with the either the approach set out in Articles 78 to 83 of Directive 2006/.../EC or the approach set out in Articles 84 to 89 of that Directive.

With respect to cash or synthetic securitisation exposures that would be subject to a deduction treatment under the treatment set out in Article 66(2) of Directive 2006/.../EC, or risk-weighted at 1 250 % as set out in Part 4 of Annex IX to that Directive, these positions shall be subject to a capital charge that is no less than set forth under that treatment. Institutions that are dealers in these exposures may apply a different treatment where they can demonstrate to their competent authorities, in addition to trading intent, that a liquid two-way market exists for the securitisation exposures or, in the case of synthetic securitisations that rely solely on credit derivatives, for the securitisation exposures themselves or all their constituent risk components. For the purposes of this section a two-way market is deemed to exist where there are independent good faith offers to buy and sell so that a price reasonably related to the last sales price or current good faith competitive bid and offer quotations can be determined within one day and settled at such a price within a relatively short time conforming to trade custom. For an institution to apply a different treatment, it shall have sufficient market data to ensure that it fully captures the concentrated default risk of these exposures in its internal approach for measuring the incremental default risk in accordance with the standards set out above.

| 6. | Institutions using internal models which are not recognised in accordance with point 4 shall be subject to a separate capital charge for specific risk as calculated according to Annex I. |
| --- | --- |

6.

Institutions using internal models which are not recognised in accordance with point 4 shall be subject to a separate capital charge for specific risk as calculated according to Annex I.

| 7. | For the purposes of point 9(b), the results of the institution's own calculation shall be scaled up by a multiplication factor of at least 3. |
| --- | --- |

7.

For the purposes of point 9(b), the results of the institution's own calculation shall be scaled up by a multiplication factor of at least 3.

| 8. | The multiplication factor shall be increased by a plus-factor of between 0 and 1 in accordance with Table 1, depending on the number of overshootings for the most recent 250 business days as evidenced by the institution's back-testing. Competent authorities shall require the institutions to calculate overshootings consistently on the basis of back-testing either on actual or on hypothetical changes in the portfolio's value. An overshooting is a one-day change in the portfolio's value that exceeds the related one-day value-at-risk measure generated by the institution's model. For the purpose of determining the plus-factor the number of overshootings shall be assessed at least quarterly.
  Table 1






  Number of overshootings | Plus-factor |
| --- | --- | --- |
| Fewer than 5 | 0,00 |
| 5 | 0,40 |
| 6 | 0,50 |
| 7 | 0,65 |
| 8 | 0,75 |
| 9 | 0,85 |
| 10 or more | 1,00 |

8.

The multiplication factor shall be increased by a plus-factor of between 0 and 1 in accordance with Table 1, depending on the number of overshootings for the most recent 250 business days as evidenced by the institution's back-testing. Competent authorities shall require the institutions to calculate overshootings consistently on the basis of back-testing either on actual or on hypothetical changes in the portfolio's value. An overshooting is a one-day change in the portfolio's value that exceeds the related one-day value-at-risk measure generated by the institution's model. For the purpose of determining the plus-factor the number of overshootings shall be assessed at least quarterly.

Table 1

Number of overshootings

Plus-factor

Fewer than 5

0,00

5

0,40

6

0,50

7

0,65

8

0,75

9

0,85

10 or more

1,00

The competent authorities may, in individual cases and owing to an exceptional situation, waive the requirement to increase the multiplication factor by the ‘plus-factor’ in accordance with Table 1, if the institution has demonstrated to the satisfaction of the competent authorities that such an increase is unjustified and that the model is basically sound.

If numerous overshootings indicate that the model is not sufficiently accurate, the competent authorities shall revoke the model's recognition or impose appropriate measures to ensure that the model is improved promptly.

In order to allow competent authorities to monitor the appropriateness of the plus-factor on an ongoing basis, institutions shall notify promptly, and in any case no later than within five working days, the competent authorities of overshootings that result form their back-testing programme and that would according to the above table imply an increase of a plus-factor.

| 9. | Each institution must meet a capital requirement expressed as the higher of:






  a) | its previous day's value-at-risk measure according to the parameters specified in this Annex plus, where appropriate, the incremental default risk charge required under point 5; or |
| --- | --- | --- |

9.

Each institution must meet a capital requirement expressed as the higher of:

a)

its previous day's value-at-risk measure according to the parameters specified in this Annex plus, where appropriate, the incremental default risk charge required under point 5; or

| b) | an average of the daily value-at-risk measures on each of the preceding 60 business days, multiplied by the factor mentioned in point 7, adjusted by the factor referred to in point 8 plus, where appropriate, the incremental default risk charge required under point 5. |
| --- | --- |

b)

an average of the daily value-at-risk measures on each of the preceding 60 business days, multiplied by the factor mentioned in point 7, adjusted by the factor referred to in point 8 plus, where appropriate, the incremental default risk charge required under point 5.

| 10. | The calculation of the value-at-risk measure shall be subject to the following minimum standards:






  a) | at least daily calculation of the value-at-risk measure; |
| --- | --- | --- |

10.

The calculation of the value-at-risk measure shall be subject to the following minimum standards:

a)

at least daily calculation of the value-at-risk measure;

| b) | a 99th percentile, one-tailed confidence interval; |
| --- | --- |

b)

a 99th percentile, one-tailed confidence interval;

| c) | a 10-day equivalent holding period; |
| --- | --- |

c)

a 10-day equivalent holding period;

| d) | an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility; and |
| --- | --- |

d)

an effective historical observation period of at least one year except where a shorter observation period is justified by a significant upsurge in price volatility; and

| e) | three-monthly data set updates. |
| --- | --- |

e)

three-monthly data set updates.

| 11. | The competent authorities shall require that the model captures accurately all the material price risks of options or option-like positions and that any other risks not captured by the model are covered adequately by own funds. |
| --- | --- |

11.

The competent authorities shall require that the model captures accurately all the material price risks of options or option-like positions and that any other risks not captured by the model are covered adequately by own funds.

| 12. | The risk-measurement model shall capture a sufficient number of risk factors, depending on the level of activity of the institution in the respective markets and in particular the following.
  Interest rate risk
  The risk-measurement system shall incorporate a set of risk factors corresponding to the interest rates in each currency in which the institution has interest rate sensitive on- or off-balance sheet positions. The institution shall model the yield curves using one of the generally accepted approaches. For material exposures to interest-rate risk in the major currencies and markets, the yield curve shall be divided into a minimum of six maturity segments, to capture the variations of volatility of rates along the yield curve. The risk-measurement system must also capture the risk of less than perfectly correlated movements between different yield curves.
  Foreign-exchange risk
  The risk-measurement system shall incorporate risk factors corresponding to gold and to the individual foreign currencies in which the institution's positions are denominated.
  For CIUs the actual foreign exchange positions of the CIU shall be taken into account. Institutions may rely on third party reporting of the foreign exchange position of the CIU, where the correctness of this report is adequately ensured. If an institution is not aware of the foreign exchange positions of a CIU, this position should be carved out and treated in accordance with the fourth paragraph of point 2.1 of Annex III.
  Equity risk
  The risk-measurement system shall use a separate risk factor at least for each of the equity markets in which the institution holds significant positions.
  Commodity risk
  The risk-measurement system shall use a separate risk factor at least for each commodity in which the institution holds significant positions. The risk-measurement system must also capture the risk of less than perfectly correlated movements between similar, but not identical, commodities and the exposure to changes in forward prices arising from maturity mismatches. It shall also take account of market characteristics, notably delivery dates and the scope provided to traders to close out positions. |
| --- | --- |

12.

The risk-measurement model shall capture a sufficient number of risk factors, depending on the level of activity of the institution in the respective markets and in particular the following.

Interest rate risk

The risk-measurement system shall incorporate a set of risk factors corresponding to the interest rates in each currency in which the institution has interest rate sensitive on- or off-balance sheet positions. The institution shall model the yield curves using one of the generally accepted approaches. For material exposures to interest-rate risk in the major currencies and markets, the yield curve shall be divided into a minimum of six maturity segments, to capture the variations of volatility of rates along the yield curve. The risk-measurement system must also capture the risk of less than perfectly correlated movements between different yield curves.

Foreign-exchange risk

The risk-measurement system shall incorporate risk factors corresponding to gold and to the individual foreign currencies in which the institution's positions are denominated.

For CIUs the actual foreign exchange positions of the CIU shall be taken into account. Institutions may rely on third party reporting of the foreign exchange position of the CIU, where the correctness of this report is adequately ensured. If an institution is not aware of the foreign exchange positions of a CIU, this position should be carved out and treated in accordance with the fourth paragraph of point 2.1 of Annex III.

Equity risk

The risk-measurement system shall use a separate risk factor at least for each of the equity markets in which the institution holds significant positions.

Commodity risk

The risk-measurement system shall use a separate risk factor at least for each commodity in which the institution holds significant positions. The risk-measurement system must also capture the risk of less than perfectly correlated movements between similar, but not identical, commodities and the exposure to changes in forward prices arising from maturity mismatches. It shall also take account of market characteristics, notably delivery dates and the scope provided to traders to close out positions.

| 13. | The competent authorities may allow institutions to use empirical correlations within risk categories and across risk categories if they are satisfied that the institution's system for measuring correlations is sound and implemented with integrity. |
| --- | --- |

13.

The competent authorities may allow institutions to use empirical correlations within risk categories and across risk categories if they are satisfied that the institution's system for measuring correlations is sound and implemented with integrity.

ANNEX VI

CALCULATING CAPITAL REQUIREMENTS FOR LARGE EXPOSURES

| 1. | The excess referred to in Article 31(b) shall be calculated by selecting those components of the total trading exposure to the client or group of clients in question which attract the highest specific-risk requirements in Annex I and/or requirements in Annex II, the sum of which equals the amount of the excess referred to in Article 31(a). |
| --- | --- |

1.

The excess referred to in Article 31(b) shall be calculated by selecting those components of the total trading exposure to the client or group of clients in question which attract the highest specific-risk requirements in Annex I and/or requirements in Annex II, the sum of which equals the amount of the excess referred to in Article 31(a).

| 2. | Where the excess has not persisted for more than 10 days, the additional capital requirement shall be 200 % of the requirements referred to in point 1, on these components. |
| --- | --- |

2.

Where the excess has not persisted for more than 10 days, the additional capital requirement shall be 200 % of the requirements referred to in point 1, on these components.

| 3. | As from 10 days after the excess has occurred, the components of the excess, selected in accordance with point 1, shall be allocated to the appropriate line in column 1 of Table 1 in ascending order of specific-risk requirements in Annex I and/or requirements in Annex II. The additional capital requirement shall be equal to the sum of the specific-risk requirements in Annex I and/or the Annex II requirements on these components, multiplied by the corresponding factor in column 2 of Table 1. |
| --- | --- |

3.

As from 10 days after the excess has occurred, the components of the excess, selected in accordance with point 1, shall be allocated to the appropriate line in column 1 of Table 1 in ascending order of specific-risk requirements in Annex I and/or requirements in Annex II. The additional capital requirement shall be equal to the sum of the specific-risk requirements in Annex I and/or the Annex II requirements on these components, multiplied by the corresponding factor in column 2 of Table 1.

Table 1

| Excess over the limits
  (on the basis of a percentage of own funds) | Factors |
| --- | --- |
| Up to 40 % | 200 % |
| From 40 % to 60 % | 300 % |
| From 60 % to 80 % | 400 % |
| From 80 % to 100 % | 500 % |
| From 100 % to 250 % | 600 % |
| Over 250 % | 900 % |

Excess over the limits

(on the basis of a percentage of own funds)

Factors

Up to 40 %

200 %

From 40 % to 60 %

300 %

From 60 % to 80 %

400 %

From 80 % to 100 %

500 %

From 100 % to 250 %

600 %

Over 250 %

900 %

ANNEX VII

TRADING

Part A — Trading Intent

| 1. | Positions/portfolios held with trading intent shall comply with the following requirements:






  a) | there must be a clearly documented trading strategy for the position/instrument or portfolios, approved by senior management, which shall include expected holding horizon; |
| --- | --- | --- |

1.

Positions/portfolios held with trading intent shall comply with the following requirements:

a)

there must be a clearly documented trading strategy for the position/instrument or portfolios, approved by senior management, which shall include expected holding horizon;

| b) | there must be clearly defined policies and procedures for the active management of the position, which shall include the following:






  i) | positions entered into on a trading desk; |
| --- | --- | --- |

b)

there must be clearly defined policies and procedures for the active management of the position, which shall include the following:

i)

positions entered into on a trading desk;

| ii) | position limits are set and monitored for appropriateness; |
| --- | --- |

ii)

position limits are set and monitored for appropriateness;

| iii) | dealers have the autonomy to enter into/manage the position within agreed limits and according to the approved strategy; |
| --- | --- |

iii)

dealers have the autonomy to enter into/manage the position within agreed limits and according to the approved strategy;

| iv) | positions are reported to senior management as an integral part of the institution's risk management process; and |
| --- | --- |

iv)

positions are reported to senior management as an integral part of the institution's risk management process; and

| v) | positions are actively monitored with reference to market information sources and an assessment made of the marketability or hedge-ability of the position or its component risks, including the assessment of, the quality and availability of market inputs to the valuation process, level of market turnover, sizes of positions traded in the market; and |
| --- | --- |

v)

positions are actively monitored with reference to market information sources and an assessment made of the marketability or hedge-ability of the position or its component risks, including the assessment of, the quality and availability of market inputs to the valuation process, level of market turnover, sizes of positions traded in the market; and

| c) | there must be clearly defined policy and procedures to monitor the position against the institution's trading strategy including the monitoring of turnover and stale positions in the institution's trading book. |
| --- | --- |

c)

there must be clearly defined policy and procedures to monitor the position against the institution's trading strategy including the monitoring of turnover and stale positions in the institution's trading book.

Part B — Systems and Controls

| 1. | Institutions shall establish and maintain systems and controls sufficient to provide prudent and reliable valuation estimates. |
| --- | --- |

1.

Institutions shall establish and maintain systems and controls sufficient to provide prudent and reliable valuation estimates.

| 2. | Systems and controls shall include at least the following elements:






  a) | documented policies and procedures for the process of valuation. This includes clearly defined responsibilities of the various areas involved in the determination of the valuation, sources of market information and review of their appropriateness, frequency of independent valuation, timing of closing prices, procedures for adjusting valuations, month end and ad-hoc verification procedures; and |
| --- | --- | --- |

2.

Systems and controls shall include at least the following elements:

a)

documented policies and procedures for the process of valuation. This includes clearly defined responsibilities of the various areas involved in the determination of the valuation, sources of market information and review of their appropriateness, frequency of independent valuation, timing of closing prices, procedures for adjusting valuations, month end and ad-hoc verification procedures; and

| b) | reporting lines for the department accountable for the valuation process that are clear and independent of the front office. |
| --- | --- |

b)

reporting lines for the department accountable for the valuation process that are clear and independent of the front office.

The reporting line shall ultimately be to a main board executive director.

Prudent Valuation Methods

| 3. | Marking to market is the at least daily valuation of positions at readily available close out prices that are sourced independently. Examples include exchange prices, screen prices, or quotes from several independent reputable brokers. |
| --- | --- |

3.

Marking to market is the at least daily valuation of positions at readily available close out prices that are sourced independently. Examples include exchange prices, screen prices, or quotes from several independent reputable brokers.

| 4. | When marking to market, the more prudent side of bid/offer shall be used unless the institution is a significant market maker in the particular type of financial instrument or commodity in question and it can close out at mid market. |
| --- | --- |

4.

When marking to market, the more prudent side of bid/offer shall be used unless the institution is a significant market maker in the particular type of financial instrument or commodity in question and it can close out at mid market.

| 5. | Where marking to market is not possible, institutions must mark to model their positions/portfolios before applying trading book capital treatment. Marking to model is defined as any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input. |
| --- | --- |

5.

Where marking to market is not possible, institutions must mark to model their positions/portfolios before applying trading book capital treatment. Marking to model is defined as any valuation which has to be benchmarked, extrapolated or otherwise calculated from a market input.

| 6. | The following requirements must be complied with when marking to model:






  a) | senior management shall be aware of the elements of the trading book which are subject to mark to model and shall understand the materiality of the uncertainty this creates in the reporting of the risk/performance of the business; |
| --- | --- | --- |

6.

The following requirements must be complied with when marking to model:

a)

senior management shall be aware of the elements of the trading book which are subject to mark to model and shall understand the materiality of the uncertainty this creates in the reporting of the risk/performance of the business;

| b) | market inputs shall be sourced, where possible, in line with market prices, and the appropriateness of the market inputs of the particular position being valued and the parameters of the model shall be assessed on a frequent basis; |
| --- | --- |

b)

market inputs shall be sourced, where possible, in line with market prices, and the appropriateness of the market inputs of the particular position being valued and the parameters of the model shall be assessed on a frequent basis;

| c) | where available, valuation methodologies which are accepted market practice for particular financial instruments or commodities shall be used; |
| --- | --- |

c)

where available, valuation methodologies which are accepted market practice for particular financial instruments or commodities shall be used;

| d) | where the model is developed by the institution itself, it shall be based on appropriate assumptions, which have been assessed and challenged by suitably qualified parties independent of the development process; |
| --- | --- |

d)

where the model is developed by the institution itself, it shall be based on appropriate assumptions, which have been assessed and challenged by suitably qualified parties independent of the development process;

| e) | there shall be formal change control procedures in place and a secure copy of the model shall be held and periodically used to check valuations; |
| --- | --- |

e)

there shall be formal change control procedures in place and a secure copy of the model shall be held and periodically used to check valuations;

| f) | risk management shall be aware of the weaknesses of the models used and how best to reflect those in the valuation output; and |
| --- | --- |

f)

risk management shall be aware of the weaknesses of the models used and how best to reflect those in the valuation output; and

| g) | the model shall be subject to periodic review to determine the accuracy of its performance (e.g. assessing the continued appropriateness of assumptions, analysis of profit and loss versus risk factors, comparison of actual close out values to model outputs). |
| --- | --- |

g)

the model shall be subject to periodic review to determine the accuracy of its performance (e.g. assessing the continued appropriateness of assumptions, analysis of profit and loss versus risk factors, comparison of actual close out values to model outputs).

For the purposes of point (d), the model shall be developed or approved independently of the front office and shall be independently tested, including validation of the mathematics, assumptions and software implementation.

| 7. | Independent price verification should be performed in addition to daily marking to market or marking to model. This is the process by which market prices or model inputs are regularly verified for accuracy and independence. While daily marking to market may be performed by dealers, verification of market prices and model inputs should be performed by a unit independent of the dealing room, at least monthly (or, depending on the nature of the market/trading activity, more frequently). Where independent pricing sources are not available or pricing sources are more subjective, prudent measures such as valuation adjustments may be appropriate. |
| --- | --- |

7.

Independent price verification should be performed in addition to daily marking to market or marking to model. This is the process by which market prices or model inputs are regularly verified for accuracy and independence. While daily marking to market may be performed by dealers, verification of market prices and model inputs should be performed by a unit independent of the dealing room, at least monthly (or, depending on the nature of the market/trading activity, more frequently). Where independent pricing sources are not available or pricing sources are more subjective, prudent measures such as valuation adjustments may be appropriate.

Valuation adjustments or reserves

| 8. | Institutions shall establish and maintain procedures for considering valuation adjustments/reserves. |
| --- | --- |

8.

Institutions shall establish and maintain procedures for considering valuation adjustments/reserves.

General standards

| 9. | The competent authorities shall require the following valuation adjustments/reserves to be formally considered: unearned credit spreads, close-out costs, operational risks, early termination, investing and funding costs, future administrative costs and, where relevant, model risk. |
| --- | --- |

9.

The competent authorities shall require the following valuation adjustments/reserves to be formally considered: unearned credit spreads, close-out costs, operational risks, early termination, investing and funding costs, future administrative costs and, where relevant, model risk.

Standards for less liquid positions

| 10. | Less liquid positions could arise from both market events and institution-related situations e.g. concentrated positions and/or stale positions. |
| --- | --- |

10.

Less liquid positions could arise from both market events and institution-related situations e.g. concentrated positions and/or stale positions.

| 11. | Institutions shall consider several factors when determining whether a valuation reserve is necessary for less liquid positions. These factors include the amount of time it would take to hedge out the position/risks within the position, the volatility and average of bid/offer spreads, the availability of market quotes (number and identity of market makers) and the volatility and average of trading volumes, market concentrations, the aging of positions, the extent to which valuation relies on marking-to-model, and the impact of other model risks. |
| --- | --- |

11.

Institutions shall consider several factors when determining whether a valuation reserve is necessary for less liquid positions. These factors include the amount of time it would take to hedge out the position/risks within the position, the volatility and average of bid/offer spreads, the availability of market quotes (number and identity of market makers) and the volatility and average of trading volumes, market concentrations, the aging of positions, the extent to which valuation relies on marking-to-model, and the impact of other model risks.

| 12. | When using third party valuations or marking to model, institutions shall consider whether to apply a valuation adjustment. In addition, institutions shall consider the need for establishing reserves for less liquid positions and on an ongoing basis review their continued suitability. |
| --- | --- |

12.

When using third party valuations or marking to model, institutions shall consider whether to apply a valuation adjustment. In addition, institutions shall consider the need for establishing reserves for less liquid positions and on an ongoing basis review their continued suitability.

| 13. | When valuation adjustments/reserves give rise to material losses of the current financial year, these shall be deducted from an institution's original own funds according to point (k) of Article 57 of Directive 2006/.../EC. |
| --- | --- |

13.

When valuation adjustments/reserves give rise to material losses of the current financial year, these shall be deducted from an institution's original own funds according to point (k) of Article 57 of Directive 2006/.../EC.

| 14. | Other profits/losses originating from valuation adjustments/reserves shall be included in the calculation of ‘net trading book profits’ mentioned in point (b) of Article 13(2) and be added to/deducted from the additional own funds eligible to cover market risk requirements according to such provisions. |
| --- | --- |

14.

Other profits/losses originating from valuation adjustments/reserves shall be included in the calculation of ‘net trading book profits’ mentioned in point (b) of Article 13(2) and be added to/deducted from the additional own funds eligible to cover market risk requirements according to such provisions.

| 15. | Valuation adjustments/reserves which exceed those made under the accounting framework to which the institution is subject shall be treated in accordance with point 13 if they give rise to material losses, or point 14 otherwise. |
| --- | --- |

15.

Valuation adjustments/reserves which exceed those made under the accounting framework to which the institution is subject shall be treated in accordance with point 13 if they give rise to material losses, or point 14 otherwise.

Part C — Internal Hedges

| 1. | An internal hedge is a position that materially or completely offsets the component risk element of a non-trading book position or a set of positions. Positions arising from internal hedges are eligible for trading book capital treatment, provided that they are held with trading intent and that the general criteria on trading intent and prudent valuation specified in Parts A and B are met. In particular:






  a) | internal hedges shall not be primarily intended to avoid or reduce capital requirements; |
| --- | --- | --- |

1.

An internal hedge is a position that materially or completely offsets the component risk element of a non-trading book position or a set of positions. Positions arising from internal hedges are eligible for trading book capital treatment, provided that they are held with trading intent and that the general criteria on trading intent and prudent valuation specified in Parts A and B are met. In particular:

a)

internal hedges shall not be primarily intended to avoid or reduce capital requirements;

| b) | internal hedges shall be properly documented and subject to particular internal approval and audit procedures; |
| --- | --- |

b)

internal hedges shall be properly documented and subject to particular internal approval and audit procedures;

| c) | the internal transaction shall be dealt with at market conditions; |
| --- | --- |

c)

the internal transaction shall be dealt with at market conditions;

| d) | the bulk of the market risk that is generated by the internal hedge shall be dynamically managed in the trading book within the authorised limits; and |
| --- | --- |

d)

the bulk of the market risk that is generated by the internal hedge shall be dynamically managed in the trading book within the authorised limits; and

| e) | internal transactions shall be carefully monitored. |
| --- | --- |

e)

internal transactions shall be carefully monitored.

Monitoring must be ensured by adequate procedures.

| 2. | The treatment referred to in point 1 applies without prejudice to the capital requirements applicable to the ‘non-trading book leg’ of the internal hedge. |
| --- | --- |

2.

The treatment referred to in point 1 applies without prejudice to the capital requirements applicable to the ‘non-trading book leg’ of the internal hedge.

| 3. | Notwithstanding points 1 and 2, when an institution hedges a non-trading book credit risk exposure using a credit derivative booked in its trading book (using an internal hedge), the non-trading book exposure is not deemed to be hedged for the purposes of calculating capital requirements unless the institution purchases from an eligible third party protection provider a credit derivative meeting the requirements set out in point 19 of Part 2 of Annex VIII to Directive 2006/.../EC with regard to the non-trading book exposure. Where such third party protection is purchased and is recognised as a hedge of a non-trading book exposure for the purposes of calculating capital requirements, neither the internal nor external credit derivative hedge shall be included in the trading book for the purposes of calculating capital requirements. |
| --- | --- |

3.

Notwithstanding points 1 and 2, when an institution hedges a non-trading book credit risk exposure using a credit derivative booked in its trading book (using an internal hedge), the non-trading book exposure is not deemed to be hedged for the purposes of calculating capital requirements unless the institution purchases from an eligible third party protection provider a credit derivative meeting the requirements set out in point 19 of Part 2 of Annex VIII to Directive 2006/.../EC with regard to the non-trading book exposure. Where such third party protection is purchased and is recognised as a hedge of a non-trading book exposure for the purposes of calculating capital requirements, neither the internal nor external credit derivative hedge shall be included in the trading book for the purposes of calculating capital requirements.

Part D — Inclusion In The Trading Book

| 1. | Institutions shall have clearly defined policies and procedures for determining which position to include in the trading book for the purposes of calculating their capital requirements, consistent with the criteria set out in Article 11 and taking into account the institution's risk management capabilities and practices. Compliance with these policies and procedures shall be fully documented and subject to periodic internal audit. |
| --- | --- |

1.

Institutions shall have clearly defined policies and procedures for determining which position to include in the trading book for the purposes of calculating their capital requirements, consistent with the criteria set out in Article 11 and taking into account the institution's risk management capabilities and practices. Compliance with these policies and procedures shall be fully documented and subject to periodic internal audit.

| 2. | Institutions shall have clearly defined policies and procedures for overall management of the trading book. At a minimum these policies and procedures shall address:






  a) | the activities the institution considers to be trading and as constituting part of the trading book for capital requirement purposes; |
| --- | --- | --- |

2.

Institutions shall have clearly defined policies and procedures for overall management of the trading book. At a minimum these policies and procedures shall address:

a)

the activities the institution considers to be trading and as constituting part of the trading book for capital requirement purposes;

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

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; |
| --- | --- | --- |

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; and |
| --- | --- |

ii)

hedge all material risks of the position with instruments for which an active, liquid two-way market exists; and

| iii) | derive reliable estimates for the key assumptions and parameters used in the model; |
| --- | --- |

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; |
| --- | --- |

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; |
| --- | --- |

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 risk manage the position within its trading operation; and |
| --- | --- |

f)

the extent to which the institution can, and is required to, actively risk manage the position within its trading operation; and

| g) | the extent to which the institution may transfer risk or positions between the non-trading and trading books and the criteria for such transfers. |
| --- | --- |

g)

the extent to which the institution may transfer risk or positions between the non-trading and trading books and the criteria for such transfers.

| 3. | Competent authorities may allow institutions to treat positions that are holdings in the trading book as set out in Article 57(l), (m) and (n) of Directive 2006/.../EC as equity or debt instruments, as appropriate, where an institution demonstrates that it is an active market maker in these positions. In this case, the institution shall have adequate systems and controls surrounding the trading of eligible own funds instruments. |
| --- | --- |

3.

Competent authorities may allow institutions to treat positions that are holdings in the trading book as set out in Article 57(l), (m) and (n) of Directive 2006/.../EC as equity or debt instruments, as appropriate, where an institution demonstrates that it is an active market maker in these positions. In this case, the institution shall have adequate systems and controls surrounding the trading of eligible own funds instruments.

| 4. | Term trading-related repo-style transactions that an institution accounts for in its non-trading book may be included in the trading book for capital requirement purposes so long as all such repo-style transactions are included. For this purpose, trading-related repo-style transactions are defined as those that meet the requirements of Article 11(2) and of Annex VII, Part A, and both legs are in the form of either cash or securities includable in the trading book. Regardless of where they are booked, all repo-style transactions are subject to a non-trading book counterparty credit risk charge. |
| --- | --- |

4.

Term trading-related repo-style transactions that an institution accounts for in its non-trading book may be included in the trading book for capital requirement purposes so long as all such repo-style transactions are included. For this purpose, trading-related repo-style transactions are defined as those that meet the requirements of Article 11(2) and of Annex VII, Part A, and both legs are in the form of either cash or securities includable in the trading book. Regardless of where they are booked, all repo-style transactions are subject to a non-trading book counterparty credit risk charge.

ANNEX VIII

REPEALED DIRECTIVES

PART A

REPEALED DIRECTIVES TOGETHER WITH THEIR SUCCESSIVE AMENDMENTS

(referred to in Article 52)

Council Directive 93/6/EEC of 15 March 1993 on the capital adequacy of investments firms and credit institutions

Directive 98/31/EC of the European Parliament and of the Council of 22 June 1998 amending Council Directive 93/6/EEC on the capital adequacy of investment firms and credit institutions

Directive 98/33/EC of the European Parliament and of the Council of 22 June 1998 amending Article 12 of Council Directive 77/780/EEC on the taking up and pursuit of the business of credit institutions, Articles 2, 5, 6, 7, 8 of and Annexes II and III to Council Directive 89/647/EEC on a solvency ratio for credit institutions and Article 2 of and Annex II to Council Directive 93/6/EEC on the capital adequacy of investment firms and credit institutions

Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council:

Only Article 26

Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC:

Only Article 67

PART B

DEADLINES FOR TRANSPOSITION

(referred to in Article 52)

| Directive | | Deadline for transposition |
| --- | --- | --- |
| Council Directive 93/6/EEC | | 1.7.1995 |
| Directive 98/31/EC | | 21.7.2000 |
| Directive 98/33/EC | | 21.7.2000 |
| Directive 2002/87/EC | | 11.8.2004 |
| Directive 2004/39/EC | | 30.4.2006/31.1.2007 |
| Directive 2005/1/EC | | 13.5.2005 |

Directive

Deadline for transposition

Council Directive 93/6/EEC

1.7.1995

Directive 98/31/EC

21.7.2000

Directive 98/33/EC

21.7.2000

Directive 2002/87/EC

11.8.2004

Directive 2004/39/EC

30.4.2006/31.1.2007

Directive 2005/1/EC

13.5.2005

ANNEX IX

CORRELATION TABLE

| This Directive | Directive 93/6/EEC | Directive 98/31/EC | Directive 98/33/EC | Directive 2002/87/EC | Directive 2004/39/EC |
| --- | --- | --- | --- | --- | --- |
| Article 1(1) first sentence | | | | | |
| Article 1(1) second sentence and (2) | Article 1 | | | | |
| Article 2(1) | | | | | |
| Article 2(2) | Article 7(3) | | | | |
| Article 3(1)(a) | Article 2(1) | | | | |
| Article 3(1)(b) | Article 2(2) | | | | Article 67(1) |
| Article 3(1)(c) to (e) | Article 2(3) to (5) | | | | |
| Article 3(1)(f) and (g) | | | | | |
| Article 3(1)(h) | Article 2(10) | | | | |
| Article 3(1)(i) | Article 2(11) | | Article 3(1) | | |
| Article 3(1)(j) | Article 2(14) | | | | |
| Article 3(1)(k) and (l) | Article 2(15) and (16) | Article 1(1)(b) | | | |
| Article 3(1)(m) | Article 2(17) | Article 1(1)(c) | | | |
| Article 3(1)(n) | Article 2(18) | Article 1(1)(d) | | | |
| Article 3(1)(o) to (q) | Article 2(19) to (21) | | | | |
| Article 3(1)(r) | Article 2(23) | | | | |
| Article 3(1)(s) | Article 2(26) | | | | |
| Article 3(2) | Article 2(7) and (8) | | | | |
| Article 3(3)(a) and (b) | Article 7(3) | | | Article 26 | |
| Article 3(3)(c) | Article 7(3) | | | | |
| Article 4 | Article 2(24) | | | | |
| Article 5 | Article 3(1) and (2) | | | | |
| Article 6 | Article 3(4) | | | | Article 67(2) |
| Article 7 | Article 3(4a) | | | | Article 67(3) |
| Article 8 | Article 3(4b) | | | | Article 67(3) |
| Article 9 | Article 3(3) | | | | |
| Article 10 | Article 3(5) to (8) | | | | |
| Article 11 | Article 2(6) | | | | |
| Article 12 first paragraph | Article 2(25) | | | | |
| Article 12 second paragraph | | | | | |
| Article 13(1) first sub-paragraph | Annex V(1) first sub-paragraph | | | | |
| Article 13(1) second sub-paragraph and (2) to (5) | Annex V(1) second sub-paragraph and (2) to (5) | Article 1(7) and Annex 4(a)(b) | | | |
| Article 14 | Annex V(6) and (7) | Annex 4(c) | | | |
| Article 15 | Annex V(8) | | | | |
| Article 16 | Annex V(9) | | | | |
| Article 17 | | | | | |
| Article 18(1) first sub-paragraph | Article 4(1) first sub-paragraph | | | | |
| Article 18(1)(a) and (b) | Article 4(1)(i) and (ii) | Article 1(2) | | | |
| Article 18(2) to (4) | Article 4(6) to (8) | | | | |
| Article 19(1) | | | | | |
| Article 19(2) | Article 11(2) | | | | |
| Article 19(3) | | | | | |
| Article 20 | | | | | |
| Article 21 | Annex IV | | | | |
| Article 22 | | | | | |
| Article 23 first and second paragraph | Article 7(5) and (6) | | | | |
| Article 23 third paragraph | | | | | |
| Article 24 | | | | | |
| Article 25 | | | | | |
| Article 26(1) | Article 7(10) | Article 1(4) | | | |
| Article 26(2) to (4) | Article 7(11) to (13) | | | | |
| Article 27 | Article 7(14) and (15) | | | | |
| Article 28(1) | Article 5(1) | | | | |
| Article 28(2) | Article 5(2) | Article 1(3) | | | |
| Article 28(3) | | | | | |
| Article 29(1)(a) to (c) and next two sub-paragraphs | Annex VI(2) | | | | |
| Article 29(1) last sub-paragraph | | | | | |
| Article 29(2) | Annex VI(3) | | | | |
| Article 30(1) and (2) first sub-paragraph | Annex VI(4) and (5) | | | | |
| Article 30(2) second sub-paragraph | | | | | |
| Article 30(3) and (4) | Annex VI(6) and (7) | | | | |
| Article 31 | Annex VI(8)(1), (2) first sentence, (3) to (5) | | | | |
| Article 32 | Annex VI(9) and (10) | | | | |
| Article 33(1) and (2) | | | | | |
| Article 33(3) | Article 6(2) | | | | |
| Article 34 | | | | | |
| Article 35(1) to (4) | Article 8(1) to (4) | | | | |
| Article 35(5) | Article 8(5) first sentence | Article 1(5) | | | |
| Article 36 | Article 9(1) to (3) | | | | |
| Article 37 | | | | | |
| Article 38 | Article 9(4) | | | | |
| Article 39 | | | | | |
| Article 40 | Article 2(9) | | | | |
| Article 41(1)(a) to (c) | Article 10 first, second and third indents | | | | |
| Article 41(1)(d) and (e) | | | | | |
| Article 41(1)(f) | Article 10 fourth indent | | | | |
| Article 41(1)(g) | | | | | |
| Article 42 | | | | | |
| Article 43 | | | | | |
| Article 44 | | | | | |
| Article 45 | | | | | |
| Article 46 | Article 12 | | | | |
| Article 47 | | | | | |
| Article 48 | | | | | |
| Article 49 | | | | | |
| Article 50 | Article 15 | | | | |
| Annex I(1) to (4) | Annex I(1) to (4) | | | | |
| Annex I(4) last paragraph | Article 2(22) | | | | |
| Annex I(5) to (7) | Annex I(5) to (7) | | | | |
| Annex I(8) | | | | | |
| Annex I(9) to (11) | Annex I(8) to (10) | | | | |
| Annex I(12) to (14) | Annex I(12) to (14) | | | | |
| Annex I(15) and (16) | Article 2(12) | | | | |
| Annex I(17) to (41) | Annex I(15) to (39) | | | | |
| Annex I(42) to (56) | | | | | |
| Annex II(1) and (2) | Annex II(1) and (2) | | | | |
| Annex II(3) to (10) | | | | | |
| Annex III(1) | Annex III(1) first sub-paragraph | Article 1(7) and Annex 3(a) | | | |
| Annex III(2) | Annex III(2) | | | | |
| Annex III(2.1) first to third paragraphs | Annex III(3.1) | Article 1(7) and Annex 3(b) | | | |
| Annex III(2.1) fourth paragraph | | | | | |
| Annex III(2.1) fifth paragraph | Annex III(3.2) | Article 1(7) and Annex 3(b) | | | |
| Annex III(2.2), (3), (3.1) | Annex III(4) to (6) | Article 1(7) and Annex 3(c) | | | |
| Annex III(3.2) | Annex III(8) | | | | |
| Annex III(4) | Annex III(11) | | | | |
| Annex IV(1) to (20) | Annex VII(1) to (20) | Article 1(7) and Annex 5 | | | |
| Annex IV(21) | Article 11a | Article 1(6) | | | |
| Annex V(1) to (12) fourth paragraph | Annex VIII(1) to (13)(ii) | Article 1(7) and Annex 5 | | | |
| Annex V(12) fifth paragraph | | | | | |
| Annex V(12) sixth paragraph to (13) | Annex VIII(13)(iii) to (14) | Article 1(7) and Annex 5 | | | |
| Annex VI | Annex VI(8)(2) after the first sentence | | | | |
| Annex VII | | | | | |
| Annex VIII | | | | | |
| Annex IX | | | | | |

This Directive

Directive 93/6/EEC

Directive 98/31/EC

Directive 98/33/EC

Directive 2002/87/EC

Directive 2004/39/EC

Article 1(1) first sentence

Article 1(1) second sentence and (2)

Article 1

Article 2(1)

Article 2(2)

Article 7(3)

Article 3(1)(a)

Article 2(1)

Article 3(1)(b)

Article 2(2)

Article 67(1)

Article 3(1)(c) to (e)

Article 2(3) to (5)

Article 3(1)(f) and (g)

Article 3(1)(h)

Article 2(10)

Article 3(1)(i)

Article 2(11)

Article 3(1)

Article 3(1)(j)

Article 2(14)

Article 3(1)(k) and (l)

Article 2(15) and (16)

Article 1(1)(b)

Article 3(1)(m)

Article 2(17)

Article 1(1)(c)

Article 3(1)(n)

Article 2(18)

Article 1(1)(d)

Article 3(1)(o) to (q)

Article 2(19) to (21)

Article 3(1)(r)

Article 2(23)

Article 3(1)(s)

Article 2(26)

Article 3(2)

Article 2(7) and (8)

Article 3(3)(a) and (b)

Article 7(3)

Article 26

Article 3(3)(c)

Article 7(3)

Article 4

Article 2(24)

Article 5

Article 3(1) and (2)

Article 6

Article 3(4)

Article 67(2)

Article 7

Article 3(4a)

Article 67(3)

Article 8

Article 3(4b)

Article 67(3)

Article 9

Article 3(3)

Article 10

Article 3(5) to (8)

Article 11

Article 2(6)

Article 12 first paragraph

Article 2(25)

Article 12 second paragraph

Article 13(1) first sub-paragraph

Annex V(1) first sub-paragraph

Article 13(1) second sub-paragraph and (2) to (5)

Annex V(1) second sub-paragraph and (2) to (5)

Article 1(7) and Annex 4(a)(b)

Article 14

Annex V(6) and (7)

Annex 4(c)

Article 15

Annex V(8)

Article 16

Annex V(9)

Article 17

Article 18(1) first sub-paragraph

Article 4(1) first sub-paragraph

Article 18(1)(a) and (b)

Article 4(1)(i) and (ii)

Article 1(2)

Article 18(2) to (4)

Article 4(6) to (8)

Article 19(1)

Article 19(2)

Article 11(2)

Article 19(3)

Article 20

Article 21

Annex IV

Article 22

Article 23 first and second paragraph

Article 7(5) and (6)

Article 23 third paragraph

Article 24

Article 25

Article 26(1)

Article 7(10)

Article 1(4)

Article 26(2) to (4)

Article 7(11) to (13)

Article 27

Article 7(14) and (15)

Article 28(1)

Article 5(1)

Article 28(2)

Article 5(2)

Article 1(3)

Article 28(3)

Article 29(1)(a) to (c) and next two sub-paragraphs

Annex VI(2)

Article 29(1) last sub-paragraph

Article 29(2)

Annex VI(3)

Article 30(1) and (2) first sub-paragraph

Annex VI(4) and (5)

Article 30(2) second sub-paragraph

Article 30(3) and (4)

Annex VI(6) and (7)

Article 31

Annex VI(8)(1), (2) first sentence, (3) to (5)

Article 32

Annex VI(9) and (10)

Article 33(1) and (2)

Article 33(3)

Article 6(2)

Article 34

Article 35(1) to (4)

Article 8(1) to (4)

Article 35(5)

Article 8(5) first sentence

Article 1(5)

Article 36

Article 9(1) to (3)

Article 37

Article 38

Article 9(4)

Article 39

Article 40

Article 2(9)

Article 41(1)(a) to (c)

Article 10 first, second and third indents

Article 41(1)(d) and (e)

Article 41(1)(f)

Article 10 fourth indent

Article 41(1)(g)

Article 42

Article 43

Article 44

Article 45

Article 46

Article 12

Article 47

Article 48

Article 49

Article 50

Article 15

Annex I(1) to (4)

Annex I(1) to (4)

Annex I(4) last paragraph

Article 2(22)

Annex I(5) to (7)

Annex I(5) to (7)

Annex I(8)

Annex I(9) to (11)

Annex I(8) to (10)

Annex I(12) to (14)

Annex I(12) to (14)

Annex I(15) and (16)

Article 2(12)

Annex I(17) to (41)

Annex I(15) to (39)

Annex I(42) to (56)

Annex II(1) and (2)

Annex II(1) and (2)

Annex II(3) to (10)

Annex III(1)

Annex III(1) first sub-paragraph

Article 1(7) and Annex 3(a)

Annex III(2)

Annex III(2)

Annex III(2.1) first to third paragraphs

Annex III(3.1)

Article 1(7) and Annex 3(b)

Annex III(2.1) fourth paragraph

Annex III(2.1) fifth paragraph

Annex III(3.2)

Article 1(7) and Annex 3(b)

Annex III(2.2), (3), (3.1)

Annex III(4) to (6)

Article 1(7) and Annex 3(c)

Annex III(3.2)

Annex III(8)

Annex III(4)

Annex III(11)

Annex IV(1) to (20)

Annex VII(1) to (20)

Article 1(7) and Annex 5

Annex IV(21)

Article 11a

Article 1(6)

Annex V(1) to (12) fourth paragraph

Annex VIII(1) to (13)(ii)

Article 1(7) and Annex 5

Annex V(12) fifth paragraph

Annex V(12) sixth paragraph to (13)

Annex VIII(13)(iii) to (14)

Article 1(7) and Annex 5

Annex VI

Annex VI(8)(2) after the first sentence

Annex VII

Annex VIII

Annex IX

P6_TA(2005)0353

Statutory audit of annual accounts and consolidated accounts ***I

European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/349/EEC (COM(2004)0177 — C6-0005/2004 — 2004/0065(COD))

(Codecision procedure: first reading)

The European Parliament,

| — | having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0177) (1), |
| --- | --- |

—

having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0177) (1),

| — | having regard to Article 251 (2) and Article 44(2)(g) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0005/2004), |
| --- | --- |

—

having regard to Article 251 (2) and Article 44(2)(g) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0005/2004),

| — | having regard to Rule 51 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 51 of its Rules of Procedure,

| — | having regard to the report of the Committee on Legal Affairs and the opinions of the Committee on Economic and Monetary Affairs, of the Committee on the Internal Market and Consumer Protection and of the Committee on Industry, Research and Energy (A6-0224/2005), |
| --- | --- |

—

having regard to the report of the Committee on Legal Affairs and the opinions of the Committee on Economic and Monetary Affairs, of the Committee on the Internal Market and Consumer Protection and of the Committee on Industry, Research and Energy (A6-0224/2005),

| 1. | Approves the Commission proposal as amended; |
| --- | --- |

1.

Approves the Commission proposal as amended;

| 2. | Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text; |
| --- | --- |

2.

Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

| 3. | Instructs its President to forward its position to the Council and Commission. |
| --- | --- |

3.

Instructs its President to forward its position to the Council and Commission.

---

(1)  Not yet published in OJ.

P6_TC1-COD(2004)0065

Position of the European Parliament adopted at first reading on 28 September 2005 with a view to the adoption of Directive 2005/.../EC of the European Parliament and of the Council on statutory audit of annual accounts and consolidated accounts and amending Council Directives 78/660/EEC and 83/349/EEC

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 44(2) (g) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and Social Committee (1),

Acting in accordance with the procedure laid down in Article 251 of the Treaty (2),

Whereas:

| (1) | Currently, the Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies (3), the Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts (4), Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (5) and Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings (6) require that the annual accounts or consolidated accounts be audited by one or more persons entitled to carry out such audits. |
| --- | --- |

(1)

Currently, the Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article 54(3)(g) of the Treaty on the annual accounts of certain types of companies (3), the Seventh Council Directive 83/349/EEC of 13 June 1983 based on Article 54(3)(g) of the Treaty on consolidated accounts (4), Council Directive 86/635/EEC of 8 December 1986 on the annual accounts and consolidated accounts of banks and other financial institutions (5) and Council Directive 91/674/EEC of 19 December 1991 on the annual accounts and consolidated accounts of insurance undertakings (6) require that the annual accounts or consolidated accounts be audited by one or more persons entitled to carry out such audits.

| (2) | The conditions for the approval of persons responsible for carrying out the statutory audit have been laid down in the Eighth Council Directive 84/253/EEC of 10 April 1984 based on Article 54(3)(g) of the Treaty on the approval of persons responsible for carrying out the statutory audits of accounting documents (7). |
| --- | --- |

(2)

The conditions for the approval of persons responsible for carrying out the statutory audit have been laid down in the Eighth Council Directive 84/253/EEC of 10 April 1984 based on Article 54(3)(g) of the Treaty on the approval of persons responsible for carrying out the statutory audits of accounting documents (7).

| (3) | The lack of a harmonised approach to statutory auditing in the Community was the reason why the Commission proposed in its 1998 Communication on ‘The Statutory Audit in the European Union: the way forward’ (8) the creation of a Committee on Auditing which could develop further action in close cooperation between the accounting profession and Member States. |
| --- | --- |

(3)

The lack of a harmonised approach to statutory auditing in the Community was the reason why the Commission proposed in its 1998 Communication on ‘The Statutory Audit in the European Union: the way forward’ (8) the creation of a Committee on Auditing which could develop further action in close cooperation between the accounting profession and Member States.

| (4) | On the basis of the work of that Committee, the Commission issued a Recommendation on ‘Quality Assurance for the Statutory Audit in the EU: minimum requirements’ (9) in November 2000 and a Recommendation on ‘Statutory Auditors' Independence in the EU: A Set of Fundamental Principles’ (10) in May
  2002
  . |
| --- | --- |

(4)

On the basis of the work of that Committee, the Commission issued a Recommendation on ‘Quality Assurance for the Statutory Audit in the EU: minimum requirements’ (9) in November 2000 and a Recommendation on ‘Statutory Auditors' Independence in the EU: A Set of Fundamental Principles’ (10) in May
  2002
  .

| (5) | This Directive aims at substantial — though not full — harmonisation of statutory audit requirements. A Member State requiring statutory audit may impose more stringent requirements, unless otherwise indicated in this Directive. |
| --- | --- |

(5)

This Directive aims at substantial — though not full — harmonisation of statutory audit requirements. A Member State requiring statutory audit may impose more stringent requirements, unless otherwise indicated in this Directive.

| (6) | Audit qualifications obtained by statutory auditors on the basis of this Directive are considered equivalent. It should therefore no longer be possible for Member States to insist that a majority of the voting rights in an audit firm must be held by locally approved auditors or that a majority of the members of the administrative or management body of an audit firm must be locally approved. |
| --- | --- |

(6)

Audit qualifications obtained by statutory auditors on the basis of this Directive are considered equivalent. It should therefore no longer be possible for Member States to insist that a majority of the voting rights in an audit firm must be held by locally approved auditors or that a majority of the members of the administrative or management body of an audit firm must be locally approved.

| (7) | The statutory audit requires adequate knowledge of matters such as company law, fiscal law and social law. Such knowledge should be tested before a statutory auditor from another Member State can be approved. |
| --- | --- |

(7)

The statutory audit requires adequate knowledge of matters such as company law, fiscal law and social law. Such knowledge should be tested before a statutory auditor from another Member State can be approved.

| (8) | In order to protect third parties, all approved auditors and audit firms should be entered in a register which is accessible to the public and which contains basic information about the statutory auditor or the audit firm. |
| --- | --- |

(8)

In order to protect third parties, all approved auditors and audit firms should be entered in a register which is accessible to the public and which contains basic information about the statutory auditor or the audit firm.

| (9) | Statutory auditors should adhere to the highest ethical standards. They should therefore be subject to professional ethics,
  covering at least their public interest function, their integrity and objectivity and their professional competence and due care. The public interest function of statutory auditors means that a broader community of people and institutions rely on the quality of a statutory auditor's work. Good audit quality contributes to an orderly functioning of markets by enhancing the integrity and efficiency of financial statements. The Commission may adopt implementing measures on professional ethics as minimum standards. In doing so, the principles contained in the International Federation of Accountants (IFAC) Code of Ethics might be considered
  . |
| --- | --- |

(9)

Statutory auditors should adhere to the highest ethical standards. They should therefore be subject to professional ethics,
  covering at least their public interest function, their integrity and objectivity and their professional competence and due care. The public interest function of statutory auditors means that a broader community of people and institutions rely on the quality of a statutory auditor's work. Good audit quality contributes to an orderly functioning of markets by enhancing the integrity and efficiency of financial statements. The Commission may adopt implementing measures on professional ethics as minimum standards. In doing so, the principles contained in the International Federation of Accountants (IFAC) Code of Ethics might be considered
  .

| (10) | It is important that statutory auditors and audit firms respect the privacy of their clients. They should therefore be bound by strict rules on confidentiality and professional secrecy which, however, should not impede proper enforcement of
  this Directive
  .
  Those confidentiality rules should also apply to any statutory auditor or audit firm which has ceased to be involved in a specific audit task. |
| --- | --- |

(10)

It is important that statutory auditors and audit firms respect the privacy of their clients. They should therefore be bound by strict rules on confidentiality and professional secrecy which, however, should not impede proper enforcement of
  this Directive
  .
  Those confidentiality rules should also apply to any statutory auditor or audit firm which has ceased to be involved in a specific audit task.

| (11) | Statutory auditors and audit firms should be independent when carrying out a statutory audit.
  They may inform the audited entity of matters arising from the audit, but should abstain from the internal decision processes of the audited entity.
  If they find themselves in a situation
  where the significance of the threats to
  their independence,
  even after application of safeguards to mitigate those threats, is too high,
  they should resign
  or abstain
  from the audit engagement.
  The conclusion that there is a relationship which compromises the auditor's independence may be different as regards the relationship between the auditor and the audited entity from that in respect of the relationship between the network and the audited entity. Where a cooperative within the meaning of Article 2(14), or a similar entity as referred to in Article 45 of Directive 86/635/EEC, is required or permitted under national provisions to be a member of a non-profit making auditing entity, an objective, reasonable and informed party would not conclude that the membership-based relationship compromises the statutory auditor's independence, provided that when such an auditing entity is conducting a statutory audit of one of its members, the principles of independence are applied to the auditors carrying out the audit and those persons who may be in a position to exert influence on the statutory audit. Examples of threats to the independence of a statutory auditor or audit firm are a direct or indirect financial interest in the audited entity and the provision of additional non-audit services. Also, the level of fees received from one audited entity and/or the structure of the fees can threaten the independence of a statutory auditor or audit firm. Types of safeguards to be applied to mitigate or eliminate these threats include prohibitions, restrictions, other policies and procedures and disclosure. Statutory auditors and audit firms should refuse to undertake any additional non-audit service that compromises their independence. The Commission may adopt implementing measures on independence as minimum standards. In doing so, the Commission might take into consideration the principles contained in the Commission Recommendation of 16 May 2002 on ‘Statutory Auditors' Independence in the EU: A Set of Fundamental Principles’. In order to determine the independence of auditors, the concept of a ‘network’ in which auditors operate needs to be clear. In this regard, various circumstances have to be taken into account such as instances where a structure could be defined as a network because it is aimed at profit or cost sharing. The criteria for demonstrating that there is a network should be judged and weighed on the basis of all factual circumstances available, such as whether there are common usual clients. |
| --- | --- |

(11)

Statutory auditors and audit firms should be independent when carrying out a statutory audit.
  They may inform the audited entity of matters arising from the audit, but should abstain from the internal decision processes of the audited entity.
  If they find themselves in a situation
  where the significance of the threats to
  their independence,
  even after application of safeguards to mitigate those threats, is too high,
  they should resign
  or abstain
  from the audit engagement.
  The conclusion that there is a relationship which compromises the auditor's independence may be different as regards the relationship between the auditor and the audited entity from that in respect of the relationship between the network and the audited entity. Where a cooperative within the meaning of Article 2(14), or a similar entity as referred to in Article 45 of Directive 86/635/EEC, is required or permitted under national provisions to be a member of a non-profit making auditing entity, an objective, reasonable and informed party would not conclude that the membership-based relationship compromises the statutory auditor's independence, provided that when such an auditing entity is conducting a statutory audit of one of its members, the principles of independence are applied to the auditors carrying out the audit and those persons who may be in a position to exert influence on the statutory audit. Examples of threats to the independence of a statutory auditor or audit firm are a direct or indirect financial interest in the audited entity and the provision of additional non-audit services. Also, the level of fees received from one audited entity and/or the structure of the fees can threaten the independence of a statutory auditor or audit firm. Types of safeguards to be applied to mitigate or eliminate these threats include prohibitions, restrictions, other policies and procedures and disclosure. Statutory auditors and audit firms should refuse to undertake any additional non-audit service that compromises their independence. The Commission may adopt implementing measures on independence as minimum standards. In doing so, the Commission might take into consideration the principles contained in the Commission Recommendation of 16 May 2002 on ‘Statutory Auditors' Independence in the EU: A Set of Fundamental Principles’. In order to determine the independence of auditors, the concept of a ‘network’ in which auditors operate needs to be clear. In this regard, various circumstances have to be taken into account such as instances where a structure could be defined as a network because it is aimed at profit or cost sharing. The criteria for demonstrating that there is a network should be judged and weighed on the basis of all factual circumstances available, such as whether there are common usual clients.

| (12) | In cases of self review or self interest, where appropriate to safeguard the statutory auditor's or audit firm's independence, it should be for the Member State rather than the statutory auditor or the audit firm to decide whether the statutory auditor or audit firm should resign or abstain from an audit engagement with regard to its audit clients. However, this should not lead to a situation where Member States have a general duty to prevent statutory auditors or audit firms from providing non-audit services to their audit clients. For the purposes of determining whether it is appropriate, in cases of self interest or self review, that a statutory auditor or audit firm should not carry out statutory audits, so as to safeguard the statutory auditor's or audit firm's independence, the factors to be taken into account should include the question whether or not the audited public interest entity has issued transferable securities admitted to trading on a regulated market within the meaning of Article 4(1), point 18 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments

   (11). |
| --- | --- |

(12)

In cases of self review or self interest, where appropriate to safeguard the statutory auditor's or audit firm's independence, it should be for the Member State rather than the statutory auditor or the audit firm to decide whether the statutory auditor or audit firm should resign or abstain from an audit engagement with regard to its audit clients. However, this should not lead to a situation where Member States have a general duty to prevent statutory auditors or audit firms from providing non-audit services to their audit clients. For the purposes of determining whether it is appropriate, in cases of self interest or self review, that a statutory auditor or audit firm should not carry out statutory audits, so as to safeguard the statutory auditor's or audit firm's independence, the factors to be taken into account should include the question whether or not the audited public interest entity has issued transferable securities admitted to trading on a regulated market within the meaning of Article 4(1), point 18 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments

   (11).

| (13) | It is important to ensure a consistent high quality of all statutory audits required by Community law. All statutory audits should therefore be carried out on the basis of international auditing standards.
  The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission

   (12)

  and with due regard to the statement made by the Commission in the European Parliament on 5 February 2002 concerning the implementation of financial services legislation. A technical committee or group on auditing will assist the Commission in the assessment of the technical soundness of all the international auditing standards, and should also involve the system of public oversight bodies of Member States. In order to achieve a maximum degree of harmonisation,
  Member States should only be allowed to impose
  national
  additional audit procedures
  or requirements
  if these follow from specific
  national legal
  requirements relating to the scope of the statutory audit
  of annual or consolidated accounts, meaning that these requirements have not been covered by the adopted international auditing standards. Member States could maintain these additional audit procedures until the audit procedures or requirements have been covered by subsequently adopted international auditing standards. If adopted international auditing standards would however contain audit procedures the performance of which would create a specific legal conflict with national law following from specific national requirements related to the scope of the statutory audit, Member States may carve out the conflicting part of the international auditing standard as long as these conflicts exist, provided the measures referred to in Article 26(3) are applied. Any addition or carve out by Member States should add a high level of credibility to the annual accounts of companies, and be conducive to the public good. The above implies that Member States can, for example, require an additional auditor's report to the supervisory board or other reporting and audit requirements based on national corporate governance rules. |
| --- | --- |

(13)

It is important to ensure a consistent high quality of all statutory audits required by Community law. All statutory audits should therefore be carried out on the basis of international auditing standards.
  The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission

   (12)

  and with due regard to the statement made by the Commission in the European Parliament on 5 February 2002 concerning the implementation of financial services legislation. A technical committee or group on auditing will assist the Commission in the assessment of the technical soundness of all the international auditing standards, and should also involve the system of public oversight bodies of Member States. In order to achieve a maximum degree of harmonisation,
  Member States should only be allowed to impose
  national
  additional audit procedures
  or requirements
  if these follow from specific
  national legal
  requirements relating to the scope of the statutory audit
  of annual or consolidated accounts, meaning that these requirements have not been covered by the adopted international auditing standards. Member States could maintain these additional audit procedures until the audit procedures or requirements have been covered by subsequently adopted international auditing standards. If adopted international auditing standards would however contain audit procedures the performance of which would create a specific legal conflict with national law following from specific national requirements related to the scope of the statutory audit, Member States may carve out the conflicting part of the international auditing standard as long as these conflicts exist, provided the measures referred to in Article 26(3) are applied. Any addition or carve out by Member States should add a high level of credibility to the annual accounts of companies, and be conducive to the public good. The above implies that Member States can, for example, require an additional auditor's report to the supervisory board or other reporting and audit requirements based on national corporate governance rules.

| (14) | In order for the Commission to
  adopt an international auditing standard for application in the Community, it is necessary that it is generally accepted internationally and that it has been developed with full participation of all interested parties following an open and transparent procedure, that it adds to the credibility and quality of annual accounts and consolidated accounts and that it is conducive to the European public good.
  The need for the adoption of an International Auditing Practice Statement as part of a standard should be assessed under the comitology procedure on a case by case basis. The Commission should ensure that before the start of the adoption process a review is conducted to see whether these requirements have been met and report to members of the Auditing Regulatory Committee on the outcome of the review. |
| --- | --- |

(14)

In order for the Commission to
  adopt an international auditing standard for application in the Community, it is necessary that it is generally accepted internationally and that it has been developed with full participation of all interested parties following an open and transparent procedure, that it adds to the credibility and quality of annual accounts and consolidated accounts and that it is conducive to the European public good.
  The need for the adoption of an International Auditing Practice Statement as part of a standard should be assessed under the comitology procedure on a case by case basis. The Commission should ensure that before the start of the adoption process a review is conducted to see whether these requirements have been met and report to members of the Auditing Regulatory Committee on the outcome of the review.

| (15) | In the case of consolidated accounts, it is important that there is a clear definition of responsibilities between the statutory auditors who audit components of the group.
  For this purpose,
  the group auditor
  should bear
  full responsibility for the audit report. |
| --- | --- |

(15)

In the case of consolidated accounts, it is important that there is a clear definition of responsibilities between the statutory auditors who audit components of the group.
  For this purpose,
  the group auditor
  should bear
  full responsibility for the audit report.

| (16) | In order to increase comparability between companies applying the same accounting standards,
  and to enhance public confidence in the audit function,
  the Commission
  may
  adopt a common audit report for the audit of annual accounts or consolidated accounts prepared on the basis of approved international accounting standards,
  unless an appropriate standard for such a report has been adopted at Community level
  . |
| --- | --- |

(16)

In order to increase comparability between companies applying the same accounting standards,
  and to enhance public confidence in the audit function,
  the Commission
  may
  adopt a common audit report for the audit of annual accounts or consolidated accounts prepared on the basis of approved international accounting standards,
  unless an appropriate standard for such a report has been adopted at Community level
  .

| (17) | Regular inspections are a good means of achieving a consistent high quality of statutory audits. Statutory auditors and audit firms should therefore be subject to a system of quality assurance that is organised in a manner which is independent from the reviewed statutory auditors and audit firms.
  For the application of Article 29 on quality assurance systems, Member States may decide that if individual auditors have a common quality assurance policy only the requirements for audit firms need to be considered. Member States may organise the system of quality assurance in such a manner that each individual auditor is to be subject to a quality assurance review at least every 6 years. In this respect, the funding for the quality assurance system should be free from undue influence. The Commission should have the competence to adopt implementing measures in matters relevant to the organisation of quality assurance systems, and in respect of its funding, in cases where public confidence in the quality assurance system is seriously compromised. Member States should be encouraged to find, through the public oversight system, a coordinated approach to the carrying-out of quality assurance reviews with a view to avoiding the imposition of unnecessary burdens on the parties concerned. |
| --- | --- |

(17)

Regular inspections are a good means of achieving a consistent high quality of statutory audits. Statutory auditors and audit firms should therefore be subject to a system of quality assurance that is organised in a manner which is independent from the reviewed statutory auditors and audit firms.
  For the application of Article 29 on quality assurance systems, Member States may decide that if individual auditors have a common quality assurance policy only the requirements for audit firms need to be considered. Member States may organise the system of quality assurance in such a manner that each individual auditor is to be subject to a quality assurance review at least every 6 years. In this respect, the funding for the quality assurance system should be free from undue influence. The Commission should have the competence to adopt implementing measures in matters relevant to the organisation of quality assurance systems, and in respect of its funding, in cases where public confidence in the quality assurance system is seriously compromised. Member States should be encouraged to find, through the public oversight system, a coordinated approach to the carrying-out of quality assurance reviews with a view to avoiding the imposition of unnecessary burdens on the parties concerned.

| (18) | Investigations and appropriate sanctions contribute to preventing and correcting inadequate execution of a statutory audit. |
| --- | --- |

(18)

Investigations and appropriate sanctions contribute to preventing and correcting inadequate execution of a statutory audit.

| (19) | Member States should organise an effective system of public oversight for statutory auditors and audit firms on the basis of home country control. The regulatory arrangements for public oversight should enable an effective cooperation at Community level between oversight activities of Member States.
  The system of public oversight must be governed by non-practitioners who are knowledgeable in the areas relevant to statutory audit. Member States may however allow a minority of practitioners to be involved in the governance of the public oversight system. These non-practitioners may be specialists who have never been linked with the audit profession or former practitioners who have left the profession.
  Competent authorities of Member States should cooperate with each other whenever necessary for the purpose of carrying out their oversight duties on statutory auditors or audit firms approved by them. Such cooperation can make an important contribution to ensuring a consistent high quality of the statutory audit in the Community.
  Since it is necessary to ensure efficient cooperation and coordination at European level among competent authorities designated by Member States, the designation of one entity, responsible for ensuring cooperation, should be without prejudice to the ability of each single authority to cooperate directly with the other competent authorities of the Member States. |
| --- | --- |

(19)

Member States should organise an effective system of public oversight for statutory auditors and audit firms on the basis of home country control. The regulatory arrangements for public oversight should enable an effective cooperation at Community level between oversight activities of Member States.
  The system of public oversight must be governed by non-practitioners who are knowledgeable in the areas relevant to statutory audit. Member States may however allow a minority of practitioners to be involved in the governance of the public oversight system. These non-practitioners may be specialists who have never been linked with the audit profession or former practitioners who have left the profession.
  Competent authorities of Member States should cooperate with each other whenever necessary for the purpose of carrying out their oversight duties on statutory auditors or audit firms approved by them. Such cooperation can make an important contribution to ensuring a consistent high quality of the statutory audit in the Community.
  Since it is necessary to ensure efficient cooperation and coordination at European level among competent authorities designated by Member States, the designation of one entity, responsible for ensuring cooperation, should be without prejudice to the ability of each single authority to cooperate directly with the other competent authorities of the Member States.

| (20) | In order to ensure compliance with Article 32(3) (Principles of public oversight), a non-practitioner is deemed to be knowledgeable in the areas relevant to the statutory audit either because of his past professional skill, or alternatively because he has knowledge of at least one of the subjects listed under Article 8. |
| --- | --- |

(20)

In order to ensure compliance with Article 32(3) (Principles of public oversight), a non-practitioner is deemed to be knowledgeable in the areas relevant to the statutory audit either because of his past professional skill, or alternatively because he has knowledge of at least one of the subjects listed under Article 8.

| (21) | The statutory auditor or audit firm should be appointed by the general meeting of shareholders
  or members
  of the audited entity. In order to protect the independence of the auditor it is important that dismissal should only be possible where there are proper grounds and if these grounds are communicated to the authority or authorities responsible for public oversight. |
| --- | --- |

(21)

The statutory auditor or audit firm should be appointed by the general meeting of shareholders
  or members
  of the audited entity. In order to protect the independence of the auditor it is important that dismissal should only be possible where there are proper grounds and if these grounds are communicated to the authority or authorities responsible for public oversight.

| (22) | Since public interest entities have a higher visibility and are economically more important, stricter requirements should apply in the case of a statutory audit of their annual or consolidated accounts. |
| --- | --- |

(22)

Since public interest entities have a higher visibility and are economically more important, stricter requirements should apply in the case of a statutory audit of their annual or consolidated accounts.

| (23) | Audit committees and effective internal control system contribute to minimise financial, operational and compliance risks, and enhance the quality of financial reporting.
  Member States might have regard to the Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board

   (13)

  , which sets out how audit committees should be established and function. Member States may determine that the functions assigned to the audit committee or a body performing equivalent functions may be performed by the administrative or supervisory body as a whole. |
| --- | --- |

(23)

Audit committees and effective internal control system contribute to minimise financial, operational and compliance risks, and enhance the quality of financial reporting.
  Member States might have regard to the Commission Recommendation of 15 February 2005 on the role of non-executive or supervisory directors of listed companies and on the committees of the (supervisory) board

   (13)

  , which sets out how audit committees should be established and function. Member States may determine that the functions assigned to the audit committee or a body performing equivalent functions may be performed by the administrative or supervisory body as a whole.

| (24) | With regard to the duties of the audit committee, according to Article 41, the statutory auditor or audit firm is in no way subordinated to the committee. |
| --- | --- |

(24)

With regard to the duties of the audit committee, according to Article 41, the statutory auditor or audit firm is in no way subordinated to the committee.

| (25) | Member States may decide also to exempt public interest entities which are collective investment undertakings whose transferable securities are admitted to trading on a regulated market from the requirement to have an audit committee. This option takes into account the fact that, in those cases where the collective investment undertaking functions merely for the purpose of pooling the assets, the employment of an audit committee will not always be appropriate. The financial reporting and related risks are not comparable to those of other public interest entities. In addition, undertakings for collective investment in transferable securities (UCITS) and their management companies operate in a strictly defined regulatory environment and are subject to specific governance mechanisms such as controls exercised by their depositary. For those collective investment undertakings which are not harmonised by Directive 85/611/EEC

   (14)

  but subject to equivalent safeguards as provided for by that Directive, Member States should, in this particular case, be allowed to provide for an equal treatment with EU-harmonised collective investment undertakings. |
| --- | --- |

(25)

Member States may decide also to exempt public interest entities which are collective investment undertakings whose transferable securities are admitted to trading on a regulated market from the requirement to have an audit committee. This option takes into account the fact that, in those cases where the collective investment undertaking functions merely for the purpose of pooling the assets, the employment of an audit committee will not always be appropriate. The financial reporting and related risks are not comparable to those of other public interest entities. In addition, undertakings for collective investment in transferable securities (UCITS) and their management companies operate in a strictly defined regulatory environment and are subject to specific governance mechanisms such as controls exercised by their depositary. For those collective investment undertakings which are not harmonised by Directive 85/611/EEC

   (14)

  but subject to equivalent safeguards as provided for by that Directive, Member States should, in this particular case, be allowed to provide for an equal treatment with EU-harmonised collective investment undertakings.

| (26) | In order to reinforce the independence of auditors of public interest entities, the key audit partner(s) auditing such entities should rotate. To organise such rotation, Member States should require a change of key audit partner(s) dealing with an audited entity, while allowing the audit firm with which the key audit partner(s) is (are) associated to continue being the statutory auditor of such entity. Where a Member State considers it appropriate in order to attain the objectives pursued, that Member State might, alternatively, require the change of the audit firm, without prejudice to Article 42(2). |
| --- | --- |

(26)

In order to reinforce the independence of auditors of public interest entities, the key audit partner(s) auditing such entities should rotate. To organise such rotation, Member States should require a change of key audit partner(s) dealing with an audited entity, while allowing the audit firm with which the key audit partner(s) is (are) associated to continue being the statutory auditor of such entity. Where a Member State considers it appropriate in order to attain the objectives pursued, that Member State might, alternatively, require the change of the audit firm, without prejudice to Article 42(2).

| (27) | The interrelation of capital markets underlines the need also to ensure high quality work performed by auditors from third countries in relation to the Community capital market. The auditors concerned should therefore be registered so as to make them subject to quality assurance reviews and to the system of investigations and sanctions. Derogations on the basis of reciprocity should be possible subject to an equivalence testing to be performed by the Commission in cooperation with Member States.
  In any case, an entity which has issued transferable securities on a regulated market within the meaning of Article 4(1), point 18 of Directive 2004/39/EC should always be audited by an auditor either registered in a Member State or overseen by competent authorities of the third country where the auditor comes from, if that third country is acknowledged by the Commission or a Member State to meet requirements equivalent to EU requirements in the field of principles of oversight, quality assurance systems and systems of investigations and sanctions, and if this arrangement is reciprocal. If a system of quality assurance of a third country has been considered by a Member State as equivalent, this does not mean that other Member States have to accept such national equivalence assessment, nor shall it pre-empt the decision of the Commission. |
| --- | --- |

(27)

The interrelation of capital markets underlines the need also to ensure high quality work performed by auditors from third countries in relation to the Community capital market. The auditors concerned should therefore be registered so as to make them subject to quality assurance reviews and to the system of investigations and sanctions. Derogations on the basis of reciprocity should be possible subject to an equivalence testing to be performed by the Commission in cooperation with Member States.
  In any case, an entity which has issued transferable securities on a regulated market within the meaning of Article 4(1), point 18 of Directive 2004/39/EC should always be audited by an auditor either registered in a Member State or overseen by competent authorities of the third country where the auditor comes from, if that third country is acknowledged by the Commission or a Member State to meet requirements equivalent to EU requirements in the field of principles of oversight, quality assurance systems and systems of investigations and sanctions, and if this arrangement is reciprocal. If a system of quality assurance of a third country has been considered by a Member State as equivalent, this does not mean that other Member States have to accept such national equivalence assessment, nor shall it pre-empt the decision of the Commission.

| (28) | The complexity of international group audits requires good cooperation between the competent authorities of Member States and those of third countries. Member States should therefore ensure that competent authorities of third countries can have access to audit working papers and other documents through the national competent authorities. In order to protect the rights of the parties concerned and at the same time facilitate access to those papers and documents, Member States should be allowed to grant direct access to the competent authorities of third countries subject to the agreement of the national competent authority.
  One of the relevant criteria for the granting of access is whether the competent authorities in third countries meet requirements which the Commission has declared adequate. Pending such a decision by the Commission, and without prejudice thereto, Member States may assess whether the requirements are adequate. |
| --- | --- |

(28)

The complexity of international group audits requires good cooperation between the competent authorities of Member States and those of third countries. Member States should therefore ensure that competent authorities of third countries can have access to audit working papers and other documents through the national competent authorities. In order to protect the rights of the parties concerned and at the same time facilitate access to those papers and documents, Member States should be allowed to grant direct access to the competent authorities of third countries subject to the agreement of the national competent authority.
  One of the relevant criteria for the granting of access is whether the competent authorities in third countries meet requirements which the Commission has declared adequate. Pending such a decision by the Commission, and without prejudice thereto, Member States may assess whether the requirements are adequate.

| (29) | Disclosure of information as referred to in Article 36 and 47 should be in accordance with the rules on the transfer of personal data to third countries laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data

   (15). |
| --- | --- |

(29)

Disclosure of information as referred to in Article 36 and 47 should be in accordance with the rules on the transfer of personal data to third countries laid down in Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data

   (15).

| (30) | The measures necessary for the implementation of this Directive should be adopted in accordance with Decision 1999/468/EC and with due regard to the declaration made by the Commission in the European Parliament on 5 February 2002 concerning the implementation of financial services legislation. For that purpose a committee should be set up to assist the Commission. |
| --- | --- |

(30)

The measures necessary for the implementation of this Directive should be adopted in accordance with Decision 1999/468/EC and with due regard to the declaration made by the Commission in the European Parliament on 5 February 2002 concerning the implementation of financial services legislation. For that purpose a committee should be set up to assist the Commission.

| (31) | The European Parliament should be given a period of three months from the first transmission of draft amendments and implementing measures to allow it to examine them and to give its opinion. However, in urgent and duly justified cases, it should be possible to shorten this period. If, within that period, a resolution is passed by the European Parliament, the Commission should re-examine the draft amendments or measures. |
| --- | --- |

(31)

The European Parliament should be given a period of three months from the first transmission of draft amendments and implementing measures to allow it to examine them and to give its opinion. However, in urgent and duly justified cases, it should be possible to shorten this period. If, within that period, a resolution is passed by the European Parliament, the Commission should re-examine the draft amendments or measures.

| (32) | The measures necessary for the implementation of this Directive should be adopted in accordance with Decision 1999/468/EC. |
| --- | --- |

(32)

The measures necessary for the implementation of this Directive should be adopted in accordance with Decision 1999/468/EC.

| (33) | In accordance with the principles of subsidiarity and proportionality as set out in Article 5 of the Treaty, the measures provided for in this Directive, in requiring the application of a single set of international auditing standards, the updating of the educational requirements, the definition of professional ethics and the technical implementation of the cooperation between competent authorities of Member States and between those authorities and the authorities of third countries, are necessary in order to achieve the objectives of further enhancing and harmonising the quality of statutory audit in the Community and facilitating cooperation between Member States and with third countries so as to strengthen confidence in the statutory audit. |
| --- | --- |

(33)

In accordance with the principles of subsidiarity and proportionality as set out in Article 5 of the Treaty, the measures provided for in this Directive, in requiring the application of a single set of international auditing standards, the updating of the educational requirements, the definition of professional ethics and the technical implementation of the cooperation between competent authorities of Member States and between those authorities and the authorities of third countries, are necessary in order to achieve the objectives of further enhancing and harmonising the quality of statutory audit in the Community and facilitating cooperation between Member States and with third countries so as to strengthen confidence in the statutory audit.

| (34) | With a view to rendering the relationship between the statutory auditor or audit firm and the audited entity more transparent, Directives 78/660/EEC and 83/349/EEC should be amended so as to require disclosure of the audit fee and the fee paid for non-audit services in the notes to the annual accounts and the consolidated accounts. |
| --- | --- |

(34)

With a view to rendering the relationship between the statutory auditor or audit firm and the audited entity more transparent, Directives 78/660/EEC and 83/349/EEC should be amended so as to require disclosure of the audit fee and the fee paid for non-audit services in the notes to the annual accounts and the consolidated accounts.

| (35) | Directive 84/253/EEC should be repealed because it lacks a comprehensive set of rules for ensuring an appropriate audit infrastructure, such as public oversight, disciplinary systems and systems of quality assurance and because it does not provide specifically for regulatory cooperation between Member States and third countries. In order to ensure legal certainty, there is a clear need to indicate that statutory auditors and audit firms that have been approved under Directive 84/253/EEC are considered as approved under this Directive. |
| --- | --- |

(35)

Directive 84/253/EEC should be repealed because it lacks a comprehensive set of rules for ensuring an appropriate audit infrastructure, such as public oversight, disciplinary systems and systems of quality assurance and because it does not provide specifically for regulatory cooperation between Member States and third countries. In order to ensure legal certainty, there is a clear need to indicate that statutory auditors and audit firms that have been approved under Directive 84/253/EEC are considered as approved under this Directive.

| (36) | Statutory auditors and audit firms are responsible for carrying out their work with due care and thus should be liable for the financial damage caused by a lack of the care owed. However, the auditors' and audit firms' ability to obtain professional indemnity insurance cover may be affected by whether they are subject to unlimited financial liability. For its part, the Commission intends examining these issues taking into account the fact that liability regimes of the Member States may vary considerably, |
| --- | --- |

(36)

Statutory auditors and audit firms are responsible for carrying out their work with due care and thus should be liable for the financial damage caused by a lack of the care owed. However, the auditors' and audit firms' ability to obtain professional indemnity insurance cover may be affected by whether they are subject to unlimited financial liability. For its part, the Commission intends examining these issues taking into account the fact that liability regimes of the Member States may vary considerably,

HAVE ADOPTED THIS DIRECTIVE:

Chapter I

Subject matter and definitions

Article 1

Subject matter

This Directive establishes rules concerning the statutory audit of annual and consolidated
  accounts
  .

Article 2

Definitions

For the purpose of this Directive, the following definitions shall apply:

| (1) | ‘Statutory audit’ means an audit of annual accounts or consolidated accounts in so far as required by Community
  law
  ; |
| --- | --- |

(1)

‘Statutory audit’ means an audit of annual accounts or consolidated accounts in so far as required by Community
  law
  ;

| (2) | ‘Statutory auditor’ means a natural person who is approved in accordance with this Directive by the competent authorities of a Member State to carry out statutory audits; |
| --- | --- |

(2)

‘Statutory auditor’ means a natural person who is approved in accordance with this Directive by the competent authorities of a Member State to carry out statutory audits;

| (3) | ‘Audit firm’ means
  a legal body or any other
  entity that is approved in accordance with this Directive by the competent authorities of a Member State to carry out statutory audits, regardless of its legal form; |
| --- | --- |

(3)

‘Audit firm’ means
  a legal body or any other
  entity that is approved in accordance with this Directive by the competent authorities of a Member State to carry out statutory audits, regardless of its legal form;

| (4) | ‘Third country audit entity’ means an entity, regardless of its legal form, which carries out audits of the annual or consolidated accounts of a company incorporated in a third country; |
| --- | --- |

(4)

‘Third country audit entity’ means an entity, regardless of its legal form, which carries out audits of the annual or consolidated accounts of a company incorporated in a third country;

| (5) | ‘Third country auditor’ means a natural person who carries out audits of the annual or consolidated accounts of a company incorporated in a third country; |
| --- | --- |

(5)

‘Third country auditor’ means a natural person who carries out audits of the annual or consolidated accounts of a company incorporated in a third country;

| (6) | ‘Group auditor’ means the statutory
  auditor(s)
  or audit
  firm(s)
  that
  carries(carry)
  out the statutory audit of the consolidated accounts; |
| --- | --- |

(6)

‘Group auditor’ means the statutory
  auditor(s)
  or audit
  firm(s)
  that
  carries(carry)
  out the statutory audit of the consolidated accounts;

| (7) | ‘Network’ means the larger structure:






  — | which is aimed at cooperation and
  to which a statutory auditor or an audit firm belongs, and |
| --- | --- | --- |

(7)

‘Network’ means the larger structure:

—

which is aimed at cooperation and
  to which a statutory auditor or an audit firm belongs, and

| — | which
  is clearly aimed at profit or cost sharing or shares common ownership, control or management, common quality control policies and procedures, a common business strategy, the
  use of a common brand-name or
  a significant part of
  professional
  resources
  ; |
| --- | --- |

—

which
  is clearly aimed at profit or cost sharing or shares common ownership, control or management, common quality control policies and procedures, a common business strategy, the
  use of a common brand-name or
  a significant part of
  professional
  resources
  ;

| (8) | ‘Affiliate of an audit firm’ means any undertaking, regardless of its legal form, which is connected to the audit firm by means of common ownership, control or management; |
| --- | --- |

(8)

‘Affiliate of an audit firm’ means any undertaking, regardless of its legal form, which is connected to the audit firm by means of common ownership, control or management;

| (9) | ‘Audit report’ means the report referred to in Article 51a of Directive 78/660/EEC and Article 37 of Directive 83/349/EEC issued by the statutory auditor or audit firm; |
| --- | --- |

(9)

‘Audit report’ means the report referred to in Article 51a of Directive 78/660/EEC and Article 37 of Directive 83/349/EEC issued by the statutory auditor or audit firm;

| (10) | ‘Competent authorities’ means the authorities or bodies designated by law that are
  in charge of
  the regulation
  and/or oversight
  of statutory auditors and audit firms
  or of specific aspects thereof; the reference to ‘competent authority’ in a specific article means a reference to the authority or body(ies) responsible for the functions referred to in that article
  ; |
| --- | --- |

(10)

‘Competent authorities’ means the authorities or bodies designated by law that are
  in charge of
  the regulation
  and/or oversight
  of statutory auditors and audit firms
  or of specific aspects thereof; the reference to ‘competent authority’ in a specific article means a reference to the authority or body(ies) responsible for the functions referred to in that article
  ;

| (11) | ‘International auditing standards’ means International Standards on Auditing and related
  Statements and Standards
  , in so far as relevant to the statutory audit; |
| --- | --- |

(11)

‘International auditing standards’ means International Standards on Auditing and related
  Statements and Standards
  , in so far as relevant to the statutory audit;

| (12) | ‘International accounting standards’ means International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and related Interpretations (SIC-IFRIC interpretations), subsequent amendments to those standards and related interpretations, future standards and related interpretations issued or adopted by the International Accounting Standards Board (IASB); |
| --- | --- |

(12)

‘International accounting standards’ means International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and related Interpretations (SIC-IFRIC interpretations), subsequent amendments to those standards and related interpretations, future standards and related interpretations issued or adopted by the International Accounting Standards Board (IASB);

| (13) | ‘Public interest entities’ means entities
  governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State within the meaning of Article 4(1), point 18 of Directive 2004/39/EC, credit institutions within the meaning of Article 1, point 1 of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions

   (16)

  and insurance undertakings as defined in Article 2(1) of Directive 91/674/EEC. Member States may also designate other entities as public interest entities, for instance entities
  that are of significant public relevance because of the nature of their business, their size or
  the
  number of
  their employees

  ; |
| --- | --- |

(13)

‘Public interest entities’ means entities
  governed by the law of a Member State whose transferable securities are admitted to trading on a regulated market of any Member State within the meaning of Article 4(1), point 18 of Directive 2004/39/EC, credit institutions within the meaning of Article 1, point 1 of Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions

   (16)

  and insurance undertakings as defined in Article 2(1) of Directive 91/674/EEC. Member States may also designate other entities as public interest entities, for instance entities
  that are of significant public relevance because of the nature of their business, their size or
  the
  number of
  their employees

  ;

| (14) | ‘Cooperative’ means a European Cooperative Society as defined in Article 1 of Council Regulation (EC) No 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE)

   (17)

  , or any other cooperative which requires a statutory audit under Community law, such as credit institutions within the meaning of Article 1, point 1 of Directive 2000/12/EC and insurance undertakings as defined in Article 2(1) of Directive 91/674/EEC; |
| --- | --- |

(14)

‘Cooperative’ means a European Cooperative Society as defined in Article 1 of Council Regulation (EC) No 1435/2003 of 22 July 2003 on the Statute for a European Cooperative Society (SCE)

   (17)

  , or any other cooperative which requires a statutory audit under Community law, such as credit institutions within the meaning of Article 1, point 1 of Directive 2000/12/EC and insurance undertakings as defined in Article 2(1) of Directive 91/674/EEC;

| (15) | ‘Non-practitioner’ means any natural person who for at least three years prior to his or her involvement in the governance of the public oversight system has not carried out statutory audits, has not held voting rights in an audit firm, has not been a member of the administrative or management body of an audit firm and has not been employed by or otherwise associated with an audit firm; |
| --- | --- |

(15)

‘Non-practitioner’ means any natural person who for at least three years prior to his or her involvement in the governance of the public oversight system has not carried out statutory audits, has not held voting rights in an audit firm, has not been a member of the administrative or management body of an audit firm and has not been employed by or otherwise associated with an audit firm;

| (16) | ‘Key audit partner(s)’ means:










  a) | the statutory auditor(s) designated by an audit firm for a particular audit engagement as being primarily responsible for carrying out the statutory audit on behalf of the audit firm; or |
| --- | --- | --- |

(16)

‘Key audit partner(s)’ means:

a)

the statutory auditor(s) designated by an audit firm for a particular audit engagement as being primarily responsible for carrying out the statutory audit on behalf of the audit firm; or

| b) | in the case of a group audit at least the statutory auditor(s) designated by an audit firm as being primarily responsible for carrying out the statutory audit at the level of the group and the statutory auditor(s) designated as being primarily responsible at the level of material subsidiaries; or |
| --- | --- |

b)

in the case of a group audit at least the statutory auditor(s) designated by an audit firm as being primarily responsible for carrying out the statutory audit at the level of the group and the statutory auditor(s) designated as being primarily responsible at the level of material subsidiaries; or

| c) | the statutory auditor(s) who sign(s) the audit report. |
| --- | --- |

c)

the statutory auditor(s) who sign(s) the audit report.

Chapter II

Approval, continuous education and mutual recognition

Article 3

Approval of statutory auditors and audit firms

1.   
  Statutory audits shall be carried out only by statutory auditors or audit firms which are approved by the Member State requiring the statutory audit.

2.   
  Each Member State shall designate competent authorities which shall be responsible for approving statutory auditors and audit firms.

The competent authorities may be professional associations provided that they are subject to a system of public oversight as provided for in this Directive.

3.
     
  Without prejudice to Article 11, the competent authorities of the Member States may only approve as statutory auditors natural persons who satisfy at least the conditions laid down in Articles 4 and 6 to 10.

4.   The competent authorities of the Member States
  may only
  approve as
  audit firms those entities which satisfy the conditions under points (a) to (d) below. Member States may only set additional conditions in relation to point (c). Such conditions shall be proportionate to the objectives pursued and shall not go beyond what is strictly necessary
  .

| (a) | The natural persons who carry out statutory audits on behalf of
  the firm
  must satisfy
  at least
  the conditions imposed by Articles 4
  and 6 to 12
  and must be approved as statutory auditors in
  that
  Member
  State. |
| --- | --- |

(a)

The natural persons who carry out statutory audits on behalf of
  the firm
  must satisfy
  at least
  the conditions imposed by Articles 4
  and 6 to 12
  and must be approved as statutory auditors in
  that
  Member
  State.

| (b) | A
  majority of the voting rights must be held by audit firms which are approved in
  any
  Member State
  or by natural persons who satisfy at least the conditions imposed by Articles 4 and 6 to 12; Member States may provide that such natural persons must also have been approved in another Member State. For the purpose of the statutory audit of cooperatives and similar entities as referred to in Article 45 of Directive 86/635/EEC, Member States may establish other specific provisions in relation to voting rights. |
| --- | --- |

(b)

A
  majority of the voting rights must be held by audit firms which are approved in
  any
  Member State
  or by natural persons who satisfy at least the conditions imposed by Articles 4 and 6 to 12; Member States may provide that such natural persons must also have been approved in another Member State. For the purpose of the statutory audit of cooperatives and similar entities as referred to in Article 45 of Directive 86/635/EEC, Member States may establish other specific provisions in relation to voting rights.

| (c) | A
  majority
  up to a maximum of 75 %
  of the members of the administrative or management body of
  the firm
  must
  be audit
  firms
  which
  are approved in any Member State
  or natural persons who satisfy at least the conditions imposed by Articles 4 and 6 to 12; Member States may provide that such natural persons must also have been approved in another Member State.
  Where such a body has no more than two members, one of those members must
  satisfy at least the conditions in this paragraph. |
| --- | --- |

(c)

A
  majority
  up to a maximum of 75 %
  of the members of the administrative or management body of
  the firm
  must
  be audit
  firms
  which
  are approved in any Member State
  or natural persons who satisfy at least the conditions imposed by Articles 4 and 6 to 12; Member States may provide that such natural persons must also have been approved in another Member State.
  Where such a body has no more than two members, one of those members must
  satisfy at least the conditions in this paragraph.

| (d) | The firm must satisfy the condition imposed by Article 4. |
| --- | --- |

(d)

The firm must satisfy the condition imposed by Article 4.

Article 4

Good repute

The competent authorities of a Member State
  may
  grant approval only to natural persons or firms of good
  repute.

Article 5

Withdrawal of approval

1.   Approval of a statutory auditor or an audit firm shall be withdrawn if the good repute of that person or firm has been seriously compromised.
  Member States may, however, provide for a reasonable period of time for the purpose of meeting the requirements of good repute.

2.   Approval of an audit firm shall be withdrawn if any of the conditions imposed in Article 3
  (4), points (b) and (c)
  is no longer fulfilled. Member States may, however, provide for a
  reasonable period of time
  for the purpose of meeting those requirements.

3.
     
  Where the approval of a statutory auditor or of an audit firm is withdrawn for any reason, the competent authority of the Member State where the approval is withdrawn shall communicate that fact and the reasons for the withdrawal to the relevant competent authorities of Member States where the statutory auditor or audit firm is also approved, details of which authorities are registered in the former Member State's register in accordance with Article 15(3).

Article 6

Educational qualifications

Without prejudice to Article 11,
  a natural person may be approved to carry out a statutory audit only after having attained university entrance
  or equivalent
  level, then completed a course of theoretical instruction, undergone practical training and passed an examination of professional competence of university final
  or equivalent
  examination level, organised or recognised by the
  Member
  State
  concerned
  .

Article 7

Examination of professional competence

The examination of professional competence referred to in Article 6 shall guarantee the necessary level of theoretical knowledge of subjects relevant to statutory audit and the ability to apply such knowledge in practice. Part at least of that examination must be written.

Article 8

Test of theoretical knowledge

1.   The test of theoretical knowledge included in the examination shall cover the following subjects in particular:

| a) | general accounting theory and principles, |
| --- | --- |

a)

general accounting theory and principles,

| b) | legal requirements and standards relating to the preparation of annual and consolidated accounts, |
| --- | --- |

b)

legal requirements and standards relating to the preparation of annual and consolidated accounts,

| c) | international accounting standards, |
| --- | --- |

c)

international accounting standards,

| d) | financial analysis, |
| --- | --- |

d)

financial analysis,

| e) | cost and management accounting, |
| --- | --- |

e)

cost and management accounting,

| f) | risk management and internal control, |
| --- | --- |

f)

risk management and internal control,

| g) | auditing
  and professional skills
  , |
| --- | --- |

g)

auditing
  and professional skills
  ,

| h) | legal requirements and professional standards relating to statutory audit and statutory auditors, |
| --- | --- |

h)

legal requirements and professional standards relating to statutory audit and statutory auditors,

| i) | international auditing
  standards
  , |
| --- | --- |

i)

international auditing
  standards
  ,

| j) | professional
  ethics and independence. |
| --- | --- |

j)

professional
  ethics and independence.

2.   It shall also cover
  at least
  the following subjects in so far as they are relevant to auditing:

| a) | company law and corporate governance, |
| --- | --- |

a)

company law and corporate governance,

| b) | the law of insolvency and similar procedures, |
| --- | --- |

b)

the law of insolvency and similar procedures,

| c) | tax law, |
| --- | --- |

c)

tax law,

| d) | civil and commercial law, |
| --- | --- |

d)

civil and commercial law,

| e) | social security law and law of employment, |
| --- | --- |

e)

social security law and law of employment,

| f) | information technology and computer systems, |
| --- | --- |

f)

information technology and computer systems,

| g) | business, general and financial economics, |
| --- | --- |

g)

business, general and financial economics,

| h) | mathematics and statistics, |
| --- | --- |

h)

mathematics and statistics,

| i) | basic principles of the financial management of undertakings. |
| --- | --- |

i)

basic principles of the financial management of undertakings.

3.   The Commission may, in accordance with the procedure referred to in Article 48(2), adapt the list of subjects to be included in the test of theoretical knowledge referred to in paragraph 1.
  The Commission will take into account developments in auditing and the audit profession when adopting these implementing measures.

Article 9

Exemptions

1.   By way of derogation from Articles 7 and 8, a Member State may provide that a person who has passed a university or equivalent examination or holds a university degree or equivalent qualification in one or more of the subjects referred to in Article 8 may be exempted from the test of theoretical knowledge in the subjects covered by that examination or degree.

2.   By way of derogation from Article 7, a Member State may provide that a holder of a university degree or equivalent qualification in one or more of the subjects referred to in Article 8 may be exempted from the test of the ability to apply in practice his theoretical knowledge of such subjects if he has received practical training in them attested by an examination or diploma recognized by the State.

Article 10

Practical training

1.   In order to ensure the ability to apply theoretical knowledge in practice, a test of which is included in the examination, a trainee shall complete a minimum of three years' practical training in inter alia the auditing of annual accounts, consolidated accounts or similar financial statements. At least two thirds of such practical training shall be completed with a statutory auditor or audit firm approved in any Member State.

2.   Member States shall ensure that all training is carried out with persons providing adequate guarantees regarding
  their ability to provide the practical
  training.

Article 11

Qualification through long-term practical experience

Member States may approve a person who does not satisfy the conditions laid down in Article 6 as a statutory auditor, if he
  or she
  can show either:

| a) | that he
  or she
  has, for 15 years, engaged in professional activities which have enabled him
  or her
  to acquire sufficient experience in the fields of finance, law and accountancy and has passed the examination of professional competence referred to in
  Article 7
  , or |
| --- | --- |

a)

that he
  or she
  has, for 15 years, engaged in professional activities which have enabled him
  or her
  to acquire sufficient experience in the fields of finance, law and accountancy and has passed the examination of professional competence referred to in
  Article 7
  , or

| b) | that he
  or she
  has, for seven years, engaged in professional activities in those fields and has, in addition, undergone the practical training referred to in Article 10 and passed the examination of professional competence referred to in
  Article 7
  . |
| --- | --- |

b)

that he
  or she
  has, for seven years, engaged in professional activities in those fields and has, in addition, undergone the practical training referred to in Article 10 and passed the examination of professional competence referred to in
  Article 7
  .

Article 12

Combination of practical training and theoretical instruction

1.   Member States may provide that periods of theoretical instruction in the fields referred to in Article 8 count towards the period of professional activity referred to in Article 11, provided that such instruction is attested by an examination recognized by the State. Such instruction must last not less than one year, nor may it reduce the period of professional activity by more than four years.

2.   The period of professional activity as well as the practical training must not be shorter than the course of theoretical instruction and the practical training required in
  Article 10.

Article 13

Continuous education

Member States shall ensure that statutory auditors are subject to appropriate programmes of continuous education in order to maintain their theoretical knowledge, professional skills and values at a sufficiently high level, and that failure to respect the continuous education requirements is subject to appropriate sanctions as referred to in Article 30.

Article 14

Approval of statutory auditors from other Member States

The competent authorities of the Member States shall establish procedures for the approval of statutory auditors which have been approved in other Member States. Those procedures shall not go beyond a requirement to pass an aptitude test in accordance with Article 4 of Council Directive 89/48/EEC (18). The aptitude test
  , which shall be conducted in one of the languages permitted by the language rules applicable in the Member State concerned,
  shall only cover the statutory auditor's adequate knowledge of the laws and regulations of that Member State in so far as relevant for the statutory audit.

Chapter III

Registration

Article 15

Public register

1.   Member States shall ensure that statutory auditors and audit firms are entered in a public register in accordance with Articles 16 and 17.
  In exceptional circumstances, Member States may disapply the requirements laid down in this Article and Article 16 regarding disclosure only to the extent necessary to mitigate an imminent and significant threat to the personal security of any person
  .

2.   Member States shall ensure that each statutory auditor and audit firm is identified in the public register by an individual number. Registration information shall be
  stored
  in the register in electronic form and shall be electronically accessible by the public.

3.   The public register shall also contain the name and address of the competent authorities in charge of
  approval as referred to in Article 3,
  quality assurance as referred to in Article 29, investigations and sanctions on statutory auditors and audit firms as referred to in Article 30, and public oversight as referred to in Article 32.

4.   Member States shall ensure that the public register is fully operational by ...
   (19).

Article 16

Registration of statutory auditors

1.
     As regards statutory auditors, the public register shall, at least, contain the following information:

| a) | name, address and registration number; |
| --- | --- |

a)

name, address and registration number;

| b) | if applicable, the
  name, address, website address and registration number
  of the audit firm by which the statutory auditor is employed, or with whom he or she is associated as a partner or otherwise; |
| --- | --- |

b)

if applicable, the
  name, address, website address and registration number
  of the audit firm by which the statutory auditor is employed, or with whom he or she is associated as a partner or otherwise;

| c) | all other registration(s) as statutory auditor with the competent authorities of other Member States and as auditor with third countries, including the name(s) of the registration authority(ies), and, if applicable, the registration number(s). |
| --- | --- |

c)

all other registration(s) as statutory auditor with the competent authorities of other Member States and as auditor with third countries, including the name(s) of the registration authority(ies), and, if applicable, the registration number(s).

2.
     
  Third country auditors registered in accordance with Article 45 shall clearly appear in the register as such and not as statutory auditors.

Article 17

Registration of audit firms

1.
     As regards audit firms, the public register shall, at least, contain the following information:

| a) | name, address and registration number; |
| --- | --- |

a)

name, address and registration number;

| b) | legal form; |
| --- | --- |

b)

legal form;

| c) | contact information, the primary contact person and, where applicable, the website address; |
| --- | --- |

c)

contact information, the primary contact person and, where applicable, the website address;

| d) | address of each office in the Member State; |
| --- | --- |

d)

address of each office in the Member State;

| e) | name and registration number of all statutory auditors employed by or associated as partner or otherwise with the audit firm; |
| --- | --- |

e)

name and registration number of all statutory auditors employed by or associated as partner or otherwise with the audit firm;

| f) | names and business addresses of all owners and shareholders; |
| --- | --- |

f)

names and business addresses of all owners and shareholders;

| g) | names and business addresses of all members of the administrative or management body; |
| --- | --- |

g)

names and business addresses of all members of the administrative or management body;

| h) | if applicable, the membership of a network and a list of the names and addresses of member firms and affiliates or an indication of the place where such information is publicly available; |
| --- | --- |

h)

if applicable, the membership of a network and a list of the names and addresses of member firms and affiliates or an indication of the place where such information is publicly available;

| i) | all other registration(s) as audit firm with the competent authorities of other Member States and as audit entity with third countries, including the name(s) of the registration authority(ies), and, if applicable, the registration number(s). |
| --- | --- |

i)

all other registration(s) as audit firm with the competent authorities of other Member States and as audit entity with third countries, including the name(s) of the registration authority(ies), and, if applicable, the registration number(s).

2.
     
  Third country audit entities registered in accordance with Article 45 shall clearly appear in the register as such and not as audit firms.

Article 18

Update of registration information

Member States shall ensure that statutory auditors and audit firms notify without undue delay the competent authorities in charge of the public register about any change of information contained in the public register. The register shall be updated without undue delay after notification.

Article 19

Responsibility for registration information

The information
  provided to the relevant competent authorities
  in accordance with
  Articles 16, 17 and 18
  shall be signed by the statutory auditor or audit firm.
  Where the competent authority provides for the provision of the information electronically, this
  can
  for example
  be done by means of an electronic signature within the meaning of Article 2, point 1 of Directive 1999/93/EC of the European Parliament and of the Council of 13 December 1999 on a Community framework for electronic signatures
   (20).

Article 20

Language

1.   The information entered in the public register shall be drawn up in one of the languages permitted by the language rules applicable in the Member State concerned.

2.   Member States may additionally allow the information to be entered in the public register in any other official language(s) of the Community. Member States may require the translation of the information to be certified.

In all cases, the Member State concerned shall ensure that the register indicates whether or not the translation is certified.

Chapter IV

Professional ethics
  , independence
  and professional secrecy

Article 21

Professional ethics

1.   Member States shall ensure that all statutory auditors and audit firms are subject to principles of professional ethics,
  covering at least their public interest function
  , their integrity and objectivity and their professional competence and due care.

2.   
  In order to ensure confidence in the audit function and in order to ensure uniform application of paragraph 1, the
  Commission may
  , in accordance with the procedure referred to in Article 48(2),
  adopt implementing measures
  concerning principles

  governing professional
  ethics
  .

Article 22

Independence and objectivity

1.   Member States shall ensure that when carrying out a statutory audit,
  the
  statutory auditor
  and/or
  the audit firm is independent from the audited entity and is not involved in
  the decision-taking
  of the audited
  entity.

2.
     
  Member States shall ensure that a statutory auditor or an audit firm shall not carry out a statutory audit if there is any direct or indirect financial, business, employment or other relationship between the statutory auditor, audit firm or the network — including the provision of additional non-audit services — and the audited entity from which an objective, reasonable and informed third party would conclude that the statutory auditor's or audit firm's independence is compromised. If the statutory auditor's or audit firm's independence is affected by threats, such as self review, self interest, advocacy, familiarity or trust or intimidation, the statutory auditor or audit firm must apply safeguards in order to mitigate those threats. If the significance of the threats compared to the safeguards applied is such that the independence is compromised, the statutory auditor or audit firm shall not carry out the statutory audit.

Member States shall in addition ensure that, where statutory audits of public interest entities are concerned, a statutory auditor or an audit firm shall, where appropriate to safeguard the statutory auditor's or audit firm's independence, not carry out a statutory audit in cases of self review or self interest.

3.   Member States shall ensure that the statutory auditor or audit firm documents in the audit working papers all
  significant
  threats to
  his, her or
  their independence as well as the safeguards applied to mitigate those threats.

4.
     
  In order to ensure confidence in the audit function and in order to ensure uniform application of paragraphs 1 and 2, the Commission may, in accordance with the procedure referred to in Article 48(2), adopt principle-based implementing measures concerning:

| a) | the threats and safeguards referred to in paragraph 3; |
| --- | --- |

a)

the threats and safeguards referred to in paragraph 3;

| b) | the situations in which the significance of the threats, as referred to in paragraph 3, is such that the independence of the statutory auditor or audit firm is compromised; |
| --- | --- |

b)

the situations in which the significance of the threats, as referred to in paragraph 3, is such that the independence of the statutory auditor or audit firm is compromised;

| c) | the question whether statutory audits may or may not be carried out in the cases of self review and self interest referred to in paragraph 2. |
| --- | --- |

c)

the question whether statutory audits may or may not be carried out in the cases of self review and self interest referred to in paragraph 2.

Article 23

Confidentiality and professional secrecy

1.   Member States shall ensure that all information and documents to which the statutory auditor or audit firm has access when carrying out a statutory audit are protected by adequate rules on confidentiality and professional secrecy.

2.   Confidentiality and professional secrecy rules relating to statutory auditors or audit firms shall not impede enforcement
  of the provisions of this Directive.

3.
     
  Where a statutory auditor or audit firm is replaced by another statutory auditor or audit firm, the former statutory auditor or audit firm shall provide access to all relevant information concerning the audited entity to the incoming statutory auditor or audit firm.

4.
     
  A statutory auditor or audit firm who has ceased to be engaged in a particular audit assignment or a former statutory auditor or audit firm shall remain subject to the provisions of paragraphs 1 and 2 with respect to that audit assignment.

Article 24

Independence and objectivity of the statutory auditors carrying out the statutory audit on behalf of audit firms

Member States shall ensure that the owners or shareholders of an audit firm as well as the members of the administrative, management and supervisory bodies of such a firm, or of an affiliated firm, do not intervene in the execution of a statutory audit in any way which jeopardises the independence and objectivity of the statutory auditor who carries out the statutory audit on behalf of the audit firm.

Article 25

Audit fees

Member States shall ensure that adequate rules are in place which provide that fees for statutory
  audits
  :

| a) | are
  not influenced or determined by the provision of additional services to the audited entity; |
| --- | --- |

a)

are
  not influenced or determined by the provision of additional services to the audited entity;

| b) | cannot be based on any form of contingency. |
| --- | --- |

b)

cannot be based on any form of contingency.

Chapter V

Auditing standards and audit reporting

Article 26

Auditing standards

1.   Member States shall require statutory auditors and audit firms to carry out statutory audits in accordance with international auditing standards adopted by the Commission in accordance with the procedure referred to in Article 48(2).
  Member States may apply a national auditing standard as long as the Commission has not adopted an international auditing standard covering the same subject-matter. Adopted international auditing standards shall be published in full in each of the official languages of the Community in the Official Journal of the European Union.

2.   The Commission
  may decide in accordance with the procedure referred to in Article 48(2) on the applicability within the Community of international auditing standards. The Commission
  shall
  only
  adopt international auditing standards for application in the
  Community if
  they:

| a) | are generally accepted internationally and are developed with proper due process, public oversight and transparency; and |
| --- | --- |

a)

are generally accepted internationally and are developed with proper due process, public oversight and transparency; and

| b) | contribute
  a high level of credibility
  and quality
  to the annual or consolidated accounts in conformity with the principles set out in Article 2(3) of Directive 78/660/EEC and in Article 16(3) of Directive 83/349/EEC;
  and |
| --- | --- |

b)

contribute
  a high level of credibility
  and quality
  to the annual or consolidated accounts in conformity with the principles set out in Article 2(3) of Directive 78/660/EEC and in Article 16(3) of Directive 83/349/EEC;
  and

| c) | are conducive to the European public good. |
| --- | --- |

c)

are conducive to the European public good.

3.   Member States may only
  impose audit
  procedures
  or requirements in addition to — or, in exceptional cases, by carving out — parts of the international auditing standards
  if these follow from specific
  national legal
  requirements relating to the scope of the statutory audit. Member States shall
  ensure that these audit procedures or requirements comply with the provisions laid down in paragraph 2, points (b) and (c) and shall
  communicate
  these to
  the Commission
  and Member States before their adoption. In the exceptional case of carving out parts of an international auditing standard, Member States shall communicate their specific national legal requirements, as well as the grounds for maintaining them, to the Commission and the other Member States at least six months before its national adoption or, in the case of requirements already existing at the time of adoption of an international auditing standard, at the latest within three months after adoption of the relevant international auditing standard
  .

4.
     
  Member States may impose additional requirements relating to the statutory audit of annual and consolidated accounts for a period of two years after the deadline for transposition laid down in Article 53(1) has elapsed.

Article 27

Statutory audit of consolidated accounts

Member States shall ensure that in the case of a statutory audit of consolidated accounts of a group of undertakings:

| a) | the group auditor bears the full responsibility for the audit report in relation with the consolidated accounts; |
| --- | --- |

a)

the group auditor bears the full responsibility for the audit report in relation with the consolidated accounts;

| b) | the
  group auditor
  carries out a review and
  maintains documentation of his
  or her
  review of the audit work performed by
  third country auditor(s), statutory auditor(s), third country audit entity(ies) or audit firm(s) for the purpose of the group audit. The documentation retained by the group auditor shall be adequate for the relevant competent authority to properly review the work of the group auditor
  ; |
| --- | --- |

b)

the
  group auditor
  carries out a review and
  maintains documentation of his
  or her
  review of the audit work performed by
  third country auditor(s), statutory auditor(s), third country audit entity(ies) or audit firm(s) for the purpose of the group audit. The documentation retained by the group auditor shall be adequate for the relevant competent authority to properly review the work of the group auditor
  ;

| c) | when a component of
  a
  group
  of undertakings
  is audited by
  auditor(s) or audit entity(s) from a third country that has no cooperation agreement as referred to in Article 47
  , the group auditor
  is responsible for ensuring proper delivery when requested to the public oversight authorities of the documentation of the audit work performed by the third country auditor(s) or audit entity(ies), including the working papers relevant for the group audit. To ensure such delivery, the group auditor shall retain
  a copy of
  such
  documentation
  , or alternatively agree with the third country auditor(s) or audit entity(ies) his proper and unrestricted access upon request or take any other appropriate action. If legal or other impediments prevent audit working papers from being passed from a third country to the group auditor, the documentation retained by the group auditor shall include evidence that he or she has undertaken the appropriate procedures in order to gain access to the audit documentation, and in the case of impediments other than legal ones arising from country legislation, evidence supporting such impediment
  . |
| --- | --- |

c)

when a component of
  a
  group
  of undertakings
  is audited by
  auditor(s) or audit entity(s) from a third country that has no cooperation agreement as referred to in Article 47
  , the group auditor
  is responsible for ensuring proper delivery when requested to the public oversight authorities of the documentation of the audit work performed by the third country auditor(s) or audit entity(ies), including the working papers relevant for the group audit. To ensure such delivery, the group auditor shall retain
  a copy of
  such
  documentation
  , or alternatively agree with the third country auditor(s) or audit entity(ies) his proper and unrestricted access upon request or take any other appropriate action. If legal or other impediments prevent audit working papers from being passed from a third country to the group auditor, the documentation retained by the group auditor shall include evidence that he or she has undertaken the appropriate procedures in order to gain access to the audit documentation, and in the case of impediments other than legal ones arising from country legislation, evidence supporting such impediment
  .

Article 28

Audit reporting

1.   Where an audit firm carries out the statutory audit, the audit report shall be signed at least by the statutory auditor(s) carrying out the statutory audit on behalf of the audit firm.
  In exceptional circumstances Member States may provide that this signature need not be disclosed to the public if such disclosure could lead to an imminent and significant threat to the personal security of any person. In any case the name(s) of the person(s) involved shall be known to the relevant competent authorities.

2.   
  Notwithstanding Article 51a(1) of Directive 78/660/EEC and in the event that the Commission has not adopted a common standard audit report in accordance with Article 26(1), the
  Commission may, in accordance with the procedure referred to in Article 48(2)

  , in order to enhance public confidence in the audit function,
  adopt a common standard audit report for annual or consolidated accounts which have been prepared in accordance with approved international accounting standards.

Chapter VI

Quality assurance

Article 29

Quality assurance systems

1.   Member States shall ensure that all statutory auditors and audit firms are subject to a system of quality assurance which meets at least the following criteria:

| a) | the quality assurance system must be organised in such a manner that it is independent from the reviewed statutory auditors and audit firms and subject to public oversight as described in Chapter VIII; |
| --- | --- |

a)

the quality assurance system must be organised in such a manner that it is independent from the reviewed statutory auditors and audit firms and subject to public oversight as described in Chapter VIII;

| b) | the funding for the quality assurance system must be secure and free from any possible undue influence by statutory auditors or audit firms; |
| --- | --- |

b)

the funding for the quality assurance system must be secure and free from any possible undue influence by statutory auditors or audit firms;

| c) | the quality assurance system must have adequate resources; |
| --- | --- |

c)

the quality assurance system must have adequate resources;

| d) | persons who carry out the quality assurance reviews must have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews; |
| --- | --- |

d)

persons who carry out the quality assurance reviews must have appropriate professional education and relevant experience in statutory audit and financial reporting combined with specific training on quality assurance reviews;

| e) | the selection of reviewers for specific quality assurance review assignments must be made under an objective procedure
  designed
  to ensure that there are no conflicts of interest between the reviewers and the statutory auditor or audit firm under review; |
| --- | --- |

e)

the selection of reviewers for specific quality assurance review assignments must be made under an objective procedure
  designed
  to ensure that there are no conflicts of interest between the reviewers and the statutory auditor or audit firm under review;

| f) | the scope of the quality assurance review
  , supported by adequate testing of selected audit files,
  must include an assessment of the
  compliance
  with applicable auditing standards and independence requirements
  , of the quantity and quality of resources spent, of the audit fees charged and of the internal quality control system of the audit firm
  ; |
| --- | --- |

f)

the scope of the quality assurance review
  , supported by adequate testing of selected audit files,
  must include an assessment of the
  compliance
  with applicable auditing standards and independence requirements
  , of the quantity and quality of resources spent, of the audit fees charged and of the internal quality control system of the audit firm
  ;

| g) | the quality assurance review must result in the establishment of a report which contains the main conclusions of the quality assurance review; |
| --- | --- |

g)

the quality assurance review must result in the establishment of a report which contains the main conclusions of the quality assurance review;

| h) | quality assurance reviews must take place at least every six years; |
| --- | --- |

h)

quality assurance reviews must take place at least every six years;

| i) | the overall results of the quality assurance system must be published annually; |
| --- | --- |

i)

the overall results of the quality assurance system must be published annually;

| j) | recommendations of quality reviews shall be followed up by the statutory auditor or audit firm within a reasonable period. |
| --- | --- |

j)

recommendations of quality reviews shall be followed up by the statutory auditor or audit firm within a reasonable period.

In the event that the recommendations referred to in point (j) are not followed up, the statutory auditor or audit firm shall
  , if applicable,
  be subject to the system of disciplinary actions or sanctions as referred to in Article 30.

2.   The Commission may adopt, in accordance with the procedure referred to in Article 48(2), implementing measures
  in order to enhance public confidence in the audit function and to ensure uniform application of paragraph 1, points (a), (b) and (e) to (j)
  .

Chapter VII

Investigations and sanctions

Article 30

Systems of investigations and sanctions

1.   Member States shall ensure that there are effective systems of investigations and sanctions to detect, correct and prevent inadequate execution of the statutory audit.

2.   Without prejudice to Member States' civil liability regimes, Member States shall provide effective, proportionate and dissuasive
  sanctions
  in respect of statutory auditors and audit firms, where statutory audits are not carried out in conformity with
  the provisions adopted in the implementation of
  this Directive.

3.   Member States shall provide that
  measures
  taken or
  sanctions
  imposed on statutory auditors and audit firms
  are
  appropriately disclosed to the public. Sanctions should include the possibility
  of the withdrawal of approval
  .

Article 31

Auditors' liability

The Commission shall before the end of 2006 present a report on the impact of the current national liability rules for carrying out statutory audits on the European capital markets and on the insurance conditions for statutory auditors and audit firms, including an objective analysis of the limitations of financial liability. The Commission shall, where appropriate, carry out a public consultation. In the light of that report, the Commission shall, if it considers it appropriate, submit recommendations to the Member States.

Chapter VIII

Public oversight and regulatory arrangements between Member States

Article 32

Principles of public oversight

1.   Member States shall organise an effective system of public oversight for statutory auditors and audit firms based on the principles set out in paragraphs 2 to 7.

2.   All statutory auditors and audit firms must be subject to public oversight.

3.   The system of public oversight must be governed by non-practitioners who are knowledgeable in the areas relevant to statutory audit. Member States may however allow a minority of practitioners to be involved in the governance of the public oversight system. Persons involved in
  the governance of the
  public oversight
  system
  must be selected under an independent and transparent nomination procedure.

4.   The system of public oversight must have the ultimate responsibility for the oversight of:

| a) | the approval and registration of statutory auditors and audit firms, and |
| --- | --- |

a)

the approval and registration of statutory auditors and audit firms, and

| b) | the adoption of standards on ethics, internal quality control of audit firms and auditing, and |
| --- | --- |

b)

the adoption of standards on ethics, internal quality control of audit firms and auditing, and

| c) | continuous education, quality assurance and investigative and disciplinary systems. |
| --- | --- |

c)

continuous education, quality assurance and investigative and disciplinary systems.

5.   The system of public oversight must have the right, where necessary, to conduct investigations in relation to statutory auditors and audit firms and must have the right to take appropriate action.

6.   The system of public oversight must be transparent. This shall include the publication of annual work programmes and activity reports.

7.   The system of public oversight must be adequately funded. The funding for the public oversight system must be secure and free from
  any undue
  influence by statutory auditors or audit firms.

Article 33

Cooperation between public oversight systems at Community level

Member States shall ensure that regulatory arrangements for systems of public oversight permit effective cooperation at Community level between oversight activities of Member States. To that extent, Member States shall make one entity specifically responsible for ensuring the
  cooperation
  .

Article 34

Mutual recognition of regulatory arrangements between Member States

1.   Regulatory arrangements of Member States shall respect the principle of home country regulation and oversight by the Member State in which the statutory auditor or audit firm is approved and the audited entity has its registered office.

2.   In the case of a statutory audit of consolidated accounts, the Member State requiring the statutory audit of the consolidated accounts may not impose additional requirements in relation to the statutory audit concerning registration, quality assurance review, auditing standards, ethics and independence on a statutory auditor or audit firm carrying out a statutory audit of a subsidiary established in another Member State.

3.   In the case of a company whose securities are traded on a regulated market in a Member State other than that in which the company has its registered office, the Member State where the securities are traded may not impose any additional requirements in relation to the statutory audit concerning registration, quality assurance review, auditing standards, ethics and independence on a statutory auditor or audit firm carrying out the statutory audit of the annual or consolidated accounts of the company.

Article 35

Designation of competent authorities

1.
     
  Member States shall designate one or more competent authorities for the purposes of the tasks provided for in this Directive. Member States shall inform the Commission of their designation.

2.
     
  The competent authorities should be organised in such a manner that conflicts of interests are avoided.

Article 36

Professional secrecy and regulatory

  cooperation between Member
  States

1.   
  The competent
  authorities of Member States
  responsible for approval, registration, quality assurance, inspection and discipline
  shall cooperate with each other whenever necessary for the purpose of carrying out their
  respective responsibilities under this Directive. The competent
  authorities
  in a Member State responsible for approval, registration, quality assurance, inspection and discipline
  shall render assistance to competent authorities
  in
  other Member States. In particular,
  competent authorities
  shall exchange information and cooperate in
  investigations related to the carrying-out of
  statutory audits.

2.   
  The obligation of professional secrecy shall apply to all persons who work or who have worked for competent authorities. Information covered by professional secrecy may not be disclosed to any other person or authority except by virtue of law, regulation or administrative procedures of a Member State.

3.   
  Paragraph 2 shall not prevent competent authorities from exchanging confidential information. Information thus exchanged shall be covered by the obligation of professional secrecy, to which persons employed or formerly employed by competent authorities are subject.

4.   
  Competent authorities shall, on request, and without undue delay, supply any information required for the purpose referred to in paragraph 1. Where necessary, the competent authorities receiving any such request shall without undue delay take the necessary measures in order to gather the required information. If the requested competent authority is not able to supply the required information without undue delay it shall notify the requesting competent authority of the reasons. Information thus supplied shall be covered by the obligation of professional secrecy to which the persons employed or formerly employed by the competent authorities that received the information are subject.

The competent authorities may refuse to act on a request for information where:

| a) | communication might adversely affect the sovereignty, security or public order of the State addressed or breach national security rules; or |
| --- | --- |

a)

communication might adversely affect the sovereignty, security or public order of the State addressed or breach national security rules; or

| b) | judicial proceedings have already been initiated in respect of the same actions and against the same statutory auditors and audit firms before the authorities of the State addressed; or |
| --- | --- |

b)

judicial proceedings have already been initiated in respect of the same actions and against the same statutory auditors and audit firms before the authorities of the State addressed; or

| c) | final judgment has already been passed on such persons for the same actions by the competent authorities of the State addressed. |
| --- | --- |

c)

final judgment has already been passed on such persons for the same actions by the competent authorities of the State addressed.

Without prejudice to the obligations to which they are subject in judicial proceedings, the authorities which receive information pursuant to paragraph 1 may use it only for the exercise of their functions within the scope of this Directive and in the context of administrative or judicial proceedings specifically related to the exercise of those functions.

5.   
  Where a competent authority is convinced that activities contrary to the provisions of this Directive are being or have been carried out on the territory of another Member State, it shall communicate and notify this in as specific a manner as possible to the competent authority of the other Member State. The competent authority of the other Member State shall take appropriate action. It shall inform the notifying competent authority of the outcome and, to the extent possible, of significant interim developments.

6.
     
  A competent authority of one Member State may also request that an investigation be carried out by the competent authority of another Member State, on the latter's territory.

It may further request that some of its own personnel be allowed to accompany the personnel of the competent authority of that other Member State during the course of the investigation.

The investigation shall be subject throughout to the overall control of the Member State on whose territory it is conducted.

The competent authorities may refuse to act on a request for the carrying-out of an investigation as provided for in the first subparagraph, or on a request for its personnel to be accompanied by personnel of a competent authority of another Member State as provided for in the second subparagraph, where such an investigation might adversely affect the sovereignty, security or public order of the State addressed, or where judicial proceedings have already been initiated in respect of the same actions and against the same persons before the authorities of the State addressed or where final judgment has already been passed on such persons for the same actions by the competent authorities of the State addressed.

7.
     
  The Commission may adopt, in accordance with the procedure referred to in Article 48(2), implementing measures in order to facilitate cooperation between competent authorities on the procedures of exchange of information and modalities for cross-border investigations provided for in paragraphs 2 to 4.

Chapter IX

Appointment, dismissal and communication

Article 37

Appointment of statutory auditors or audit firms

1.
     The statutory auditor or audit firm shall be appointed by the general meeting of shareholders
  or members
  of the audited
  entity.

2.
     
  Member States may allow alternative systems or modalities for the appointment of the statutory auditor or audit firm provided that those systems or modalities are designed to ensure the independence of the statutory auditor or audit firm from the executive members of the administrative body or from the managerial body of the audited entity.

Article 38

Dismissal and resignation of statutory auditors or audit firms

1.   Member States shall ensure that statutory auditors or audit firms may only be dismissed where there are proper grounds; divergence of opinions on accounting treatments or audit procedures shall not be a proper ground for dismissal.

2.   
  Member States shall ensure that
  the audited entity and the statutory auditor or audit
  firm inform
  the authority or authorities responsible for public oversight about the dismissal or resignation
  during the term of appointment and give
  an adequate explanation of the reasons therefor.

Article 39

Application to non-listed public interest entities

Member States may exempt public interest entities which have not issued transferable securities admitted to trading on a regulated market within the meaning of Article 4(1), point 18 of Directive 2004/39/EC, and their statutory auditor(s) or audit firm(s), from one or more of the requirements in this chapter.

Chapter X

Special provisions for the statutory audit of public interest entities

Article 40

Transparency report

1.   Member States shall ensure that
  statutory auditors or
  audit firms that carry out statutory audit(s) of public interest entities publish on their website
  , within three months of the end of each financial year,
  an annual transparency report that includes at least the following:

| a) | a description of the legal structure and ownership; |
| --- | --- |

a)

a description of the legal structure and ownership;

| b) | where the audit firm belongs to a network, a description of the network and the legal and structural arrangements in the network; |
| --- | --- |

b)

where the audit firm belongs to a network, a description of the network and the legal and structural arrangements in the network;

| c) | a
  description of
  the governance structure of the audit firm; |
| --- | --- |

c)

a
  description of
  the governance structure of the audit firm;

| d) | a description of the internal quality control system of the audit firm and a statement by the administrative or management body on the effectiveness of its functioning; |
| --- | --- |

d)

a description of the internal quality control system of the audit firm and a statement by the administrative or management body on the effectiveness of its functioning;

| e) | an indication of when the last quality assurance review
  referred to in Article 29
  took place; |
| --- | --- |

e)

an indication of when the last quality assurance review
  referred to in Article 29
  took place;

| f) | a listing of public interest entities for which a statutory audit has been carried out during the last year by the audit firm; |
| --- | --- |

f)

a listing of public interest entities for which a statutory audit has been carried out during the last year by the audit firm;

| g) | a statement about the audit firm's independence practices which also confirms that an internal review of independence compliance has been conducted; |
| --- | --- |

g)

a statement about the audit firm's independence practices which also confirms that an internal review of independence compliance has been conducted;

| h) | a statement on the policy followed by the audit firm concerning continuous education of statutory auditors as referred to in Article 13; |
| --- | --- |

h)

a statement on the policy followed by the audit firm concerning continuous education of statutory auditors as referred to in Article 13;

| i) | financial information showing the importance of the audit firm such as the total turnover divided into fees from the statutory audit of annual and consolidated accounts, and fees charged for other assurance services, tax advisory services and other non-audit services; |
| --- | --- |

i)

financial information showing the importance of the audit firm such as the total turnover divided into fees from the statutory audit of annual and consolidated accounts, and fees charged for other assurance services, tax advisory services and other non-audit services;

| j) | information about the basis for the partner remuneration. |
| --- | --- |

j)

information about the basis for the partner remuneration.

Member States may in exceptional circumstances disapply the requirement in point (f) to the extent necessary to mitigate an imminent and significant threat to the personal security of any person.

2.   The transparency report shall be signed by the
  statutory auditor or
  audit firm
  , as the case may be
  . This can
  for example
  be done by means of an electronic signature within the meaning of
  Article 2(1)
  of Directive 1999/93/EC.

Article 41

Audit committee

1.   Public interest entities shall have an audit committee
  . Member States shall determine whether the audit committee is to be
  composed of non-executive members of the administrative body
  and/or
  members of the supervisory body of the audited entity
  and/or of members that are appointed by the general meeting of shareholders of the audited entity. At least one member of the audit committee shall be
  independent
  and shall have
  competence in accounting and/or auditing.

In public interest entities which meet the criteria of Article 2(1), point (f), of Directive 2003/71/EC

   (21)

  , Member States may permit the functions assigned to the audit committee to be performed by the administrative or supervisory body as a whole, provided at least that when the chairman of such body is an executive member, he or she is not the chairman of the audit committee.

2.   
  Without prejudice to the responsibility of the members of the administrative, management or supervisory bodies, or of other members that are appointed by the general meeting of shareholders of the audited entity, the
  audit committee shall inter alia:

| a) | monitor the financial reporting process; |
| --- | --- |

a)

monitor the financial reporting process;

| b) | monitor the effectiveness of the company's internal control, internal audit where applicable, and risk management systems; |
| --- | --- |

b)

monitor the effectiveness of the company's internal control, internal audit where applicable, and risk management systems;

| c) | monitor
  the statutory audit of the annual and consolidated accounts; |
| --- | --- |

c)

monitor
  the statutory audit of the annual and consolidated accounts;

| d) | review and monitor the independence of the statutory auditor or audit firm and in particular the provision of additional services to the audited
  entity. |
| --- | --- |

d)

review and monitor the independence of the statutory auditor or audit firm and in particular the provision of additional services to the audited
  entity.

3.   
  In public interest entities, the proposal of the administrative or supervisory body for the appointment of a statutory auditor or audit firm shall be based on a recommendation made by the audit committee.

4.
     
  The statutory auditor or audit firm must report to the audit committee on key matters arising from the statutory audit, in particular on material weaknesses in internal control in relation to the financial reporting process.

5.
     
  Member States may allow or decide that the provisions laid down in paragraphs 1 to 4 shall not apply to public interest entities that have a body performing equivalent functions to an audit committee, established and functioning according to provisions in place in the Member State where the entity to be audited is registered. In such a case the entity shall disclose which body carries out these functions and how it is composed.

6.
     
  Member States may exempt from the obligation to have an audit committee:

| a) | public interest entities which are subsidiary undertakings as defined in Article 1 of Directive 83/349/EEC if the company complies with the requirements in paragraphs 1 to 4 at group level; |
| --- | --- |

a)

public interest entities which are subsidiary undertakings as defined in Article 1 of Directive 83/349/EEC if the company complies with the requirements in paragraphs 1 to 4 at group level;

| b) | public interest entities which are collective investment undertakings within the meaning of Article 1(2) of Directive 85/611/EEC; Member States may also exempt public interest entities the sole object of which is the collective investment of capital provided by the public, which operate on the principle of risk spreading and which do not seek to take legal or management control over any of the issuers of its underlying investments provided that those collective investment undertakings are authorised and subject to supervision by competent authorities and that they have a depositary exercising functions equivalent to those under Directive 85/611/EEC; |
| --- | --- |

b)

public interest entities which are collective investment undertakings within the meaning of Article 1(2) of Directive 85/611/EEC; Member States may also exempt public interest entities the sole object of which is the collective investment of capital provided by the public, which operate on the principle of risk spreading and which do not seek to take legal or management control over any of the issuers of its underlying investments provided that those collective investment undertakings are authorised and subject to supervision by competent authorities and that they have a depositary exercising functions equivalent to those under Directive 85/611/EEC;

| c) | public interest entities the sole business of which is to act as issuer of asset-backed securities as defined in Article 2(5) of Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC

   (22)

  ; in such instances, Member States shall require the entity to explain to the public the reasons for which it considers it not appropriate to have either an audit committee or an administrative or supervisory body entrusted to carry out the functions of an audit committee; |
| --- | --- |

c)

public interest entities the sole business of which is to act as issuer of asset-backed securities as defined in Article 2(5) of Commission Regulation (EC) No 809/2004 of 29 April 2004 implementing Directive 2003/71/EC

   (22)

  ; in such instances, Member States shall require the entity to explain to the public the reasons for which it considers it not appropriate to have either an audit committee or an administrative or supervisory body entrusted to carry out the functions of an audit committee;

| d) | credit institutions within the meaning of Article 1(1) of Directive 2000/12/EC whose shares are not admitted to trading on a regulated market of any Member State within the meaning of Article 4(1), point 18 of Directive 2004/39/EC and which have, in a continuous or repeated manner, only issued debt securities provided that the total nominal amount of all such debt securities remains below 100 000 000 Euro and that they have not published a prospectus under Directive 2003/71/EC. |
| --- | --- |

d)

credit institutions within the meaning of Article 1(1) of Directive 2000/12/EC whose shares are not admitted to trading on a regulated market of any Member State within the meaning of Article 4(1), point 18 of Directive 2004/39/EC and which have, in a continuous or repeated manner, only issued debt securities provided that the total nominal amount of all such debt securities remains below 100 000 000 Euro and that they have not published a prospectus under Directive 2003/71/EC.

Article 42

Independence

1.
     In addition to the provisions laid down in
  Articles 22
  and 24
  ,
  Member States shall ensure that
  statutory auditors or audit firms that carry out statutory audits of public interest entities
  :

| a) | annually confirm in writing to the audit committee their independence from the audited public interest entity
  ; |
| --- | --- |

a)

annually confirm in writing to the audit committee their independence from the audited public interest entity
  ;

| b) | annually disclose to the audit committee any additional services provided to the audited entity; and |
| --- | --- |

b)

annually disclose to the audit committee any additional services provided to the audited entity; and

| c) | discuss with the audit committee the threats to their independence and the safeguards applied to mitigate those threats as documented by them pursuant to Article 22(3). |
| --- | --- |

c)

discuss with the audit committee the threats to their independence and the safeguards applied to mitigate those threats as documented by them pursuant to Article 22(3).

2.
     
  Member States shall ensure that the key audit partner(s) responsible for carrying out the statutory audit rotate(s) from the audit engagement within a maximum period of seven years after the date of appointment and is/are allowed to participate in the audit of the audited entity again after a period of at least two years.

3.
     
  The statutory auditor or the key audit partner who carries out the statutory audit on behalf of an audit firm shall not be allowed to take up a key management position in the audited entity before a period of at least two years has elapsed since he or she resigned as a statutory auditor or key audit partner from the audit engagement.

Article 43

Quality assurance

The quality review referred to in Article 29 must be carried out at least every three years for statutory auditors or audit firms that carry out statutory audits of public interest
  entities
  .

Chapter

  XI

International aspects

Article 44

Approval of auditors from third countries

1.
     On the condition of reciprocity, the competent authorities of a Member State may
  approve a
  third country
  auditor
  as statutory auditor if the person has furnished proof
  that he or she complies with requirements equivalent to those provided for in Articles 4 and 6 to 13.

2.
     
  The competent authorities of a Member State shall, before granting approval to a third country auditor who meets the requirements of paragraph 1, apply the requirements laid down in Article 14.

Article 45

Registration
  and oversight of third country auditors and audit entities

1.   The competent authorities of a Member State shall register in accordance with Articles 15 to 17
  all third country auditors and audit entities
  which provide an audit report
  concerning the
  annual or consolidated accounts of a company
  incorporated
  outside the Community
  and
  whose
  transferable
  securities are admitted to trading on a regulated market of that Member State within the meaning of
  Article 4(1), point 18 of Directive 2004/39/EC except when the company is an issuer exclusively of debt securities admitted to trading on a regulated market in a Member State within the meaning of Article 2(1)b of Directive 2004/109/EC

   (23)

  (Transparency), the denomination per unit of which is at least 50 000 Euro or, in case of debt securities denominated in another currency, equivalent, at the date of the issue, to at least 50 000 Euro.

2.   
  Articles
  18
  and 19
  shall apply.

3.   Member States shall subject registered
  third country auditors and audit entities
  to their system of oversight, their quality assurance system and their systems of investigations and sanctions.
  Member States may exempt registered third country auditors and audit entities from being subject to their quality assurance system if another Member State, or a third country's system of quality assurance that has been assessed as equivalent in accordance with Article 46, has already carried out a quality review of the third country auditor or audit entity during the previous three years.

4.   Without prejudice to Article 46, audit reports concerning annual accounts or consolidated accounts referred to in paragraph 1 issued by
  third country auditors or audit entities
  that are not registered in the Member State shall not have legal effect in that Member State.

5.   Member States may only register
  third country audit entities
  if:

| a) | they meet requirements which are equivalent to those
  of Article
  3(3); |
| --- | --- |

a)

they meet requirements which are equivalent to those
  of Article
  3(3);

| b) | the majority of the members of the administrative or management body of the
  third country audit entity
  meet requirements which are equivalent to those of Articles 4 to 10; |
| --- | --- |

b)

the majority of the members of the administrative or management body of the
  third country audit entity
  meet requirements which are equivalent to those of Articles 4 to 10;

| c) | the
  third country
  auditor carrying out the audit on behalf of the
  third country audit entity

  meets requirements which are equivalent to those of Articles 4 to 10; |
| --- | --- |

c)

the
  third country
  auditor carrying out the audit on behalf of the
  third country audit entity

  meets requirements which are equivalent to those of Articles 4 to 10;

| d) | the audits of the annual or consolidated accounts referred to in paragraph 1 are carried out in accordance with international auditing standards as referred to in Article 26, as well as the requirements laid down in
  Articles 22, 24 and 25, or with equivalent standards and requirements
  ; |
| --- | --- |

d)

the audits of the annual or consolidated accounts referred to in paragraph 1 are carried out in accordance with international auditing standards as referred to in Article 26, as well as the requirements laid down in
  Articles 22, 24 and 25, or with equivalent standards and requirements
  ;

| e) | they publish on their website an annual transparency report which includes the information referred to in Article 40

  or they comply with equivalent disclosure requirements
  . |
| --- | --- |

e)

they publish on their website an annual transparency report which includes the information referred to in Article 40

  or they comply with equivalent disclosure requirements
  .

6.
     
  In order to ensure uniform application of paragraph 5, point (d), the equivalence referred to therein shall be assessed by the Commission in cooperation with Member States and shall be decided upon by the Commission in accordance with the procedure referred to in Article 48(2). Pending such a decision by the Commission, Member States may assess the equivalence referred to in paragraph 1 as long as the Commission has not taken any decision.

Article 46

Derogation in the case of equivalence

1.
     Member States may disapply or modify the requirements in Article 45(1) and (3) on the basis of reciprocity only if these
  third country audit entities or third country auditors
  are subject to systems of public oversight, quality assurance and investigations and sanctions in the third country that meet requirements equivalent to those of Articles 29, 30 and
  31
  .

2.
     
  In order to ensure uniform application of paragraph 1, the equivalence referred to therein shall be assessed by the Commission in cooperation with Member States and shall be decided upon by the Commission in accordance with the procedure referred to in Article 48(2). Member States may assess the equivalence referred to in paragraph 1 or rely on the assessments carried out by other Member States as long as the Commission has not taken any decision. If the Commission decides that the requirement of equivalence referred to in paragraph 1 is not complied with, it may allow the audit entities concerned to continue their audit activities in accordance with the relevant Member State's requirements during an appropriate transitional period.

3.
     
  Member States shall communicate to the Commission:

| a) | their assessment of the equivalence referred to in paragraph 2; and |
| --- | --- |

a)

their assessment of the equivalence referred to in paragraph 2; and

| b) | the main elements of the cooperative arrangements with third country systems of public oversight, quality assurance and investigations and sanctions, on the basis of paragraph 1. |
| --- | --- |

b)

the main elements of the cooperative arrangements with third country systems of public oversight, quality assurance and investigations and sanctions, on the basis of paragraph 1.

Article 47

Cooperation with competent authorities from third countries

1.   Member States may allow the transfer to the competent authorities of a third country of audit working papers or other documents held by statutory auditors or audit firms approved by them, provided that:

| a) | these audit working papers or other documents relate to audits of companies which have issued securities in that third country
  or which form part of a group issuing statutory consolidated accounts in that third country
  ; |
| --- | --- |

a)

these audit working papers or other documents relate to audits of companies which have issued securities in that third country
  or which form part of a group issuing statutory consolidated accounts in that third country
  ;

| b) | the transfer takes place via the home competent authorities to the competent authorities of that third country and upon their request; |
| --- | --- |

b)

the transfer takes place via the home competent authorities to the competent authorities of that third country and upon their request;

| c) | the competent authorities of the third country concerned meet requirements which have been declared adequate in accordance with paragraph 3; |
| --- | --- |

c)

the competent authorities of the third country concerned meet requirements which have been declared adequate in accordance with paragraph 3;

| d) | there are working arrangements on the basis of reciprocity agreed between the competent authorities concerned; |
| --- | --- |

d)

there are working arrangements on the basis of reciprocity agreed between the competent authorities concerned;

| e) | the transfer of personal data to the third country is in accordance with Chapter IV of Directive 95/46/EC. |
| --- | --- |

e)

the transfer of personal data to the third country is in accordance with Chapter IV of Directive 95/46/EC.

2.   The working arrangements referred to in paragraph 1, point (d) shall ensure that:

| a) | justification is provided by the competent authorities of the purpose of the request for audit working papers and other documents; |
| --- | --- |

a)

justification is provided by the competent authorities of the purpose of the request for audit working papers and other documents;

| b) | the persons employed or formerly employed by the competent authorities of the third country that receive the information are subject to obligations of professional secrecy; |
| --- | --- |

b)

the persons employed or formerly employed by the competent authorities of the third country that receive the information are subject to obligations of professional secrecy;

| c) | the competent authorities of the third country may use audit working papers and documents only for the exercise of their functions of public oversight, quality assurance and investigations that meet requirements equivalent to those of Articles 29, 30 and 32; |
| --- | --- |

c)

the competent authorities of the third country may use audit working papers and documents only for the exercise of their functions of public oversight, quality assurance and investigations that meet requirements equivalent to those of Articles 29, 30 and 32;

| d) | the request from a competent authority of a third country for audit working papers or other documents held by a statutory auditor or audit firm can be refused where the provision of those working papers or documents would adversely affect the sovereignty, security or public order of the Community or of the Member State concerned, or where judicial proceedings have already been initiated in respect of the same actions and against the same persons before the authorities of the Member State concerned. |
| --- | --- |

d)

the request from a competent authority of a third country for audit working papers or other documents held by a statutory auditor or audit firm can be refused where the provision of those working papers or documents would adversely affect the sovereignty, security or public order of the Community or of the Member State concerned, or where judicial proceedings have already been initiated in respect of the same actions and against the same persons before the authorities of the Member State concerned.

3.   The adequacy referred to in paragraph 1, point (c)
  shall be
  decided upon by the Commission in accordance with the procedure referred to in Article 48(2)

  in order to facilitate cooperation between competent authorities
  . The assessment of adequacy shall be carried out in cooperation with Member States and be based on the requirements of Article 36 or essentially equivalent functional results. Member States shall take the measures necessary to comply with the Commission's decision.

4.   In exceptional cases and by way of derogation from paragraph 1, Member States may allow statutory auditors and audit firms approved by them to transfer audit working papers and other documents directly to the competent authorities of a third country, provided that:

| a) | investigations have been initiated by the competent authorities in that third country; |
| --- | --- |

a)

investigations have been initiated by the competent authorities in that third country;

| b) | the transfer does not conflict with the obligations with which statutory auditors and audit firms are required to comply in relation to the transfer of audit working papers and other documents to their home competent authority; |
| --- | --- |

b)

the transfer does not conflict with the obligations with which statutory auditors and audit firms are required to comply in relation to the transfer of audit working papers and other documents to their home competent authority;

| c) | there are working arrangements with the competent authorities of that third country that allow the competent authorities in the Member State reciprocal direct access to audit working papers and other documents of audit firms; |
| --- | --- |

c)

there are working arrangements with the competent authorities of that third country that allow the competent authorities in the Member State reciprocal direct access to audit working papers and other documents of audit firms;

| d) | the requesting competent authority of the third country informs in advance the home competent authority of the statutory auditor or audit firm of each direct request for information, indicating the reasons therefor; |
| --- | --- |

d)

the requesting competent authority of the third country informs in advance the home competent authority of the statutory auditor or audit firm of each direct request for information, indicating the reasons therefor;

| e) | the conditions referred to in paragraph 2 are respected. |
| --- | --- |

e)

the conditions referred to in paragraph 2 are respected.

5.   The Commission may, in accordance with the procedure referred to in Article 48(2),
  specify
  the exceptional cases referred to in paragraph 4
  in order to facilitate cooperation between competent authorities and to ensure the uniform application of that paragraph
  .

6.   Member States shall communicate to the Commission the working arrangements referred to in paragraphs 1 and 4.

Chapter XII

Transitional and final
  provisions

Article

  48

Committee

1.   The Commission shall be assisted by an audit regulatory committee (hereinafter referred to as the Committee) composed of representatives of the Member States and chaired by a representative of the Commission.

2.   Where reference is made to this paragraph the regulatory procedure laid down in Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to Article 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months.

3.
     
  Without prejudice to the implementing measures already adopted, and except for the provisions in Article 26, upon expiry of a two-year period following the adoption of this Directive and on 1 April 2008 at the latest, the application of its provisions requiring the adoption of technical rules, amendments and decisions in accordance with paragraph 2 shall be suspended. Acting on a proposal from the Commission, the European Parliament and the Council may renew the provisions concerned in accordance with the procedure laid down in Article 251 of the Treaty and to that end they shall review them prior to the expiry of the period or date referred to above.

4.   The Committee shall adopt its Rules of Procedure.

Article 49

Amendment of Directive 78/660/EEC and Directive 83/349/EEC

1.   Directive 78/660/EEC is amended as follows:

| (a) | In Article 43(1) the following point is added:






  ‘15) | separately, the total
  fees for the financial year
  charged by
  the statutory auditor or audit firm for the statutory audit of annual accounts
  ,
  the
  total
  fees
  charged
  for other assurance services,
  the total fees charged for
  tax advisory services and
  the total fees charged for
  other non-audit services.


  Member States may provide that this requirement shall not apply where the company is included within the consolidated accounts required to be drawn up under Article 1 of Directive 83/349/EEC, provided that such information is given in the notes to the consolidated accounts.’ |
| --- | --- | --- |

(a)

In Article 43(1) the following point is added:

‘15)

separately, the total
  fees for the financial year
  charged by
  the statutory auditor or audit firm for the statutory audit of annual accounts
  ,
  the
  total
  fees
  charged
  for other assurance services,
  the total fees charged for
  tax advisory services and
  the total fees charged for
  other non-audit services.

Member States may provide that this requirement shall not apply where the company is included within the consolidated accounts required to be drawn up under Article 1 of Directive 83/349/EEC, provided that such information is given in the notes to the consolidated accounts.’

| (b) | Article 44(1) shall be replaced by the following:
  ‘1.   Member States may permit the companies referred to in Article 11 to draw up abridged notes on their accounts without the information required in Article 43(1), points (5) to (12), (14)(a) and (15). However, the notes must disclose the information specified in Article 43(1), point (6) in total for all the items concerned.’ |
| --- | --- |

(b)

Article 44(1) shall be replaced by the following:

‘1.   Member States may permit the companies referred to in Article 11 to draw up abridged notes on their accounts without the information required in Article 43(1), points (5) to (12), (14)(a) and (15). However, the notes must disclose the information specified in Article 43(1), point (6) in total for all the items concerned.’

| (c) | Article 45(2) shall be replaced by the following:




  ‘2.
     
  Paragraph 1(b) shall also apply to the information specified in Article 43(1), point (8).




  The Member States may permit the companies referred to in Article 27 to omit disclosure of the information specified in Article 43(1), point (8). The Member States may also permit the companies referred to in Article 27 to omit disclosure of the information specified in Article 43(1), point (15), provided that such information is delivered to the public oversight system referred to in Article 32 of [8th Company Law Directive] when requested by such a public oversight system.’ |
| --- | --- |

(c)

Article 45(2) shall be replaced by the following:

‘2.
     
  Paragraph 1(b) shall also apply to the information specified in Article 43(1), point (8).

The Member States may permit the companies referred to in Article 27 to omit disclosure of the information specified in Article 43(1), point (8). The Member States may also permit the companies referred to in Article 27 to omit disclosure of the information specified in Article 43(1), point (15), provided that such information is delivered to the public oversight system referred to in Article 32 of [8th Company Law Directive] when requested by such a public oversight system.’

2.   In Article 34 of Directive 83/349/EEC the following point is added:

| ‘16) | separately, the total
  fees for the financial year
  charged by
  the statutory auditor or audit firm for the statutory audit of the consolidated accounts
  ,
  the
  total
  fees
  charged
  for other assurance services,
  the total fees charged for
  tax advisory services and
  the total fees charged for
  other non-audit services.’ |
| --- | --- |

‘16)

separately, the total
  fees for the financial year
  charged by
  the statutory auditor or audit firm for the statutory audit of the consolidated accounts
  ,
  the
  total
  fees
  charged
  for other assurance services,
  the total fees charged for
  tax advisory services and
  the total fees charged for
  other non-audit services.’

Article 50

Article 50

Repeal of Directive 84/253/EEC

Directive 84/253/EEC shall be repealed with effect from the date indicated in Article 54. References to the repealed Directive shall be construed as references to this Directive.

Article 54

Article 51

Article 51

Transitional provision

Statutory auditors or audit firms that are approved by the competent authorities of the Member States in accordance with Directive 84/253/EEC before the entry into force of the provisions referred to in Article 53(1) shall be considered as having been approved in accordance with this Directive.

with Directive

entry

Article 53(1) shall

with this

Article 52

Article 52

Minimum harmonisation

Minimum harmonisation

Member States requiring statutory audit may impose more stringent requirements, unless otherwise indicated in this Directive.

Member States requiring statutory audit may impose more stringent requirements, unless otherwise indicated in this Directive.

Article 53

Transposition

1.   Member States shall adopt and publish
  within ...

   (24) the provisions necessary to comply with this Directive. They shall forthwith inform the Commission thereof.

within ...

24

2.   When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

3.   Member States shall communicate to the Commission the texts of the main provisions of national law which they adopt in the field covered by this Directive.

Article 54

Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Official Journal of the European Union

Article 55

This Directive is addressed to the Member States.

Done at ...

For the European Parliament

The President

For the Council

The President

---

(1)  OJ C 157, 28.6.2005, p. 115.

1

(2)  Position of the European Parliament of 28 September 2005.

2

Position of the European Parliament of 28 September 2005.

(3)  OJ L 222, 14.8.1978, p. 11. Directive as last amended by Directive 2003/51/EC of the European Parliament and of the Council (OJ L 178, 17.7.2003, p. 16).

3

(4)  OJ L 193, 18.7.1983, p. 1. Directive as last amended by Directive 2003/51/EC.

4

(5)  OJ L 372, 31.12.1986, p. 1. Directive as last amended by Directive 2003/51/EC.

5

(6)  OJ L 374, 31.12.1991, p. 7. Directive as amended by Directive 2003/51/EC.

6

Directive

(7)  OJ L 126, 12.5.1984, p. 20.

7

(8)  OJ C 143, 8.5.1998, p. 12.

8

(9)  OJ L 91, 31.3.2001, p. 91.

9

(10)  OJ L 191, 19.7.2002, p. 22.

10

(11)  OJ L 145, 30.4.2004, p. 1.

11

(12)  OJ L 184, 17.7.1999, p. 23.

12

(13)  OJ L 52, 25.2.2005, p. 51.

13

(14)  
  Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (

  OJ L 375, 31.12.1985, p. 3). Directive as last amended by Directive 2005/1/EC of the European Parliament and of the Council (OJ L 79, 24.3.2005, p. 9).

14

Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (

(15)  OJ L 281, 23.11.1995, p. 31. Directive as amended by Regulation (EC) No 1882/2003 of the European Parliament and of the Council (OJ L 284, 31.10.2003, p. 1).

15

(16)  OJ L 126, 26.5.2000, p. 1. Directive as last amended by Directive 2005/1/EC.

16

(17)  OJ L 207, 18.8.2003, p. 1.

17

(18)  Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration (
  OJ L 19, 24.1.1989, p. 16
  ). Directive as amended by Directive 2001/19/EC of the European Parliament and of the Council (
  OJ L 206, 31.7.2001, p. 1).

18

Council Directive 89/48/EEC of 21 December 1988 on a general system for the recognition of higher-education diplomas awarded on completion of professional education and training of at least three years' duration (

)

Directive as amended by Directive 2001/19/EC of the European Parliament and of the Council (

(19)  3 years after the entry into force of this Directive.

19

3 years after the entry into force of this Directive.

(20)  OJ L 13, 19.1.2000, p. 12.

20

(21)  
  Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading (

  OJ L 345, 31.12.2003, p. 64).

21

Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the prospectus to be published when securities are offered to the public or admitted to trading (

(22)  OJ L 149, 30.4.2004, p. 1.

22

(23)  
  Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (

  OJ L 390, 31.12.2004, p. 38).

23

Directive 2004/109/EC of the European Parliament and of the Council of 15 December 2004 on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (

(24)  
  24 months after the entry into force of this Directive.

24

24 months after the entry into force of this Directive.

P6_TA(2005)0354

Development of the Community's railways ***I

European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council amending Council Directive 91/440/EEC on the development of the Community's railways (COM(2004)0139 — C6-0001/2004 — 2004/0047(COD))

(Codecision procedure: first reading)

The European Parliament,

| — | having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0139) (1), |
| --- | --- |

—

having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0139) (1),

| — | having regard to Articles 251(2) and 71 of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0001/2004), |
| --- | --- |

—

having regard to Articles 251(2) and 71 of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0001/2004),

| — | having regard to Rule 51 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 51 of its Rules of Procedure,

| — | having regard to the report of the Committee on Transport and Tourism (A6-0143/2005), |
| --- | --- |

—

having regard to the report of the Committee on Transport and Tourism (A6-0143/2005),

| 1. | Approves the Commission proposal as amended; |
| --- | --- |

1.

Approves the Commission proposal as amended;

| 2. | Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text; |
| --- | --- |

2.

Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

| 3. | Instructs its President to forward its position to the Council and Commission. |
| --- | --- |

3.

Instructs its President to forward its position to the Council and Commission.

---

(1)  Not yet published in OJ.

P6_TC1-COD(2004)0047

Position of the European Parliament adopted at first reading on 28 September 2005 with a view to the adoption of Directive 2005/.../EC of the European Parliament and of the Council amending Council Directive 91/440/EEC on the development of the Community's railways and amending Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 71 thereof,

Having regard to the proposal from the Commission (1),

Having regard to the opinion of the European Economic and Social Committee (2),

Having regard to the opinion of the Committee of the Regions (3),

Acting in accordance with the procedure referred to in Article 251 of the Treaty (4),

Whereas:

| (1) | Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways (5) was designed to facilitate the adaptation of the Community's railways to the requirements of the single market and to improve their efficiency. |
| --- | --- |

(1)

Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways (5) was designed to facilitate the adaptation of the Community's railways to the requirements of the single market and to improve their efficiency.

| (2) | In its White Paper European transport policy for 2010: time to decide
   (6), the Commission announced its intention to continue building the internal market in rail services by proposing to open up the market in international passenger services. |
| --- | --- |

(2)

In its White Paper European transport policy for 2010: time to decide
   (6), the Commission announced its intention to continue building the internal market in rail services by proposing to open up the market in international passenger services.

| (3) | On 23 October 2003, the European Parliament adopted an amendment (7) calling for the opening up to competition of all national and international rail passenger services by 1 January 2008. The Commission stated on that occasion that it intended to present a specific proposal which dovetailed with the existing legislation on public service contracts as well as measures to protect the rights of passengers on international services. |
| --- | --- |

(3)

On 23 October 2003, the European Parliament adopted an amendment (7) calling for the opening up to competition of all national and international rail passenger services by 1 January 2008. The Commission stated on that occasion that it intended to present a specific proposal which dovetailed with the existing legislation on public service contracts as well as measures to protect the rights of passengers on international services.

| (4) | International rail services currently present a very contrasting picture. Long-distance services (night trains) are in difficulty and several of them have recently been withdrawn by the railway undertakings concerned to limit losses. The market for international high-speed services, on the other hand, has seen a sharp increase in traffic and will continue its vigorous development with the doubling and interconnection of the trans-European high-speed network by 2010. Nevertheless, there is strong competitive pressure from low-cost airlines in both cases and it is essential to stimulate new initiatives by promoting competition between railway undertakings. |
| --- | --- |

(4)

International rail services currently present a very contrasting picture. Long-distance services (night trains) are in difficulty and several of them have recently been withdrawn by the railway undertakings concerned to limit losses. The market for international high-speed services, on the other hand, has seen a sharp increase in traffic and will continue its vigorous development with the doubling and interconnection of the trans-European high-speed network by 2010. Nevertheless, there is strong competitive pressure from low-cost airlines in both cases and it is essential to stimulate new initiatives by promoting competition between railway undertakings.

| (5) | It would not be possible to open up the market in
  passenger services
  without detailed provisions on infrastructure access, substantial progress on interoperability and a strict framework for rail safety at national and European level. All of these elements are now in place following the transposition of Directives 2001/12/EC
   (8), 2001/13/EC
   (9), 2001/14/EC
   (10)

  and 2004/49/EC

   (11). This new institutional framework must be supported by established, consolidated practice by the proposed date for opening
  up
  the
  networks for passenger
  services.
  As these European Community framework directives must be transposed into national law by 2006 at the latest, international passenger networks should be opened up by 2008 and all other forms of passenger service by 2012. |
| --- | --- |

(5)

It would not be possible to open up the market in
  passenger services
  without detailed provisions on infrastructure access, substantial progress on interoperability and a strict framework for rail safety at national and European level. All of these elements are now in place following the transposition of Directives 2001/12/EC
   (8), 2001/13/EC
   (9), 2001/14/EC
   (10)

  and 2004/49/EC

   (11). This new institutional framework must be supported by established, consolidated practice by the proposed date for opening
  up
  the
  networks for passenger
  services.
  As these European Community framework directives must be transposed into national law by 2006 at the latest, international passenger networks should be opened up by 2008 and all other forms of passenger service by 2012.

| (6) | Member States should remain free to anticipate the grant of access rights to railway undertakings and international groupings for national and international passenger transport services. The use of such rights may temporarily be confined to railway undertakings, and their directly and indirectly controlled subsidiaries, that hold a licence in the Member States where analogous conditions for access to the railway infrastructure apply. |
| --- | --- |

(6)

Member States should remain free to anticipate the grant of access rights to railway undertakings and international groupings for national and international passenger transport services. The use of such rights may temporarily be confined to railway undertakings, and their directly and indirectly controlled subsidiaries, that hold a licence in the Member States where analogous conditions for access to the railway infrastructure apply.

| (7) | The number of railway services without intermediate stops is very limited. In the case of journeys with intermediate stops, it is essential to authorise new entrants to pick up and set down passengers along the route in order to ensure that such operations have a realistic profitability threshold and to avoid placing potential competitors in an unfavourable situation compared with the existing operators, which have the right to pick up and set down passengers along the route. |
| --- | --- |

(7)

The number of railway services without intermediate stops is very limited. In the case of journeys with intermediate stops, it is essential to authorise new entrants to pick up and set down passengers along the route in order to ensure that such operations have a realistic profitability threshold and to avoid placing potential competitors in an unfavourable situation compared with the existing operators, which have the right to pick up and set down passengers along the route.

| (8) | Council Regulation (EEC) No 1191/69 of 26 June 1969 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway (12) authorises Member States and local authorities to award public service contracts. These contracts may contain exclusive rights to operate certain services. It is therefore necessary to ensure that the provisions of this Regulation are consistent with the principle of opening up
  passenger services
  to competition. On
  26 July 2000
  the Commission presented
  a proposal
  for a regulation of the European Parliament and of the Council on action by Member States concerning public service requirements and the award of public service contracts in passenger transport by rail, road and inland waterway (13) to replace Regulation (EEC) No 1191/69. The principal aim of this text is to introduce controlled competition in the award of public service contracts.
  The European Parliament adopted a position on this proposal at first reading on 14 November 2001

   (14)

  . However, the Council has not yet adopted a common position, so that it has not been possible for the legislative procedure to continue. |
| --- | --- |

(8)

Council Regulation (EEC) No 1191/69 of 26 June 1969 on action by Member States concerning the obligations inherent in the concept of a public service in transport by rail, road and inland waterway (12) authorises Member States and local authorities to award public service contracts. These contracts may contain exclusive rights to operate certain services. It is therefore necessary to ensure that the provisions of this Regulation are consistent with the principle of opening up
  passenger services
  to competition. On
  26 July 2000
  the Commission presented
  a proposal
  for a regulation of the European Parliament and of the Council on action by Member States concerning public service requirements and the award of public service contracts in passenger transport by rail, road and inland waterway (13) to replace Regulation (EEC) No 1191/69. The principal aim of this text is to introduce controlled competition in the award of public service contracts.
  The European Parliament adopted a position on this proposal at first reading on 14 November 2001

   (14)

  . However, the Council has not yet adopted a common position, so that it has not been possible for the legislative procedure to continue.

| (9) | In order to create specialised infrastructure, such as high-speed railway lines, railway undertakings require planning and legal certainty commensurate with the substantial long-term investment involved. It should therefore be possible for such undertakings normally to conclude framework agreements with a term of 10 years. Directive 2001/14/EC should be amended accordingly. |
| --- | --- |

(9)

In order to create specialised infrastructure, such as high-speed railway lines, railway undertakings require planning and legal certainty commensurate with the substantial long-term investment involved. It should therefore be possible for such undertakings normally to conclude framework agreements with a term of 10 years. Directive 2001/14/EC should be amended accordingly.

| (10) | The application of this Directive should be evaluated on the basis of
  two reports
  to be presented by the Commission two years after the
  dates
  of opening up the market in international
  and national
  passenger services,
  respectively
  .
  These reports should include first evaluations by the Commission of the impact of the first and second railway packages on public service quality standards, social standards of employees and environmental performance. Furthermore the Commission should present an impact assessment on the opening of the networks for national passenger services by 31 December 2005. |
| --- | --- |

(10)

The application of this Directive should be evaluated on the basis of
  two reports
  to be presented by the Commission two years after the
  dates
  of opening up the market in international
  and national
  passenger services,
  respectively
  .
  These reports should include first evaluations by the Commission of the impact of the first and second railway packages on public service quality standards, social standards of employees and environmental performance. Furthermore the Commission should present an impact assessment on the opening of the networks for national passenger services by 31 December 2005.

| (11) | Since the objective of the action to be taken, namely the development of the Community's railways, cannot be sufficiently achieved by the Member States given the need to ensure fair and non-discriminatory conditions of access to infrastructure and take account of the obviously international dimension of the way in which important parts of the rail networks operate, and can therefore, by reason of the need for co-ordinated transnational action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective. |
| --- | --- |

(11)

Since the objective of the action to be taken, namely the development of the Community's railways, cannot be sufficiently achieved by the Member States given the need to ensure fair and non-discriminatory conditions of access to infrastructure and take account of the obviously international dimension of the way in which important parts of the rail networks operate, and can therefore, by reason of the need for co-ordinated transnational action, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve that objective.

| (12) | Directives
  91/440/EEC
  and 2001/14/EC
  should therefore be amended accordingly, |
| --- | --- |

(12)

Directives
  91/440/EEC
  and 2001/14/EC
  should therefore be amended accordingly,

HAVE ADOPTED THIS DIRECTIVE:

Article 1

Directive 91/440/EEC is hereby amended as follows:

| 1) | The fourth indent of Article 3 is deleted. |
| --- | --- |

1)

The fourth indent of Article 3 is deleted.

| 2) | The following indent is inserted in Article 3 after the fifth indent:






  ‘— | international passenger service shall mean passenger services where the train crosses at least one border of a Member State; the train may be joined and/or split, and the different sections may have different origins and destinations, provided that all wagons cross at least one border.’ |
| --- | --- | --- |

2)

The following indent is inserted in Article 3 after the fifth indent:

‘—

international passenger service shall mean passenger services where the train crosses at least one border of a Member State; the train may be joined and/or split, and the different sections may have different origins and destinations, provided that all wagons cross at least one border.’

| 3) | The first indent of Article 5(3) is deleted. |
| --- | --- |

3)

The first indent of Article 5(3) is deleted.

| 4) | The phrase ‘and international groupings’ is deleted in Article 8(1). |
| --- | --- |

4)

The phrase ‘and international groupings’ is deleted in Article 8(1).

| 5) | Paragraph (1) of Article 10 is deleted. |
| --- | --- |

5)

Paragraph (1) of Article 10 is deleted.

| 6) | The
  amendments
  referred to in points 1), 3), 4) and 5) above shall take effect on
  1 January 2008
  . |
| --- | --- |

6)

The
  amendments
  referred to in points 1), 3), 4) and 5) above shall take effect on
  1 January 2008
  .

| 7) | The following paragraphs 3(a), 3(b), 3(c) and 3(d) are inserted in Article 10:
  ‘3(a)   Railway undertakings within the scope of Article 2 shall,
  for the purpose of operating international passenger services, by 1 January 2008
  ,
  and, for the purpose of operating all other types of passenger service, by 1 January 2012,
  be granted
  , on equitable conditions,
  access to the
  infrastructure. Railway
  undertakings shall,
  when operating
  an international passenger service, have the right to pick up
  and set down
  passengers at any station
  between the points of departure and destination
  .

  3(b)   Member States may limit the right of access defined in
  paragraph 3(a) for services which
  are covered by a public service contract conforming to the Community legislation in force.
  Any
  such limitation,
  including one that results in
  restricting the right to pick up
  and set down
  passengers at any station, may
  only be imposed, on the basis of an objective economic analysis, by the regulatory body referred to in Article 30 of Directive 2001/14/EC (15) or by agreement between the regulatory bodies concerned if the public service would otherwise no longer be viable.



  3(c)   Member States shall take the necessary measures to ensure that the decisions referred to in paragraph 3(b) are subject to judicial review.


  3(d)
     
  Member States shall remain free to anticipate the grant of access rights to railway undertakings and international groupings for national and international passenger transport services. The use of such rights may temporarily be confined to railway undertakings, and their directly and indirectly controlled subsidiaries, that hold a licence in the Member States where analogous conditions for access to the railway infrastructure apply. |
| --- | --- |

7)

The following paragraphs 3(a), 3(b), 3(c) and 3(d) are inserted in Article 10:

‘3(a)   Railway undertakings within the scope of Article 2 shall,
  for the purpose of operating international passenger services, by 1 January 2008
  ,
  and, for the purpose of operating all other types of passenger service, by 1 January 2012,
  be granted
  , on equitable conditions,
  access to the
  infrastructure. Railway
  undertakings shall,
  when operating
  an international passenger service, have the right to pick up
  and set down
  passengers at any station
  between the points of departure and destination
  .

3(b)   Member States may limit the right of access defined in
  paragraph 3(a) for services which
  are covered by a public service contract conforming to the Community legislation in force.
  Any
  such limitation,
  including one that results in
  restricting the right to pick up
  and set down
  passengers at any station, may
  only be imposed, on the basis of an objective economic analysis, by the regulatory body referred to in Article 30 of Directive 2001/14/EC (15) or by agreement between the regulatory bodies concerned if the public service would otherwise no longer be viable.

3(c)   Member States shall take the necessary measures to ensure that the decisions referred to in paragraph 3(b) are subject to judicial review.

3(d)
     
  Member States shall remain free to anticipate the grant of access rights to railway undertakings and international groupings for national and international passenger transport services. The use of such rights may temporarily be confined to railway undertakings, and their directly and indirectly controlled subsidiaries, that hold a licence in the Member States where analogous conditions for access to the railway infrastructure apply.

| 8) | The following paragraph is added to Article 14:
  ‘By
  31 December 2009 and 31 December 2013 respectively,
  at the latest, the Commission shall submit to the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the Council
  two reports
  on the implementation of the provisions
  of this Directive
  ,
  the first report relating to international passenger services and the second report relating to all other types of passenger service, including in each report an assessment of the allocation of train paths and of the effects on public service contracts.
  ’ |
| --- | --- |

8)

The following paragraph is added to Article 14:

‘By
  31 December 2009 and 31 December 2013 respectively,
  at the latest, the Commission shall submit to the European Parliament, the European Economic and Social Committee, the Committee of the Regions and the Council
  two reports
  on the implementation of the provisions
  of this Directive
  ,
  the first report relating to international passenger services and the second report relating to all other types of passenger service, including in each report an assessment of the allocation of train paths and of the effects on public service contracts.
  ’

Article 2

Article 17(5) of Directive 2001/14/EC shall be replaced by the following:

‘5.
     
  Framework agreements shall in principle be of a duration of five years and shall be renewable for periods equal to their original duration. The infrastructure manager may agree to a shorter or longer period in specific cases. Periods longer than five years must be justified by reference to the existence of commercial contracts, specialised investments or risks.

For services using specialised infrastructure, as referred to in Article 24, and which require substantial and long-term investment, framework agreements may be of 10 years' duration. Any period longer than 10 years shall be permissible only in exceptional cases, in particular where there is large-scale, long-term investment, and particularly where such investment is covered by contractual commitments including a multi-annual amortisation plan.’

Article 3

Article 3

Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by [...]
   (16) at the latest. They shall forthwith inform the Commission thereof.

by [...]

16

latest. They

inform

thereof

When Member States adopt those provisions, they shall contain a reference to this Directive or shall be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

those

they

a

on the occasion

Member States shall determine how

is to be made

Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive, together with a table showing how the provisions of this Directive correspond to the national provisions adopted.

, together with a table showing how the provisions of this Directive correspond to the national provisions adopted

Article 4

Article 4

This Directive shall enter into force on the day following its publication in the Official Journal of the European Union.

Official Journal of the European Union.

Article 5

Article 5

This Directive is addressed to the Member States.

Done at..., ...

For the European Parliament

The President

For the Council

The President

---

(1)  OJ C ..., ..., p. ....

1

(2)  OJ C 221, 8.9.2005, p. 56.

2

(3)  OJ C 71, 22.3.2005, p. 26.

3

(4)  Position of the European Parliament of 28.9.2005.

4

Position of the European Parliament of 28.9.2005.

(5)  OJ L 237, 24.8.1991, p. 25. Directive as last amended by the Act of Accession of 2003.

5

Directive as last amended by the Act of Accession of 2003.

(6)  COM(2001)0370.

6

(7)  OJ C 82 E, 1.4.2004, p. 502.

7

(8)  Directive 2001/12/EC of the European Parliament and of the Council of 26 February 2001 amending Council Directive 91/440/EEC (
  OJ L 75, 15.3.2001, p. 1).

8

Directive 2001/12/EC of the European Parliament and of the Council of 26 February 2001 amending Council Directive 91/440/EEC (

(9)  Directive 2001/13/EC of the European Parliament and of the Council of 26 February 2001 amending Council Directive 95/18/EC on the licensing of railway undertakings (
  OJ L 75, 15.3.2001, p. 26). Directive as last amended by Directive 2004/49/EC (OJ L 164, 30.4.2004, p. 44).

9

Directive 2001/13/EC of the European Parliament and of the Council of 26 February 2001 amending Council Directive 95/18/EC on the licensing of railway undertakings (

(10)  Directive 2001/14/EC of the European Parliament and of the Council of 26 February 2001 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (
  OJ L 75, 15.3.2001, p. 29). Directive as last amended by Directive 2004/49/EC.

10

Directive 2001/14/EC of the European Parliament and of the Council of 26 February 2001 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (

(11)  
  Directive 2004/49/EC of the European Parliament and of the Council of 29 April 2004 on safety on the Community's railways and amending Council Directive 95/18/EC on the licensing of railway undertakings and Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification
  .

11

Directive 2004/49/EC of the European Parliament and of the Council of 29 April 2004 on safety on the Community's railways and amending Council Directive 95/18/EC on the licensing of railway undertakings and Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification

(12)  OJ L 156, 28.6.1969, p. 1. Regulation as last amended by Regulation (EEC) No 1893/91 (OJ L 169, 29.6.1991, p. 1).

12

(13)  OJ C 365 E, 19.12.2000, p. 169.

13

(14)  OJ C 140 E, 13.6.2002, p. 262.

14

(15)  OJ L 75, 15.3.2001, p. 29. Directive as last amended by Directive 2004/49/EC (OJ L 164, 30.4.2004, p. 44).’

15

(16)  18 months after the date of adoption of this Directive.

16

the date of adoption

this

P6_TA(2005)0355

Certification of train crews ***I

European Parliament legislative resolution on the proposal for a directive of the European Parliament and of the Council on the certification of train crews operating locomotives and trains on the Community's rail network (COM(2004)0142 — C6-0002/2004 — 2004/0048(COD))

(Codecision procedure: first reading)

The European Parliament,

| — | having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0142) (1), |
| --- | --- |

—

having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0142) (1),

| — | having regard to Articles 251(2) and 71 of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0002/2004), |
| --- | --- |

—

having regard to Articles 251(2) and 71 of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0002/2004),

| — | having regard to Rule 51 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 51 of its Rules of Procedure,

| — | having regard to the report of the Committee on Transport and Tourism (A6-0133/2005), |
| --- | --- |

—

having regard to the report of the Committee on Transport and Tourism (A6-0133/2005),

| 1. | Approves the Commission proposal as amended; |
| --- | --- |

1.

Approves the Commission proposal as amended;

| 2. | Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text; |
| --- | --- |

2.

Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

| 3. | Instructs its President to forward its position to the Council and Commission. |
| --- | --- |

3.

Instructs its President to forward its position to the Council and Commission.

---

(1)  Not yet published in OJ.

P6_TC1-COD(2004)0048

Position of the European Parliament adopted at first reading on 28 September 2005 with a view to the adoption of Directive 2005/.../EC of the European Parliament and of the Council on the certification of train drivers and train crews operating locomotives and trains on the Community's rail network

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 71 thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and Social Committee (1),

Having regard to the opinion of the Committee of the Regions (2),

Acting in accordance with the procedure laid down in Article 251 of the Treaty (3),

Whereas:

| (1) | Directive 2004/49/EC
   (4)
  requires infrastructure managers and railway undertakings to establish their safety management systems in such a way that the railway system is at least able to achieve the common safety objectives and comply with the national safety regulations and safety requirements defined in the Technical Specifications for Interoperability and that the relevant parts of the Joint Safety Methods are applied. These safety management systems provide, among other things, for staff training programmes and systems which ensure that staff competence is maintained and that duties are performed in the appropriate manner. |
| --- | --- |

(1)

Directive 2004/49/EC
   (4)
  requires infrastructure managers and railway undertakings to establish their safety management systems in such a way that the railway system is at least able to achieve the common safety objectives and comply with the national safety regulations and safety requirements defined in the Technical Specifications for Interoperability and that the relevant parts of the Joint Safety Methods are applied. These safety management systems provide, among other things, for staff training programmes and systems which ensure that staff competence is maintained and that duties are performed in the appropriate manner.

| (2) | Directive 2004/49/EC provides that, to be able to gain access to railway infrastructure, a railway undertaking must hold a safety certificate. |
| --- | --- |

(2)

Directive 2004/49/EC provides that, to be able to gain access to railway infrastructure, a railway undertaking must hold a safety certificate.

| (3) | Under Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways (5), licensed railway undertakings have, since 15 March 2003, a right of access to the trans-European freight network and, from 2008 at the latest, to the entire international freight services network. Furthermore, in the framework of the second railway package, it is proposed to extend this right of access to the whole network for international rail freight services and for all types of rail freight services. This gradual extension of access rights will inevitably lead to an increase in cross-border rail freight traffic. The result will be a growing demand for drivers trained and certified for cross-border services. |
| --- | --- |

(3)

Under Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways (5), licensed railway undertakings have, since 15 March 2003, a right of access to the trans-European freight network and, from 2008 at the latest, to the entire international freight services network. Furthermore, in the framework of the second railway package, it is proposed to extend this right of access to the whole network for international rail freight services and for all types of rail freight services. This gradual extension of access rights will inevitably lead to an increase in cross-border rail freight traffic. The result will be a growing demand for drivers trained and certified for cross-border services.

| (4) | A study carried out by the Commission in 2002 highlighted the fact that the laws of the Member States on the certification conditions for train drivers differ considerably. Community rules for the certification of train drivers need to be adopted to overcome these differences while maintaining the present high level of safety of the Community railway system. |
| --- | --- |

(4)

A study carried out by the Commission in 2002 highlighted the fact that the laws of the Member States on the certification conditions for train drivers differ considerably. Community rules for the certification of train drivers need to be adopted to overcome these differences while maintaining the present high level of safety of the Community railway system.

| (5) | Such Community rules must also contribute to the aims of Community policies on the freedom of movement of workers, freedom of establishment and freedom to provide services in the context of the common transport policy, while avoiding any distortion of competition. |
| --- | --- |

(5)

Such Community rules must also contribute to the aims of Community policies on the freedom of movement of workers, freedom of establishment and freedom to provide services in the context of the common transport policy, while avoiding any distortion of competition.

| (6) | To guarantee the necessary uniformity and transparency, the Community should establish a single certification model
  in two parts: the basic licence, attesting to compliance with certain requirements and basic fitness and competence to drive trains, and a harmonised complementary certificate attesting to technical knowledge and knowledge specific to the service. The Member States should be responsible for issuing the basic licence, and railway undertakings should be responsible for issuing the harmonised complementary certificate. These documents should be mutually recognised by the Member States. |
| --- | --- |

(6)

To guarantee the necessary uniformity and transparency, the Community should establish a single certification model
  in two parts: the basic licence, attesting to compliance with certain requirements and basic fitness and competence to drive trains, and a harmonised complementary certificate attesting to technical knowledge and knowledge specific to the service. The Member States should be responsible for issuing the basic licence, and railway undertakings should be responsible for issuing the harmonised complementary certificate. These documents should be mutually recognised by the Member States.

| (7) | This Directive follows and is largely based on the ‘historic’ agreements reached on 27 January 2004 between the social partners: the Community of European Railways (CER) and the European Transport Workers' Federation (ETF) on the ‘European licence for drivers carrying out a cross-border interoperability service’ and on ‘certain aspects of the working conditions of mobile staff engaged in cross-border services’

   (6). |
| --- | --- |

(7)

This Directive follows and is largely based on the ‘historic’ agreements reached on 27 January 2004 between the social partners: the Community of European Railways (CER) and the European Transport Workers' Federation (ETF) on the ‘European licence for drivers carrying out a cross-border interoperability service’ and on ‘certain aspects of the working conditions of mobile staff engaged in cross-border services’

   (6).

| (8) | The common provisions on certification

  must make
  it easier for train drivers to move from one Member State to another, but also from one railway undertaking to another, and generally for the licence and the harmonised complementary certificate to be recognised by all railway sector stakeholders
  , while promoting improved training and employment for the staff concerned
  . To this end, it is essential that the provisions establish minimum requirements which applicants must meet to obtain the basic licence and the harmonised complementary certificate. |
| --- | --- |

(8)

The common provisions on certification

  must make
  it easier for train drivers to move from one Member State to another, but also from one railway undertaking to another, and generally for the licence and the harmonised complementary certificate to be recognised by all railway sector stakeholders
  , while promoting improved training and employment for the staff concerned
  . To this end, it is essential that the provisions establish minimum requirements which applicants must meet to obtain the basic licence and the harmonised complementary certificate.

| (9) | In the context of the gradual opening of rail infrastructure and increased competition among railway undertakings, the training capital of train drivers should be preserved by guaranteeing the mutual recognition of their training so as to make it easier for them to find employment by introducing common standards. |
| --- | --- |

(9)

In the context of the gradual opening of rail infrastructure and increased competition among railway undertakings, the training capital of train drivers should be preserved by guaranteeing the mutual recognition of their training so as to make it easier for them to find employment by introducing common standards.

| (10) | The requirements for obtaining licences and certificates should cover at least the minimum age for driving a train, the applicant's medical and psychological fitness, professional experience and knowledge of certain matters relating to driving a train, and a knowledge of the infrastructures on which drivers will be required to travel. |
| --- | --- |

(10)

The requirements for obtaining licences and certificates should cover at least the minimum age for driving a train, the applicant's medical and psychological fitness, professional experience and knowledge of certain matters relating to driving a train, and a knowledge of the infrastructures on which drivers will be required to travel.

| (11) | The tasks and requirements defined in Annexes I to VI of this Directive may be revised to bring them into line with technical and scientific progress. As technical requirements, these annexes must be fully compatible with the Technical Specifications for Interoperability (TSIs) and must be revised in accordance with the procedures laid down by Directives 96/48/EC

   (7)

  and 2001/16/EC

   (8)

  on interoperability and in full compliance with Regulation (EC) No 881/2004

   (9)

  , in particular Articles 3, 4, 6, 12 and 17 thereof on the role of the social partners. |
| --- | --- |

(11)

The tasks and requirements defined in Annexes I to VI of this Directive may be revised to bring them into line with technical and scientific progress. As technical requirements, these annexes must be fully compatible with the Technical Specifications for Interoperability (TSIs) and must be revised in accordance with the procedures laid down by Directives 96/48/EC

   (7)

  and 2001/16/EC

   (8)

  on interoperability and in full compliance with Regulation (EC) No 881/2004

   (9)

  , in particular Articles 3, 4, 6, 12 and 17 thereof on the role of the social partners.

| (12) | This Directive must not prejudice the implementation of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (10), nor of Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (11). |
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(12)

This Directive must not prejudice the implementation of Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (10), nor of Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data (11).

| (13) | All of the information contained in the licence, the harmonised complementary certificate and the registers must be used by the national safety authorities to facilitate evaluation of the staff certification provided for in Articles 10 and 11 of Directive 2004/49/EC and to speed up the issuing of the safety certificates provided for in the same articles. |
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(13)

All of the information contained in the licence, the harmonised complementary certificate and the registers must be used by the national safety authorities to facilitate evaluation of the staff certification provided for in Articles 10 and 11 of Directive 2004/49/EC and to speed up the issuing of the safety certificates provided for in the same articles.

| (14) | The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (12). |
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(14)

The measures necessary for the implementation of this Directive should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (12).

| (15) | Member States must provide for inspections and penalties appropriate to infringements of the national provisions for implementing this Directive. |
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(15)

Member States must provide for inspections and penalties appropriate to infringements of the national provisions for implementing this Directive.

| (16) | For rail transport to continue to operate effectively, train drivers who are already working in their profession before the entry into force of this Directive must retain their acquired rights during a transition period. |
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(16)

For rail transport to continue to operate effectively, train drivers who are already working in their profession before the entry into force of this Directive must retain their acquired rights during a transition period.

| (17) | The replacement of national rules on the certification of train drivers by the provisions of this Directive should be completed gradually and in such a way as to entail the least possible burden on railway undertakings and infrastructure managers. Those entities should, to that end, be called upon in particular to determine how experience acquired should be taken into account for the purposes of issuing licences and certificates under this Directive. |
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(17)

The replacement of national rules on the certification of train drivers by the provisions of this Directive should be completed gradually and in such a way as to entail the least possible burden on railway undertakings and infrastructure managers. Those entities should, to that end, be called upon in particular to determine how experience acquired should be taken into account for the purposes of issuing licences and certificates under this Directive.

| (18) | Since a common regulatory framework for the certification of
  train drivers and
  train crews operating locomotives and trains for the carriage of passengers and goods cannot be set up by the Member States, the Community may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve these objectives, |
| --- | --- |

(18)

Since a common regulatory framework for the certification of
  train drivers and
  train crews operating locomotives and trains for the carriage of passengers and goods cannot be set up by the Member States, the Community may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve these objectives,

HAVE ADOPTED THIS DIRECTIVE:

CHAPTER I

SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1

Subject matter

This Directive lays down the conditions and procedures for the certification of
  train drivers and
  train crews operating locomotives and trains on the Community's rail network. For this purpose, it also specifies the tasks for which the competent authorities of the Member States, the train drivers and other stakeholders in the sector, in particular the railway undertakings, infrastructure managers and training centres, are responsible.

The employment of
  train drivers and
  train crews certified in accordance with this Directive shall not exonerate railway undertakings and infrastructure managers from their obligation to set up a system of monitoring and internal control of the competence and conduct of their
  train drivers and
  train crews pursuant to Article 9 of and Annex III to Directive 2004/49/EC. The certificate shall not relieve either the railway undertaking or the infrastructure manager of its responsibility as regards safety and, in particular, the training of its staff.

Article 2

Definitions

For the purposes of this Directive:

| a) | ‘competent authority’ means the authority appointed by a Member State to issue train drivers' licences after establishing that applicants meet the necessary requirements. This is the national safety authority set up under Article 16 of Directive 2004/49/EC; |
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a)

‘competent authority’ means the authority appointed by a Member State to issue train drivers' licences after establishing that applicants meet the necessary requirements. This is the national safety authority set up under Article 16 of Directive 2004/49/EC;

| b) | ‘train driver’ means a person capable of driving
  trains, regularly or occasionally, including traction units, electric rail cars,
  shunting locomotives
  and
  work trains or trains for the carriage of passengers or goods by rail in an autonomous, responsible and safe manner. A train driver's duties are listed in Annex II to this Directive; |
| --- | --- |

b)

‘train driver’ means a person capable of driving
  trains, regularly or occasionally, including traction units, electric rail cars,
  shunting locomotives
  and
  work trains or trains for the carriage of passengers or goods by rail in an autonomous, responsible and safe manner. A train driver's duties are listed in Annex II to this Directive;

| c) | ‘train crew’ means staff
  who are not train drivers but who are present
  on the locomotive or train
  and who regularly or occasionally perform safety-related duties in and on the train
  and whose professional qualifications accordingly contribute to traffic safety
  as regards both the train itself and its passengers and freight
  ; |
| --- | --- |

c)

‘train crew’ means staff
  who are not train drivers but who are present
  on the locomotive or train
  and who regularly or occasionally perform safety-related duties in and on the train
  and whose professional qualifications accordingly contribute to traffic safety
  as regards both the train itself and its passengers and freight
  ;

| d) | ‘infrastructure manager’ means any entity or undertaking responsible in particular for the establishment and maintenance of the railway infrastructure, or any part thereof, as defined in Article 3 of Directive 91/440/EEC; |
| --- | --- |

d)

‘infrastructure manager’ means any entity or undertaking responsible in particular for the establishment and maintenance of the railway infrastructure, or any part thereof, as defined in Article 3 of Directive 91/440/EEC;

| e) | ‘railway undertaking’ means any public or private undertaking the business of which is to provide services for the carriage of goods and/or passengers by rail, with the requirement that the undertaking must ensure traction; this also includes undertakings which provide traction only; |
| --- | --- |

e)

‘railway undertaking’ means any public or private undertaking the business of which is to provide services for the carriage of goods and/or passengers by rail, with the requirement that the undertaking must ensure traction; this also includes undertakings which provide traction only;

| f) | ‘technical specifications for interoperability’ or ‘TSIs’ means the specifications adopted under Directives 96/48/EC and 2001/16/EC, which must be complied with in order to ensure the interoperability of the trans-European rail system; |
| --- | --- |

f)

‘technical specifications for interoperability’ or ‘TSIs’ means the specifications adopted under Directives 96/48/EC and 2001/16/EC, which must be complied with in order to ensure the interoperability of the trans-European rail system;

| (g) | ‘Agency’ means the European Railway Agency established by Regulation (EC) No 881/2004; |
| --- | --- |

(g)

‘Agency’ means the European Railway Agency established by Regulation (EC) No 881/2004;

| h) | ‘safety certificate’ means the certificate issued to a railway undertaking by the national safety authority in accordance with Article 10 of Directive 2004/49/EC; |
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h)

‘safety certificate’ means the certificate issued to a railway undertaking by the national safety authority in accordance with Article 10 of Directive 2004/49/EC;

| i) | ‘safety authorisation’ means the certificate issued to an infrastructure manager by the safety authority in accordance with Article 11 of Directive 2004/49/EC; |
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i)

‘safety authorisation’ means the certificate issued to an infrastructure manager by the safety authority in accordance with Article 11 of Directive 2004/49/EC;

| j) | ‘training centre’ means a body accredited or recognised by a competent authority for the purpose of giving training courses. |
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j)

‘training centre’ means a body accredited or recognised by a competent authority for the purpose of giving training courses.

Article 3

Scope

The purpose of this Directive is the certification of
  train drivers and
  train crews operating locomotives and trains on the Community's rail network for a railway undertaking requiring a safety certificate or an infrastructure manager requiring a safety authorisation.

CHAPTER II

CERTIFICATION OF TRAIN DRIVERS

Article 4

Community certification model

1.   All train drivers shall have the necessary fitness and qualifications to drive trains and shall hold the following documents:

| a) | a licence identifying the train driver and the authority issuing the certificate and stating the duration of validity. The licence shall be the property of the train driver and shall be issued, on application, to train drivers who satisfy the minimum requirements as regards medical and psychological fitness, basic education and general professional skills. The licence shall comply with the requirements of Annex I; |
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a)

a licence identifying the train driver and the authority issuing the certificate and stating the duration of validity. The licence shall be the property of the train driver and shall be issued, on application, to train drivers who satisfy the minimum requirements as regards medical and psychological fitness, basic education and general professional skills. The licence shall comply with the requirements of Annex I;

| b) | a harmonised certificate stating that the holder has received additional training in the framework of the railway undertaking's safety management system or, in the case of train drivers employed by the infrastructure manager, that of the latter, indicating the infrastructures on which the holder is authorised to drive and the rolling stock which the holder is authorised to drive. The harmonised certificate shall comply with the requirements of Annex I. |
| --- | --- |

b)

a harmonised certificate stating that the holder has received additional training in the framework of the railway undertaking's safety management system or, in the case of train drivers employed by the infrastructure manager, that of the latter, indicating the infrastructures on which the holder is authorised to drive and the rolling stock which the holder is authorised to drive. The harmonised certificate shall comply with the requirements of Annex I.

2.   The harmonised complementary certificate shall authorise driving in
  either
  or
  both
  of the following categories:

| a) | category A: shunting locomotives, work trains
  and maintenance railway vehicles
  ; |
| --- | --- |

a)

category A: shunting locomotives, work trains
  and maintenance railway vehicles
  ;

| b) | category B: carriage of passengers
  and/or goods.s |
| --- | --- |

b)

category B: carriage of passengers
  and/or goods.s

3.   With regard to the licence referred to in paragraph 1(a), the general system for the recognition of professional qualifications established by Council Directive 92/51/EEC
   (13), shall still apply to the recognition of the professional qualifications of train drivers who are nationals of a Member State and have obtained their training certificate in a third country. Train drivers whose professional qualifications are recognised on this basis shall have to be issued certificates in accordance with this Directive.

Article 5

Issuing bodies

1.   The licence referred to in Article 4(1)(a) shall be issued by the competent authority referred to in Article 2(a). The competent authority may delegate this task only under the terms provided for in Article 17.

2.   The harmonised certificate referred to in Article 4(1)(b) shall be issued by the railway undertaking which employs the train driver or, where appropriate, by the infrastructure manager.

Article 6

Mutual recognition

1.   Once train drivers have the licence and the harmonised complementary certificate issued in accordance with this Directive, they may drive trains provided that the railway undertaking or the infrastructure manager responsible for the transport in question has a safety certificate or a safety authorisation, and only on the network covered both by the harmonised complementary certificate and by the safety certificate, or the safety authorisation.

2.   Licences issued by a Member State in accordance with this Directive shall be mutually recognised by the other Member States.

CHAPTER III

CONDITIONS AND PROCEDURE FOR OBTAINING THE LICENCE AND THE HARMONISED COMPLEMENTARY CERTIFICATE

Article 7

Minimum requirements

To obtain the licence, applicants shall satisfy the minimum requirements set out in Articles 8, 9 and 11(1) and (2).

To obtain the harmonised complementary certificate, applicants shall hold a licence and satisfy the minimum requirements set out in Articles 10 and 11(1), (3) and (4).

Without prejudice to Article 6, a Member State may apply more stringent requirements with regard to the issuing of licences on its own territory.

Article 8

Minimum age

Applicants shall be at least 20 years of age. However, Member States may issue licences to applicants from the age of 18 years, the validity of such a licence then being limited to the territory of the issuing Member State.

Article 9

Training and basic skills

1.   Applicants shall have received basic training equivalent to level 3 as referred to in Council Decision 85/368/EEC of 16 July 1985 on the comparability of vocational training qualifications between the Member States of the European Community
   (14) and satisfy the requirements laid down in Annex III.

2.   Applicants shall provide confirmation of their physical and mental fitness by passing a medical examination conducted by a medical doctor recognised by the competent authority. The examination must cover at least the criteria indicated in Annex III, points 2.1 and 4.

3.   Applicants shall demonstrate their psychological fitness by passing an examination conducted
  or supervised
  by a psychologist
  or doctor
  recognised by the competent authority. The examination shall cover at least the criteria indicated in Annex III, point 2.2.

4.   The basic linguistic knowledge criterion referred to in Annex III, point 5, shall be met and shall be checked whenever train drivers have to travel on new infrastructures involving new linguistic requirements.

Article 10

Professional experience

Without prejudice to Article 6, a Member State may, on its territory, require applicants to provide evidence of at least two years' professional experience in category A, as referred to in Article 4(2)(a), before they are able to move on to
  category B
  .

Without prejudice to Article 6, at least three years' professional experience in category B (as referred to in Article 4(2)(b)) shall be required in order to move on to a cross-border transport service.

Article 11

Professional qualifications

1.   Applicants shall have undergone a full programme of training as described in Annex IV, point 1, which consists of a part relating to the licence and a part relating to the harmonised complementary certificate. The training method shall satisfy the criteria in Annex IV, points 2 and 3.

2.   Applicants shall have passed an examination testing their general knowledge of their profession; this examination shall cover at least the general subjects listed in Annex V.

3.   Applicants shall have passed an examination testing their professional knowledge relating to the rolling stock for which the harmonised complementary certificate is being applied for; this examination shall include at least the general subjects listed in Annex VI.

4.   Applicants shall have passed an examination testing their professional knowledge relating to the infrastructures for which the harmonised certificate is being applied for. This examination shall cover at least the general subjects listed in Annex VII. Where appropriate, the examination shall also cover linguistic knowledge in accordance with Article 9(4).

Article 12

Application for the licence

1.   The competent authority shall publish the procedure to be followed for obtaining a licence, together with the necessary forms.

2.   All licence applications shall be lodged with the competent authority by the candidate train driver's employer or by the candidate train driver.

3.   Applications submitted to the competent authority may concern:

| a) | the granting of a new licence: this may be a matter of a novice train driver or a person who was already a train driver before this Directive entered into force, or a request for a duplicate; |
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a)

the granting of a new licence: this may be a matter of a novice train driver or a person who was already a train driver before this Directive entered into force, or a request for a duplicate;

| b) | an update: one or more of the licence particulars have changed and must be updated. |
| --- | --- |

b)

an update: one or more of the licence particulars have changed and must be updated.

Article 13

Granting of the licence

The competent authority shall issue the licence no later than three weeks after receiving all the necessary documents.

The licence shall be in the official language(s) of the Member State issuing it. The licence must be renewed every five years.

The licence shall be the property of the train driver and shall be issued in a single original. Any reproduction of the licence, other than by the competent authority in the case of a request for a duplicate, shall be prohibited.

Article 14

Minimum monitoring requirements

1.   In order to keep the licence and the harmonised certificate, holders shall undergo periodic examinations and/or tests relating to the requirements referred to in Articles 9 and 11. The following minimum frequency shall be observed:

| a) | medical examinations (physical and mental fitness): every three years up to the age of
  55
  , thereafter every year; |
| --- | --- |

a)

medical examinations (physical and mental fitness): every three years up to the age of
  55
  , thereafter every year;

| b) | knowledge
  of infrastructure (including routes and operating rules)
  :
  every two years or after any absence from the route concerned of more than one year
  ; |
| --- | --- |

b)

knowledge
  of infrastructure (including routes and operating rules)
  :
  every two years or after any absence from the route concerned of more than one year
  ;

| c) | knowledge of rolling stock:
  every two years

  ; |
| --- | --- |

c)

knowledge of rolling stock:
  every two years

  ;

| d) | updating of general professional knowledge and knowledge of traffic and safety provisions by way of continuing training: every year. |
| --- | --- |

d)

updating of general professional knowledge and knowledge of traffic and safety provisions by way of continuing training: every year.

For each of these periodic checks the railway undertaking shall affirm by a statement in the harmonised certificate and in the register provided for in Article 20 that the train driver has met these requirements.

2.   
  For the purpose of maintaining the harmonised complementary certificate, railway undertakings and infrastructure managers shall, in the context of their safety management systems set up pursuant to Article 9 of Directive 2004/49/EC, adopt measures (such as driving under supervision) and lay down periods of validity regarding skills relating to rolling stock, lines and — where necessary — languages so that train drivers do not use the lines and/or vehicles covered by their harmonised complementary certificates beyond those periods.

Article 15

Cessation of employment

When a train driver ceases to be employed by a railway undertaking
  or infrastructure manager
  , it shall inform the competent authority without delay.

The licence shall remain valid without prejudice to Article 14.

The harmonised complementary certificate shall become invalid on cessation of employment.
  Nevertheless, in accordance with Article 20(2), the railway undertaking concerned shall be required to keep a record of that certificate in its register. Train drivers shall keep a certified copy of the harmonised complementary certificate which they hold.

They may submit this certificate to any new railway undertaking or infrastructure manager so that it can adapt its training with a view to issuing a fresh harmonised complementary certificate.

Article 16

Amendments and withdrawals

1.   If there is any change in a train driver's state of health likely to call into question their fitness for the job and the continuation of their licence or harmonised complementary certificate, the employer or the train driver, as appropriate, shall inform the competent authority without delay

2.   If the competent authority finds
  or is informed
  that a train driver no longer satisfies one or more requirements, it shall immediately withdraw the licence
  and immediately
  inform the party concerned and their employer of its reasoned decision, without prejudice to the right of appeal provided for in Article 19. The suspension shall be temporary or permanent depending on the scale of the problems created for rail safety. The competent authority shall update the register provided for in Article 20.
  As soon as it is informed, the employer shall withdraw the harmonised certificate, either temporarily or permanently, depending on the reasons given by the competent authority. The employer shall update the register provided for in Article 20.

If an employer finds that a train driver no longer satisfies one or more requirements, it shall immediately withdraw the harmonised certificate and immediately inform the party concerned and the competent authority of its reasoned decision. The employer shall update the register provided for in Article 20.

3.
     
  Member States shall ensure that in cases where a licence or harmonised complementary certificate is withdrawn provision is made for an independent assessment and, where appropriate, reinstatement procedure. The employee concerned may request this procedure.

4.   Member States shall take all the necessary steps to avoid the risks of falsification of certificates and tampering with the register provided for in Article 20. Employers shall be required to ensure and to check that the licences and complementary certificates of their train drivers in service are valid.

CHAPTER IV

TASKS AND DECISIONS OF THE COMPETENT AUTHORITY

Article 17

Tasks of the competent authority

1.   The competent authority shall fulfil its tasks in a transparent and non-discriminatory manner.

It shall respond quickly to requests for information and present any requests for additional information without delay during the preparation of the licences.

2.
     
  The tasks of competent authority shall include:

| a) | issuing licences following checks that all the conditions laid down in this Directive have been met, on the basis of the requisite documents submitted by applicants; |
| --- | --- |

a)

issuing licences following checks that all the conditions laid down in this Directive have been met, on the basis of the requisite documents submitted by applicants;

| b) | authorising and verifying safety management systems, in accordance with Directive 2004/49/EC; |
| --- | --- |

b)

authorising and verifying safety management systems, in accordance with Directive 2004/49/EC;

| c) | key inspection tasks; |
| --- | --- |

c)

key inspection tasks;

| d) | guaranteeing the quality and objectivity of training and examination procedures. |
| --- | --- |

d)

guaranteeing the quality and objectivity of training and examination procedures.

3.   The competent authority may delegate or subcontract the tasks referred to in paragraph 5 to third parties provided that such tasks can be carried out by the authorised representative or subcontractor without any conflict of interest.

Tasks shall be delegated in a transparent and non-discriminatory manner.

4.   When the competent authority delegates or subcontracts tasks to a railway undertaking, at least one of the following two conditions shall be complied with:

| a) | the railway undertaking shall issue licences only to its own train drivers; |
| --- | --- |

a)

the railway undertaking shall issue licences only to its own train drivers;

| b) | the railway undertaking shall not enjoy exclusivity in the territory concerned for any of the delegated or subcontracted tasks. |
| --- | --- |

b)

the railway undertaking shall not enjoy exclusivity in the territory concerned for any of the delegated or subcontracted tasks.

5.   The tasks referred to in (a) to (e) may be delegated subject to the conditions attached to them:

| a) | the testing of physical and mental fitness shall be carried out by
  occupational physicians
  or occupational health institutes accredited by the competent authority; |
| --- | --- |

a)

the testing of physical and mental fitness shall be carried out by
  occupational physicians
  or occupational health institutes accredited by the competent authority;

| b) | the testing of psychological fitness shall be carried out by psychologists
  , transport psychologists
  or occupational psychology institutes accredited by the competent authority; |
| --- | --- |

b)

the testing of psychological fitness shall be carried out by psychologists
  , transport psychologists
  or occupational psychology institutes accredited by the competent authority;

| c) | the testing of general professional knowledge shall be carried out by institutes
  and
  examiners
  which are both
  accredited by the competent authority; |
| --- | --- |

c)

the testing of general professional knowledge shall be carried out by institutes
  and
  examiners
  which are both
  accredited by the competent authority;

| d) | the granting of new licences and the updating of licences may be delegated to third parties accredited by the competent authority; |
| --- | --- |

d)

the granting of new licences and the updating of licences may be delegated to third parties accredited by the competent authority;

| e) | the tasks relating to the keeping of the register referred to in Article 20 may be delegated to third parties appointed by the competent authority. |
| --- | --- |

e)

the tasks relating to the keeping of the register referred to in Article 20 may be delegated to third parties appointed by the competent authority.

6.   When a competent authority delegates or subcontracts tasks, the authorised representative or subcontractor shall be required, in performing such tasks, to comply with the obligations imposed on the competent authorities by this Directive.

7.   When a competent authority delegates or subcontracts tasks, it shall set up a system for checking whether these tasks have been carried out, which will enable it to make sure that the conditions laid down in paragraphs 3 and 4 are being complied with.

8.   The testing of professional knowledge relating to the rolling stock and infrastructures shall be carried out by the railway undertaking.

Article 18

Accreditation
  and recognition

Tasks may be delegated under Article 17 only to persons or bodies already accredited by the competent authority or by an accreditation body appointed by the Member State. The accreditation process shall be based on the
  criteria of competence, independence, impartiality and absence of any conflict of interest
  and on the evaluation of a dossier submitted by candidates which provides appropriate evidence of their skills in the area in question.

The
  Member State shall ensure publication and updating of
  a register of persons and bodies accredited under this Directive.

Without prejudice to paragraph 1, a Member State may stipulate that a person or body recognised under this Directive must be recognised by the competent authority or a body designated by the Member State. Recognition shall be based on criteria of independence, skill, and impartiality. However, where a very rare special skill is involved, an exception may be made to that rule subject to a favourable opinion delivered by the Commission in accordance with the procedure provided for in Article 31.

Article 19

Decisions of the competent authority

1.   The competent authority shall state the reasons for its decisions.

2.   The competent authority shall set up an administrative appeals procedure allowing employers and train drivers to request a review of a decision relating to any application as referred to in Article 12 or any withdrawal as referred to in Article 16(2).

3.   Member States shall take the necessary steps to ensure juridical review of the decisions taken by a competent authority.

Article 20

Registers and exchange of information

1.   The competent authorities shall be required to:

| a) | keep a register of all licences issued, expiring, amended, suspended, cancelled or reported lost or destroyed. This register shall contain the particulars of every licence, which can be called up using the national number allotted to each train driver. It shall be regularly updated; |
| --- | --- |

a)

keep a register of all licences issued, expiring, amended, suspended, cancelled or reported lost or destroyed. This register shall contain the particulars of every licence, which can be called up using the national number allotted to each train driver. It shall be regularly updated;

| b) | supply information on the status of such licences to the competent authorities of the other Member States, the Agency or any employer of train drivers who wishes to know or to check certain particulars during a recruitment procedure. |
| --- | --- |

b)

supply information on the status of such licences to the competent authorities of the other Member States, the Agency or any employer of train drivers who wishes to know or to check certain particulars during a recruitment procedure.

2.   The railway undertakings shall be required to:

| a) | keep a register of all harmonised complementary certificates issued, expiring, amended, suspended, cancelled or reported lost or destroyed. This register shall contain the particulars of every certificate, as well as the particulars relating to the periodic checks provided for in Article 14. It shall be regularly updated; |
| --- | --- |

a)

keep a register of all harmonised complementary certificates issued, expiring, amended, suspended, cancelled or reported lost or destroyed. This register shall contain the particulars of every certificate, as well as the particulars relating to the periodic checks provided for in Article 14. It shall be regularly updated;

| b) | cooperate with the competent authority of the State where they are domiciled in order to interconnect its register with that of the competent authority so as to give it immediate access to the particulars required; |
| --- | --- |

b)

cooperate with the competent authority of the State where they are domiciled in order to interconnect its register with that of the competent authority so as to give it immediate access to the particulars required;

| c) | supply information on the status of such certificates to the competent authorities of the other Member States. |
| --- | --- |

c)

supply information on the status of such certificates to the competent authorities of the other Member States.

3.   The competent authorities shall cooperate with the Agency in order to ensure the interoperability of the registers. To this end the Commission shall adopt, in accordance with the procedure referred to in Article 31(2), and on the basis of a draft prepared by the Agency, the basic parameters of the registers to be set up, such as the particulars to be recorded, their format and the data exchange protocol.

4.   The competent authorities shall make sure that the registers which they set up under paragraph 1 and the modes of operation of such registers comply with Directive 95/46/EC.

5.   The Agency shall make sure that the system set up under paragraph 2(a) and (b) complies with Regulation (EC) No 45/2001.

6.
     
  Train drivers must have access at all times to the data concerning them stored in the registers of competent authorities and of railway undertakings and must be provided with a copy of that data on request.

CHAPTER V

TRAINING OF TRAIN DRIVERS

Article 21

Training

1.   The procedure to be followed with a view to obtaining the licence provided for in Article 12(1) shall include the training programme needed to comply with the professional qualification requirements referred to in Article 11.

The objectives of this training are defined in Annex V. They may be supplemented:

| a) | either by the relevant technical specifications for interoperability; |
| --- | --- |

a)

either by the relevant technical specifications for interoperability;

| b) | or by the criteria proposed by the Agency pursuant to Article 17 of Regulation (EC) No 881/2004 and adopted by the Commission in accordance with the procedure referred to in Article 31(2). |
| --- | --- |

b)

or by the criteria proposed by the Agency pursuant to Article 17 of Regulation (EC) No 881/2004 and adopted by the Commission in accordance with the procedure referred to in Article 31(2).

2.   The procedure to be followed to obtain the harmonised certificate is specific to each railway undertaking. The objectives of the training programme are set out in Article 11 and, more particularly, in Annexes VI and VII.

3.   Pursuant to Article 13 of Directive 2004/49/EC, Member States shall take steps to ensure that train drivers have fair and non-discriminatory access to the training needed to fulfil the conditions for obtaining the licence and the complementary harmonised certificate.

Article 22

Financing of training

Railway undertakings and infrastructure managers shall be contractually responsible for professional training, both basic training and in-service training.

A railway undertaking or infrastructure manager employing a train driver whose training has been funded in whole or in part by another railway undertaking or infrastructure manager which the train driver has left voluntarily after less than five years' employment shall refund to that undertaking or infrastructure manager the cost of that training.

The detailed rules for implementing this provision shall be established on the basis of a recommendation drawn up by the Agency in the framework of Article 17 of Regulation (EC) No 881/2004.

Article 23

Examinations

The examinations and examiners intended for the purpose of checking the requisite professional qualifications shall be determined when laying down the procedure to be followed to obtain the licence provided for in Article 12(1) and the harmonised complementary certificate. These examinations shall be overseen by selection boards made up of
  examiners who are competent, independent, impartial and free from any conflict of interest. Examiners checking the competences required for a licence shall be accredited in accordance with Article 18
  .

The choice of examiners and examinations shall be governed by Community criteria proposed by the Agency and adopted by the Commission under the procedure laid down in Article 31(2). In the absence of such Community criteria, the competent authorities shall establish national criteria.

CHAPTER VI

ASSESSMENT

Article 24

Quality standards

The competent authorities shall ensure that all tasks associated with training, assessment of skills, updating of licences and complementary certificates are the subject of continuous monitoring under a quality standards system designed to guarantee the achievement of the objectives set out in this Directive with regard to basic requirements and professional qualifications.

Article 25

Independent assessment

1.   An independent assessment of the procedures for the acquisition and assessment of knowledge, understanding, skills and competence, and of the system for the issuing of licences and harmonised complementary certificates, shall be carried out in each Member State at intervals of not more than five years. The assessment shall be carried out by qualified persons who are not themselves involved in the activities concerned.

2.   The results of these independent assessments shall be duly documented and brought to the attention of the competent authorities concerned. If need be, Member States shall take appropriate measures to remedy any shortcomings brought to light by the independent assessment.

CHAPTER VII

CERTIFICATION OF
  TRAIN CREWS

Article 26

Provisions applicable to

  train crews

All members of the train crew
  shall be in possession of a certificate issued by a competent authority in accordance with the provisions of this Article.

By 1 January 2009, the Agency shall consider the profiles and tasks of train crew members in the light of their respective effects on transport safety. The Agency shall, in the framework of Article 17 of Regulation (EC) No 881/2004, draw up recommendations concerning the certification of train crews consistent with this Directive and with uniform European qualification standards.

On the basis of these recommendations, the Commission shall adopt a certification scheme for train crews in accordance with the procedure referred to in Article 31(2). Once adopted, the scheme shall become an integral part of this Directive and shall be set out in an annex to it.

Until the scheme is adopted, the relevant TSIs adopted pursuant to Directives 96/48/EC and 2001/16/EC shall apply to train crews.

In the absence of such Community rules, the competent authorities shall establish and publish the minimum requirements to be met.

CHAPTER VIII

INSPECTIONS AND PENALTIES

Article 27

State controls

1.   The competent authority may at any time take steps to verify, on board trains operating in its area of jurisdiction, that the driving personnel are in possession of the documents issued pursuant to this Directive.

2.   Notwithstanding verification as provided for in paragraph 1, train drivers may be required to demonstrate their competence in the event of negligence at the workplace. Such a demonstration may consist, in the main, in verifying compliance with the requirements set out in Article 11(3) and (4).

3.   The competent authority may carry out administrative enquiries regarding compliance with this Directive by train drivers, railway undertakings, infrastructure managers, assessors and training centres pursuing their activities in their areas of jurisdiction.

4.   If a competent authority considers that a licence issued by a competent authority in another Member State fails to comply with the relevant criteria, it may approach that authority and request either that a further inspection be carried out or that the licence be withdrawn. The authority that issued the licence in question shall undertake to examine the request within three weeks and to notify the other authority of its decision.

5.   If a competent authority considers that a complementary certificate fails to comply with the relevant criteria, it may approach the railway undertaking and request either that a further inspection be carried out or that the complementary certificate be withdrawn.

6.   If a Member State considers that a decision taken by a competent authority in another Member State pursuant to paragraph 4 fails to comply with the relevant criteria, the matter shall be referred to the Commission which shall deliver its opinion within three months. If necessary, corrective measures shall be proposed to the Member State concerned. In the event of disagreement or dispute, the matter shall be referred to the Committee mentioned in Article 31(1), and the Commission shall take whatever measures are necessary in accordance with the procedure referred to in Article 31(2).

Article 28

Penalties

The Member States shall lay down the rules on penalties applicable to infringements of the national provisions adopted pursuant to this Directive and shall take all measures necessary to ensure that they are implemented. The penalties provided for shall be effective, proportionate, non-discriminatory and dissuasive. The Member States shall notify the Commission of those provisions by the date specified in Article 34 at the latest and shall notify it without delay of any subsequent amendment affecting them.

CHAPTER IX

FINAL PROVISIONS

Article 29

Derogations

Member States may exclude from the measures they adopt in implementation of this Directive:

| a) | metros, trams and other light rail systems; |
| --- | --- |

a)

metros, trams and other light rail systems;

| b) | networks that are operationally separate from the rest of the rail system and are intended only for the operation of local, urban or suburban passenger services and undertakings operating solely on those networks; |
| --- | --- |

b)

networks that are operationally separate from the rest of the rail system and are intended only for the operation of local, urban or suburban passenger services and undertakings operating solely on those networks;

| c) | privately owned railway infrastructure that exists solely for use by the infrastructure owners for their own freight operations; |
| --- | --- |

c)

privately owned railway infrastructure that exists solely for use by the infrastructure owners for their own freight operations;

| d) | sections of track that are closed to normal traffic for the purpose of maintaining, renewing or upgrading railway systems. |
| --- | --- |

d)

sections of track that are closed to normal traffic for the purpose of maintaining, renewing or upgrading railway systems.

Article 30

Amendments to the annexes

The Annexes shall be adapted to scientific and technical progress, in accordance with the procedure referred to in Article 31(2)

  , whilst fully respecting the procedures and powers conferred by Regulation (EC) No 881/2004, in particular Articles 3, 4, 6, 12 and 17 thereof
  .

The social partners shall be involved in this adaptation process in the context of the sectoral dialogue committee established by Decision 98/500/EC

   (15).

Article 31

Committee

1.   The Commission shall be assisted by the Committee set up by Article 21 of Directive 96/48/EC.

2.   Where reference is made to this paragraph, the regulatory procedure laid down in Articles 5 and 7 of Decision 1999/468/EC shall apply, in compliance with Article 8 thereof.

The period provided for in Article 5(6) of Decision 1999/468/EC shall be three months.

3.   The Committee shall adopt its rules of procedure.

Article 32

Report

The Agency shall evaluate the development of the certification of train drivers in accordance with this Directive
  and other developments in the Member States concerning the management of the competence of train drivers
  . It shall submit to the Commission, not later than
  1 January 2009
  , a report containing, where appropriate, improvements to be made to the system as regards the procedures for issuing licences and harmonised complementary certificates, the accreditation of training centres and assessors, the quality system put in place by the competent authorities, the mutual recognition of certificates and mobility in the employment market.

The Commission shall take appropriate measures on the basis of these recommendations and shall propose, if necessary, changes to this Directive.

Article 33

Cooperation

Member States shall assist one another in the implementation of this Directive.

Article 34

Transposition

1.   Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by
  31 December 2006
  at the latest. They shall forthwith inform the Commission thereof.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

2.   Member States shall communicate to the Commission the text of the essential provisions of national law which they adopt in the field covered by this Directive, together with a table showing how the provisions of this Directive correspond to the national provisions adopted.

Article 35

Gradual phasing-in

1.   This Directive shall be phased in gradually in stages as indicated below.

| (a) | During the first stage (2006-2008), Member States shall transpose this Directive into national law. The registers mentioned in Article 20 shall be set up. |
| --- | --- |

(a)

During the first stage (2006-2008), Member States shall transpose this Directive into national law. The registers mentioned in Article 20 shall be set up.

| (b) | With effect from 1 January 2007
  , an initial group of train drivers shall be certified in accordance with this Directive; the group in question shall consist of train drivers
  who drive locomotives and trains for which the right of access to the Community's rail network derives from Directive 91/440/EEC or who drive passenger trains operated pursuant to cross-border cooperation arrangements concluded between undertakings
  . |
| --- | --- |

(b)

With effect from 1 January 2007
  , an initial group of train drivers shall be certified in accordance with this Directive; the group in question shall consist of train drivers
  who drive locomotives and trains for which the right of access to the Community's rail network derives from Directive 91/440/EEC or who drive passenger trains operated pursuant to cross-border cooperation arrangements concluded between undertakings
  .

| (c) | With effect from 1 January 2009 and in accordance with the certification scheme to be adopted by the Commission in accordance with Article 26, train crew members shall be certified in accordance with this Directive. |
| --- | --- |

(c)

With effect from 1 January 2009 and in accordance with the certification scheme to be adopted by the Commission in accordance with Article 26, train crew members shall be certified in accordance with this Directive.

| (d) | With effect from 1 January 2010, all other train drivers shall be certified in accordance with this Directive. |
| --- | --- |

(d)

With effect from 1 January 2010, all other train drivers shall be certified in accordance with this Directive.

2.
     
  At the request of any Member State, the Commission shall ask the Agency to carry out, in consultation with the Member State so requesting, a cost / benefit analysis of the application of this Directive to train drivers and train crews operating exclusively on the territory of that Member State. The cost / benefit analysis shall cover a period of 10 years and shall be submitted to the Commission by the end of the stage mentioned in paragraph 1(a).

If the cost / benefit analysis shows that the costs of applying this Directive to such train drivers and train crews outweigh the benefits, the Commission shall, in accordance with the procedure referred to in Article 31(2), adopt a decision within 6 months of submission of the cost / benefit analysis. That decision may exempt such train drivers and train crews from the application of paragraph 1(c) and (d) for up to 10 years.

3.   A transition period shall be established, being the period commencing on the date of entry into force of this Directive and ending two years following the Decision on the basic parameters contained in the registers, as provided for in Article 20. During the transition period, Member States may certify train drivers in accordance with the provisions which applied prior to the entry into force of this Directive in the case of train drivers who were working in their profession or who started an approved education and training programme or an approved training course prior to the entry into force of this Directive.

4.   Member States shall replace, before 2015, all certificates issued prior to the entry into force of this Directive and during the above transition period by licences and harmonised complementary certificates in conformity with this Directive
  , without prejudice to paragraph 2
  .

5.   All train drivers duly certified in accordance with the provisions which applied prior to the entry into force of this Directive may continue to pursue their professional activities until 2010 in the case of cross-border services, and until 2015 in other cases. This Directive does not confer any mutual recognition rights on the relevant certificates, albeit without prejudice to the general mutual recognition scheme set up under Directive 92/51/EEC which shall continue to apply until the end of the transition period.

6.   
  The
  Agency
  may at any time
  examine the possibility of using a smartcard instead of the licence and harmonised complementary certificate provided for in Article 4. Such a smartcard would have the advantage of combining these two items in one and at the same time could be used for other applications either in the area of security or for train driver management purposes. Where appropriate, the Commission shall adopt, in accordance with the procedure referred to in Article 31(2) and on the basis of a draft prepared by the Agency, the technical and operating specifications for such a smartcard.

Article 36

Entry into force

This Directive shall enter in force on the day following that of its publication in the Official Journal of the European Communities.

Article 37

Addressees

This Directive is addressed to the Member States.

Done at Strasbourg, ...

For the European

The President

Parliament For the Council

The President

---

(1)  OJ C 221, 8.9.2005, p. 64.

1

(2)  OJ C 71, 22.3.2005, p. 26
  .

2

71, 22.3.2005, p. 26

(3)  Position of the European Parliament of 28 September 2005.

3

(4)  Directive 2004/49/EC of the European Parliament and of the Council of 29 April 2004 on safety on the Community's railways and amending Council Directive 95/18/EC on the licensing of railway undertakings and Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (Railway Safety Directive) (
  OJ L 164, 30.4.2004, p.44
  .

4

Directive 2004/49/EC of the European Parliament and of the Council of 29 April 2004 on safety on the Community's railways and amending Council Directive 95/18/EC on the licensing of railway undertakings and Directive 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification (Railway Safety Directive)

OJ L 164, 30.4.2004, p.44

(5)  OJ L 237, 24.8.1991, p. 25
  . Directive as last amended by the 2003 Act of Accession.

5

, p. 25

as

the 2003 Act of Accession.

(6)  OJ L 195, 27.7.2005, p. 18.

6

(7)  
  Council Directive 96/48/EC of 23 July 1996 on the interoperability of the trans-European high-speed rail system (

  OJ L 235, 17.9.1996, p. 6). Directive as last amended by Directive 2004/50/EC of the European Parliament and of the Council (OJ L 164, 30.4.2004, p. 114).

7

Council Directive 96/48/EC of 23 July 1996 on the interoperability of the trans-European high-speed rail system (

(8)  
  Directive 2001/16/EC of the European Parliament and of the Council of 19 March 2001 on the interoperability of the trans-European conventional rail system (

  OJ L 110, 20.4.2001, p. 1). Directive last amended by Directive 2004/50/EC.

8

Directive 2001/16/EC of the European Parliament and of the Council of 19 March 2001 on the interoperability of the trans-European conventional rail system (

(9)  
  Regulation (EC) No 881/2004 of the European Parliament and of the Council of 29 April 2004 establishing a European Railway Agency (

  OJ L 164, 30.4.2004, p. 1).

9

Regulation (EC) No 881/2004 of the European Parliament and of the Council of 29 April 2004 establishing a European Railway Agency (

(10)  OJ L 281, 23.11.1995, p. 31. Directive as amended by Regulation (EC) No 1882/2003 (
  OJ L 284, 31.10.2003, p. 1).

10

Directive as amended by Regulation (EC) No 1882/2003 (

(11)  OJ L 8, 12.1.2001, p. 1.

11

(12)  OJ L 184, 17.7.1999, p. 23.

12

(13)  OJ L 209, 24.7.1992, p. 25. Directive as last amended by Commission Decision 2004/108/EC (OJ L 32, 5.2.2004, p. 15).

13

(14)  OJ L 199, 31.7.1985, p.56.

14

(15)  
  Commission Decision 98/500/EC of 20 May 1998 on the establishment of Sectoral Dialogue Committees promoting the Dialogue between the social partners at European level (

  OJ L 225, 12.8.1998, p. 27). Decision last amended by the Act of Accession of 2003.

15

Commission Decision 98/500/EC of 20 May 1998 on the establishment of Sectoral Dialogue Committees promoting the Dialogue between the social partners at European level (

ANNEX I

COMMUNITY MODEL LICENCE AND COMPLEMENTARY CERTIFICATE

1.   Characteristics of the licence

The physical characteristics of the train driver's licence must be in conformity with ISO standards 7810 and 7816-1.

The methods for verifying the characteristics of the driving licences to ensure that they are consistent with international standards must comply with ISO standard 10373.

2.   Contents of the licence

The front of the licence shall contain:

| a) | the words ‘Train driver's licence’ printed in large type in the language or languages of the Member State issuing the licence; |
| --- | --- |

a)

the words ‘Train driver's licence’ printed in large type in the language or languages of the Member State issuing the licence;

| b) | the name of the Member State issuing the licence (optional); |
| --- | --- |

b)

the name of the Member State issuing the licence (optional);

| c) | the distinguishing sign of the Member State issuing the licence in accordance with the country's ISO 3166 code, printed in negative in a blue rectangle and encircled by 12 yellow stars; |
| --- | --- |

c)

the distinguishing sign of the Member State issuing the licence in accordance with the country's ISO 3166 code, printed in negative in a blue rectangle and encircled by 12 yellow stars;

| d) | information specific to the certificate issued, numbered as follows:






  1. | the surname of the holder; |
| --- | --- | --- |

d)

information specific to the certificate issued, numbered as follows:

1.

the surname of the holder;

| 2. | other name(s) of the holder; |
| --- | --- |

2.

other name(s) of the holder;

| 3. | the date and place of birth of the holder; |
| --- | --- |

3.

the date and place of birth of the holder;

| 4. | a. | the date of issue of the licence; |
| --- | --- | --- |

4.

a.

the date of issue of the licence;

| b. | the date of expiry of the licence; |
| --- | --- |

b.

the date of expiry of the licence;

| c. | the name of the issuing authority; |
| --- | --- |

c.

the name of the issuing authority;

| 5. | the number of the certificate giving access to data in the national register; |
| --- | --- |

5.

the number of the certificate giving access to data in the national register;

| 6. | a photograph of the holder; |
| --- | --- |

6.

a photograph of the holder;

| 7. | the signature of the holder; |
| --- | --- |

7.

the signature of the holder;

| 8. | the permanent place of residence or postal address of the holder (optional); |
| --- | --- |

8.

the permanent place of residence or postal address of the holder (optional);

| e) | the words ‘European Communities model’ in the language or languages of the Member State issuing the licence and the words ‘Train driving licence’ in the other languages of the Community, printed in yellow to form the background of the licence; |
| --- | --- |

e)

the words ‘European Communities model’ in the language or languages of the Member State issuing the licence and the words ‘Train driving licence’ in the other languages of the Community, printed in yellow to form the background of the licence;

| f) | the reference colours:






  — | blue: Pantone Reflex blue, |
| --- | --- | --- |

f)

the reference colours:

—

blue: Pantone Reflex blue,

| — | yellow: Pantone yellow. |
| --- | --- |

—

yellow: Pantone yellow.

3.   Harmonised complementary certificate

The harmonised complementary certificate shall contain:

| 9. | the name and address of the railway undertakings for which the train driver is authorised to drive trains; |
| --- | --- |

9.

the name and address of the railway undertakings for which the train driver is authorised to drive trains;

| 10. | the categories in which the holder is entitled to drive; |
| --- | --- |

10.

the categories in which the holder is entitled to drive;

| 11. | the type of rolling stock which the holder is authorised to drive; |
| --- | --- |

11.

the type of rolling stock which the holder is authorised to drive;

| 12. | the infrastructure on which the holder is authorised to drive; |
| --- | --- |

12.

the infrastructure on which the holder is authorised to drive;

| 13. | any additional information or restrictions. |
| --- | --- |

13.

any additional information or restrictions.

4.   Data contained in national registers

| (a) | Data relating to the licence:






  14. | Data relating to checking the requirements set out in Article 8; |
| --- | --- | --- |

(a)

Data relating to the licence:

14.

Data relating to checking the requirements set out in Article 8;

| 15. | Data relating to checking the requirements set out in Article 9; |
| --- | --- |

15.

Data relating to checking the requirements set out in Article 9;

| 16. | Data relating to checking the requirements set out in Article 10; |
| --- | --- |

16.

Data relating to checking the requirements set out in Article 10;

| 17. | Data relating to checking the requirements set out in Article 11(1) and (2); |
| --- | --- |

17.

Data relating to checking the requirements set out in Article 11(1) and (2);

| 18. | Data relating to periodic checks — Article 14. |
| --- | --- |

18.

Data relating to periodic checks — Article 14.

| (b) | Data relating to the harmonised complementary certificate:






  19. | Data relating to the railway undertaking (authorised rolling stock — Article 11(3), authorised services, training relating to the safety management system); |
| --- | --- | --- |

(b)

Data relating to the harmonised complementary certificate:

19.

Data relating to the railway undertaking (authorised rolling stock — Article 11(3), authorised services, training relating to the safety management system);

| 20. | Data relating to checking the requirements set out in Article 11(4): authorised infrastructure (refer to the register of infrastructure provided for in Article 24 of Directives 96/48/EC and 2001/16/EC); |
| --- | --- |

20.

Data relating to checking the requirements set out in Article 11(4): authorised infrastructure (refer to the register of infrastructure provided for in Article 24 of Directives 96/48/EC and 2001/16/EC);

| 21. | Data relating to periodic checks — Article 14. |
| --- | --- |

21.

Data relating to periodic checks — Article 14.

ANNEX II

DUTIES OF TRAIN DRIVERS

| 1. | Before departure, carrying out the prescribed checks in particular in relation to the functioning and load capacity of the vehicle. |
| --- | --- |

1.

Before departure, carrying out the prescribed checks in particular in relation to the functioning and load capacity of the vehicle.

| 2. | Helping to check the effectiveness of the brakes. |
| --- | --- |

2.

Helping to check the effectiveness of the brakes.

| 3. | Driving locomotives in a proper and safe manner with due regard to signals, speed limits and schedules. |
| --- | --- |

3.

Driving locomotives in a proper and safe manner with due regard to signals, speed limits and schedules.

| 4. | Operating the safety deadman circuit and the train controlling system, and observing and operating instruments. |
| --- | --- |

4.

Operating the safety deadman circuit and the train controlling system, and observing and operating instruments.

| 5. | Recognising and identifying technical and operational faults and unusual incidents in good time, and, when required, inspecting carriages and wagons for damage and defects, protecting the train and summoning assistance. |
| --- | --- |

5.

Recognising and identifying technical and operational faults and unusual incidents in good time, and, when required, inspecting carriages and wagons for damage and defects, protecting the train and summoning assistance.

| 6. | Rectifying minor faults and taking steps to initiate repair work in the event of more serious faults to vehicles. |
| --- | --- |

6.

Rectifying minor faults and taking steps to initiate repair work in the event of more serious faults to vehicles.

| 7. | Shunting the train safely. |
| --- | --- |

7.

Shunting the train safely.

| 8. | Dealing with routine records and submitting concise written, oral or computerised reports on unusual incidents. |
| --- | --- |

8.

Dealing with routine records and submitting concise written, oral or computerised reports on unusual incidents.

ANNEX III

BASIC REQUIREMENTS

1.   Qualifications

| — | at least nine years' secondary education, followed by two to three years' post-secondary education in technical professions or in an apprenticeship or in commercial professions, or |
| --- | --- |

—

at least nine years' secondary education, followed by two to three years' post-secondary education in technical professions or in an apprenticeship or in commercial professions, or

| — | at least 12 years' education. |
| --- | --- |

—

at least 12 years' education.

2.   Minimum content of the examination before appointment

2.1   Medical examinations

| — | a general medical examination; |
| --- | --- |

—

a general medical examination;

| — | examinations of sensory functions (vision, hearing, colour perception); |
| --- | --- |

—

examinations of sensory functions (vision, hearing, colour perception);

| — | blood or urine tests to detect diabetes mellitus and other conditions as indicated by the clinical examination; |
| --- | --- |

—

blood or urine tests to detect diabetes mellitus and other conditions as indicated by the clinical examination;

| — | an ECG at rest; |
| --- | --- |

—

an ECG at rest;

| — | tests for illegal drugs. |
| --- | --- |

—

tests for illegal drugs.

2.2   Psychological examinations

The purpose of the psychological examinations is to assist the railway undertaking in the appointment and management of staff who have the cognitive, psychomotor, behavioural and personality skills to perform their duties safely.

In determining the content of the psychological examination, the psychologist must, as a minimum, take into account the following criteria which are relevant to the requirements of each safety function:

| — | Cognitive: attention and concentration; memory; perception; reasoning; communication; |
| --- | --- |

—

Cognitive: attention and concentration; memory; perception; reasoning; communication;

| — | Psychomotor: reaction time, hand coordination; |
| --- | --- |

—

Psychomotor: reaction time, hand coordination;

| — | Behavioural and personality: emotional self-control, behavioural reliability, autonomy, conscientiousness. |
| --- | --- |

—

Behavioural and personality: emotional self-control, behavioural reliability, autonomy, conscientiousness.

If the psychologist omits any of the above criteria, this decision must be justified and documented.

3.   Periodic examinations after appointment

In addition to the frequency indicated in Article 14(1), the occupational physician must increase the frequency of examinations if the health of the member of staff so requires.

3.1   Minimum content of the periodic medical examination after appointment

If the worker complies with the criteria required for the examination which is carried out before appointment, the specialised periodic examinations must include as a minimum:

| — | a general medical examination; |
| --- | --- |

—

a general medical examination;

| — | an examination of sensory functions (vision, hearing, colour perception); |
| --- | --- |

—

an examination of sensory functions (vision, hearing, colour perception);

| — | blood or urine tests to detect diabetes mellitus and other conditions as indicated by the clinical examination; |
| --- | --- |

—

blood or urine tests to detect diabetes mellitus and other conditions as indicated by the clinical examination;

| — | tests for illegal drugs where clinically indicated. |
| --- | --- |

—

tests for illegal drugs where clinically indicated.

In addition, an ECG at rest is also required for train drivers over 40 years of age.

3.2   Validation of physical fitness

Physical fitness shall be checked regularly and after any occupational accident
  or any period of leave following an accident involving persons
  . The occupational physician or the medical service of the undertaking can decide to carry out an additional medical examination, particularly after a period of 30 days' sick leave. The employer can ask the
  accredited
  physician to check the physical fitness of the train driver if the employer had to withdraw the train driver from service for safety reasons.

At no time during their service must train drivers be under the influence of any substance which is likely to affect their concentration, attention or behaviour.

4.   Medical requirements

4.1   General requirements

Staff must not be suffering from any medical conditions or be taking any medication which is likely to cause:

| — | a sudden loss of consciousness; |
| --- | --- |

—

a sudden loss of consciousness;

| — | a reduction in attention or concentration; |
| --- | --- |

—

a reduction in attention or concentration;

| — | sudden incapacity; |
| --- | --- |

—

sudden incapacity;

| — | a loss of balance or coordination; |
| --- | --- |

—

a loss of balance or coordination;

| — | significant limitation of mobility. |
| --- | --- |

—

significant limitation of mobility.

4.2   Vision

The following requirements as regards vision must be complied with:

| — | aided or unaided distance visual acuity: 0,8; minimum of 0,3 for the worst eye; |
| --- | --- |

—

aided or unaided distance visual acuity: 0,8; minimum of 0,3 for the worst eye;

| — | maximum corrective contact lenses: hypermetropia +5/myopia –8. Derogations are authorised in exceptional cases and after having obtained the opinion of an eye specialist. The occupational physician then takes the decision; |
| --- | --- |

—

maximum corrective contact lenses: hypermetropia +5/myopia –8. Derogations are authorised in exceptional cases and after having obtained the opinion of an eye specialist. The occupational physician then takes the decision;

| — | near and intermediate vision: sufficient, whether aided or unaided; |
| --- | --- |

—

near and intermediate vision: sufficient, whether aided or unaided;

| — | contact lenses are authorised; |
| --- | --- |

—

contact lenses are authorised;

| — | normal colour vision: use of a recognised test, such as Ishihara, as well as another recognised test if required; |
| --- | --- |

—

normal colour vision: use of a recognised test, such as Ishihara, as well as another recognised test if required;

| — | field of vision: full; |
| --- | --- |

—

field of vision: full;

| — | vision for both eyes: effective; |
| --- | --- |

—

vision for both eyes: effective;

| — | binocular vision: effective; |
| --- | --- |

—

binocular vision: effective;

| — | sensitivity to contrasts: good; |
| --- | --- |

—

sensitivity to contrasts: good;

| — | no progressive eye diseases; |
| --- | --- |

—

no progressive eye diseases;

| — | lens implants, keratotomies and keratectomies are allowed only on condition that they are checked on a yearly basis or at intervals set by the occupational physician. |
| --- | --- |

—

lens implants, keratotomies and keratectomies are allowed only on condition that they are checked on a yearly basis or at intervals set by the occupational physician.

4.3   Hearing requirements

Sufficient hearing confirmed by an audiogram, i.e.:

| — | hearing good enough to hold a phone conversation and to be able to hear warning sounds and radio messages. |
| --- | --- |

—

hearing good enough to hold a phone conversation and to be able to hear warning sounds and radio messages.

The following values should be taken as guidelines:

| — | the hearing deficiency must not be higher than 40 dB at 500 and 1 000 Hz; |
| --- | --- |

—

the hearing deficiency must not be higher than 40 dB at 500 and 1 000 Hz;

| — | the hearing deficiency must not be higher than 45 dB at 2 000 Hz for the ear with the worst air conduction of sound. |
| --- | --- |

—

the hearing deficiency must not be higher than 45 dB at 2 000 Hz for the ear with the worst air conduction of sound.

4.4   Pregnancy

In the event of poor tolerance or a pathological condition, pregnancy must be considered to be a reason for the temporary exclusion of train drivers. The occupational physician (as defined above) must ensure that the legal provisions protecting pregnant workers are applied.

4.5   Special health criteria for train drivers

4.5.1   Vision

| — | aided or unaided distance visual acuity: 1,2; at least 0,5 for the worst eye; |
| --- | --- |

—

aided or unaided distance visual acuity: 1,2; at least 0,5 for the worst eye;

| — | ability to withstand dazzle; |
| --- | --- |

—

ability to withstand dazzle;

| — | coloured contact lenses and photochromatic lenses are not allowed. UV filter lenses are allowed. |
| --- | --- |

—

coloured contact lenses and photochromatic lenses are not allowed. UV filter lenses are allowed.

4.5.2   Hearing and speaking requirements

| — | no anomaly of the vestibular system. |
| --- | --- |

—

no anomaly of the vestibular system.

| — | no chronic speech disorder (given the necessity to exchange messages loudly and clearly); |
| --- | --- |

—

no chronic speech disorder (given the necessity to exchange messages loudly and clearly);

| — | no use of hearing
  aids. |
| --- | --- |

—

no use of hearing
  aids.

5.   
  Language
  tests

Staff responsible for controlling rail traffic must be able to use the messages and communication method described in the ‘Operations’ TSI.

Train drivers and other staff of railway undertakings who have to communicate with the infrastructure manager on critical safety issues must have language skills in the language indicated by the infrastructure manager concerned. Their language skills must be such that they can communicate actively and effectively in routine, adverse and emergency situations.

ANNEX IV

PROFESSIONAL QUALIFICATIONS

General programme and training method

1.   Introduction

The content and organisation of the training courses must cover:

| — | an introduction to the railway undertaking and the post concerned, including first aid and health and safety at work; |
| --- | --- |

—

an introduction to the railway undertaking and the post concerned, including first aid and health and safety at work;

| — | operational rules, traffic safety regulations; |
| --- | --- |

—

operational rules, traffic safety regulations;

| — | engineering (railway infrastructure and rolling stock) with emphasis on signalling, braking systems and train control systems, train preparation and fault detection and repairs. Decision-making about the fitness for service of the locomotive; |
| --- | --- |

—

engineering (railway infrastructure and rolling stock) with emphasis on signalling, braking systems and train control systems, train preparation and fault detection and repairs. Decision-making about the fitness for service of the locomotive;

| — | communication; training in loudspeaker usage as part of customer service; |
| --- | --- |

—

communication; training in loudspeaker usage as part of customer service;

| — | acquisition of driving skills: accompanying an experienced train driver, driving under supervision, simulator, independent driving; |
| --- | --- |

—

acquisition of driving skills: accompanying an experienced train driver, driving under supervision, simulator, independent driving;

| — | local conditions and route knowledge acquisition; this training may take place after qualifying when the train driver is assigned to a particular area of duty; |
| --- | --- |

—

local conditions and route knowledge acquisition; this training may take place after qualifying when the train driver is assigned to a particular area of duty;

| — | incidents and abnormal situations: coping under stress and in conflict situations; |
| --- | --- |

—

incidents and abnormal situations: coping under stress and in conflict situations;

| — | fire-fighting. |
| --- | --- |

—

fire-fighting.

The skills required are divided into three parts:

| — | The ‘general’ part, details of which are given in Annex V; |
| --- | --- |

—

The ‘general’ part, details of which are given in Annex V;

| — | The part relating to rolling stock, details of which are given in Annex VI; |
| --- | --- |

—

The part relating to rolling stock, details of which are given in Annex VI;

| — | The part relating to infrastructure, details of which are given in Annex VII. |
| --- | --- |

—

The part relating to infrastructure, details of which are given in Annex VII.

2.   Training method

There should be a good balance between theoretical training (classroom and demonstrations) and practical training (on-the-job experience, driving with and without supervision).

Computer-aided training is accepted for individual learning of the operational rules, signalling situations, etc. However, simulators of the latest generation should be used.

The use of simulators may be useful for the effective training of train drivers; they are particularly useful for reducing the driving time on the infrastructure, training to deal with abnormal situations and further training on new types of locomotives.

Concerning the acquisition of route knowledge, the approach to be favoured is where the train driver accompanies another train driver for a number of journeys along the route, both in daylight and at night. Videos of the routes as seen from the driver's cab can be used as an alternative training method.

3.   Examination

There must be theoretical and practical examinations at the end of the training course.

Assessment of driving ability is normally made in driving tests on the network. Simulators may also be used for examining the application of operational rules and the train driver's performance in particularly difficult situations.

ANNEX V

EXAMINATION ON GENERAL PROFESSIONAL KNOWLEDGE

General matters

The general training has the following objectives:

| — | acquiring the knowledge and procedures regarding of railway technologies, including safety and operational regulations, |
| --- | --- |

—

acquiring the knowledge and procedures regarding of railway technologies, including safety and operational regulations,

| — | acquiring knowledge and procedures regarding the risks related to railway operation and the various means to be used to combat them, |
| --- | --- |

—

acquiring knowledge and procedures regarding the risks related to railway operation and the various means to be used to combat them,

| — | acquiring knowledge and procedures regarding one or more railway operating modes, |
| --- | --- |

—

acquiring knowledge and procedures regarding one or more railway operating modes,

| — | acquiring knowledge and procedures regarding one or more types of rolling stock. |
| --- | --- |

—

acquiring knowledge and procedures regarding one or more types of rolling stock.

In particular, train drivers must be able to:

| — | understand the specific requirements for working in the profession of train driver, its importance, and the professional and personal demands (long periods of work, being away from home, etc), |
| --- | --- |

—

understand the specific requirements for working in the profession of train driver, its importance, and the professional and personal demands (long periods of work, being away from home, etc),

| — | apply staff safety rules, |
| --- | --- |

—

apply staff safety rules,

| — | identify traction units, |
| --- | --- |

—

identify traction units,

| — | know and apply a working method in a precise manner, |
| --- | --- |

—

know and apply a working method in a precise manner,

| — | identify the reference and applications documents (manual of procedures and manual of lines as defined in the ‘Operations’ TSI, driver's manual, breakdown manual, etc), |
| --- | --- |

—

identify the reference and applications documents (manual of procedures and manual of lines as defined in the ‘Operations’ TSI, driver's manual, breakdown manual, etc),

| — | adopt a lifestyle which is compatible with the profession of a safety operative, |
| --- | --- |

—

adopt a lifestyle which is compatible with the profession of a safety operative,

| — | identify the procedures applicable to accidents involving persons, |
| --- | --- |

—

identify the procedures applicable to accidents involving persons,

| — | distinguish the hazards involved in railway operations in general, |
| --- | --- |

—

distinguish the hazards involved in railway operations in general,

| — | know the principles governing traffic safety, |
| --- | --- |

—

know the principles governing traffic safety,

| — | apply the principles of electrotechnology. |
| --- | --- |

—

apply the principles of electrotechnology.

ANNEX VI

EXAMINATION OF PROFESSIONAL KNOWLEDGE OF ROLLING STOCK

After completing specific training on rolling stock, train drivers must be able to carry out the following tasks.

1.   Tests and checks prior to departure

Train drivers must be able to:

| — | perform a route check and consult the relevant documents, |
| --- | --- |

—

perform a route check and consult the relevant documents,

| — | collect the documentation and the necessary equipment, |
| --- | --- |

—

collect the documentation and the necessary equipment,

| — | check the capacities of the traction unit, |
| --- | --- |

—

check the capacities of the traction unit,

| — | check the information entered in the documents on board the traction unit, |
| --- | --- |

—

check the information entered in the documents on board the traction unit,

| — | ensure, by performing the checks and tests specified, that the traction unit is capable of providing the required traction power, and that the safety equipment is operating, |
| --- | --- |

—

ensure, by performing the checks and tests specified, that the traction unit is capable of providing the required traction power, and that the safety equipment is operating,

| — | perform any routine preventive maintenance operations. |
| --- | --- |

—

perform any routine preventive maintenance operations.

2.   Knowledge of rolling stock

To operate a locomotive, train drivers must be familiar with all the controls and indicators placed at their disposal, in particular those concerning:

| — | traction, |
| --- | --- |

—

traction,

| — | braking, |
| --- | --- |

—

braking,

| — | traffic safety-related elements. |
| --- | --- |

—

traffic safety-related elements.

In order to detect and locate anomalies in the rolling stock, report them and determine what is required to repair them, and in certain cases, to take action, train drivers must be familiar with (1):

| — | the constituent parts of the rolling stock. their purpose, and the devices specific to the hauled stocks, in particular the system of stopping the train by venting the brake pipe, |
| --- | --- |

—

the constituent parts of the rolling stock. their purpose, and the devices specific to the hauled stocks, in particular the system of stopping the train by venting the brake pipe,

| — | the meaning of markings on the inside and outside of the rolling stock, in particular the symbols used for the transportation of dangerous goods, |
| --- | --- |

—

the meaning of markings on the inside and outside of the rolling stock, in particular the symbols used for the transportation of dangerous goods,

| — | the parts specific to traction units (2). |
| --- | --- |

—

the parts specific to traction units (2).

3.   Testing the brakes

Train drivers must be able to:

| — | check, before departure, that the train's actual braking power corresponds to the braking power required for the line as specified in the vehicle documents, |
| --- | --- |

—

check, before departure, that the train's actual braking power corresponds to the braking power required for the line as specified in the vehicle documents,

| — | check the functioning of the traction unit's brakes before departure, at start-up and during running. |
| --- | --- |

—

check the functioning of the traction unit's brakes before departure, at start-up and during running.

4.   Operating mode and maximum speed of the train in relation to the line characteristics

Train drivers must be able to:

| — | take note of information given to them before departure, |
| --- | --- |

—

take note of information given to them before departure,

| — | determine the type of running and the maximum speed of the train on the basis of variables such as speed limits or any signalling changes. |
| --- | --- |

—

determine the type of running and the maximum speed of the train on the basis of variables such as speed limits or any signalling changes.

5.   Driving the train in a way which does not damage installations or vehicles

Train drivers must be able to:

| — | use all available control systems in accordance with the applicable rules, |
| --- | --- |

—

use all available control systems in accordance with the applicable rules,

| — | start the train taking account of adhesion and power constraints, |
| --- | --- |

—

start the train taking account of adhesion and power constraints,

| — | know the train's position on the line at all times, |
| --- | --- |

—

know the train's position on the line at all times,

| — | apply the brakes for decelerations and stops, taking account of the rolling stock and installations. |
| --- | --- |

—

apply the brakes for decelerations and stops, taking account of the rolling stock and installations.

6.   Anomalies

Train drivers must be able to:

| — | be attentive to unusual occurrences concerning the behaviour of the train, |
| --- | --- |

—

be attentive to unusual occurrences concerning the behaviour of the train,

| — | identify signs of anomalies, distinguish between them and react according to their relative importance, always giving priority to the safety of rail traffic and persons, |
| --- | --- |

—

identify signs of anomalies, distinguish between them and react according to their relative importance, always giving priority to the safety of rail traffic and persons,

| — | know the available means of protection and communication, |
| --- | --- |

—

know the available means of protection and communication,

| — | inspect the train to detect any minor anomalies, |
| --- | --- |

—

inspect the train to detect any minor anomalies,

| — | try to remedy such anomalies. |
| --- | --- |

—

try to remedy such anomalies.

7.   Operating incidents and accidents, fires and accidents involving persons

Train drivers must be able to:

| — | take steps to protect the train and summon assistance in the event of an accident involving persons on board the train, |
| --- | --- |

—

take steps to protect the train and summon assistance in the event of an accident involving persons on board the train,

| — | determine whether the train is transporting dangerous goods and identify them on the basis of train documents and wagon lists. |
| --- | --- |

—

determine whether the train is transporting dangerous goods and identify them on the basis of train documents and wagon lists.

8.   Conditions for continuing running after an accident involving rolling stock

After an incident, train drivers must be able to:

| — | decide if the vehicle can continue to run and under what conditions, |
| --- | --- |

—

decide if the vehicle can continue to run and under what conditions,

| — | inform the infrastructure manager of those conditions as soon as possible. |
| --- | --- |

—

inform the infrastructure manager of those conditions as soon as possible.

9.   Immobilisation of the train

Train drivers must be able to take measures to ensure that the train does not start up unexpectedly, even in the most difficult conditions.

---

(1)  In particular:

| — | mechanical structures |
| --- | --- |

—

mechanical structures

| — | braking system |
| --- | --- |

—

braking system

| — | suspension and attachment equipment |
| --- | --- |

—

suspension and attachment equipment

| — | running gear |
| --- | --- |

—

running gear

| — | safety equipment. |
| --- | --- |

—

safety equipment.

(2)  In particular:

| — | collection of current and high-voltage systems |
| --- | --- |

—

collection of current and high-voltage systems

| — | tanks, fuel supply system, exhaust equipment |
| --- | --- |

—

tanks, fuel supply system, exhaust equipment

| — | traction chain, motors and transmission |
| --- | --- |

—

traction chain, motors and transmission

| — | communication equipment (ground-to-train radio, etc.). |
| --- | --- |

—

communication equipment (ground-to-train radio, etc.).

ANNEX VII

EXAMINATION OF PROFESSIONAL KNOWLEDGE OF INFRASTRUCTURE

Matters relating to infrastructure

1.   Testing the brakes

Train drivers must be able to check, before departure, that the train's actual braking power corresponds to the braking power required for the line as specified in the vehicle documents.

2.   Type of operation and maximum train speed according to the line characteristics

Train drivers must be able to:

| — | take note of information given to them before departure, such as the speed limits or any signalling changes, |
| --- | --- |

—

take note of information given to them before departure, such as the speed limits or any signalling changes,

| — | determine the type of running and the maximum speed of the train on the basis of the characteristics of the line. |
| --- | --- |

—

determine the type of running and the maximum speed of the train on the basis of the characteristics of the line.

3.   Knowledge of the line

Train drivers must be able to anticipate problems and react appropriately in terms of safety and performance. They must therefore have a thorough knowledge of the railway lines and installations on their route and of any equivalent routes agreed on.

The following aspects are important:

| — | operational conditions (changes of track, one-way running, etc.), |
| --- | --- |

—

operational conditions (changes of track, one-way running, etc.),

| — | identification of tracks that can be used for a given type of running, |
| --- | --- |

—

identification of tracks that can be used for a given type of running,

| — | the operations regime, |
| --- | --- |

—

the operations regime,

| — | the block system and associated regulations, |
| --- | --- |

—

the block system and associated regulations,

| — | station names and the position and distance-sighting of stations and signal boxes to adapt driving accordingly, |
| --- | --- |

—

station names and the position and distance-sighting of stations and signal boxes to adapt driving accordingly,

| — | transition signalling between different operating or power supply systems, |
| --- | --- |

—

transition signalling between different operating or power supply systems,

| — | speed limits for the different train categories driven, |
| --- | --- |

—

speed limits for the different train categories driven,

| — | topographical profiles, |
| --- | --- |

—

topographical profiles,

| — | particular braking conditions, for example on lines with a steep downward gradient, |
| --- | --- |

—

particular braking conditions, for example on lines with a steep downward gradient,

| — | particular operating features: special signals, signs, departure conditions, etc. |
| --- | --- |

—

particular operating features: special signals, signs, departure conditions, etc.

4.   Safety regulations

Train drivers must be able to:

| — | start the train only when all prescribed conditions are fulfilled (timetable, start order or signal, operation of signals if required, etc.), |
| --- | --- |

—

start the train only when all prescribed conditions are fulfilled (timetable, start order or signal, operation of signals if required, etc.),

| — | observe track-side or in-cab signals, interpret them immediately and without error, and act as specified, |
| --- | --- |

—

observe track-side or in-cab signals, interpret them immediately and without error, and act as specified,

| — | run the train safely according to the specific modes of operation: apply special modes if instructed, temporary speed restrictions, running in opposite direction, permission to overrun signals at danger, switching operations, turns, running through construction sites, etc., |
| --- | --- |

—

run the train safely according to the specific modes of operation: apply special modes if instructed, temporary speed restrictions, running in opposite direction, permission to overrun signals at danger, switching operations, turns, running through construction sites, etc.,

| — | respect scheduled or supplementary stops, and if necessary perform supplementary operations for passengers during these stops, notably opening and closing the doors. |
| --- | --- |

—

respect scheduled or supplementary stops, and if necessary perform supplementary operations for passengers during these stops, notably opening and closing the doors.

5.   Driving the train

Train drivers must:

| — | know the train's position on the line at all times, |
| --- | --- |

—

know the train's position on the line at all times,

| — | apply the brakes for decelerations and stops, taking account of the rolling stock and installations, |
| --- | --- |

—

apply the brakes for decelerations and stops, taking account of the rolling stock and installations,

| — | adjust the running of the train in accordance with the timetable and any orders given on saving energy, taking account of the characteristics of the traction unit, the train, the line and the environment. |
| --- | --- |

—

adjust the running of the train in accordance with the timetable and any orders given on saving energy, taking account of the characteristics of the traction unit, the train, the line and the environment.

6.   anomalies

Train drivers must be able to:

| — | be attentive, insofar as train operation permits, to unusual occurrences concerning the infrastructure and the environment: signals, tracks, energy supply, level crossings, track surrounding, other traffic, |
| --- | --- |

—

be attentive, insofar as train operation permits, to unusual occurrences concerning the infrastructure and the environment: signals, tracks, energy supply, level crossings, track surrounding, other traffic,

| — | be attentive to unusual occurrences concerning the behaviour of the train, |
| --- | --- |

—

be attentive to unusual occurrences concerning the behaviour of the train,

| — | know particular distances to clear obstacles, |
| --- | --- |

—

know particular distances to clear obstacles,

| — | inform the infrastructure manager as soon as possible of the place and nature of anomalies observed, making sure that the information has been understood, |
| --- | --- |

—

inform the infrastructure manager as soon as possible of the place and nature of anomalies observed, making sure that the information has been understood,

| — | ensure or take measures to ensure the safety of traffic and persons, whenever necessary. |
| --- | --- |

—

ensure or take measures to ensure the safety of traffic and persons, whenever necessary.

7.   Operating incidents and accidents, fires and accidents involving persons

Train drivers must be able to:

| — | take steps to protect the train and summon assistance in the event of an accident involving persons, |
| --- | --- |

—

take steps to protect the train and summon assistance in the event of an accident involving persons,

| — | determine where to stop the train in the event of a fire and facilitate the evacuation of passengers, if necessary, |
| --- | --- |

—

determine where to stop the train in the event of a fire and facilitate the evacuation of passengers, if necessary,

| — | provide useful information on the fire as soon as possible if the fire cannot be brought under control by the train driver acting alone, |
| --- | --- |

—

provide useful information on the fire as soon as possible if the fire cannot be brought under control by the train driver acting alone,

| — | after an incident, decide if the rolling stock can continue to run and under which conditions, |
| --- | --- |

—

after an incident, decide if the rolling stock can continue to run and under which conditions,

| — | inform the infrastructure manager of these conditions as soon as possible. |
| --- | --- |

—

inform the infrastructure manager of these conditions as soon as possible.

P6_TA(2005)0356

International rail passengers' rights and obligations ***I

European Parliament legislative resolution on the proposal for a regulation of the European Parliament and of the Council on International Rail Passengers' Rights and Obligations (COM(2004)0143 — C6-0003/2004 — 2004/0049(COD))

(Codecision procedure: first reading)

The European Parliament,

| — | having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0143) (1), |
| --- | --- |

—

having regard to the Commission proposal to the European Parliament and the Council (COM(2004)0143) (1),

| — | having regard to Article 251(2) and Article 71(1) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0003/2004), |
| --- | --- |

—

having regard to Article 251(2) and Article 71(1) of the EC Treaty, pursuant to which the Commission submitted the proposal to Parliament (C6-0003/2004),

| — | having regard to Rule 51 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 51 of its Rules of Procedure,

| — | having regard to the report of the Committee on Transport and Tourism (A6-0123/2005), |
| --- | --- |

—

having regard to the report of the Committee on Transport and Tourism (A6-0123/2005),

| 1. | Approves the Commission proposal as amended; |
| --- | --- |

1.

Approves the Commission proposal as amended;

| 2. | Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text; |
| --- | --- |

2.

Calls on the Commission to refer the matter to Parliament again if it intends to amend the proposal substantially or replace it with another text;

| 3. | Instructs its President to forward its position to the Council and Commission. |
| --- | --- |

3.

Instructs its President to forward its position to the Council and Commission.

---

(1)  Not yet published in OJ.

P6_TC1-COD(2004)0049

Position of the European Parliament adopted at first reading on 28 September 2005 with a view to the adoption of European Parliament and Council Regulation (EC) No .../2005 on Rail Passengers' Rights and Obligations

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 71(1) thereof,

Having regard to the proposal from the Commission,

Having regard to the opinion of the European Economic and Social Committee (1),

Having regard to the opinion of the Committee of the Regions (2),

Acting in accordance with the procedure laid down in Article 251 of the Treaty (3),

Whereas:

| (1) | In the framework of the common transport policy, it is important to safeguard the quality of rail services and users' rights
  for rail
  passengers and to improve the quality and effectiveness
  of rail

  passenger services in order to help increase the share of rail transport in relation to other modes of transport. |
| --- | --- |

(1)

In the framework of the common transport policy, it is important to safeguard the quality of rail services and users' rights
  for rail
  passengers and to improve the quality and effectiveness
  of rail

  passenger services in order to help increase the share of rail transport in relation to other modes of transport.

| (2) | The Consumer Policy Strategy 2002-2006 (4)
  seeks to achieve a high level of consumer protection in the field of transport, and to apply consumer protection in the field of transport as provided by Article 153 (2) of the Treaty. |
| --- | --- |

(2)

The Consumer Policy Strategy 2002-2006 (4)
  seeks to achieve a high level of consumer protection in the field of transport, and to apply consumer protection in the field of transport as provided by Article 153 (2) of the Treaty.

| (3) | The Convention concerning International Carriage by Rail (COTIF) of 9 May 1980 currently in force includes Uniform Rules concerning the Contract for International Carriage of Passengers and Luggage by Rail (CIV - Appendix A to the Convention). The COTIF has been amended by the Vilnius Protocol of 3 June 1999. The accession of the Community to the COTIF will be possible once the Vilnius Protocol has entered into force. It is important that this Regulation should take account of what is already provided for in the CIV. However, it is desirable to protect not only international passengers but domestic passengers too. For reasons of legal certainty it is essential, wherever the CIV already contains provisions, to avoid incorporating those provisions verbatim into this Regulation. |
| --- | --- |

(3)

The Convention concerning International Carriage by Rail (COTIF) of 9 May 1980 currently in force includes Uniform Rules concerning the Contract for International Carriage of Passengers and Luggage by Rail (CIV - Appendix A to the Convention). The COTIF has been amended by the Vilnius Protocol of 3 June 1999. The accession of the Community to the COTIF will be possible once the Vilnius Protocol has entered into force. It is important that this Regulation should take account of what is already provided for in the CIV. However, it is desirable to protect not only international passengers but domestic passengers too. For reasons of legal certainty it is essential, wherever the CIV already contains provisions, to avoid incorporating those provisions verbatim into this Regulation.

| (4) | User's rights for rail services include the receipt of information regarding the service before, during and after the journey. |
| --- | --- |

(4)

User's rights for rail services include the receipt of information regarding the service before, during and after the journey.

| (5) | The rail passenger is the weaker party to the transport contract, and the passenger's rights in this respect needs to be safeguarded. |
| --- | --- |

(5)

The rail passenger is the weaker party to the transport contract, and the passenger's rights in this respect needs to be safeguarded.

| (6) | Computerised systems used for selling rail passenger tickets can, if properly used, provide an important and useful service to rail passengers. It is therefore necessary to facilitate access to such systems on a non-discriminatory basis. |
| --- | --- |

(6)

Computerised systems used for selling rail passenger tickets can, if properly used, provide an important and useful service to rail passengers. It is therefore necessary to facilitate access to such systems on a non-discriminatory basis.

| (7) | Railway undertakings should cooperate to facilitate transfer from one network to another as well as from one operator to another and by this cooperation
  promote
  the provision of integrated tickets to rail passengers. |
| --- | --- |

(7)

Railway undertakings should cooperate to facilitate transfer from one network to another as well as from one operator to another and by this cooperation
  promote
  the provision of integrated tickets to rail passengers.

| (8) | In order to ensure that
  the rail
  passenger will benefit from the rules laid down in this Regulation, the railway undertakings offering rail passenger services should cooperate. This cooperation should be open on non-discriminatory terms to any railway undertaking offering a rail passenger service. |
| --- | --- |

(8)

In order to ensure that
  the rail
  passenger will benefit from the rules laid down in this Regulation, the railway undertakings offering rail passenger services should cooperate. This cooperation should be open on non-discriminatory terms to any railway undertaking offering a rail passenger service.

| (9) | Rail passenger services should benefit
  all
  citizens in general.
  All passengers, including passengers with a disability or other passengers with reduced mobility, have a right to
  equal opportunities for rail travel
  free from discrimination
  . |
| --- | --- |

(9)

Rail passenger services should benefit
  all
  citizens in general.
  All passengers, including passengers with a disability or other passengers with reduced mobility, have a right to
  equal opportunities for rail travel
  free from discrimination
  .

| (10) | Railway undertakings and station managers should always take account of all possible problems for people with reduced mobility, so that, when purchasing new rolling stock or making alterations to stations, information and assistance facilities and the overall accessibility of the railway network are systematically improved. |
| --- | --- |

(10)

Railway undertakings and station managers should always take account of all possible problems for people with reduced mobility, so that, when purchasing new rolling stock or making alterations to stations, information and assistance facilities and the overall accessibility of the railway network are systematically improved.

| (11) | A system of unlimited liability in case of death or injury to passengers is appropriate in the context of a safe and modern rail transport system. |
| --- | --- |

(11)

A system of unlimited liability in case of death or injury to passengers is appropriate in the context of a safe and modern rail transport system.

| (12) | The introduction of liability limits for loss of, or damage to, luggage and for damage occasioned by delay, missed connections or cancellation of a journey should lead to greater clarity and should provide incentives for
  the rail
  passenger market, to the benefit of the passengers. |
| --- | --- |

(12)

The introduction of liability limits for loss of, or damage to, luggage and for damage occasioned by delay, missed connections or cancellation of a journey should lead to greater clarity and should provide incentives for
  the rail
  passenger market, to the benefit of the passengers.

| (13) | It is desirable to relieve accident victims and their dependants of short-term financial concerns in the period immediately after the accident. |
| --- | --- |

(13)

It is desirable to relieve accident victims and their dependants of short-term financial concerns in the period immediately after the accident.

| (14) | It is important that the rules of this Regulation apply even when the passenger transport is carried out by other modes, in particular by sea or inland waterway, as a part of the railway journey or because of temporary changes. This prevalence of liability of the railway operator is in line with international conventions, in particular Article 1 (3) of the CIV, the Vilnius Protocol, and Article 2 (2) of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 2002. |
| --- | --- |

(14)

It is important that the rules of this Regulation apply even when the passenger transport is carried out by other modes, in particular by sea or inland waterway, as a part of the railway journey or because of temporary changes. This prevalence of liability of the railway operator is in line with international conventions, in particular Article 1 (3) of the CIV, the Vilnius Protocol, and Article 2 (2) of the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea 2002.

| (15) | In the case of travel provided by successive rail undertakings a passenger should be able to claim against any of the railway undertakings taking part in the transport. |
| --- | --- |

(15)

In the case of travel provided by successive rail undertakings a passenger should be able to claim against any of the railway undertakings taking part in the transport.

| (16) | It is in the interests of the rail passenger market that a high level of safety is maintained at stations as well as on board the train. |
| --- | --- |

(16)

It is in the interests of the rail passenger market that a high level of safety is maintained at stations as well as on board the train.

| (17) | In the interests of other passengers and of the railway undertaking, a passenger needs to comply with certain rules of behaviour. |
| --- | --- |

(17)

In the interests of other passengers and of the railway undertaking, a passenger needs to comply with certain rules of behaviour.

| (18) | The effects of this Regulation should be reviewed, in particular, in relation to inflation and to developments of the level of competition on the relevant rail passenger markets. |
| --- | --- |

(18)

The effects of this Regulation should be reviewed, in particular, in relation to inflation and to developments of the level of competition on the relevant rail passenger markets.

| (19) | This Regulation should be without prejudice to Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (5). |
| --- | --- |

(19)

This Regulation should be without prejudice to Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (5).

| (20) | Member States should lay down penalties applicable to infringements of this Regulation. |
| --- | --- |

(20)

Member States should lay down penalties applicable to infringements of this Regulation.

| (21) | Since the objectives of the action to be taken, that is the development of the Community's railways and the introduction of passenger rights
  in rail
  traffic, cannot be sufficiently achieved by the Member States
  alone and
  can, therefore, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives. |
| --- | --- |

(21)

Since the objectives of the action to be taken, that is the development of the Community's railways and the introduction of passenger rights
  in rail
  traffic, cannot be sufficiently achieved by the Member States
  alone and
  can, therefore, be better achieved at Community level, the Community may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve those objectives.

| (22) | The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (6), |
| --- | --- |

(22)

The measures necessary for the implementation of this Regulation should be adopted in accordance with Council Decision 1999/468/EC of 28 June 1999 laying down the procedures for the exercise of implementing powers conferred on the Commission (6),

HAVE ADOPTED THIS REGULATION:

CHAPTER ONE

GENERAL PROVISIONS

Article 1

Subject matter and Scope

1.
     
  This Regulation implements certain provisions of the Convention concerning International Carriage by Rail (COTIF) and contains a number of supplementary provisions.

2.   This Regulation establishes rights and obligations for
  all
  rail passengers.

Public service contracts, too, must guarantee at least the level of protection provided for in this Regulation. Member States may provide for more extensive rights in national law or in public service contracts. For a period of five years from the entry into force of this Regulation, Member States may request a derogation from this provision. When adopting its decision on the derogation, the Commission shall take into account the situation and development of the rail market in the Member States concerned.

3.   
  If
  the Community has concluded an agreement on rail transport with a third country, this Regulation shall also apply to international journeys to or from that country or in transit through
  it
  .

Article 2

Definitions

For the purposes of this Regulation the following definitions shall apply:

| 1) | ‘railway undertaking’ means any public or private undertaking licensed in accordance with applicable Community legislation,
  the business
  of which is
  regularly
  to provide services for the transport of passengers by rail and entailing the undertaking's provision of traction; |
| --- | --- |

1)

‘railway undertaking’ means any public or private undertaking licensed in accordance with applicable Community legislation,
  the business
  of which is
  regularly
  to provide services for the transport of passengers by rail and entailing the undertaking's provision of traction;

| 2) | ‘infrastructure manager’ means any body or undertaking that is responsible in particular for establishing and maintaining railway infrastructure, or a part thereof, as defined in Article 3 of Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways
   (7)
  , which may also include the management of infrastructure control and safety systems; the functions of the infrastructure manager on a network or part of a network may be allocated to different bodies or undertakings; |
| --- | --- |

2)

‘infrastructure manager’ means any body or undertaking that is responsible in particular for establishing and maintaining railway infrastructure, or a part thereof, as defined in Article 3 of Council Directive 91/440/EEC of 29 July 1991 on the development of the Community's railways
   (7)
  , which may also include the management of infrastructure control and safety systems; the functions of the infrastructure manager on a network or part of a network may be allocated to different bodies or undertakings;

| 3) | ‘allocation body’ means the organisation responsible for the allocation of railway infrastructure capacity; |
| --- | --- |

3)

‘allocation body’ means the organisation responsible for the allocation of railway infrastructure capacity;

| 4) | ‘charging body’ means the organisation responsible for the charging for the use of the railway infrastructure capacity; |
| --- | --- |

4)

‘charging body’ means the organisation responsible for the charging for the use of the railway infrastructure capacity;

| 5) | ‘tour operator’ means, an organiser or retailer other than a railway undertaking within the meaning of Article 2(2) and (3) of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (8); |
| --- | --- |

5)

‘tour operator’ means, an organiser or retailer other than a railway undertaking within the meaning of Article 2(2) and (3) of Council Directive 90/314/EEC of 13 June 1990 on package travel, package holidays and package tours (8);

| 6) | ‘main railway station’ means a railway station
  which the Member State concerned designates as such on account of its volume of traffic, international character and/or geographical location
  ; |
| --- | --- |

6)

‘main railway station’ means a railway station
  which the Member State concerned designates as such on account of its volume of traffic, international character and/or geographical location
  ;

| 7) | ‘station manager’ means the organisational entity in a Member State, which has been made responsible for the management and/or maintenance of railway stations; |
| --- | --- |

7)

‘station manager’ means the organisational entity in a Member State, which has been made responsible for the management and/or maintenance of railway stations;

| 8) | ‘transport contract’ means a contract between a railway undertaking and/or tour operator on the one hand and a passenger on the other hand for the provision of one or more journeys and, where applicable, one or more reservations, regardless of the railway or other transport undertaking by which the transport will be carried out and whether it will be subcontracted by the railway undertaking and/or tour operator that concludes the contract; |
| --- | --- |

8)

‘transport contract’ means a contract between a railway undertaking and/or tour operator on the one hand and a passenger on the other hand for the provision of one or more journeys and, where applicable, one or more reservations, regardless of the railway or other transport undertaking by which the transport will be carried out and whether it will be subcontracted by the railway undertaking and/or tour operator that concludes the contract;

| 9) | ‘ticket’ means a valid document serving as proof of the establishment of a transport contract and giving entitlement to transportation, or something equivalent in paperless form, including electronic form, issued or authorised by the railway undertaking; |
| --- | --- |

9)

‘ticket’ means a valid document serving as proof of the establishment of a transport contract and giving entitlement to transportation, or something equivalent in paperless form, including electronic form, issued or authorised by the railway undertaking;

| 10) | ‘season ticket’ means a transport contract which permits the holder to travel on a regular basis for a certain period of time on a certain route; |
| --- | --- |

10)

‘season ticket’ means a transport contract which permits the holder to travel on a regular basis for a certain period of time on a certain route;

| 11) | ‘reservation’ means
  a contract between a passenger and a railway undertaking, in relation to which a ticket or other evidence is made out and issued to the passenger
  ; |
| --- | --- |

11)

‘reservation’ means
  a contract between a passenger and a railway undertaking, in relation to which a ticket or other evidence is made out and issued to the passenger
  ;

| 12) | ‘through ticket’ means a ticket or tickets representing a transport contract necessary to carry out an international journey from origin to destination using a number of services and/or railway undertakings; |
| --- | --- |

12)

‘through ticket’ means a ticket or tickets representing a transport contract necessary to carry out an international journey from origin to destination using a number of services and/or railway undertakings;

| 13) | ‘international journey’ means a passenger journey by rail whereby at least one internal Community border is crossed, and which can be effected by means of an international service and/or by means of a national service for the domestic part of the journey; |
| --- | --- |

13)

‘international journey’ means a passenger journey by rail whereby at least one internal Community border is crossed, and which can be effected by means of an international service and/or by means of a national service for the domestic part of the journey;

| 14) | ‘international service’ means a rail passenger service where the train crosses at least one internal Community border; the train may be joined and/or split and the different sections may have different origins and
  destinations
  ; |
| --- | --- |

14)

‘international service’ means a rail passenger service where the train crosses at least one internal Community border; the train may be joined and/or split and the different sections may have different origins and
  destinations
  ;

| 15) | ‘delay’
  means the time between
  the
  arrival scheduled in the timetable and real-time arrival of the service
  ; alterations to the timetable which are announced to passengers at least 48 hours in advance shall not be defined as delays; |
| --- | --- |

15)

‘delay’
  means the time between
  the
  arrival scheduled in the timetable and real-time arrival of the service
  ; alterations to the timetable which are announced to passengers at least 48 hours in advance shall not be defined as delays;

| 16) | ‘cancellation’ means the suspension of a scheduled service
  with the exception of services whose cancellation is announced to passengers at least 48 hours in advance; |
| --- | --- |

16)

‘cancellation’ means the suspension of a scheduled service
  with the exception of services whose cancellation is announced to passengers at least 48 hours in advance;

| 17) | ‘Computerised
  Information and Reservation System for Rail Transport (CRST)’ means a computerised system containing information about all passenger services offered by railway undertakings; the information stored in the CRST on passenger services includes information on:






  a) | schedules and timetables of passenger services; |
| --- | --- | --- |

17)

‘Computerised
  Information and Reservation System for Rail Transport (CRST)’ means a computerised system containing information about all passenger services offered by railway undertakings; the information stored in the CRST on passenger services includes information on:

a)

schedules and timetables of passenger services;

| b) | availability of seats on passenger services; |
| --- | --- |

b)

availability of seats on passenger services;

| c) | fares and special conditions; |
| --- | --- |

c)

fares and special conditions;

| d) | accessibility of trains for Persons with Reduced Mobility; |
| --- | --- |

d)

accessibility of trains for Persons with Reduced Mobility;

| e) | facilities through which reservations can be made or tickets may be issued to the extent that some or all of these facilities are made available to subscribers; |
| --- | --- |

e)

facilities through which reservations can be made or tickets may be issued to the extent that some or all of these facilities are made available to subscribers;

| 18) | ‘system vendor’ means any entity and its affiliates which is or are responsible for the operation or marketing of Computerised Information and Reservation Systems for Rail Transport;
  railway undertakings which support their own sales by means of Computerised Information and Reservation Systems are not system vendors as defined here; |
| --- | --- |

18)

‘system vendor’ means any entity and its affiliates which is or are responsible for the operation or marketing of Computerised Information and Reservation Systems for Rail Transport;
  railway undertakings which support their own sales by means of Computerised Information and Reservation Systems are not system vendors as defined here;

| 19) | ‘person with reduced mobility’ means any person whose
  independence, whose capacity for orientation or communication or whose
  mobility is reduced due to physical, sensory or locomotory incapacity, to an intellectual impairment, age, illness, or any other cause of disability when using transport and whose situation needs special attention and the adaptation to a person's need of the service made available to all passengers; |
| --- | --- |

19)

‘person with reduced mobility’ means any person whose
  independence, whose capacity for orientation or communication or whose
  mobility is reduced due to physical, sensory or locomotory incapacity, to an intellectual impairment, age, illness, or any other cause of disability when using transport and whose situation needs special attention and the adaptation to a person's need of the service made available to all passengers;

| 20) | ‘successive railway undertaking’ means a railway undertaking performing part of an international service; |
| --- | --- |

20)

‘successive railway undertaking’ means a railway undertaking performing part of an international service;

| 21) | ‘substitute railway undertaking’ means a railway undertaking which has not concluded the transport contract with the passenger but to whom the railway undertaking has entrusted, in whole or in part, the performance of the transport; |
| --- | --- |

21)

‘substitute railway undertaking’ means a railway undertaking which has not concluded the transport contract with the passenger but to whom the railway undertaking has entrusted, in whole or in part, the performance of the transport;

| 22) | ‘CIV’ means the Uniform Rules concerning the Contract for International Carriage of Passengers and Luggage by Rail, as amended by the Vilnius Protocol, Appendix A to the COTIF. |
| --- | --- |

22)

‘CIV’ means the Uniform Rules concerning the Contract for International Carriage of Passengers and Luggage by Rail, as amended by the Vilnius Protocol, Appendix A to the COTIF.

CHAPTER II

INFORMATION AND TICKETS

Article 3

Travel information

Railway undertakings and/or tour operators shall provide to the passenger
  upon request
  the information set out in Annex I
  concerning the services which they offer
  .

Information shall be
  available
  in
  a
  format
  which is accessible and comprehensible and shall be provided free of charge
  .
  Particular attention shall be devoted to the needs of people with audio and/or visual impairment.

Railway undertakings and tour operators shall be liable for the accuracy of the information provided in print or in electronic format concerning the services which they offer.

Article 4

Transport contract and tickets

1.   By the transport contract the railway undertaking or railway undertakings shall undertake to transport the passenger as well as hand luggage and luggage to the place of destination.
  They shall transport the bicycle of the passenger in all trains, including transborder and high speed trains, possibly on payment of a charge.
  The contract must be confirmed by one or more tickets issued to the passenger. The tickets shall be considered prima facie evidence of the conclusion of the contract.
  The provisions of Articles 6 and 7 of the CIV shall apply to transport contracts.

2.   
  Without prejudice to paragraph 1,
  railway undertakings shall issue tickets which contain at least the information listed in
  Annex II.

Article 5

Access to travel information systems

1.   Without prejudice to Council Regulation (EEC) No 2299/89 of 24 July 1989 on a code of conduct for computer reservation systems (9), in particular Article 21 b thereof, paragraphs 2 to 7 below shall apply.

2.   A system
  vendor shall
  allow any railway undertaking which submits a request for this the opportunity to participate, on an equal and non-discriminatory basis, in
  distribution
  facilities within the available capacity of the system concerned, subject to any technical constraints outside the control of the system vendor.

3.   A system vendor shall not:

| a) | attach unreasonable conditions to any contract with a participating railway undertaking; |
| --- | --- |

a)

attach unreasonable conditions to any contract with a participating railway undertaking;

| b) | require the acceptance of supplementary conditions which, by their nature or according to commercial usage, have no connection with participation in its information system and shall apply the same conditions for the same level of service. |
| --- | --- |

b)

require the acceptance of supplementary conditions which, by their nature or according to commercial usage, have no connection with participation in its information system and shall apply the same conditions for the same level of service.

4.   A system vendor shall not make it a condition of participation in its information system that a participating railway undertaking may not at the same time be a participant in another system.

5.   A participating railway undertaking shall have the right to terminate its contract with a system vendor without penalty on giving at least six months' notice, expiring no earlier than the end of the first year.

6.   Loading and processing facilities provided by the system vendor shall be offered to all participating railway undertakings without discrimination.

7.   If the system vendor adds any improvement to the distribution facilities provided or the equipment used in the provision of the facilities, it shall offer these improvements to all participating railway undertakings on the same terms and conditions, subject to current technical limitations.

Article 6

Availability of Tickets, Through tickets and
  Reservations

1.   
  Railway
  undertakings shall co-operate, without prejudice to the provisions of Articles 81, 82 and 86 of the Treaty, in order to offer to the passenger through tickets for international journeys. The co-operation shall be open to any railway undertaking on a non-discriminatory basis. Services performed for the provision of tickets shall be charged on a cost related basis. Railway undertakings shall notify the co-operation agreement(s) to the Commission one year after the entry into force of this Regulation.

2.   
  Tickets must
  be distributed to passengers at least
  via
  :

| a) | ticket offices and, if available,
  accessible
  selling machines on all main railway stations or |
| --- | --- |

a)

ticket offices and, if available,
  accessible
  selling machines on all main railway stations or

| b) | telephone/
  accessible
  internet
  sites
  or any other widely available information technology without additional charges for the use of this distribution channel. |
| --- | --- |

b)

telephone/
  accessible
  internet
  sites
  or any other widely available information technology without additional charges for the use of this distribution channel.

3.
     
  Tickets issued in the framework of public service contracts must be distributed at least via:

| a) | ticket offices and, if available, accessible selling machines on all main railway stations and |
| --- | --- |

a)

ticket offices and, if available, accessible selling machines on all main railway stations and

| b) | telephone/accessible internet sites or any other widely available information technology without additional charges for the use of this distribution channel. |
| --- | --- |

b)

telephone/accessible internet sites or any other widely available information technology without additional charges for the use of this distribution channel.

4.
     
  If there is no ticket office or selling machine in the railway station of departure, passengers must at least be informed in the railway station:

| a) | about the possibility of buying a ticket by telephone, through the internet or on the train and the procedures to follow; |
| --- | --- |

a)

about the possibility of buying a ticket by telephone, through the internet or on the train and the procedures to follow;

| b) | about the nearest main railway station or place where ticket offices and/or selling machines are provided. |
| --- | --- |

b)

about the nearest main railway station or place where ticket offices and/or selling machines are provided.

5.   
  Unless, on the grounds of security, anti-fraud policy or compulsory train reservation, access to the train or the terminal is limited to holders of a valid ticket,
  railway undertakings shall offer the possibility of purchasing tickets on the train
  , in particular if the passenger was unable to purchase his ticket at the railway station of departure on any of the following grounds:

| a) | closed ticket offices; |
| --- | --- |

a)

closed ticket offices;

| b) | deficient ticket machines; |
| --- | --- |

b)

deficient ticket machines;

| c) | absence of ticket offices or ticket machines in the station of departure; |
| --- | --- |

c)

absence of ticket offices or ticket machines in the station of departure;

| d) | absence of accessible ticket offices or accessible ticket machines where the passenger is a person with reduced mobility. |
| --- | --- |

d)

absence of accessible ticket offices or accessible ticket machines where the passenger is a person with reduced mobility.

The passenger must immediately inform the competent train staff.

Article 7

Technical Specifications for Interoperability

1.
     
  In order to allow passengers to obtain the information referred to in Article 3 and to allow railway undertakings to issue tickets as referred to in Article 4 as well as through tickets and reservations as referred to in Article 6, paragraphs 2 to 4 below shall apply.

2.
     
  The Technical Specifications for Interoperability (TSI) referred to in Chapter II and Annex II(2.5)(a) (telematics applications for passengers) of Directive 2001/16/EC of the European Parliament and of the Council of 19 March 2001 on the interoperability of the trans-European conventional rail system

   (10)

  shall be applied for the purposes of this Regulation to all services offered by railway undertakings, including high-speed services.

3.
     
  One year after the adoption of this Regulation, the Commission shall, on a proposal to be submitted by the European Railway Agency, adopt the Technical Specifications for the Interoperability of telematics applications for passengers. The TSI shall enable the provision of the information in Annex I.

4.
     
  Railway undertakings shall adapt their computerised information and reservation systems according to the requirements set out in the TSI at the latest one year after adoption of the TSI by the Commission.

CHAPTER III

LIABILITY
  AND COMPENSATION IN THE EVENT OF DEATH OR INJURY OF PASSENGERS

Article 8

Death and injury of passengers

1.   The railway undertaking shall be liable in the event of death or bodily injury, whether physical or
  psychological
  , of a passenger, upon condition that the accident which caused the death or injury
  was not due to natural disasters, acts of war or terrorism
  .

2.
     
  Even if the railway undertaking contests its responsibility for bodily injury to a passenger whom it conveys, it shall remain the passenger's sole interlocutor and the only entity from which the passenger may claim compensation, without prejudice to redress on grounds of liability which the railway undertaking may seek from third parties
  .

3.   The obligation of insurance set out in Article 9 of Council Directive 95/18/EC of 19 June 1995 on the licensing of railway undertakings
   (11) as far as it relates to liability for passengers shall be understood as requiring that a railway undertaking shall be insured up to a level that is adequate to ensure that all persons entitled to compensation receive the full amount to which they are entitled in accordance with this Regulation.

The minimum insurance coverage per passenger shall be 310 000Euro.

Article

  9

Compensation in the event of death or injury of passengers

1.
     
  The liability of a railway undertaking for damages sustained in the event of death or bodily injury of a passenger shall not be subject to any financial limit.

2.
     
  For damages arising under Article 8(1) not exceeding 120 000 Euro per passenger the railway undertaking shall not be able to exclude or limit its liability. Above that amount, the railway undertaking shall not be liable for damages if it proves that it was not negligent or otherwise at fault.

3.
     
  If, through the death of a passenger, persons to whom the deceased had, or would have had, a legal duty to maintain are deprived of their support, such persons shall also be compensated for that loss.

Article 10

Advance payments

In the event of the death or injury of a passenger, the railway undertaking shall make an advance payment, to cover immediate economic needs, within 15 days from the identification of the person entitled to damages.

In the event of death this payment shall not be less than 19 000 Euro.

This advance payment shall not imply any acknowledgement of liability and may be offset against any amounts subsequently paid on account of the liability of the railway undertaking.

CHAPTER IV

LIABILITY AND COMPENSATION IN THE EVENT OF DAMAGE TO OR LOSS OF HAND LUGGAGE, OTHER LUGGAGE, VEHICLES AND ANIMALS

Article 11

Luggage, vehicles and animals

1.   
  Liability and compensation in the event of total or partial destruction or loss of or damage to hand luggage, other luggage, wheel-chairs, children's prams, bicycles or other vehicles and animals shall be governed by the provisions of the CIV, Chapter III, and in particular Articles 33 to 46 thereof.

2.   
  Without prejudice to paragraph 1, the railway undertaking or station manager that is liable for compensation in the event of total or partial destruction or loss of or damage to mobility equipment/medical equipment belonging to a passenger with reduced mobility shall pay compensation equivalent, at the maximum, to the replacement value of the equipment. Where appropriate, the railway undertaking shall also offer the passenger temporary replacement equipment.

CHAPTER V

LIABILITY,
  COMPENSATION
  AND ASSISTANCE IN THE EVENT OF DELAYS

Article 12

Delays

1.
     
  The railway undertaking shall be liable for a delay, or a delay which results in a missed connection and/or cancellation of a service for passengers and/or the transport of luggage.

2.
     
  The railway undertaking shall not be liable for a delay, missed connection or cancellation of a service if it is due to:

| (a) | exceptional weather conditions, natural disasters, acts of war or terrorism; |
| --- | --- |

(a)

exceptional weather conditions, natural disasters, acts of war or terrorism;

| (b) | circumstances outside the operation of the railway undertaking which the carrier, despite the duty of care required under the circumstances, could not prevent and whose consequences it could not prevent; |
| --- | --- |

(b)

circumstances outside the operation of the railway undertaking which the carrier, despite the duty of care required under the circumstances, could not prevent and whose consequences it could not prevent;

| (c) | the fault of the passenger, or |
| --- | --- |

(c)

the fault of the passenger, or

| (d) | the conduct of a third party, which the carrier, despite the duty of care required under the circumstances, could not prevent and whose consequences it could not prevent; another undertaking using the same railway infrastructure shall not be defined as a third party. |
| --- | --- |

(d)

the conduct of a third party, which the carrier, despite the duty of care required under the circumstances, could not prevent and whose consequences it could not prevent; another undertaking using the same railway infrastructure shall not be defined as a third party.

3.
     
  The railway undertaking and/or station manager shall also be liable for delays in the provision of assistance at the station or on board the train which lead a passenger with reduced mobility to miss a train at departure or miss a connection at arrival.

Article 13

Compensation for delays

1.
     
  The railway undertaking shall refund surcharges to the passenger if the services actually provided do not meet the criteria indicated (see Annex II, point 6) for surcharges.

2.   Without losing the right of transport, a passenger may request compensation for delays from the railway undertaking if he is facing a delay. The minimum compensations for delays
  shall be as follows:

| — | 25 % in the event of a delay of 60 minutes or more; |
| --- | --- |

—

25 % in the event of a delay of 60 minutes or more;

| — | 50 % in the event of a delay of 120 minutes or more; |
| --- | --- |

—

50 % in the event of a delay of 120 minutes or more;

| — | 75 % in the event of a delay of 180 minutes or more. |
| --- | --- |

—

75 % in the event of a delay of 180 minutes or more.

3.
     
  Passengers who hold a season ticket and who encounter recurrent delays or cancellations during the period of validity of their season ticket shall receive compensation if requested. This may be granted in various ways: free journeys, price reductions and extension of the period of validity of a season ticket
  .

Railway undertakings shall determine in advance, in close consultation with representatives of users and with the authorities in connection with public service contracts, the criteria for punctuality and reliability of the service concerned which shall be used for the purposes of applying this paragraph.

4.   The compensation referred to in paragraph 2 shall be granted within
  one month
  after the submission of the request for compensation. The compensation
  can be

  granted in vouchers and/or other services
  if their terms are flexible (in particular regarding the validity period and destination). The compensation must be paid in money at the justified request of the passenger.

5.   The compensation referred to in paragraphs 2 and 3 shall not be reduced by financial transaction costs such as fees, telephone-costs or stamps. Railway undertakings may introduce a minimum threshold under which payments for compensation will not be paid. This threshold shall not exceed 4 Euro.

6.
     
  This article shall apply without prejudice to a passenger's rights to further compensation. The compensation granted under this article may be deducted from such compensation.

Article 14

Missed connections and cancellations

1.
     
  The first priority for railway undertakings shall be to ensure connections and avoid cancellations by all available means.

2.   In the event of a delay,
  including a delay in the provision of assistance to a person with reduced mobility by the railway undertaking,
  leading to a missed connection or a cancellation of
  a service
  , paragraph 3 shall apply, except when the railway undertaking can prove that the service was
  delayed or
  cancelled solely because of exceptional circumstances.

3.   When a railway undertaking is facing a delay that will lead to a missed connection or when, before the scheduled time of departure, a railway undertaking cancels or reasonably expects to cancel
  a railway
  service, it shall make every effort to inform the passengers
  and to ensure that the final destination can be reached
  .

At the very least the passengers shall be offered a choice between:

| a) | reimbursement of the full cost of the ticket, under the conditions by which it was paid, for the part or parts of their journey not made and for the part or parts already made if
  the journey
  is no longer serving any purpose in relation to the passenger's original travel plan, together with, when relevant, a return service to the first point of departure at the earliest opportunity. The payment of the reimbursement shall be made under the same conditions as the payment for compensation referred to in Article 13(4) and (5); or |
| --- | --- |

a)

reimbursement of the full cost of the ticket, under the conditions by which it was paid, for the part or parts of their journey not made and for the part or parts already made if
  the journey
  is no longer serving any purpose in relation to the passenger's original travel plan, together with, when relevant, a return service to the first point of departure at the earliest opportunity. The payment of the reimbursement shall be made under the same conditions as the payment for compensation referred to in Article 13(4) and (5); or

| b) | continuation or re-routing, under comparable transport conditions
  granting an equivalent degree of accessibility
  , to the final destination at the earliest opportunity,
  possibly using more expensive trains, without extra costs
  ; or |
| --- | --- |

b)

continuation or re-routing, under comparable transport conditions
  granting an equivalent degree of accessibility
  , to the final destination at the earliest opportunity,
  possibly using more expensive trains, without extra costs
  ; or

| c) | continuation or re-routing, under comparable transport conditions, to the final destination at a later
  date
  . |
| --- | --- |

c)

continuation or re-routing, under comparable transport conditions, to the final destination at a later
  date
  .

Article 15

Assistance

1.   In the event of a delay, a delay leading to a missed connection or a cancellation of service, passengers shall be kept informed about the situation and the estimated departure time and estimated arrival time by the railway undertaking or by the station operator not later than ten minutes after the planned departure time or after the interruption of service.

2.   In the event of a delay, a delay leading to a missed connection or a cancellation of service, passengers shall be offered free of charge:

| a) | meals and refreshments
  where possible;
  and/or |
| --- | --- |

a)

meals and refreshments
  where possible;
  and/or

| b) | overnight
  accommodation
  , unless this is not possible in the circumstances prevailing,
  in cases where a stay of one or more nights becomes necessary or an additional stay becomes necessary; and/or |
| --- | --- |

b)

overnight
  accommodation
  , unless this is not possible in the circumstances prevailing,
  in cases where a stay of one or more nights becomes necessary or an additional stay becomes necessary; and/or

| c) | transport between the railway station and
  such
  place of accommodation (hotel or other);
  or |
| --- | --- |

c)

transport between the railway station and
  such
  place of accommodation (hotel or other);
  or

| d) | when the rail service is suspended indefinitely for a reason other than the exceptional circumstances identified in Article 12(2),
  transport between the
  affected
  railway station and the final destination of the service
  by
  an alternate transport means. |
| --- | --- |

d)

when the rail service is suspended indefinitely for a reason other than the exceptional circumstances identified in Article 12(2),
  transport between the
  affected
  railway station and the final destination of the service
  by
  an alternate transport means.

3.   Railway undertakings shall, at the request of the passenger, certify on the ticket that the rail service has suffered a delay, has lead to a missed connection or has been cancelled.
  If a railway undertaking requires such certification, it must take the necessary measures to enable passengers to obtain it simply and quickly.

4.   In applying paragraphs 1 and 2, the operating railway undertaking shall pay particular attention to the needs of passengers with reduced mobility and any accompanying persons, as well as to the needs of unaccompanied children.
  Information regarding delays or cancellations, hotel accommodation or alternative transport arrangements, reimbursement schemes, continuation or re-routing options must be communicated in a manner that is accessible. Accommodation or alternate transport arranged for passengers with reduced mobility by the railway undertaking must be accessible and adequate assistance in cases of delay or cancellation must be provided.

CHAPTER VI

COMMON PROVISIONS

Article 16

Other modes of transport

Where
  railway vehicles are carried by ferry on
  parts
  of the journey
  or where rail transport is temporary replaced by another mode of transport, Article 31 of the CIV shall apply.

Article 17

Successive railway undertakings

If
  the journey
  is performed by successive railway undertakings, the railway undertakings involved in the transport shall be jointly and severally liable in the event of death or personal injuries to the passenger, or the event of damage to or loss of luggage or of delays, delays leading to missed connections or cancellations.

Article 18

Substitute railway undertakings

Where a railway undertaking has entrusted the performance of the transport, in whole or in part, to a substitute railway undertaking, the railway undertaking shall nevertheless remain liable in respect of the entire transport
  as provided for in Article 39 of the CIV.

Article 19

Persons for whom the railway undertaking is responsible

The railway undertaking shall be liable for
  persons as provided for in Article 51 of the CIV.

Article 20

Basis of claims — aggregation of claims

In all cases where this Regulation applies, any action in respect of liability, on whatever grounds, may be brought against the railway undertaking only subject to the conditions and limitations laid down in this Regulation.

The same shall apply to any action brought against its staff or other persons for whom the railway undertaking is liable according to Article 19.

The aggregate amount of compensation payable by the railway undertaking, the substitute railway undertaking and their staff and other persons whose services they make use of for the performance of the transport shall not exceed the limits provided for in this Regulation.

Article 21

Limitation of actions

The period of limitation of actions shall be governed by Article 60 of the CIV.

Article 22

Right of recourse

Nothing in this Regulation shall prejudice the question whether a person liable for damage in accordance with its provisions has a right of recourse against any other person.

The railway undertaking shall have the right to claim compensation from the infrastructure manager to recover the compensation the railway undertaking has paid to the passengers. This infrastructure manager's liability shall be without prejudice to the application of the performance scheme laid down in Article 11 of Directive 2001/14/EC of the European Parliament and of the Council of 26 February 2001 on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification
   (12)

  and shall be proportional to the price of the train path if no compensation system is provided for in the performance scheme
  .

Article 23

Exclusion of waiver and stipulation of limits

1.   Obligations towards passengers pursuant to this Regulation shall not be limited or waived, notably by a derogation or restrictive clause in the transport contract.

2.   Railway undertakings may offer contract conditions more favourable for the passenger than the minimum conditions laid down in this Regulation.

Article 24

Exoneration

If the railway undertaking proves that the damage was caused or contributed to by the negligence or other wrongful act or omission of the person claiming compensation, or the person from whom he derives his rights, the railway undertaking shall be wholly or partly exonerated from its liability to the claimant to the extent that such negligence or wrongful act or omission caused or contributed to the damage.

CHAPTER VII

PERSONS WITH REDUCED MOBILITY

Article 25

Prevention of refusal of transport

A railway undertaking and/or a tour operator shall not refuse, on the grounds of reduced mobility, to issue a ticket and reservation for
  a
  service departing from a main railway station.

Article 26

Special facilities on board trains

If passengers with reduced mobility require special facilities on board a train, which cannot be made available without very great additional effort, the duty of the railway undertaking to convey such passengers shall apply only insofar as the available capacity permits.

Railway undertakings are called upon to increase their capacity in line with needs in this respect.

Article 27

Prohibition of fare discrimination

Railway undertakings and/or tour operators shall ensure that passengers with disabilities can purchase tickets for the same price as non-disabled passengers.

Article 28

PRM accessibility at stations and on trains

Railway undertakings and station managers shall progressively improve the accessibility of stations, platforms and trains to people with reduced mobility by eliminating all remaining obstacles when trains are renewed or replaced, or when platforms and/ or stations are renewed or newly developed.

Article 29

Assistance at railway stations

1.   On departure from, transit through or arrival at a railway station of a person with reduced
  mobility, the
  station manager shall provide assistance in such a way that the person is able to board the departing service, to change to the corresponding service or to disembark from the arriving service for which he or she purchased a ticket.

2.   The assistance referred to in paragraph 1 is provided on condition that notification is made of the person's need for such assistance to the railway undertaking and/or tour operator with which the ticket was purchased, at least
  48 hours
  before the assistance is needed.

3.   If no notification is made in accordance with
  paragraph 2
  , the station manager of the departure station, transit station or arrival station shall make all reasonable efforts to provide assistance
  as referred to in paragraph 1.

4.
     
  During the training of the railway and station staff responsible, particular attention will be paid to the main problems facing people with reduced mobility when travelling by train, so that they can provide the right assistance; this shall be done in consultation with the organisations concerned.

Article 30

Requesting assistance

1.   The station manager shall be responsible for the provision of the assistance to persons with reduced mobility.

2.   The station manager shall designate points, within and outside the
  main
  railway station, at which persons with reduced mobility can announce their arrival at the
  main
  railway station and, if need be, request assistance.

Article 31

Assistance on board

A railway undertaking,
  station manager
  and/or a tour operator shall provide to a person with reduced mobility the assistance on board of a train and during boarding and disembarking from a train
  as
  set out in
  Article 29.

Article 32

Notification of need for assistance

Railway undertakings and tour operators shall
  provide a mechanism whereby passengers with reduced mobility can notify the railway undertaking of their need for assistance, and shall advise them of such mechanism at the point of sale.

CHAPTER VIII

PERSONAL
  SECURITY OF
  PASSENGERS AND COMPLAINTS

Article 33

Personal
  security
  of passengers

1.   Railway undertakings
  and station managers
  shall take adequate measures to ensure a high level of
  personal
  security in railway stations and on trains. They shall prevent risks to passenger security and effectively address these risks where and when they occur within the sphere of their responsibility.

2.   Without prejudice to the provisions of Article 81, 82 and 86 of the Treaty, railway undertakings shall co-operate to accomplish and maintain a high level of security and to exchange information on best practices concerning the prevention of activities, which are likely to deteriorate the level of
  security.

Article 34

Independent assessment

The European Railway Agency shall perform an independent assessment of the effectiveness of self-regulation by the sector and shall facilitate comparisons between railway undertakings.

Article 35

Complaints

1.   
  Railway undertakings
  shall set up a complaint handling mechanism. The railway undertaking shall make the contact details of its complaint handling service widely known to passengers.

2.   Passengers may submit a
  complaint to
  any of the railway undertakings involved in the service, or to the point of sale where the ticket has been purchased.

3.   A complaint may be submitted
  at least
  in the language(s) of the Member States on whose territory the journey has taken
  place, or
  in
  English
  .

4.   
  The
  railway undertaking or point of sale receiving a complaint submitted under paragraph 2 is obliged to give a reasoned response to the passenger within 20 working days after receipt of the complaint. The response will indicate the possibilities for an out of court dispute settlement procedure and applicable legal redress. Where a substantial response is not possible within 20 working days due to lack of information the complainant shall be notified of the expected delay period. In any case the response to the complaint shall be available within three
  months
  .

Article 36

Addressee of claims

Claims relating to the liability of the railway undertaking shall be addressed in writing to the railway undertaking.

In the event of an international journey performed by successive railway undertakings or by one or several substitute railway undertakings the claim may be addressed to any of the railway undertakings involved in the transport. A claim addressed to one of the railway undertakings taking part in the transport shall be regarded as having been addressed also to the others.

Article 37

Passenger obligations

Without prejudice to the rights provided for in Article 6(5), passengers' obligations shall be governed by Article 9 of the CIV.

CHAPTER IX

INFORMATION AND ENFORCEMENT

Article 38

Information to passengers about their rights

Railway undertakings
  , station managers and tour operators shall inform passengers of their rights and obligations under this Regulation.

To this end, the Commission shall make a summary of this Regulation available to railway undertakings, station managers and tour operators in a language comprehensible to the passenger.

Article 39

Enforcement

1.   
  For each of Articles 3 to 38 of this Regulation,
  each Member State shall designate:

| a) | a body responsible for its enforcement, or |
| --- | --- |

a)

a body responsible for its enforcement, or

| b) | a body which mediates disputes concerning its application and which satisfies the principles set out in Commission Recommendation 2001/310/EC of 4 April 2001 on the principles for out-of-court bodies involved in the consensual resolution of consumer disputes

   (13). |
| --- | --- |

b)

a body which mediates disputes concerning its application and which satisfies the principles set out in Commission Recommendation 2001/310/EC of 4 April 2001 on the principles for out-of-court bodies involved in the consensual resolution of consumer disputes

   (13).

Where appropriate, these bodies shall take the necessary measures to ensure that the rights of passengers are respected. To this end, railway undertakings shall make contact details of the relevant Member State's designated enforcement body widely known to passengers.

The body shall be independent in its organisation, funding decisions, legal structure and decision-making from any infrastructure manager, charging body, allocation body or railway undertaking.

The Member States shall inform the Commission of the body designated in accordance with this paragraph.

2.   Each passenger may complain to any body designated under paragraph 1, or to any other competent body designated by a Member State, about an alleged infringement of this Regulation.

3.
     
  Railway undertakings and station managers shall ensure that passengers are informed in an appropriate manner, at the station and on the train, how they can contact this body.

4.
     
  The body designated pursuant to paragraph 1 shall regularly publish the number and categories of complaints received from passengers.

Article 40

Co-operation of enforcement bodies

The enforcement bodies referred to in Article 39(1) shall exchange information about their work and decision-making principles and practice for the purpose of co-ordinating their decision-making principles across the Community. The Commission shall support them in this task.

CHAPTER X

FINAL PROVISIONS

Article 41

Penalties

The Member States shall lay down the rules on penalties applicable to infringements of the provisions of this Regulation and shall take all measures necessary to ensure that they are implemented. The penalties provided for must be effective, proportionate and dissuasive. The Member States shall notify those provisions to the Commission by ... (14) at the latest and shall notify it without delay of any subsequent amendment affecting them.

Article 42

Annexes

The annexes shall be modified in accordance with the procedure referred to in Article 44 (2).

Article 43

Amending provisions

1.   The measures necessary for the implementation of Articles 3 to 6 and 28 to 32 shall be adopted in accordance with the procedure referred to in Article 44(2).

2.   The amounts referred to in Articles 10 and 13 shall be modified in accordance with the procedure referred to in Article 44(2).

Article 44

Committee

1.   The Commission shall be assisted by the Committee instituted by Article 11a of Directive 91/440/EEC.

2.   Where reference is made to this paragraph, Articles 5 and 7 of Decision 1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.

The period laid down in Article 5(6) of Decision 1999/468/EC shall be set at three months.

3.   The Committee shall adopt its Rules of Procedure.

Article 45

Report

The Commission shall report to the European Parliament and the Council on the implementation and the results of this Regulation three years after its entry into force, in particular on the service quality levels.

The report will be based on information to be provided pursuant Article 40(1) of this Regulation as well as Article 10b of Directive 91/440/EEC. The report shall be accompanied where necessary by appropriate proposals.

Article 46

This Regulation shall enter into force
  one year
  after the date of its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at ...

For the European Parliament

The President

For the Council

The President

---

(1)  
  OJ C 221, 8.9.2005, p. 8
  .

1

OJ C 221, 8.9.2005, p. 8

(2)  
  OJ C 71, 22.3.2005, p. 26
  .

2

OJ C 71, 22.3.2005, p. 26

(3)  Position of the European Parliament of 28 September 2005.

3

Position of the European Parliament of 28 September 2005.

(4)  
  OJ C 137, 8.6.2002, p. 2
  .

4

OJ C 137, 8.6.2002, p. 2

(5)  OJ L 281, 23.11.1995, p. 31
  . Directive amended by Regulation (EC) No 1882/2003 (

  OJ L 284, 31.10.2003, p. 1
  ).

5

. Directive amended by Regulation (EC) No 1882/2003 (

OJ L 284, 31.10.2003, p. 1

(6)  OJ L 184, 17.7.1999, p. 23.

6

(7)  
  OJ L 237, 24.8.1991, p. 25
  . Directive last amended by the 2003 Act of Accession.

7

OJ L 237, 24.8.1991, p. 25

Directive last amended by the 2003 Act of Accession

(8)  OJ L 158, 23.6.1990, p. 59.

8

(9)  OJ L 220, 29.7.1989, p. 1
  . Regulation last amended by Regulation (EC) No 323/1999 (

  OJ L 40, 13.2.1999, p. 1
  ).

9

. Regulation last amended by Regulation (EC) No 323/1999 (

OJ L 40, 13.2.1999, p. 1

(10)  

  OJ L 110, 20.4.2001, p. 1

  .
  Directive last amended by Directive 2004/50/EC
  (

  OJ L 164, 30.4.2004, p. 114

  ).

10

OJ L 110, 20.4.2001, p. 1

Directive last amended by Directive 2004/50/EC

OJ L 164, 30.4.2004, p. 114

(11)  
  OJ L 143, 27.6.1995, p. 70
  . Directive last amended by Directive 2004/49/EC of the European Parliament and of the Council (
  OJ L 164, 30.4.2004, p. 44
  ).

11

OJ L 143, 27.6.1995, p. 70

Directive last amended by Directive 2004/49/EC of the European Parliament and of the Council

OJ L 164, 30.4.2004, p. 44

(12)  OJ L 75, 15.3.2001, p. 29. Directive last amended by Directive 2004/49/EC.

12

Directive last amended by Directive 2004/49/EC

(13)  

  OJ L 109, 19.4.2001, p. 56

  .

13

OJ L 109, 19.4.2001, p. 56

(14)  Six months after the entry into force of this Regulation.

14

ANNEX I

MINIMUM INFORMATION TO BE PROVIDED BY RAILWAY UNDERTAKINGS

Pre journey information

| — | All relevant conditions applicable to the contract; |
| --- | --- |

—

All relevant conditions applicable to the contract;

| — | Time schedules and conditions for the fastest trip; |
| --- | --- |

—

Time schedules and conditions for the fastest trip;

| — | Time schedules and conditions for the lowest fares; |
| --- | --- |

—

Time schedules and conditions for the lowest fares;

| — | Accessibility and access conditions for PRM; |
| --- | --- |

—

Accessibility and access conditions for PRM;

| — | Accessibility and access conditions for bikes
  and other vehicles
  ; |
| --- | --- |

—

Accessibility and access conditions for bikes
  and other vehicles
  ;

| — | Availability of seats in smoking and non-smoking, first and second class as well as couchettes and sleeping carriages; |
| --- | --- |

—

Availability of seats in smoking and non-smoking, first and second class as well as couchettes and sleeping carriages;

| — | Any activities likely to disrupt or delay services; |
| --- | --- |

—

Any activities likely to disrupt or delay services;

| — | Availability of on board services; |
| --- | --- |

—

Availability of on board services;

| — | Information about intermodal options (bus, tram, underground train, light rail, bicycle hire, etc.) upon arrival; |
| --- | --- |

—

Information about intermodal options (bus, tram, underground train, light rail, bicycle hire, etc.) upon arrival;

| — | Information about procedures and contact details for the submission of complaints and for use in the event of loss of luggage. |
| --- | --- |

—

Information about procedures and contact details for the submission of complaints and for use in the event of loss of luggage.

Information during the journey

| — | On board services |
| --- | --- |

—

On board services

| — | Next station |
| --- | --- |

—

Next station

| — | Delays |
| --- | --- |

—

Delays

| — | Main connecting services |
| --- | --- |

—

Main connecting services

| — | Security and safety issues |
| --- | --- |

—

Security and safety issues

This information shall be provided at least in the languages of the Member States through which the service is carried out.

Information after the journey

| — | Procedures and places for lost luggage |
| --- | --- |

—

Procedures and places for lost luggage

| — | Procedures
  and
  contact
  details
  for submission of complaints |
| --- | --- |

—

Procedures
  and
  contact
  details
  for submission of complaints

This information shall be provided at least in the languages of the Member States where the service is provided.

ANNEX II

MINIMUM INFORMATION TO BE PROVIDED ON THE TICKET

Railway Undertaking(s) carrying out the transport;

Validity of the tickets (dates; services; class);

Indication whether the ticket must be validated before the journey and conditions of use of the ticket;

Indication whether, and until when, a refund is possible;

Price, including taxes and other charges;

Criteria such as comfort, high speed, etc., on account of which surcharges make the ticket or the services on offer more expensive than conventional services.

P6_TA(2005)0357

25th anniversary of Solidarity and its message for Europe

European Parliament resolution on the 25th Anniversary of Solidarity and its message for Europe

The European Parliament,

| — | having regard to Rule 103(4) of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 103(4) of its Rules of Procedure,

| A. | whereas the founding fathers of the European Union proclaimed that the unification of Europe would not be complete until the enslavement of central and eastern Europe ceased to exist and the Iron Curtain was shattered, |
| --- | --- |

A.

whereas the founding fathers of the European Union proclaimed that the unification of Europe would not be complete until the enslavement of central and eastern Europe ceased to exist and the Iron Curtain was shattered,

| B. | whereas the enlargement of the European Union on 1 May 2004 was an act unifying Europe around common values and aims which united countries, nations and citizens of the European Union, |
| --- | --- |

B.

whereas the enlargement of the European Union on 1 May 2004 was an act unifying Europe around common values and aims which united countries, nations and citizens of the European Union,

| C. | believing that the accomplishment of the aims of the European Union should be reinforced by conscientious actions of nations and citizens of Europe seeking freedom and solidarity, |
| --- | --- |

C.

believing that the accomplishment of the aims of the European Union should be reinforced by conscientious actions of nations and citizens of Europe seeking freedom and solidarity,

| D. | recalling that the mass strikes led by workers which took place in many Polish cities in July and August 1980 were an expression of rejection of a system of totalitarian enslavement, |
| --- | --- |

D.

recalling that the mass strikes led by workers which took place in many Polish cities in July and August 1980 were an expression of rejection of a system of totalitarian enslavement,

| E. | recalling that the strike under the leadership of Lech Wałęsa, which took place between 14 and 31 August 1980 in the shipyard of Gdańsk under the eyes of Europe and the entire world, was conducted with extraordinary bravery and determination in the name of fundamental European values, and that the ‘21 postulates’ formulated by the shipyard workers from Gdańsk opened a new chapter in the European fight for ‘bread and freedom’, |
| --- | --- |

E.

recalling that the strike under the leadership of Lech Wałęsa, which took place between 14 and 31 August 1980 in the shipyard of Gdańsk under the eyes of Europe and the entire world, was conducted with extraordinary bravery and determination in the name of fundamental European values, and that the ‘21 postulates’ formulated by the shipyard workers from Gdańsk opened a new chapter in the European fight for ‘bread and freedom’,

| F. | expressing its esteem for the Gdańsk Accords signed on 31 August 1980 which, in a totalitarian system, created a 500-day space of freedom for the independent and self-governing trade union Solidarność, with its 10 million members, and gave rise to a powerful citizens' movement uniting all significant social spheres of Poland, |
| --- | --- |

F.

expressing its esteem for the Gdańsk Accords signed on 31 August 1980 which, in a totalitarian system, created a 500-day space of freedom for the independent and self-governing trade union Solidarność, with its 10 million members, and gave rise to a powerful citizens' movement uniting all significant social spheres of Poland,

| G. | recalling the message to the working people of eastern Europe addressed by the First Convention of Solidarność in the name of the common fight for human rights in that part of Europe, |
| --- | --- |

G.

recalling the message to the working people of eastern Europe addressed by the First Convention of Solidarność in the name of the common fight for human rights in that part of Europe,

| H. | recalling that Polish society defended its rights and beliefs with courage and determination, particularly in the face of the martial law introduced by the Communist government on 13 December 1981 against Solidarność and against Polish society's aspirations for freedom, |
| --- | --- |

H.

recalling that Polish society defended its rights and beliefs with courage and determination, particularly in the face of the martial law introduced by the Communist government on 13 December 1981 against Solidarność and against Polish society's aspirations for freedom,

| I. | recalling the broad recognition of and support for the events of August 1980, and the support for the Solidarność movement from free societies in Europe during the period of the trade union's legal existence, as well as after the declaration of martial law, and expressing the belief that the historic impulse of Solidarność was one of the most important moments in the formation of a European public space, |
| --- | --- |

I.

recalling the broad recognition of and support for the events of August 1980, and the support for the Solidarność movement from free societies in Europe during the period of the trade union's legal existence, as well as after the declaration of martial law, and expressing the belief that the historic impulse of Solidarność was one of the most important moments in the formation of a European public space,

| J. | recognising that the Solidarność movement applied peaceful means in the fight against a totalitarian system, and was one of the most significant movements in Europe which rejected violence, |
| --- | --- |

J.

recognising that the Solidarność movement applied peaceful means in the fight against a totalitarian system, and was one of the most significant movements in Europe which rejected violence,

| K. | acknowledging that the Polish motto ‘there is no liberty without Solidarity’ is important for the whole of Europe and the world, |
| --- | --- |

K.

acknowledging that the Polish motto ‘there is no liberty without Solidarity’ is important for the whole of Europe and the world,

| L. | recognising that the peaceful success of Solidarność had an influence on other movements fighting for human rights, and believing that it is still a role model for countries that are deprived of freedom, |
| --- | --- |

L.

recognising that the peaceful success of Solidarność had an influence on other movements fighting for human rights, and believing that it is still a role model for countries that are deprived of freedom,

| M. | expressing the belief that the historic events of August 1980 were significant for the whole of Europe, and that the strike of shipyard workers in Gdańsk, as well as the Gdańsk Accords, may be treated as the beginning of the collapse of the Communist system, the end of the Cold War, the end of the division of Europe and the fall of the Berlin Wall, |
| --- | --- |

M.

expressing the belief that the historic events of August 1980 were significant for the whole of Europe, and that the strike of shipyard workers in Gdańsk, as well as the Gdańsk Accords, may be treated as the beginning of the collapse of the Communist system, the end of the Cold War, the end of the division of Europe and the fall of the Berlin Wall,

| 1. | Expresses its deepest esteem and gratitude to the Polish workers and to all people of central and eastern Europe who fought for human rights, freedom, solidarity and the unity of Europe; |
| --- | --- |

1.

Expresses its deepest esteem and gratitude to the Polish workers and to all people of central and eastern Europe who fought for human rights, freedom, solidarity and the unity of Europe;

| 2. | Recognises that, in order to commemorate this effort and to place it in the collective memory of Europe, 31 August is to be celebrated as the Day of Freedom and Solidarity; |
| --- | --- |

2.

Recognises that, in order to commemorate this effort and to place it in the collective memory of Europe, 31 August is to be celebrated as the Day of Freedom and Solidarity;

| 3. | Calls on the Council and the Commission to raise awareness that Solidarność is part of European education and culture; |
| --- | --- |

3.

Calls on the Council and the Commission to raise awareness that Solidarność is part of European education and culture;

| 4. | Instructs its President to forward this resolution to the Council, the Commission and the parliaments and governments of the Member States. |
| --- | --- |

4.

Instructs its President to forward this resolution to the Council, the Commission and the parliaments and governments of the Member States.

P6_TA(2005)0358

Territorial cohesion in regional development

European Parliament resolution on the role of territorial cohesion in regional development (2004/2256(INI))

The European Parliament,

| — | having regard to the Treaty establishing a Constitution for Europe, and in particular to Articles I-3, I-14, II-96, III-220, III-363, paragraph 3 and Article 8 of the Protocol on the application of the principles of subsidiarity and proportionality, |
| --- | --- |

—

having regard to the Treaty establishing a Constitution for Europe, and in particular to Articles I-3, I-14, II-96, III-220, III-363, paragraph 3 and Article 8 of the Protocol on the application of the principles of subsidiarity and proportionality,

| — | having regard to the Treaty on European Union and the Treaty establishing the European Community, as amended by the Single European Act and the Treaties of Maastricht, Amsterdam and Nice, and in particular Articles 158 and 159 of the Treaty establishing the European Community, |
| --- | --- |

—

having regard to the Treaty on European Union and the Treaty establishing the European Community, as amended by the Single European Act and the Treaties of Maastricht, Amsterdam and Nice, and in particular Articles 158 and 159 of the Treaty establishing the European Community,

| — | having regard to its resolutions of 7 February 2002 (1) and 22 April 2004 (2) respectively on the Commission's Second and Third reports on economic and social cohesion, |
| --- | --- |

—

having regard to its resolutions of 7 February 2002 (1) and 22 April 2004 (2) respectively on the Commission's Second and Third reports on economic and social cohesion,

| — | having regard to its resolution of 2 September 2003 on structurally disadvantaged regions (islands, mountain regions, regions with low population density) in the context of cohesion policy, and their institutional prospects (3), |
| --- | --- |

—

having regard to its resolution of 2 September 2003 on structurally disadvantaged regions (islands, mountain regions, regions with low population density) in the context of cohesion policy, and their institutional prospects (3),

| — | having regard to its resolution of 29 June 1995 on the Commission document ‘Europe 2000+, Cooperation for European territorial development’ (4), |
| --- | --- |

—

having regard to its resolution of 29 June 1995 on the Commission document ‘Europe 2000+, Cooperation for European territorial development’ (4),

| — | having regard to the European Spatial Development Perspective (ESDP) adopted in Potsdam in 1999 by the Informal Council of EU Ministers responsible for Spatial Planning, |
| --- | --- |

—

having regard to the European Spatial Development Perspective (ESDP) adopted in Potsdam in 1999 by the Informal Council of EU Ministers responsible for Spatial Planning,

| — | having regard to the White Paper on European Governance adopted by the Commission in July 2001 (COM(2001)0428), |
| --- | --- |

—

having regard to the White Paper on European Governance adopted by the Commission in July 2001 (COM(2001)0428),

| — | having regard to the opinion of the Committee of the Regions of 10 April 2003 on ‘Territorial cohesion in Europe’ (5), |
| --- | --- |

—

having regard to the opinion of the Committee of the Regions of 10 April 2003 on ‘Territorial cohesion in Europe’ (5),

| — | having regard to the reports of the European Spatial Planning Observatory Network (ESPON), including that of 2004 on territorial cohesion and the spring 2005 interim report entitled ‘In search of territorial potentials’, |
| --- | --- |

—

having regard to the reports of the European Spatial Planning Observatory Network (ESPON), including that of 2004 on territorial cohesion and the spring 2005 interim report entitled ‘In search of territorial potentials’,

| — | having regard to the study carried out in February 2005 by Notre Europe, at the request of the Committee on Regional Development, on the future of the cohesion policy, |
| --- | --- |

—

having regard to the study carried out in February 2005 by Notre Europe, at the request of the Committee on Regional Development, on the future of the cohesion policy,

| — | having regard to the conclusions of the informal Council of Ministers responsible for spatial planning held on 29 November 2004 in Rotterdam, |
| --- | --- |

—

having regard to the conclusions of the informal Council of Ministers responsible for spatial planning held on 29 November 2004 in Rotterdam,

| — | having regard to the conclusions of the informal Council of Ministers on regional policy and territorial cohesion of 20 and 21 May 2005, and its intention to draft by 2007 a document entitled ‘The Territorial State and Perspectives of the European Union’, |
| --- | --- |

—

having regard to the conclusions of the informal Council of Ministers on regional policy and territorial cohesion of 20 and 21 May 2005, and its intention to draft by 2007 a document entitled ‘The Territorial State and Perspectives of the European Union’,

| — | having regard to Rule 45 of its Rules of Procedure, |
| --- | --- |

—

having regard to Rule 45 of its Rules of Procedure,

| — | having regard to the report of the Committee on Regional Development (A6-0251/2005), |
| --- | --- |

—

having regard to the report of the Committee on Regional Development (A6-0251/2005),

| A. | whereas cohesion, since it aims to promote harmonious and uniform development throughout the territory of the EU, represents one of the strategic objectives of the Union, and whereas, following enlargement, the Union must further enhance the effectiveness of cohesion policy, given the much greater disparities which are becoming apparent in the Community of 25 Member States, |
| --- | --- |

A.

whereas cohesion, since it aims to promote harmonious and uniform development throughout the territory of the EU, represents one of the strategic objectives of the Union, and whereas, following enlargement, the Union must further enhance the effectiveness of cohesion policy, given the much greater disparities which are becoming apparent in the Community of 25 Member States,

| B. | whereas territorial cohesion is becoming a new objective of the Union and enriches the objective of economic and social cohesion by giving it a transversal dimension applicable to the whole territory and all Community policies, |
| --- | --- |

B.

whereas territorial cohesion is becoming a new objective of the Union and enriches the objective of economic and social cohesion by giving it a transversal dimension applicable to the whole territory and all Community policies,

| C. | whereas a territorial cohesion policy at EU level is of crucial importance for the development of the Union by supplying a fundamental ‘Community Added Value,’ which is capable of enhancing sustainable development prospects, |
| --- | --- |

C.

whereas a territorial cohesion policy at EU level is of crucial importance for the development of the Union by supplying a fundamental ‘Community Added Value,’ which is capable of enhancing sustainable development prospects,

| D. | whereas the ultimate aim of territorial cohesion is to ensure that the territory as a whole develops to the maximum extent, avoiding geographical concentrations of activities, and to improve the conditions of life for all those who live there, guaranteeing in particular equality between men and women, |
| --- | --- |

D.

whereas the ultimate aim of territorial cohesion is to ensure that the territory as a whole develops to the maximum extent, avoiding geographical concentrations of activities, and to improve the conditions of life for all those who live there, guaranteeing in particular equality between men and women,

| E. | whereas regional natural resources and their industrial processing are of great importance for the development of the regions but also for the European Union as a whole, and consequently benefit all citizens of the Union, |
| --- | --- |

E.

whereas regional natural resources and their industrial processing are of great importance for the development of the regions but also for the European Union as a whole, and consequently benefit all citizens of the Union,

| F. | whereas it is necessary to incorporate the territorial dimension into Community policies, given the real impact of sectoral policies — particularly transport, environment, competition and research policy — on the territory of the Union, |
| --- | --- |

F.

whereas it is necessary to incorporate the territorial dimension into Community policies, given the real impact of sectoral policies — particularly transport, environment, competition and research policy — on the territory of the Union,

| G. | whereas the mid-term review of the Lisbon and Gothenburg strategies was relatively disappointing as regards the desirability of including the territorial dimension in the EU's priority objectives, |
| --- | --- |

G.

whereas the mid-term review of the Lisbon and Gothenburg strategies was relatively disappointing as regards the desirability of including the territorial dimension in the EU's priority objectives,

| H. | whereas the method for setting the Community's strategic guidelines on cohesion policy now includes territorial cohesion as a purpose for which the Funds may be used, |
| --- | --- |

H.

whereas the method for setting the Community's strategic guidelines on cohesion policy now includes territorial cohesion as a purpose for which the Funds may be used,

| 1. | Considers that territorial cohesion is a fundamental objective of regional planning in the Union and provides the raison d'être for regional development policy; |
| --- | --- |

1.

Considers that territorial cohesion is a fundamental objective of regional planning in the Union and provides the raison d'être for regional development policy;

| 2. | Notes that territorial cohesion is based on the principle of equity between citizens, wherever they live in the Union; |
| --- | --- |

2.

Notes that territorial cohesion is based on the principle of equity between citizens, wherever they live in the Union;

| 3. | Calls, therefore, for regional development to be founded on programmes which guarantee equality of treatment between the EU's territories, while preserving their diversity, which inter alia implies appropriate accessibility of services of general interest (SGI) and services of general economic interest (SGEI); |
| --- | --- |

3.

Calls, therefore, for regional development to be founded on programmes which guarantee equality of treatment between the EU's territories, while preserving their diversity, which inter alia implies appropriate accessibility of services of general interest (SGI) and services of general economic interest (SGEI);

| 4. | Calls for the territorial dimension to be considered as a major element in the Lisbon and Gothenburg strategies; |
| --- | --- |

4.

Calls for the territorial dimension to be considered as a major element in the Lisbon and Gothenburg strategies;

| 5. | Reiterates that the harmonious development of the whole territory of the EU must be founded on the application of a polycentric spatial development model, parity of access to infrastructure and knowledge and wise management of the natural and cultural heritage, as proposed by the ESDP; |
| --- | --- |

5.

Reiterates that the harmonious development of the whole territory of the EU must be founded on the application of a polycentric spatial development model, parity of access to infrastructure and knowledge and wise management of the natural and cultural heritage, as proposed by the ESDP;

| 6. | Urges that initial priority should be given to combating distortions between the centre and the periphery and disparities at sub-national level, so as to strengthen cohesion; |
| --- | --- |

6.

Urges that initial priority should be given to combating distortions between the centre and the periphery and disparities at sub-national level, so as to strengthen cohesion;

| 7. | Stresses, with this in mind, the importance of cooperation and partnership between urban centres, suburban areas, and the countryside, particularly those with specific disadvantages; |
| --- | --- |

7.

Stresses, with this in mind, the importance of cooperation and partnership between urban centres, suburban areas, and the countryside, particularly those with specific disadvantages;

| 8. | Further stresses the role of towns, particularly small and medium-sized towns, as a specially important motor for growth and territorial balance; |
| --- | --- |

8.

Further stresses the role of towns, particularly small and medium-sized towns, as a specially important motor for growth and territorial balance;

| 9. | Calls for a boost to be given to all dimensions of territorial cooperation, whether cross-border, trans-national or inter-regional; |
| --- | --- |

9.

Calls for a boost to be given to all dimensions of territorial cooperation, whether cross-border, trans-national or inter-regional;

| 10. | Hopes for the implementation of a mechanism for cross-fertilisation between sector-specific policies with a major impact on the development of the EU's territories and regional development policy; |
| --- | --- |

10.

Hopes for the implementation of a mechanism for cross-fertilisation between sector-specific policies with a major impact on the development of the EU's territories and regional development policy;

| 11. | Calls for the measures advocated in the July 2001 White Paper on European Governance to be put into practice with a view to achieving genuine multi-level and multi-sectoral governance with enhanced cooperation between territorial actors at three levels: regional, national and European; considers that this cooperation should be based on the principle of partnership with all appropriate parties; |
| --- | --- |

11.

Calls for the measures advocated in the July 2001 White Paper on European Governance to be put into practice with a view to achieving genuine multi-level and multi-sectoral governance with enhanced cooperation between territorial actors at three levels: regional, national and European; considers that this cooperation should be based on the principle of partnership with all appropriate parties;

| 12. | Reaffirms that the principle of ‘One Fund per Programme’ makes it possible to strengthen the integrated approach of the cohesion policy, and is at the very heart of the policy of territorial cohesion; |
| --- | --- |

12.

Reaffirms that the principle of ‘One Fund per Programme’ makes it possible to strengthen the integrated approach of the cohesion policy, and is at the very heart of the policy of territorial cohesion;

| 13. | Calls on the Commission, with a view to measuring the development of the regions and evaluating objectively the obstacles — and in particular the specific territorial disadvantages — in its way, to carry out a study alongside GDP, on new territorial indicators, namely the decentralisation and accessibility index, infrastructure and transport provision, the level of activity in research and innovation, education and training, level of diversification of production in the area, and the unemployment rate; |
| --- | --- |

13.

Calls on the Commission, with a view to measuring the development of the regions and evaluating objectively the obstacles — and in particular the specific territorial disadvantages — in its way, to carry out a study alongside GDP, on new territorial indicators, namely the decentralisation and accessibility index, infrastructure and transport provision, the level of activity in research and innovation, education and training, level of diversification of production in the area, and the unemployment rate;

| 14. | Calls on the Commission to establish, by means of Epson, a system for the assessment of the impact of the various Community policies on territorial cohesion within the Union and stresses the role of the European Parliament in the process of further evaluation of the outcomes, |
| --- | --- |

14.

Calls on the Commission to establish, by means of Epson, a system for the assessment of the impact of the various Community policies on territorial cohesion within the Union and stresses the role of the European Parliament in the process of further evaluation of the outcomes,

| 15. | Reiterates the call made in the Third report on economic and social cohesion of February 2004 for Parliament and the Council to adopt a ‘Community Cohesion Strategy’, which would set out clear priorities and concrete guidelines for the States and regions, forming the regional plank of the Union's sustainable development strategy, based on the principles and policy aims of the ESDP; |
| --- | --- |

15.

Reiterates the call made in the Third report on economic and social cohesion of February 2004 for Parliament and the Council to adopt a ‘Community Cohesion Strategy’, which would set out clear priorities and concrete guidelines for the States and regions, forming the regional plank of the Union's sustainable development strategy, based on the principles and policy aims of the ESDP;

| 16. | Calls, finally, on the Commission to draw up before 2007 a White Paper on the objective of territorial cohesion, indicating, in particular, how this objective is to be incorporated in the national strategic plan of each Member State; |
| --- | --- |

16.

Calls, finally, on the Commission to draw up before 2007 a White Paper on the objective of territorial cohesion, indicating, in particular, how this objective is to be incorporated in the national strategic plan of each Member State;

| 17. | Instructs its President to forward this resolution to the Council and Commission. |
| --- | --- |

17.

Instructs its President to forward this resolution to the Council and Commission.

---

(1)  OJ C 284 E, 21.11.2002, p. 329.

(2)  OJ C 104 E, 30.4.2004, p. 1000.

(3)  OJ C 76 E, 25.3.2004, p. 111.

(4)  OJ C 183, 17.7.1995, p. 39.

(5)  OJ C 244, 10.10.2003, p. 23.

P6_TA(2005)0359

Partnership for the outermost regions

European Parliament resolution on a stronger partnership for the outermost regions (2004/2253(INI))

The European Parliament,

| — | having regard to the Commission Communications of 26 May 2004 entitled ‘A stronger partnership for the outermost regions’ (COM(2004)0343) and of 6 August 2004 on a stronger partnership strengthened for the outermost regions: assessment and prospects (COM(2004)0543), and to the annex to the latter (SEC(2004)1030), |
| --- | --- |

—

having regard to the Commission Communications of 26 May 2004 entitled ‘A stronger partnership for the outermost regions’ (COM(2004)0343) and of 6 August 2004 on a stronger partnership strengthened for the outermost regions: assessment and prospects (COM(2004)0543), and to the annex to the latter (SEC(2004)1030),

| — | having regard to the process which has served to establish the special status of the outermost regions in primary EU law (Article 299(2) of the EC Treaty) and to the substance and legal scope of that status, |
| --- | --- |

—

having regard to the process which has served to establish the special status of the outermost regions in primary EU law (Article 299(2) of the EC Treaty) and to the substance and legal scope of that status,

| — | having regard to Community action as a whole in aid of the outermost regions, |
| --- | --- |

—

having regard to Community action as a whole in aid of the outermost regions,

| — | having regard to paragraph 58 of the Presidency Conclusions of the Seville European Council of 21 and 22 June 2002, which formed the basis for the above-mentioned Commission Communications on a stronger partnership for the outermost regions, |
| --- | --- |

—

having regard to paragraph 58 of the Presidency Conclusions of the Seville European Council of 21 and 22 June 2002, which formed the basis for the above-mentioned Commission Communications on a stronger partnership for the outermost regions,

| — | having regard to the memorandum by Spain, France, Portugal and the outermost regions on measures to build on Article 299(2) of the EC Treaty and to the contribution of the outermost regions to that memorandum, sent to the Commission on 2 June 2003, |
| --- | --- |

—

having regard to the memorandum by Spain, France, Portugal and the outermost regions on measures to build on Article 299(2) of the EC Treaty and to the contribution of the outermost regions to that memorandum, sent to the Commission on 2 June 2003,

| — | having regard to the report by the Presidents of the Outermost Regions on the Commission Communication entitled ‘A stronger partnership for the outermost regions’, sent to the Commission on 17 June 2004, |
| --- | --- |

—

having regard to the report by the Presidents of the Outermost Regions on the Commission Communication entitled ‘A stronger partnership for the outermost regions’, sent to the Commission on 17 June 2004,

| — | having regard to paragraph 47, final indent, of the Presidency Conclusions of the Brussels European Council of 17 and 18 June 2004, |
| --- | --- |

—

having regard to paragraph 47, final indent, of the Presidency Conclusions of the Brussels European Council of 17 and 18 June 2004,

| — | having regard to the Final Declaration of the Tenth Conference of Presidents of the Outermost Regions, held in Ponta Delgada on 2 September 2004, |
| --- | --- |

—

having regard to the Final Declaration of the Tenth Conference of Presidents of the Outermost Regions, held in Ponta Delgada on 2 September 2004,

| — | having regard to the opinions of the Committee of the Regions of 18 November 2004 on the Commission Communication entitled ‘A stronger partnership for the outermost regions’ (1) and of 13 December 2000 on the outermost regions of the EU and implementation of Article 299 (2), |
| --- | --- |

—

having regard to the opinions of the Committee of the Regions of 18 November 2004 on the Commission Communication entitled ‘A stronger partnership for the outermost regions’ (1) and of 13 December 2000 on the outermost regions of the EU and implementation of Article 299 (2),

| — | having regard to the opinions of the European Economic and Social Committee of 19 July 2005 on the Commission Communication entitled ‘A stronger partnership for the outermost regions’ (CES/847/2005) and of 29 May 2002 on the future strategy for the outermost regions of the European Union (3), |
| --- | --- |

—

having regard to the opinions of the European Economic and Social Committee of 19 July 2005 on the Commission Communication entitled ‘A stronger partnership for the outermost regions’ (CES/847/2005) and of 29 May 2002 on the future strategy for the outermost regions of the European Union (3),

| — | having regard to its previous resolutions and opinions concerning the position of the outermost regions, in particular its resolution of 25 October 2000 on the measures to implement Article 299(2): the outermost regions of the European Union (4), |
| --- | --- |

—

having regard to its previous resolutions and opinions concerning the position of the outermost regions, in particular its resolution of 25 October 2000 on the measures to implement Article 299(2): the outermost regions of the European Union (4),

| — | having regard to the Commission Communication of 26 February 2004 entitled ‘Building our common Future — Policy challenges and Budgetary means of the Enlarged Union 2007-2013’ (COM(2004)0101), |
| --- | --- |

—

having regard to the Commission Communication of 26 February 2004 entitled ‘Building our common Future — Policy challenges and Budgetary means of the Enlarged Union 2007-2013’ (COM(2004)0101),

| — | having regard to the Commission Communication of 18 February 2004 entitled ‘Third progress report on economic and social cohesion’ (COM(2004)0107); its resolution of 22 April 2004 on the third report on economic and social cohesion (5); and the opinion of the Committee of the Regions of 16 June 2004 on the third report on economic and social cohesion (6) and the opinion of the European Economic and Social Committee of 30 June 2004 on the third report on economic and social cohesion (7), |
| --- | --- |

—

having regard to the Commission Communication of 18 February 2004 entitled ‘Third progress report on economic and social cohesion’ (COM(2004)0107); its resolution of 22 April 2004 on the third report on economic and social cohesion (5); and the opinion of the Committee of the Regions of 16 June 2004 on the third report on economic and social cohesion (6) and the opinion of the European Economic and Social Committee of 30 June 2004 on the third report on economic and social cohesion (7),

| — | having regard to the first contribution from the outermost regions on the future of economic and social cohesion, delivered to the Commission in February 2002, |
| --- | --- |

—

having regard to the first contribution from the outermost regions on the future of economic and social cohesion, delivered to the Commission in February 2002,

| — | having regard to the Commission Communication of 14 July 2004 on the Financial Perspectives 2007-2013 (COM(2004)0487) and other related documents, and to the fact that the Temporary Committee on Policy Challenges and Budgetary Means of the enlarged Union 2007-2013 was set up within Parliament to probe into the European Union's budget resources in the period from 2007 to 2013, which Committee adopted its report on 19 May 2005 (A6-0153/2005), |
| --- | --- |

—

having regard to the Commission Communication of 14 July 2004 on the Financial Perspectives 2007-2013 (COM(2004)0487) and other related documents, and to the fact that the Temporary Committee on Policy Challenges and Budgetary Means of the enlarged Union 2007-2013 was set up within Parliament to probe into the European Union's budget resources in the period from 2007 to 2013, which Committee adopted its report on 19 May 2005 (A6-0153/2005),

| — | having regard to its resolution of 8 June 2005 on Policy Challenges and Budgetary Means of the enlarged Union 2007-2013 (8), |
| --- | --- |

—

having regard to its resolution of 8 June 2005 on Policy Challenges and Budgetary Means of the enlarged Union 2007-2013 (8),

| — | having regard to the proposal for a Council regulation laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund (COM(2004)0492); the proposal for a regulation of the European Parliament and of the Council on the European Regional Development Fund (COM(2004)0495); the proposal for a regulation of the European Parliament and of the Council on the European Social Fund (COM(2004)0493); and the proposal for a Council regulation establishing a Cohesion Fund (COM(2004)0494), |
| --- | --- |

—

having regard to the proposal for a Council regulation laying down general provisions on the European Regional Development Fund, the European Social Fund and the Cohesion Fund (COM(2004)0492); the proposal for a regulation of the European Parliament and of the Council on the European Regional Development Fund (COM(2004)0495); the proposal for a regulation of the European Parliament and of the Council on the European Social Fund (COM(2004)0493); and the proposal for a Council regulation establishing a Cohesion Fund (COM(2004)0494),

| — | having regard to the proposal for a Council regulation on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (COM(2004)0490); and the proposal for a Council regulation on the European Fisheries Fund (COM(2004)0497), |
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—

having regard to the proposal for a Council regulation on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) (COM(2004)0490); and the proposal for a Council regulation on the European Fisheries Fund (COM(2004)0497),

| — | having regard to the decision taken by the Heads of State or Government of the Member States of the European Union on 18 June 2004 to adopt the Treaty establishing a Constitution for Europe (hereinafter ‘the Constitutional Treaty’ ), |
| --- | --- |

—

having regard to the decision taken by the Heads of State or Government of the Member States of the European Union on 18 June 2004 to adopt the Treaty establishing a Constitution for Europe (hereinafter ‘the Constitutional Treaty’ ),

| — | having regard to the fact that under the Constitutional Treaty a new pillar has been added to cohesion policy, namely the territorial cohesion pillar, |
| --- | --- |

—

having regard to the fact that under the Constitutional Treaty a new pillar has been added to cohesion policy, namely the territorial cohesion pillar,

| — | having regard to the fact that the status of the outermost regions has been incorporated and strengthened in Articles III-424 and IV-440(2) of the Constitutional Treaty, |
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—

having regard to the fact that the status of the outermost regions has been incorporated and strengthened in Articles III-424 and IV-440(2) of the Constitutional Treaty,

| — | having regard to Rule 45 of its Rules of Procedure, |
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—

having regard to Rule 45 of its Rules of Procedure,

| — | having regard to the report of the Committee on Regional Development and the opinions of the Committee on Agriculture and Rural Development and the Committee on Fisheries (A6-0246/2005), |
| --- | --- |

—

having regard to the report of the Committee on Regional Development and the opinions of the Committee on Agriculture and Rural Development and the Committee on Fisheries (A6-0246/2005),

| A. | whereas primary EU law and, recently, the Constitutional Treaty have recognised the nature of the constraints affecting the outermost regions (great distance, island status, small land area, difficult relief and climate, and economic dependency on a small number of products), which constraints, by reason of their permanent and pervasive nature and combined presence, differentiate those regions from the Union's other regions having geographical disadvantages or population problems, |
| --- | --- |

A.

whereas primary EU law and, recently, the Constitutional Treaty have recognised the nature of the constraints affecting the outermost regions (great distance, island status, small land area, difficult relief and climate, and economic dependency on a small number of products), which constraints, by reason of their permanent and pervasive nature and combined presence, differentiate those regions from the Union's other regions having geographical disadvantages or population problems,

| B. | having regard to the importance of the various Community measures adopted in favour of the outermost regions, while nonetheless pointing out their the insufficiency of such measures, especially in areas that are of strategic importance for development, |
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B.

having regard to the importance of the various Community measures adopted in favour of the outermost regions, while nonetheless pointing out their the insufficiency of such measures, especially in areas that are of strategic importance for development,

| C. | whereas it remains essential that the European Union supports the outermost regions given their unequal position vis-à-vis the Community as a whole, with a view to their development and to bringing them up to a level of sustained convergence; whereas this support must also enable the outermost regions to be integrated into such highly competitive processes as the internal market, economic and monetary union, the Lisbon strategy, enlargement and globalisation, |
| --- | --- |

C.

whereas it remains essential that the European Union supports the outermost regions given their unequal position vis-à-vis the Community as a whole, with a view to their development and to bringing them up to a level of sustained convergence; whereas this support must also enable the outermost regions to be integrated into such highly competitive processes as the internal market, economic and monetary union, the Lisbon strategy, enlargement and globalisation,

| D. | having regard to the need to guarantee the economically, socially and environmentally sustainable exploitation of living aquatic resources, particularly the need to preserve fish stocks in the outermost regions, |
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D.

having regard to the need to guarantee the economically, socially and environmentally sustainable exploitation of living aquatic resources, particularly the need to preserve fish stocks in the outermost regions,

| E. | whereas the outermost regions have fragile economies with little possibilities for diversification, in which in some cases fishing and ancestral fishing communities play a key social and economic role and strengthen other economic activities upstream and downstream, |
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E.

whereas the outermost regions have fragile economies with little possibilities for diversification, in which in some cases fishing and ancestral fishing communities play a key social and economic role and strengthen other economic activities upstream and downstream,

| F. | welcoming the potential of the future development strategy for the outermost regions as defined by the Commission in the above-mentioned Communications on a stronger partnership for the outermost regions — guided by the ‘competitiveness’, ‘access and the offsetting of other constraints’ and ‘integration into the regional area’ priorities for action — whose implementation calls for input both from the revised economic and social cohesion policy and from the other Community policies, |
| --- | --- |

F.

welcoming the potential of the future development strategy for the outermost regions as defined by the Commission in the above-mentioned Communications on a stronger partnership for the outermost regions — guided by the ‘competitiveness’, ‘access and the offsetting of other constraints’ and ‘integration into the regional area’ priorities for action — whose implementation calls for input both from the revised economic and social cohesion policy and from the other Community policies,

| G. | noting that, in the context of the revised cohesion policy, input remains insufficient, confined as it is to the establishment of a specific programme to compensate for additional costs and the action plan for a wider neighbourhood, |
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G.

noting that, in the context of the revised cohesion policy, input remains insufficient, confined as it is to the establishment of a specific programme to compensate for additional costs and the action plan for a wider neighbourhood,

| H. | whereas there have been repeated calls for a specific strategy and programme for the outermost regions, |
| --- | --- |

H.

whereas there have been repeated calls for a specific strategy and programme for the outermost regions,

| I. | welcoming, nonetheless, the objectives whose achievement is envisaged through the specific programme to compensate for additional costs and the action plan for a wider neighbourhood, |
| --- | --- |

I.

welcoming, nonetheless, the objectives whose achievement is envisaged through the specific programme to compensate for additional costs and the action plan for a wider neighbourhood,

| J. | whereas the situation of the outermost regions needs to be referred to in the cohesion policy objective ‘European territorial cooperation’, thus linking up with the action plan for a wider neighbourhood; whereas the Commission should, in this context, allocate funds on a case-by-case basis, on similar lines to those followed for the specific programme, and should establish criteria which do not limit the participation of the outermost regions; whereas the Commission must ensure that those regions are eligible in practice for crossborder cooperation, |
| --- | --- |

J.

whereas the situation of the outermost regions needs to be referred to in the cohesion policy objective ‘European territorial cooperation’, thus linking up with the action plan for a wider neighbourhood; whereas the Commission should, in this context, allocate funds on a case-by-case basis, on similar lines to those followed for the specific programme, and should establish criteria which do not limit the participation of the outermost regions; whereas the Commission must ensure that those regions are eligible in practice for crossborder cooperation,

| K. | whereas, in the context of the action plan for a wider neighbourhood (and, therefore, of the cohesion policy objective ‘European territorial cooperation’ ), and, additionally, of the European Union's new neighbourhood policy, it is necessary to promote not only the integration of the outermost regions within their respective geographic areas, but also their socio-economic and cultural links with countries with emigrant communities from those regions or with which those regions have traditional ties (e.g. Venezuela, Brazil, the United States, South Africa, Canada and Australia), |
| --- | --- |

K.

whereas, in the context of the action plan for a wider neighbourhood (and, therefore, of the cohesion policy objective ‘European territorial cooperation’ ), and, additionally, of the European Union's new neighbourhood policy, it is necessary to promote not only the integration of the outermost regions within their respective geographic areas, but also their socio-economic and cultural links with countries with emigrant communities from those regions or with which those regions have traditional ties (e.g. Venezuela, Brazil, the United States, South Africa, Canada and Australia),

| L. | whereas the Commission needs, in the context of the action plan for a wider neighbourhood, to propose responses to the difficulties now faced by certain outermost regions regarding illegal immigration and other related problems, |
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L.

whereas the Commission needs, in the context of the action plan for a wider neighbourhood, to propose responses to the difficulties now faced by certain outermost regions regarding illegal immigration and other related problems,

| M. | whereas, in addition, with regard to the general framework for access to Structural Funds, the present period of negotiation of the financial perspectives and of the reform of cohesion policy is a crucial one for the future of the outermost regions, and it is therefore essential to defend and safeguard, in this connection, the unique situation of those regions by continuing to provide prioritised financial support, |
| --- | --- |

M.

whereas, in addition, with regard to the general framework for access to Structural Funds, the present period of negotiation of the financial perspectives and of the reform of cohesion policy is a crucial one for the future of the outermost regions, and it is therefore essential to defend and safeguard, in this connection, the unique situation of those regions by continuing to provide prioritised financial support,

| N. | having regard to the right to differentiated treatment in this area laid down in Article 299(2) of the EC Treaty, which forsees the possibility of adopting relevant measures for the outermost regions with regard, especially, to the conditions of access to Structural Funds; recalling the EU's position thus far towards the outermost regions with regard to Structural Funds and that those regions have even been granted, in view of their special circumstances, higher co-financing rates than those granted to the other cohesion regions, |
| --- | --- |

N.

having regard to the right to differentiated treatment in this area laid down in Article 299(2) of the EC Treaty, which forsees the possibility of adopting relevant measures for the outermost regions with regard, especially, to the conditions of access to Structural Funds; recalling the EU's position thus far towards the outermost regions with regard to Structural Funds and that those regions have even been granted, in view of their special circumstances, higher co-financing rates than those granted to the other cohesion regions,

General considerations

| 1. | Calls on the Commission to bring its efforts to bear, exercising the right of initiative accorded to it under Article 299(2) of the EC Treaty, to launch procedures to enable the aspirations of the outermost regions to be met in full, be it under cohesion policy or in connection with the other policies, Community measures and areas important for their development, namely agriculture, fisheries, competition and state aids, enterprise policy, services of general interest and services of general economic interest, taxation, customs measures, environment, energy, research and technological development, vocational training, transport, trans-European networks, new information and communication technologies, regional cooperation, and so forth; |
| --- | --- |

1.

Calls on the Commission to bring its efforts to bear, exercising the right of initiative accorded to it under Article 299(2) of the EC Treaty, to launch procedures to enable the aspirations of the outermost regions to be met in full, be it under cohesion policy or in connection with the other policies, Community measures and areas important for their development, namely agriculture, fisheries, competition and state aids, enterprise policy, services of general interest and services of general economic interest, taxation, customs measures, environment, energy, research and technological development, vocational training, transport, trans-European networks, new information and communication technologies, regional cooperation, and so forth;

| 2. | Calls on the Commission to carry out an assessment of the impact of the Community legislation liable to have implications for the outermost regions; calls for the special situation of the outermost regions to be properly taken into account at all levels of implementation of Community policies and actions; |
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2.

Calls on the Commission to carry out an assessment of the impact of the Community legislation liable to have implications for the outermost regions; calls for the special situation of the outermost regions to be properly taken into account at all levels of implementation of Community policies and actions;

| 3. | Recalls that most of the positive discrimination measures adopted for these regions are not such as to affect the fundamental principles of the functioning of the EU; |
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3.

Recalls that most of the positive discrimination measures adopted for these regions are not such as to affect the fundamental principles of the functioning of the EU;

| 4. | Calls on the Commission to include the outermost regions in the EU's efforts to achieve the objectives of the Lisbon strategy and the Gothenburg goals; |
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4.

Calls on the Commission to include the outermost regions in the EU's efforts to achieve the objectives of the Lisbon strategy and the Gothenburg goals;

Financial perspective and cohesion policy

| 5. | Calls on the Council to ensure that the adoption of the financial perspective for 2007-2013 results in guaranteed status for the measures aimed at achieving the objectives of the Union, including the economic, social and territorial development of the outermost regions; |
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5.

Calls on the Council to ensure that the adoption of the financial perspective for 2007-2013 results in guaranteed status for the measures aimed at achieving the objectives of the Union, including the economic, social and territorial development of the outermost regions;

| 6. | Calls on the Commission to ensure, whether under the specific programme to compensate for additional costs or under the wider neighbourhood action plan, or where access in general to Structural Funds is concerned, that equal treatment continues along the lines which the Union has been following in its measures concerning the outermost regions; |
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6.

Calls on the Commission to ensure, whether under the specific programme to compensate for additional costs or under the wider neighbourhood action plan, or where access in general to Structural Funds is concerned, that equal treatment continues along the lines which the Union has been following in its measures concerning the outermost regions;

| 7. | Strongly supports the special action of 1 100 million Euro for the outermost regions proposed by the Commission, as well as the possibility of financing operating aid, as provided in Article 11 of the above-mentioned proposal for a regulation of the European Parliament and of the Council on the European Regional Development Fund; calls for full practical expression to be given to the requirement laid down in Article 299(2) of the EC Treaty for the outermost regions to be treated as a special case as regards their access to the Structural Funds, including those regions whose GDP has already risen above 75 % of the Community average; |
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7.

Strongly supports the special action of 1 100 million Euro for the outermost regions proposed by the Commission, as well as the possibility of financing operating aid, as provided in Article 11 of the above-mentioned proposal for a regulation of the European Parliament and of the Council on the European Regional Development Fund; calls for full practical expression to be given to the requirement laid down in Article 299(2) of the EC Treaty for the outermost regions to be treated as a special case as regards their access to the Structural Funds, including those regions whose GDP has already risen above 75 % of the Community average;

| 8. | Calls for the amounts allocated to the specific programme to be increased and devoted exclusively to the outermost regions without penalising any one such region; |
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8.

Calls for the amounts allocated to the specific programme to be increased and devoted exclusively to the outermost regions without penalising any one such region;

| 9. | Calls for the wider neighbourhood action plan to be based on a concept of closeness in the broad sense so as to enable support to be provided for projects involving organisations in countries which have large communities of emigrants from outermost regions, to whom those regions consequently feel very close; |
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9.

Calls for the wider neighbourhood action plan to be based on a concept of closeness in the broad sense so as to enable support to be provided for projects involving organisations in countries which have large communities of emigrants from outermost regions, to whom those regions consequently feel very close;

| 10. | Insists that the action plan for a wider neighbourhood should be granted a specific financial allocation for transnational and crossborder cooperation, and that the long-expected coordination between the actions funded by the European Regional Development Fund in support of the outermost regions and their counterparts funded by the European Development Fund (EDF) in support of neighbouring ACP countries or overseas possessions and territories at last become a reality, whether or not budgetisation of the EDF takes place; |
| --- | --- |

10.

Insists that the action plan for a wider neighbourhood should be granted a specific financial allocation for transnational and crossborder cooperation, and that the long-expected coordination between the actions funded by the European Regional Development Fund in support of the outermost regions and their counterparts funded by the European Development Fund (EDF) in support of neighbouring ACP countries or overseas possessions and territories at last become a reality, whether or not budgetisation of the EDF takes place;

| 11. | Calls for the action plan to be used to tackle the problems of illegal immigration which face some outermost regions; |
| --- | --- |

11.

Calls for the action plan to be used to tackle the problems of illegal immigration which face some outermost regions;

Human capital

| 12. | Calls on the Commission to boost this important part of development in the outermost regions by encouraging training and specific consolidation in areas devoted exclusively to the promotion of competition and growth; |
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12.

Calls on the Commission to boost this important part of development in the outermost regions by encouraging training and specific consolidation in areas devoted exclusively to the promotion of competition and growth;

Agriculture and fisheries

| 13. | Reminds the Commission that the economies of the outermost regions are based on small-scale sectors, including agriculture and fisheries, which tend to require support on various levels and, especially, incentives to enhance the attractiveness of the employment of young people; |
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13.

Reminds the Commission that the economies of the outermost regions are based on small-scale sectors, including agriculture and fisheries, which tend to require support on various levels and, especially, incentives to enhance the attractiveness of the employment of young people;

| 14. | Calls on the Commission, in the context of the revision currently under way of the agricultural component of the Programme of Options Specifically Relating to Remoteness and Insularity (POSEI), to ensure the stability of the resources allocated, allowing for possible adjustments in line with exceptional needs and simplifying the administrative arrangements; |
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14.

Calls on the Commission, in the context of the revision currently under way of the agricultural component of the Programme of Options Specifically Relating to Remoteness and Insularity (POSEI), to ensure the stability of the resources allocated, allowing for possible adjustments in line with exceptional needs and simplifying the administrative arrangements;

| 15. | Calls on the Commission, in the context of the future rules of the EAFRD, to take account of the specific circumstances of the outermost regions, allocating them sufficient financial resources to attain the rural development policy objectives and preserving uniform treatment for those regions when setting the Fund's contribution rates, on lines similar to those of the European Fisheries Fund (EFF); |
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15.

Calls on the Commission, in the context of the future rules of the EAFRD, to take account of the specific circumstances of the outermost regions, allocating them sufficient financial resources to attain the rural development policy objectives and preserving uniform treatment for those regions when setting the Fund's contribution rates, on lines similar to those of the European Fisheries Fund (EFF);

| 16. | Calls on the Commission, in the context of the external dimension of the Common Market Organisation (CMO) in bananas, to introduce a single tariff at a level high enough to preserve the Community's banana production, and, if necessary, to propose compensatory measures for Community producers; |
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16.

Calls on the Commission, in the context of the external dimension of the Common Market Organisation (CMO) in bananas, to introduce a single tariff at a level high enough to preserve the Community's banana production, and, if necessary, to propose compensatory measures for Community producers;

| 17. | Deplores the abolition of sales aid for the sugar sector; calls for the restoration of this instrument and full compensation for loss of income in order genuinely to take account of the specific handicaps suffered by the outermost regions; considers, moreover, that it is essential to ensure that sugar production and refining in the Azores are given access to the national market under conditions equivalent to those in force before the incorporation of this region in the European Union, in the same way as has been the case with the Canary islands, without compromising the pursuit of this activity in the region; |
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17.

Deplores the abolition of sales aid for the sugar sector; calls for the restoration of this instrument and full compensation for loss of income in order genuinely to take account of the specific handicaps suffered by the outermost regions; considers, moreover, that it is essential to ensure that sugar production and refining in the Azores are given access to the national market under conditions equivalent to those in force before the incorporation of this region in the European Union, in the same way as has been the case with the Canary islands, without compromising the pursuit of this activity in the region;

| 18. | Suggests that identical concerns regarding guaranteeing differentiated treatment and the continued viability of the industry in the outermost regions should apply to the milk and fruit and vegetable sectors, subject to their respective specific conditions; |
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18.

Suggests that identical concerns regarding guaranteeing differentiated treatment and the continued viability of the industry in the outermost regions should apply to the milk and fruit and vegetable sectors, subject to their respective specific conditions;

| 19. | Calls on the Commission to adopt measures to boost the competitiveness of the agricultural products of the outermost regions so that they can compete on the market with similar products originating in countries which have association agreements with the EU or which benefit from preferential regimes; |
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19.

Calls on the Commission to adopt measures to boost the competitiveness of the agricultural products of the outermost regions so that they can compete on the market with similar products originating in countries which have association agreements with the EU or which benefit from preferential regimes;

| 20. | Calls on the Commission, in the context of the future provisions of the EFF, to take account of the specific needs of the outermost regions in the sector; |
| --- | --- |

20.

Calls on the Commission, in the context of the future provisions of the EFF, to take account of the specific needs of the outermost regions in the sector;

| 21. | Reiterates the need for a permanent protection zone so as to allow positive discrimination in access to maritime resources for the fishing fleets of the outermost regions in such a way as to preserve local economies; |
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21.

Reiterates the need for a permanent protection zone so as to allow positive discrimination in access to maritime resources for the fishing fleets of the outermost regions in such a way as to preserve local economies;

| 22. | Draws attention to the simultaneous great richness and great fragility of the marine ecosystems of the outermost regions, and the consequent need to pay particular attention to the fishing gear and practices permitted, as well as to access to the surrounding and adjacent waters; |
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22.

Draws attention to the simultaneous great richness and great fragility of the marine ecosystems of the outermost regions, and the consequent need to pay particular attention to the fishing gear and practices permitted, as well as to access to the surrounding and adjacent waters;

| 23. | Urges the Commission, in view of the particular circumstances of the exclusive economic zones of the outermost regions (absence of a continental shelf in certain cases) and the limitations of their fisheries zones (often confined to submarine hills), to apply, without hesitation, the precautionary principle and the principle of relative stability, thereby helping ensure not only biological and ecological balance for the species concerned, but also the protection of the socio-economic fabric related to the fisheries sector in those regions; urges the Commission also to take account in its legislative proposals of the fact that fishing activity in some of the outermost regions, for example in the Indian Ocean, is very recent and that fish stocks in these areas are still rich; |
| --- | --- |

23.

Urges the Commission, in view of the particular circumstances of the exclusive economic zones of the outermost regions (absence of a continental shelf in certain cases) and the limitations of their fisheries zones (often confined to submarine hills), to apply, without hesitation, the precautionary principle and the principle of relative stability, thereby helping ensure not only biological and ecological balance for the species concerned, but also the protection of the socio-economic fabric related to the fisheries sector in those regions; urges the Commission also to take account in its legislative proposals of the fact that fishing activity in some of the outermost regions, for example in the Indian Ocean, is very recent and that fish stocks in these areas are still rich;

| 24. | Reiterates the need for future support for the renewal and modernisation of the fishing fleet, in the interests of the sector's profitability and competitiveness; |
| --- | --- |

24.

Reiterates the need for future support for the renewal and modernisation of the fishing fleet, in the interests of the sector's profitability and competitiveness;

| 25. | Urges the Commission, in the light of the vulnerabilities coming from the stauts of the outermost regions, to continue its support in those regions for the fisheries-products processing industry, at a level equivalent to or higher than that of the Financial Instrument for Fisheries Guidance; |
| --- | --- |

25.

Urges the Commission, in the light of the vulnerabilities coming from the stauts of the outermost regions, to continue its support in those regions for the fisheries-products processing industry, at a level equivalent to or higher than that of the Financial Instrument for Fisheries Guidance;

| 26. | Calls for fish-processing in the outermost regions to be taken into account in the review of state aid for the fisheries sector; |
| --- | --- |

26.

Calls for fish-processing in the outermost regions to be taken into account in the review of state aid for the fisheries sector;

| 27. | Urges the Commission to accept the principle that POSEI-Fisheries aid should be permanent, and considers that the compensation levels in respect of the additional costs arising from outermost region status in the marketing of certain fisheries products should be increased; |
| --- | --- |

27.

Urges the Commission to accept the principle that POSEI-Fisheries aid should be permanent, and considers that the compensation levels in respect of the additional costs arising from outermost region status in the marketing of certain fisheries products should be increased;

| 28. | Urges the Commission to take all possible steps towards the rapid establishment of the Regional Advisory Councils; considers that, in the case of the Regional Advisory Council for South Western Waters, an island subdivision should be created to deal with the specific fisheries in the outermost regions; |
| --- | --- |

28.

Urges the Commission to take all possible steps towards the rapid establishment of the Regional Advisory Councils; considers that, in the case of the Regional Advisory Council for South Western Waters, an island subdivision should be created to deal with the specific fisheries in the outermost regions;

Competition and state aids

| 29. | Hopes, as regards state aid for regional purposes, that the outermost regions can continue to receive non-degressive operating aid, not limited in time, and that the aid can be extended to cover the transport sector, provided that the public procurement rules guarantee fair price-setting by the undertakings concerned; hopes that the outermost regions can continue to benefit from a higher rate over and above the amount of initial investment aid; hopes that movable transport assets will be included among eligible costs as regards initial investment; hopes also that it will be permitted to compensate outermost regions for the additional costs incurred in transporting goods within the EU market; |
| --- | --- |

29.

Hopes, as regards state aid for regional purposes, that the outermost regions can continue to receive non-degressive operating aid, not limited in time, and that the aid can be extended to cover the transport sector, provided that the public procurement rules guarantee fair price-setting by the undertakings concerned; hopes that the outermost regions can continue to benefit from a higher rate over and above the amount of initial investment aid; hopes that movable transport assets will be included among eligible costs as regards initial investment; hopes also that it will be permitted to compensate outermost regions for the additional costs incurred in transporting goods within the EU market;

| 30. | Calls, in the context of the revision of the guidelines on regionally-oriented state aids to be applied from 2007, for compensation to be authorised for the outermost regions for the additional costs arising from the transport of goods within the EU market, rather than only within the national borders of the country concerned; |
| --- | --- |

30.

Calls, in the context of the revision of the guidelines on regionally-oriented state aids to be applied from 2007, for compensation to be authorised for the outermost regions for the additional costs arising from the transport of goods within the EU market, rather than only within the national borders of the country concerned;

| 31. | Calls, in addition, in the context of the revision of the same guidelines, for all due value to be given to existing practice as regards the outermost regions, and for the relevant circumstances to be taken into account; |
| --- | --- |

31.

Calls, in addition, in the context of the revision of the same guidelines, for all due value to be given to existing practice as regards the outermost regions, and for the relevant circumstances to be taken into account;

| 32. | Calls for the aid provisions for the outermost regions under Article III-167(3)(a) of the Constitutional Treaty to be implemented without delay; |
| --- | --- |

32.

Calls for the aid provisions for the outermost regions under Article III-167(3)(a) of the Constitutional Treaty to be implemented without delay;

| 33. | Calls for the rules governing very small-scale aid to be extended to cover the transport sector; |
| --- | --- |

33.

Calls for the rules governing very small-scale aid to be extended to cover the transport sector;

Enterprise policy

| 34. | Calls on the Commission to adapt existing measures to the particular situation of the outermost regions, facilitating the access of those regions to such measures; calls for action to promote the competitiveness of businesses in those regions, whether via specific measures designed to further their integration into a neighbouring geographic area, or via definition of and support for new models of competitiveness; also advocates support for entrepreneurship and the spirit of enterprise; |
| --- | --- |

34.

Calls on the Commission to adapt existing measures to the particular situation of the outermost regions, facilitating the access of those regions to such measures; calls for action to promote the competitiveness of businesses in those regions, whether via specific measures designed to further their integration into a neighbouring geographic area, or via definition of and support for new models of competitiveness; also advocates support for entrepreneurship and the spirit of enterprise;

Services of general economic interest

| 35. | Calls on the Commission to act on its promise for a working party to study the operation of services of general economic interest in the outermost regions and to draw up proposals geared to the special features and needs of those regions where the market in public services is concerned; |
| --- | --- |

35.

Calls on the Commission to act on its promise for a working party to study the operation of services of general economic interest in the outermost regions and to draw up proposals geared to the special features and needs of those regions where the market in public services is concerned;

| 36. | Calls on the Commission, in relation to the EU's approach to services of general interest in the wake of the White Paper (COM(2004)0374), to pay due attention to the specific constraints of the outermost regions, especially when classifying certain service activities in those regions as services of general interest and when determining the application to those activities of competition and internal market rules adapted to the specific circumstances of the outermost regions; |
| --- | --- |

36.

Calls on the Commission, in relation to the EU's approach to services of general interest in the wake of the White Paper (COM(2004)0374), to pay due attention to the specific constraints of the outermost regions, especially when classifying certain service activities in those regions as services of general interest and when determining the application to those activities of competition and internal market rules adapted to the specific circumstances of the outermost regions;

Taxation and customs measures

| 37. | Calls on the Commission to continue to apply specific tax measures for the benefit of the outermost regions and to show willingness to propose other arrangements to promote the self-contained development of those regions; |
| --- | --- |

37.

Calls on the Commission to continue to apply specific tax measures for the benefit of the outermost regions and to show willingness to propose other arrangements to promote the self-contained development of those regions;

| 38. | Calls on the Commission to show willingness to consider requests from outermost regions for temporary suspension of Common Customs Tariff duties levied on supplies of non-agricultural commodities for production uses and of fishery products, and on imported capital goods for business and industrial use; |
| --- | --- |

38.

Calls on the Commission to show willingness to consider requests from outermost regions for temporary suspension of Common Customs Tariff duties levied on supplies of non-agricultural commodities for production uses and of fishery products, and on imported capital goods for business and industrial use;

Environment

| 39. | Calls on the Commission not to neglect this area in future measures in support of the outermost regions, since resources are insufficient to meet continuing needs regarding the environment, specifically as regards the protection of biodiversity, implementation of the Natura 2000 network, and waste management, a fact which makes it more difficult to pursue an environmental policy in the outermost regions which is consistent with the fundamental principles of Community environmental policy; calls on the Commission to implement measures along the lines of the environment component of the Programme of options specific to the remote and insular nature of Madeira and the Azores (POSEIMA); |
| --- | --- |

39.

Calls on the Commission not to neglect this area in future measures in support of the outermost regions, since resources are insufficient to meet continuing needs regarding the environment, specifically as regards the protection of biodiversity, implementation of the Natura 2000 network, and waste management, a fact which makes it more difficult to pursue an environmental policy in the outermost regions which is consistent with the fundamental principles of Community environmental policy; calls on the Commission to implement measures along the lines of the environment component of the Programme of options specific to the remote and insular nature of Madeira and the Azores (POSEIMA);

Trans-European networks

| 40. | Calls on the Commission to pay particular attention to the special characteristics of the outermost regions in the context of trans-European networks; |
| --- | --- |

40.

Calls on the Commission to pay particular attention to the special characteristics of the outermost regions in the context of trans-European networks;

| 41. | Calls on the Commission, as regards trans-European energy networks, to treat projects in outermost regions as subject to the co-financing rate laid down for projects deemed to have priority; |
| --- | --- |

41.

Calls on the Commission, as regards trans-European energy networks, to treat projects in outermost regions as subject to the co-financing rate laid down for projects deemed to have priority;

| 42. | Calls on the Commission, as regards trans-European transport infrastructure networks, to enable ports and airports in outermost regions to be co-financed by the Cohesion Fund, if eligible; |
| --- | --- |

42.

Calls on the Commission, as regards trans-European transport infrastructure networks, to enable ports and airports in outermost regions to be co-financed by the Cohesion Fund, if eligible;

Research and technological development

| 43. | Calls on the Commission to give operational effect to recital 14 of Decision No 1513/2002/EC of the European Parliament and of the Council of 27 June 2002 concerning the sixth framework programme of the European Community for research, technological development and demonstration activities, contributing to the creation of the European Research Area and to innovation (2002 to 2006) (9), under both the current framework programme and its successor; calls for ways to be found under the next framework programme to open up funding to projects in outermost regions, especially in the centres of excellence in those regions; |
| --- | --- |

43.

Calls on the Commission to give operational effect to recital 14 of Decision No 1513/2002/EC of the European Parliament and of the Council of 27 June 2002 concerning the sixth framework programme of the European Community for research, technological development and demonstration activities, contributing to the creation of the European Research Area and to innovation (2002 to 2006) (9), under both the current framework programme and its successor; calls for ways to be found under the next framework programme to open up funding to projects in outermost regions, especially in the centres of excellence in those regions;

| 44. | Calls for the action plan for research, technological development, demonstration and innovation, submitted by the outermost regions to the Commission in 2003, to be taken into account; |
| --- | --- |

44.

Calls for the action plan for research, technological development, demonstration and innovation, submitted by the outermost regions to the Commission in 2003, to be taken into account;

| 45. | Calls for projects in outermost regions to be financed under the framework programme for reserach and technological development and co-financed in addition by the Structural Funds; |
| --- | --- |

45.

Calls for projects in outermost regions to be financed under the framework programme for reserach and technological development and co-financed in addition by the Structural Funds;

New information and communications technologies

| 46. | Calls on the Commission to ensure that special attention be paid to projects in the outermost regions in the field of information society and technological innovation, given those sectors' key role in promoting development; recalls those regions' demands in this area as set out in the above-mentioned memorandum of Spain, France, Portugal and the outermost regions and contribution of the outermost regions thereto, sent to the Commission on 2 June 2003; |
| --- | --- |

46.

Calls on the Commission to ensure that special attention be paid to projects in the outermost regions in the field of information society and technological innovation, given those sectors' key role in promoting development; recalls those regions' demands in this area as set out in the above-mentioned memorandum of Spain, France, Portugal and the outermost regions and contribution of the outermost regions thereto, sent to the Commission on 2 June 2003;

Transport

| 47. | Calls for the outermost regions to be incorporated into every aspect of Community transport policy; |
| --- | --- |

47.

Calls for the outermost regions to be incorporated into every aspect of Community transport policy;

| 48. | Calls on the Commission to ensure that transport projects financed by the Community in the outermost regions bring about improvements first and foremost to the quality of life of the inhabitants and the self-contained development of those regions; calls for projects developed in breach of Community environmental law to be halted; recommends, furthermore, that all transport projects developed for the outermost regions must have a precise and clearly-defined analysis of the benefits for the diversification of the local economy, social cohesion and the sustainability of the regional job market; |
| --- | --- |

48.

Calls on the Commission to ensure that transport projects financed by the Community in the outermost regions bring about improvements first and foremost to the quality of life of the inhabitants and the self-contained development of those regions; calls for projects developed in breach of Community environmental law to be halted; recommends, furthermore, that all transport projects developed for the outermost regions must have a precise and clearly-defined analysis of the benefits for the diversification of the local economy, social cohesion and the sustainability of the regional job market;

| 49. | Calls for co-financing to meet additional transport costs and for transport to be developed in the neighbourhood of the outermost regions, not least by involving non-member countries to that end; |
| --- | --- |

49.

Calls for co-financing to meet additional transport costs and for transport to be developed in the neighbourhood of the outermost regions, not least by involving non-member countries to that end;

Final considerations

| 50. | Welcomes the fact, lastly, that the bodies working to defend the special status of the outermost regions have established and cemented an important partnership; points to the Commission's key role in that process, as reflected in the above-mentioned Communications on a stronger partnership for the outermost regions;
  *
  - * |
| --- | --- |

50.

Welcomes the fact, lastly, that the bodies working to defend the special status of the outermost regions have established and cemented an important partnership; points to the Commission's key role in that process, as reflected in the above-mentioned Communications on a stronger partnership for the outermost regions;

*

- *

| 51. | Instructs its President to forward this resolution to the Council, the Commission, the Committee of the Regions, the European Economic and Social Committee, the national, regional, and local authorities of the outermost regions, and the Chairman-in-Office of the Conference of Presidents of the Outermost Regions. |
| --- | --- |

51.

Instructs its President to forward this resolution to the Council, the Commission, the Committee of the Regions, the European Economic and Social Committee, the national, regional, and local authorities of the outermost regions, and the Chairman-in-Office of the Conference of Presidents of the Outermost Regions.

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(1)  OJ C 71, 22.3.2005, p. 40.

(2)  OJ C 144, 16.5.2001, p. 11.

(3)  OJ C 221, 17.9.2002, p. 37.

(4)  OJ C 197, 12.7.2001, p. 197.

(5)  OJ C 104E, 30.4.2004, p. 1000.

(6)  OJ C 318, 22.12.2004, p. 1.

(7)  OJ C 302, 7.12.2004, p. 60.

(8)  Texts Adopted, P6_TA(2005)0224.

(9)  OJ L 232, 29.8.2002, p. 1.

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