# Commission Implementing Decision of 12 December 2014 on the equivalence of the supervisory and regulatory requirements of            certain third countries and territories for the purposes of the treatment of exposures according to Regulation (EU) No 575/2013            of the European Parliament and of the Council (Text with EEA relevance) (2014/908/EU)         

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# Commission Implementing Decision

# of 12 December 2014

# on the equivalence of the supervisory and regulatory requirements of certain third countries and territories for the purposes                        of the treatment of exposures according to Regulation (EU) No 575/2013 of the European Parliament and of the Council                     

# (Text with EEA relevance)

# (2014/908/EU)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements                           for credit institutions and investment firms and amending Regulation (EU) No 648/2012(1), and in particular Articles 107(4), 114(7), 115(4), 116(5) and 142(2) thereof,                        

Whereas:

(1)Institutions are to fulfil capital requirements which adequately reflect the risks undertaken by those institutions, including                              credit risk, having regard to the different geographical contexts in which they operate. The credit risk incurred by institutions                              attached to exposures to entities located outside the Union is determined, all other factors being equal, by the quality of                              the relevant regulatory framework and supervision implemented in the relevant third country.

(2)Article 107(3) of Regulation (EU) No 575/2013 allows institutions to treat exposures to third country investment firms, credit                              institutions and exchanges as exposures to institutions only if the third country applies prudential and supervisory requirements                              to the entity concerned which are at least equivalent to those applied in the Union.

(3)Articles 114(7), 115(4) and 116(5) of Regulation (EU) No 575/2013 set specific risk weights applicable to exposures to central                              governments, central banks, regional governments, local authorities, and public sector entities located in third countries                              that apply supervisory and regulatory arrangements at least equivalent to those applied in the Union.

(4)Article 153 of Regulation (EU) No 575/2013 lays down the formula for the calculation of the risk weighted exposures amounts                              for exposures to corporates, institutions, central governments and central banks under the internal-ratings based (IRB) approach                              and details the parameters to be used for the calculation, including the coefficient of correlation. Article 153(2) of Regulation                              (EU) No 575/2013 sets the coefficient of correlation applicable to large financial sector entities. According to Article 142(1)(4)(b)                              of that Regulation, in order to qualify for the definition of ‘large financial sector entity’, the financial sector entity                              or one of its subsidiaries must be subject to the laws of a third country applying prudential supervisory requirements at                              least equivalent to those applied in the Union.

(5)In order to determine the appropriate risk-weighted exposures for the calculation of capital requirements for the credit risk                              attached to exposures to certain categories of entities located in third countries, the Commission has assessed the equivalence                              of the supervisory and regulatory arrangements of third countries to the corresponding supervisory and regulatory arrangements                              in the Union.

(6)The equivalence has been determined by an outcome-based analysis of the third country's regulatory and supervisory arrangements                              which tests their ability to achieve the same general objectives as the Union's supervisory and regulatory arrangements. The                              objectives refer, in particular, to the stability and integrity of both the domestic and the global financial system in its                              entirety; the effectiveness and adequacy of protection of depositors and other consumers of financial services; the cooperation                              between different actors of the financial system, including regulators and supervisors; the independence and the effectiveness                              of supervision; and the effective implementation and enforcement of relevant internationally agreed standards. In order to                              achieve the same general objectives of the Union's supervisory and regulatory arrangements, the supervisory and regulatory                              arrangements of the third country should comply with a series of operational, organisational and supervisory standards reflecting                              the essential elements of the Union's supervisory and regulatory requirements applicable to relevant categories of financial                              institutions. Taking into account independent assessments by the international organisations, such as those carried out by                              the Basel Committee on Banking Supervision, the International Monetary Fund and the International Organization of Securities                              Commissions, the Commission has assessed the supervisory and regulatory arrangements of certain third countries applicable                              to credit institutions, investment firms, and exchanges. This analysis has enabled the Commission to evaluate the equivalence                              of third country arrangements for the purposes of determining the treatment of the relevant categories of exposures mentioned                              in Articles 107, 114, 115, 116 and 142 of Regulation (EU) No 575/2013.

(7)For the purposes of Articles 114, 115, and 116 of Regulation (EU) No 575/2013 equivalence should be determined by reference                              to the supervisory and regulatory arrangements applicable to credit institutions since these arrangements usually set the                              risk weights for the calculation of capital requirements for credit risk.

(8)For the purposes of Article 142(1)(4)(b) of Regulation (EU) No 575/2013, the equivalence assessment is confined to the supervisory                              and regulatory arrangements applicable to third country undertakings with a main business comparable to that of a credit institution                              or investment firm, in accordance with the definition provided in Article 4(1)(27) of that Regulation.

(9)Following the assessment, it appears that Australia, Brazil, Canada, China, Guernsey, Hong Kong, India, Isle of Man, Japan,                              Jersey, Mexico, Monaco, Saudi Arabia, Singapore, South Africa, Switzerland and the USA have in place supervisory and regulatory                              arrangements which comply with a series of operational, organisational and supervisory standards reflecting the essential                              elements of the Union's supervisory and regulatory arrangements applicable to credit institutions. Therefore, it is appropriate                              to consider the supervisory and regulatory requirements for credit institutions located in those third countries and territories                              as at least equivalent to those applied in the Union for the purposes of Article 107(4) and Article 142(1)(4)(b) of Regulation                              (EU) No 575/2013.

(10)Following the assessment, it appears that Australia, Brazil, Canada, China, Mexico, Saudi Arabia, Singapore, South Africa                              and the USA have in place supervisory and regulatory arrangements which comply with a series of operational, organisational                              and supervisory standards reflecting the essential elements of the Union's supervisory and regulatory arrangements applicable                              to investment firms. Therefore, it is appropriate to consider the supervisory and regulatory requirements applying to investment                              firms located in those third countries as at least equivalent to those applied in the Union for the purposes of Article 107(4)                              and Article 142(1)(4)(b) of Regulation (EU) No 575/2013.

(11)Following the assessment, it appears that Brazil, Canada, China, India, Japan, Mexico, Saudi Arabia, Singapore, South Africa                              and the USA have in place supervisory and regulatory arrangements which comply with a series of operational standards reflecting                              the essential elements of the Union's supervisory and regulatory arrangements applicable to exchanges. Therefore, it is appropriate                              to consider the supervisory and regulatory requirements of those third countries applied to exchanges as at least equivalent                              to those applied in the Union for the purposes of Article 107(4) of Regulation (EU) No 575/2013 limited to exposures to exchanges                              located in those third countries.

(12)The sole purpose of this Decision is to determine equivalence for the purposes of assigning risk weights under Articles 107,                              114, 115, 116 and 142 of Regulation (EU) No 575/2013.

(13)The list of third countries and territories considered to be equivalent for the purposes of this Decision is not definitive.                              The Commission, with the assistance of the European Banking Authority, will continue monitoring on a regular basis the evolution                              of the supervisory and regulatory arrangements of third countries and territories with a view to updating, as appropriate                              and at least every 5 years, the lists of third countries and territories set out in this Decision in light, in particular,                              of the constant development of supervisory and regulatory arrangements, in the Union and at global level, and taking into                              account new available sources of relevant information.

(14)The regular review of the prudential and supervisory requirements applicable in the third countries and territories listed                              in the Annexes should be without prejudice to the possibility of the Commission to undertake a specific review relating to                              an individual third country or territory at any time outside the general review, where relevant developments make it necessary                              for the Commission to re-assess the recognition granted by this Decision. Such re-assessment could lead to the withdrawal                              of the recognition of equivalence.

(15)The provisions in this Decision are closely linked, since they deal with the equivalence of the supervisory and regulatory                              requirements of certain third countries and territories for the purposes of the treatment of exposures according to Regulation                              (EU) No 575/2013. To ensure coherence between those provisions, which should enter into force at the same time, and to facilitate                              a comprehensive view and compact access to them by institutions subject to those obligations, it is desirable to include certain                              implementing acts required by Regulation (EU) No 575/2013 in a single Decision.

(16)The measures provided for in this Decision are in accordance with the opinion of the European Banking Committee.

(17)In order to avoid a sudden increase in capital requirements for credit institutions and investment firms in the Union, this                              Decision should enter into force on 1 January 2015,

HAS ADOPTED THIS DECISION:

## Article 1U.K.Equivalence of requirements applied to credit institutions for the purposes of Article 107(4) of Regulation (EU) No 575/2013

For the purposes of Article 107(4) of Regulation (EU) No 575/2013, the third countries and territories listed in Annex I to                     this Decision shall be considered as applying supervisory and regulatory arrangements to credit institutions equivalent to                     those applied in the Union.                  

## Article 2U.K.Equivalence of requirements applied to investment firms for the purposes of Article 107(4) of Regulation (EU) No 575/2013

For the purposes of Article 107(4) of Regulation (EU) No 575/2013, the third countries listed in Annex II to this Decision                     shall be considered as applying supervisory and regulatory arrangements to investment firms equivalent to those applied in                     the Union.                  

## Article 3U.K.Equivalence of requirements applied to exchanges for the purposes of Article 107(4) of Regulation (EU) No 575/2013

For the purposes of Article 107(4) of Regulation (EU) No 575/2013, the third countries listed in Annex III to this Decision                     shall be considered as applying supervisory and regulatory arrangements to exchanges equivalent to those applied in the Union.                  

## Article 4U.K.Equivalence of requirements applied to exposures to central governments, central banks, regional governments, local authorities                        and public sector entities for the purposes of Articles 114, 115, 116 of Regulation (EU) No 575/2013

For the purposes of Articles 114(7), 115(4) and 116(5) of Regulation (EU) No 575/2013, the third countries and territories                     listed in Annex IV to this Decision shall be considered as applying supervisory and regulatory arrangements equivalent to                     those applied to credit institutions in the Union.                  

## Article 5U.K.Equivalence of requirements to credit institutions and investment firms for the purposes Article 142 of Regulation (EU) No                        575/2013

For the purposes of Article 142(2) of Regulation (EU) No 575/2013, the third countries and territories listed in Annex V to                     this Decision shall be considered as applying supervisory and regulatory arrangements equivalent to those applied in the Union.                  

## Article 6U.K.Entry into force

This Decision shall enter into force on 1 January 2015.

Done at Brussels, 12 December 2014.

*For the Commission*                            

*The President*                            

Jean-Claude Juncker                            

## ANNEX IU.K.LIST OF THIRD COUNTRIES AND TERRITORIES FOR THE PURPOSES OF ARTICLE 1 (CREDIT INSTITUTIONS)

Australia

Brazil

Canada

China

Guernsey

Hong Kong

India

Isle of Man

Japan

Jersey

Mexico

Monaco

Saudi Arabia

Singapore

South Africa

Switzerland

USA

## ANNEX IIU.K.LIST OF THIRD COUNTRIES FOR THE PURPOSES OF ARTICLE 2 (INVESTMENT FIRMS)

Australia

Brazil

Canada

China

Mexico

Saudi Arabia

Singapore

South Africa

USA

## ANNEX IIIU.K.LIST OF THIRD COUNTRIES FOR THE PURPOSES OF ARTICLE 3 (EXCHANGES)

Brazil

Canada

China

India

Japan

Mexico

Saudi Arabia

Singapore

South Africa

USA

## ANNEX IVU.K.LIST OF THIRD COUNTRIES AND TERRITORIES FOR THE PURPOSES OF ARTICLE 4 (CREDIT INSTITUTIONS)

Australia

Brazil

Canada

China

Guernsey

Hong Kong

India

Isle of Man

Japan

Jersey

Mexico

Monaco

Saudi Arabia

Singapore

South Africa

Switzerland

USA

## ANNEX VU.K.LIST OF THIRD COUNTRIES AND TERRITORIES FOR THE PURPOSES OF ARTICLE 5 (CREDIT INSTITUTIONS AND INVESTMENT FIRMS)

Credit institutions:

Australia

Brazil

Canada

China

Guernsey

Hong Kong

India

Isle of Man

Japan

Jersey

Mexico

Monaco

Saudi Arabia

Singapore

South Africa

Switzerland

USA

Investment firms:

Australia

Brazil

Canada

China

Mexico

Saudi Arabia

Singapore

South Africa

USA

1

OJ L 176, 27.6.2013, p. 1.